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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-K
 þ Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 2004, OR o Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to . Commission file number 1-12164 WOLVERINE TUBE, INC. 
 Delaware
    
    63-0970812(State of Incorporation)
    
    (IRS Employer Identification No.)200 Clinton Avenue West, 10th FloorHuntsville, Alabama
    
    35801(Address of principal executive offices)
    
    (Zip Code)(256) 353-1310(Registrants Telephone Number, including Area Code)Securities registered pursuant to Section 12(b) of the Act:Title of each class:
    
    Name of exchange on which registered:Common Stock, $0.01 Par Value
    
    New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: None
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES þ NO o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of the registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Act).
YES þ NO o The aggregate market value of the voting and non-voting common equity held by non-affiliates of the
registrant as of July 4, 2004, was approximately $156,537,540 based upon the closing price reported
for such date on the New York Stock Exchange. For purposes of this disclosure, shares of Common
Stock held by executive officers and directors of the registrant have been excluded because such
persons may be deemed to be affiliates. Indicate the number of shares outstanding of each class of Common Stock, as of the latest
practicable date: Class
    
    Outstanding as of March 7, 2005Common Stock, $0.01 Par Value
    
    14,985,570 Shares
 DOCUMENTS INCORPORATED BY REFERENCE Portions of the definitive proxy statement for the annual meeting of stockholders to be held on May
19, 2005 are incorporated by reference into Part III.




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FORM 10-K
YEAR ENDED DECEMBER 31, 2004
TABLE OF CONTENTS Page No.PART IItem 1. Business
    
    
    1Item 2. Properties
    
    
    22Item 3. Legal Proceedings
    
    
    23Item 4. Submission of Matters to a Vote of Security Holders
    
    
    23PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
    
    
    24Item 6. Selected Financial Data
    
    
    24Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    26Item 7A. Quantitative and Qualitative Disclosures About
Market Risk
    
    
    50Item 8. Financial Statements and Supplementary Data
    
    
    50Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
    
    
    50Item 9A.Controls and Procedures
    
    
    51Item 9B. Other Information
    
    
    52PART IIIItem 10. Directors and Executive Officers of the Registrant
    
    
    53Item 11. Executive Compensation
    
    
    53Item 12. Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters
    
    
    53Item 13. Certain Relationships and Related Transactions
    
    
    53Item 14. Principal Accounting Fees and Services
    
    
    53PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    54EX-10.47 Ninth Amendment and Agreement to Consignment and Forward Contracts AgreementEX-21  LIST OF SUBSIDIARIESEX-23.1  CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMEX-23.2  CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMEX-31.1 CERTIFICATION OF CEO PURSUANT TO SECTION 302EX-31.2 CERTIFICATION OF CFO PURSUANT TO SECTION 302EX-32.1 CERTIFICATION OF CEO PURSUANT TO 18 U.S.C.EX-32.2 CERTIFICATION OF CFO PURSUANT TO 18 U.S.C.




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PART I 
 Item 1. Business General Wolverine Tube, Inc. (the Company, Wolverine, we, our, or us) is a world-class
quality manufacturer of copper and copper alloy tube, fabricated products, metal joining products,
and copper and copper alloy rod and bar products. Our focus is on custom-engineered, higher
value-added tubular products, including fabricated copper components and metal joining products,
which enhance performance and energy efficiency in many applications, including: commercial and
residential heating, ventilation and air conditioning, refrigeration, home appliances, automotive,
industrial equipment, power generation, petrochemicals and chemical processing. We believe that our product line is the broadest of any North American manufacturer of copper
and copper alloy tube, which allows us to offer customers complete packaged solutions, and to
pursue cross-selling opportunities. Our technological expertise has helped us to establish strong
and long-standing relationships with many of the leading original equipment manufacturers (OEM)
that use our of higher value-added copper tube in North America, and enables us to maintain a leading
market share in our most important product lines and geographic markets. We have expanded our operations through acquisitions and international growth over the last
five years. In late 2004, we opened a new 130,000 square foot leased manufacturing facility to
produce technical tube and fabricated products in Monterrey, Mexico. Our investment in the Mexican
facility by the end of 2005 will total approximately $5 million, $3 million of which will be from
the reallocation of equipment from other Wolverine facilities. In 2001, we invested approximately
$9 million for the construction of a 33,000 square foot technical tube manufacturing facility in
Esposende, Portugal, which began commercial production in early 2002. In 2003, this facility began
producing brazed assemblies for our European customers. In 2000, we purchased the joining products
business of Engelhard Corporation, a leading manufacturer of brazing alloys, fluxes, and lead-free
solder, based in Warwick, Rhode Island, for approximately $42 million. We are a Delaware corporation organized in 1987, and are the successor to a business founded
in Detroit, Michigan in 1916. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K
and amendments to those reports are available on our website, at no charge, at www.wlv.com, as soon
as reasonably practicable after electronic filing or furnishing such information to the Securities
and Exchange Commission (SEC). Also available on our website, or in print upon written request
at no charge, are our corporate governance guidelines, the charters of our audit, compensation and
corporate governance and nominating committees, and a copy of our code of business conduct and
ethics that applies to our directors, officers and employees, including our chief executive officer, principal financial officer, principal
accounting officer, controller or other persons performing similar functions. 1




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Because our common stock is listed on the New York Stock Exchange (NYSE), our chief
executive officer is required to make, and he has made, an annual certification to the NYSE stating
that he was not aware of any violations by us of the corporate governance listing standards of the
NYSE. Our chief executive officer made his annual certification to that effect to the NYSE as of
August 4, 2004. In addition, we have filed, as exhibits to this Annual Report on Form 10-K, the
certifications of our principal executive officer and principal financial officer under Sections
906 and 302 of the Sarbanes-Oxley Act of 2002 regarding the quality of our public disclosure. Competition The copper tube markets in which we compete are highly competitive. Several of our
competitors produce only copper tube products of a limited type. In contrast, we produce a broad
range of copper products, such as technical tube for large commercial air conditioners used in
high-rise buildings, industrial tube and fabricated components used in residential and light
commercial air conditioning units, wholesale tube used in commercial and residential construction,
and copper and copper alloy tube used in power generation, petrochemical and marine applications.
Moreover, our metal joining products are used in almost all of these applications. While no single company competes with us in all of our product lines, we face significant
competition in each product line. Cerro Flow Products, Inc., Industrias Nacobre S.A. de C.V.,
KobeWieland Copper Products Inc., Wieland-Werke AG, Mueller Industries Inc., Olin Corporation,
Outokumpu American Brass Company, J.W. Harris Company, Inc., Parker Hannifin Corp. and others
compete against us in one or more product lines. We also face competition from China based copper
tube manufacturers who compete with us primarily in China and in North America. Minimal product differentiation among competitors in the wholesale and rod and bar product
categories creates a pricing structure that enables customers to differentiate products almost
exclusively on price. In these product lines, certain of our competitors have significantly larger
market shares than us, and tend to be price leaders in the industry. If any of these competitors
were to significantly reduce their prices, our business, operating results or financial condition
could be adversely affected. For certain of our higher value-added commercial products, we compete primarily on the
technological advantages of these products. Technological improvements in competitors products
could reduce our competitive advantage in these product lines, and thereby adversely affect our
business, operating results or financial condition. Our competitors can be expected to continue to
improve the designs of their products, and to introduce new products with competitive prices and
performance characteristics. We could also be adversely affected if new technologies emerge in the air conditioning,
refrigeration or other consumer industries that reduce or eliminate the need for copper and copper
alloy tube, fabricated copper components, and metal joining products. Certain of our products,
such as plumbing tube, compete with products made of alternative materials, such as polybutylene
plastic. A substantial increase in the price of copper could decrease the relative 2




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attractiveness of copper products in cases where alternatives exist and are allowable by local law or code,
thereby adversely affecting our business, operating results or financial condition. Product Segments We classify our products as commercial products, wholesale products, or rod, bar and other
products. Commercial Products Commercial products consist of several types of technically enhanced tube and fabricated
products made to customer specifications, as well as our metal joining products. We believe that
we are the primary supplier of one or more commercial products to some of the worlds largest and
best known OEMs, particularly in the commercial and residential heating ventilation and
air-conditioning, refrigeration and home appliance industries. Generally, our technical tube and
fabricated products are custom designed, are manufactured for specific customer applications, and
are sold directly to OEMs. Because of the higher level of added value, profitability tends to be
higher for commercial products than for our other products. Commercial products include: Industrial Tube Our small (as small as .01 inches) and medium diameter copper tube used primarily by
residential air conditioning, appliance and refrigeration equipment manufacturers is known as
industrial tube. Industrial tube is made to customer specifications for equipment manufacturing.
Our industrial tube products include coils in lengths in excess of one mile (to permit economical
transport to and use by the customers), smooth straight tube, internally enhanced tube with
internal surface ridges to increase heat transfer in air conditioning coils, and very small
diameter capillary tube. Technical Tube Technical tube is used to increase the heat transfer in large commercial air conditioners,
heat exchangers for power generating and chemical processing plants, water heaters, swimming pool
and spa heaters and large industrial equipment oil coolers. Small, wedge-like grooves (fins) on
the outer surface, together with additional internal enhancements, increase the surface area and
refrigerant agitation, thereby increasing heat transfer efficiency. We were the first company to
commercially develop integral finned tube, in which the fins are formed directly from the wall of
the tube, and we hold patents in this area. Copper Alloy Tube Copper alloy tube (principally copper mixed with nickel) is manufactured for certain severe
uses and corrosive environments such as condenser tubes and heat exchangers in power generating
plants, chemical plants, refineries and ships. Our copper alloy tube products include smooth and
surface enhanced tube produced from a variety of alloys. Also included in the alloy 3




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tube category are surface enhanced titanium, brass and steel tube we produce from smooth tube supplied by outside
sources. Fabricated Products Fabricated products encompass a wide variety of copper, copper alloy, steel, titanium and
aluminum tube products and sub-assemblies for a number of different applications. Precision drawn
tube in a variety of cross-sectional shapes and alloys can be supplied in customer specified
straight lengths or coils. Specialty fabricated parts, complex brazed assemblies and components
(such as return bends and manifolds) are produced for a wide range of applications. Capabilities
include cutting, bending/swaging, end spinning, hole piercing/drilling, specialized coiling and
brazing. Metal Joining Products Metal joining products include brazing alloys, fluxes and lead-free solder used in the air
conditioning, plumbing, electronic, electrical component, jewelry, catalyst, lighting,
shipbuilding, aerospace, general industrial and other metal-joining industries. There are over
2,000 product variations in this category. Commercial product sales accounted for 72%, 74% and 77% of our net sales in 2004, 2003 and
2002, respectively. Wholesale Products Wholesale products consist of plumbing and refrigeration service tube produced in standard
sizes and lengths primarily for plumbing, air conditioning and refrigeration service applications.
Several major competitors manufacture copper tube in common sizes from 1/2 to 4 in diameter.
These products are considered commodity products because price, availability and delivery are the
driving competitive factors. Wolverines plumbing tube and refrigeration service tube are sold
primarily through wholesalers and master distributors. Wholesale product sales accounted for 21%, 19% and 17% of our net sales in 2004, 2003 and
2002, respectively. Rod, Bar and Other Products Rod, bar and other products consist of a broad range of copper and copper alloy solid
products, including round, rectangular, hexagonal and specialized shapes. Brass rod and bar are
used by industrial equipment and machinery manufacturers for valves, fittings and plumbing goods. Copper bars are used in electrical distribution systems and switchgear. Copper and
copper alloy rod and bar products are sold directly to manufacturers and to service centers that
keep an inventory of standard sizes. Other products consist of various tube, rod, bar and other
items sold by our product distribution facility in The Netherlands. Rod, bar and other products accounted for 7%, 7% and 6% of our net sales in 2004, 2003
and 2002, respectively. 4




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Sales and Marketing We employ a direct sales force that is augmented by independent sales agents to pursue global
sales opportunities. In addition, customer service representatives are available to respond to
customer questions and to undertake or resolve any required customer service issues. Our sales
structure forms an integral, critical link in communicating with our customers. Sales and
marketing employees are particularly important in the higher value-added product segments, in which
we often work side by side with customers in their product enhancement and new product development
efforts. The sales function is coordinated through key senior executives responsible for our sales
and marketing efforts. North America Our sales structure in North America consists of sales officers, managers, field marketing
representatives, customer service representatives and independent sales agents who are responsible
for selling and servicing customer accounts. International Our export sales are derived from both internal salespeople and foreign sales agents. We
maintain sales, marketing and business development offices in Apeldorn, The Netherlands and in
Shanghai, China. For information concerning sales, gross profit, and certain other financial information about
foreign and domestic operations, see Note 21 of the Notes to Consolidated Financial Statements. Energy Efficiency and Governmental Regulations Effective January 2006, the U.S. Government mandated increase in the Seasonal Energy
Efficiency Ratio (SEER) standard takes effect. The new minimum standard is 13 SEER, which is a
30% increase from the current minimum standard rating of 10 SEER. We expect that the new standard
will increase demand for our industrial tube and fabricated product businesses during the second
half of 2005, as customers gear-up for the January 2006 implementation date of the new SEER
mandate. We also expect the demand for our higher value-added, energy efficient tubes will
continue to grow as manufacturers continue seeking ways to produce products that are less costly,
more energy efficient and operate at a lower cost, and as existing commercial air conditioners
continue to be replaced in response to the ban on production of chlorofluorocarbons. Government regulations at the local, state and federal levels
periodically provide various incentives for consumers to purchase more energy efficient products,
such as air conditioners, refrigerators and similar appliances, which we believe may also increase
demand for our products. However, there can be no assurance that this anticipated demand will
materialize, or that we will not face increased competition, with an adverse effect on
profitability, from other manufacturers in this higher value-added segment. 5




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Markets Major markets for each of our product lines are set forth below: Products
    
    Major MarketsCommercial Products:Technical Tube
    
    Commercial air conditioning manufacturers, power and process
industry, heat exchanger manufacturers, water, swimming pool and spa heater
manufacturers and oil cooler manufacturers.Industrial Tube
    
    Residential and small commercial air conditioning
manufacturers, appliance manufacturers, automotive manufacturers, industrial
equipment manufacturers, refrigeration equipment manufacturers and redraw mills
(which further process the tube).Copper Alloy Tube
    
    Utilities and other power generating companies, refining and
chemical processing companies, heat exchanger manufacturers and shipbuilders.Fabricated Products
    
    Commercial and residential air conditioning manufacturers,
refrigeration manufacturers and consumer appliance manufacturers. Automotive,
controls, welding, electrical, marine, building, heat transfer industries and other
general industrial applications.Metal Joining Products
    
    Residential and commercial air conditioning
manufacturers, plumbing, electronic, lighting, shipbuilding, aerospace, catalysts,
jewelry and other metal joining industries.Wholesale Products
    
    Plumbing wholesalers and refrigeration service wholesalers.Rod, Bar and Other Products
    
    Electrical equipment, power generation and
automotive parts manufacturers, locomotive, aluminum smelting and other industrial
equipment manufacturers and metal service centers.
 6




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Key Customers In 2004, 2003 and 2002 our 10 largest customers accounted for approximately 44%, 46%, and 47%,
respectively, of our consolidated net sales. No single customer accounted for 10% or more of our
consolidated net sales in any of the previous 3 years. Backlog A significant part of our sales are based on short-term purchase orders. For this reason, we
do not maintain a backlog, and believe that a backlog is not a meaningful indicator of our future
results. A significant amount of our sales result from customer relationships wherein we provide a
high degree of specialized service and generally become the largest supplier of a customers copper
and copper alloy requirements. Under these arrangements, our customers provide forecasts of their
requirements, against which purchase orders are periodically released. In several cases, we have
entered into multi-year arrangements with major customers in order to continue serving as the
predominant supplier and, in several cases, the exclusive supplier on a global basis. Manufacturing Processes The manufacture of copper and copper alloy tube, fabricated products and metal joining
products consists of manufacturing processes including casting, extruding, drawing, forming,
joining and finishing. In most cases, raw material is first cast into a solid cylindrical shape or
billet. The billet is then heated to a high temperature, a hole is pierced through the center
of the cylinder, and the cylinder is then extruded under high pressure. Material is then either
drawn down to smaller sizes, or reduced on a forging machine and then drawn down to a smaller size.
The outside and/or inside surface may be enhanced to achieve the desired heat transfer qualities.
Depending on customer needs, bending, shaping, precision cutting, forming, annealing (heating to
restore flexibility), coiling or other operations may be required to finish the product. Virtually all of our tube products are seamless with the exception of our welded tube products
manufactured at our Jackson, Tennessee facility. Welded tube is made from a flat strip that is
roll formed and welded together at the seam. Raw Materials, Suppliers and Pricing Our principal raw materials are copper, nickel, zinc, tin and silver. In 2004, we purchased
approximately 337 million pounds of metal, approximately 99% of which was copper. We contract for
our copper requirements through a variety of sources, including producers, merchants, brokers,
dealers, industrial suppliers and scrap dealers. Our raw materials are available from a variety of
sources. We do not believe that the loss of any one source would materially affect our business,
operating results or financial condition. The key elements of our copper procurement and product pricing strategies are the assurance of
a stable supply and the avoidance, where possible, of exposures to metal price fluctuations.
Copper prices fluctuate daily, typically using the Commodities Exchange (COMEX) price as a
benchmark. We generally have an open pricing option under which we may fix the price of all
or a portion of the metal subject to purchase contracts at any time up to 7




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the last COMEX trading day (usually two days before the end of the month) of the last month in a contract period. Product delivered to customers is priced with either: (i) a metal charge based on the market
value of the metal as of the date of product shipment to the customer and a fixed fabrication
charge, or (ii) we may quote a firm price to a customer, which covers both the cost of metal and
fabrication charges. In either case, we minimize our exposure to metal price fluctuations through
a variety of hedging strategies. When firm prices are quoted to customers, we generally, at the
time the metal price for the customer is established, either price an equivalent amount of metal
under open pricing arrangements with suppliers, or purchase forward contracts for the equivalent
amount of metal. It is not our policy to attempt to profit from fluctuations in metal prices by
taking speculative or risky commodity derivative positions. Beginning in April 2002, and in conjunction with the change in our method of accounting for
inventories from the last-in, first-out method (LIFO) to the first-in, first-out method (FIFO), we
began to enter into commodity forward contracts to sell copper in order to mitigate the impact that
copper price decreases could have on the value of our inventory. See Note 2 to the Consolidated
Financial Statements, Summary of Significant Accounting Policies  Derivatives and Hedging
Activity for more information. Research and Development Our research and development efforts are primarily conducted in our Technology Center located
in Decatur, Alabama, and are devoted to new product development, manufacturing process improvements
and new product applications. While developing new products, we often work closely with certain
major customers in order to develop specific new products for their applications. To compliment
our research and development capabilities, we occasionally coordinate our efforts with those of
universities, and governmental and private research organizations. Through our Technology Center,
we support the engineering and testing of our custom-engineered processes, specialized products and
product enhancements, and may make modifications to these based upon customer specifications. In 2002, we announced the introduction of a new, innovative Micro-Deformation Technology
MDTÔ. This technology is being used to develop highly enhanced new heat transfer products
for large chiller applications. In addition, this new technology has enabled us to develop
products for non-tube applications, including electronic cooling, filtration, catalyst and others.
We continue to participate in several industrial, university and governmental research projects
relating to more efficient heat transfer tubes for industrial, commercial and residential heating
and cooling applications, as well as refrigeration, power generation, chemical and petrochemical
industries. Research and development expense was $3.5 million in 2004, $2.9 million in 2003 and $3.1
million in 2002. It is anticipated that a similar level of expenditure will be maintained in 2005.
In addition to our Technology Center, we utilize our manufacturing facilities and technical
personnel to assist in continually improving our manufacturing processes, as well as new product
development as it relates to those manufacturing facilities. 8




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Patents and Trademarks We own a number of trademarks and patents within the United States (and in other
jurisdictions) on certain products and related manufacturing processes. We have also granted
licenses with respect to some of these trademarks and patents. While we believe that our patents
and trademarks provide a competitive advantage and have value, we do not consider the success of
our business as a whole to be primarily dependent on these patents, patent rights or
trademarks. Environmental Matters Our facilities and operations are subject to extensive environmental regulations imposed by
local, state, federal, and provincial authorities in the United States, Canada, China, Portugal and
Mexico with respect to emissions to air, discharges to waterways, and the generation, handling,
storage, transportation, treatment and disposal of waste materials. We have incurred, and may
continue to incur, additional liabilities under environmental statutes and regulations. These
potential liabilities may relate to contamination of sites we own or operate (including
contamination caused by prior owners and operators of such sites, abutters or other persons), or
have previously owned or operated, as well as the off-site disposal of hazardous substances. We believe our operations are in substantial compliance with all applicable environmental laws
and regulations as currently interpreted. We utilize an active environmental auditing and
evaluation process to facilitate compliance with applicable environmental laws and regulations.
However, future regulations and/or changes in the text or interpretation of existing regulations
may subject our operations to increasingly more stringent standards. While we cannot quantify the
effect of any future potential changes on our business, compliance with such requirements may make
it necessary, at costs which may be substantial, to retrofit existing facilities with additional
pollution-control equipment and to undertake new measures in connection with the storage,
transportation, treatment and disposal of by-products and wastes. We have established a reserve of approximately $1.0 million for undiscounted estimated
environmental remediation costs at December 31, 2004. The total cost of environmental assessment
and remediation depends on a variety of regulatory, technical and factual issues, some of which are
not known or cannot be anticipated. While we believe that the reserve, under existing laws and
regulations, is adequate to cover presently identified environmental remediation liabilities, there
can be no assurance that such amount will be adequate to cover the ultimate costs of these
liabilities, or the costs of environmental remediation liabilities that may be identified in the
future. Employees As of December 31, 2004, we had a total of 3,178 employees. Approximately 9% of our employees
are represented by a union comprised of a majority of the hourly employees at our Montreal, Quebec
plant who are covered by a collective bargaining agreement that expires on March 22, 2005. We are
currently in negotiations with the Montreal labor union regarding a new collective bargaining
agreement. The 37 maintenance department employees at our Shawnee, Oklahoma facility elected to be
represented by the Arkansas Regional Council of Carpenters/United Brotherhood of Carpenters and
Joiners of America in May 2003, but opted to 9




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de-certify that representation in October 2004. As a whole, we believe our relations with our employees are good. Executive Officers of the Registrant The following table sets forth certain information with respect to each of our executive
officers as of December 31, 2004, except as otherwise noted: Name
    
    Age
    
    Current Position with the CompanyDennis J. Horowitz
    
    
    58
    
    
    Chairman, Chief Executive Officer and Director(February 2005)Johann R. Manning, Jr.
    
    
    44
    
    
    President and Chief Operating Officer (February 2005)James E. Deason
    
    
    57
    
    
    Executive Vice President, Chief Financial Officer,Secretary and DirectorGarry K. Johnson
    
    
    49
    
    
    Senior Vice President, SalesMassoud Neshan
    
    
    51
    
    
    Senior Vice President, TechnologyThomas B. Sabol
    
    
    45
    
    
    Senior Vice President, Finance and AccountingKeith I. Weil
    
    
    47
    
    
    Senior Vice President, International and StrategicDevelopment (February 2005)Thomas A. Morton
    
    
    51
    
    
    Vice President of Purchasing and LogisticsAllan J. Williamson
    
    
    57
    
    
    Corporate Controller
 Dennis J. Horowitz has been Chief Executive Officer and a director of our company since March
1998, and in January of 2001 he also became Chairman of the Board of Directors. He also previously
held the position of President of our company from March 1998 until February 2005. Prior to
joining our company, Mr. Horowitz served as Corporate Vice President and President of the Americas
of AMP Incorporated, a high technology electric connector and interconnection systems company, since September 1994. Mr. Horowitz also serves as a director
of Superconductor Technologies, Inc and Technitrol, Inc. Johann R. Manning, Jr. has been President and Chief Operating Officer since February 2005. He
previously held positions of Senior Vice President, Fabricated Products and General Counsel of our
company from October 2001 until February 2005, Senior Vice President of Human Resources and General
Counsel from May 2000 until October 2001 and Vice President of Human Resources and General Counsel
from May 1998 until May 2000. Prior to joining our company, Mr. Manning had served as Senior
Counsel for Mercedes-Benz U.S. International, Inc., a vehicle manufacturer, since March 1998.
Prior to joining Mercedes-Benz, Mr. Manning was employed for over eight years with Genuine Parts
Company, a diversified wholesale distribution company, where he held various positions including
Vice President of Human Resources and Corporate Counsel for its Motion Industries, Inc. subsidiary. James E. Deason has been a director of our company since October 1995. Mr. Deason has been
the Executive Vice President, Chief Financial Officer and Secretary of our company since September
1994. Prior to joining our company, Mr. Deason, a Certified Public Accountant, spent 19 years with
Ernst & Young LLP and was a partner from 1988 until he joined our company. On December 1, 2004,
Mr. Deason announced his intention to retire, effective March 31, 2005, as Executive Vice
President, Chief Financial Officer, Secretary and a member of the Board of Directors. 10




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Garry K. Johnson has been the Senior Vice President, Sales of our company since 2002. He
previously held the positions of Vice President, Sales from 1998 until 2002, Industrial Marketing
Manager from 1990 until 1998, Field Sales Representative from 1981 until 1990 and Production
Supervisor from 1979 until 1981. Mr. Johnson has been employed by our company for twenty-six
years. Massoud Neshan has been the Senior Vice President, Technology of our company since August
1999. Prior to joining our company, Mr. Neshan had served as Vice President of Engineering and
Research and Development for Hill Phoenix, a subsidiary of The Dover Corporation, since March 1996.
Prior to joining Hill Phoenix, Mr. Neshan was employed for six years with Nax Corporation where he
held the position of Executive Vice President. Mr. Neshan has spent his entire career in the
heating, ventilation, air conditioning/refrigeration industry. Thomas B. Sabol has been the Senior Vice President, Finance and Accounting, of our company
since December 2004. Prior to joining our company, Mr. Sabol was an independent business
consultant since 2003. Prior to 2003, Mr. Sabol had served first as Chief Financial Officer, and
later as Chief Operating Officer, of Plexus Corp., a publicly traded electronic manufacturing
services company from January 1996 until November 2003. Mr. Sabol will assume the role of Senior
Vice President, Chief Financial Officer and Secretary upon the retirement of Mr. Deason. Mr. Sabol
also serves as a director of Suntron Corporation. Keith I. Weil has been the Senior Vice President, International and Strategic Development of
our company since February 2005. He has also held the position of Senior Vice President, Tubing
Products, of our company from December 1998 until February 2005. Prior to joining our company, Mr. Weil had been a Global Business Executive and General Manager
Consumer/Commercial for AMP Incorporated since 1996. Prior to 1996, Mr. Weil was employed by
Philips Electronics NV for fourteen years in positions that included President of Graner Company (a
division of Philips), General Manager of Philips Circuit Assemblies and Vice President of Marketing
for Philips Broadband. Thomas A. Morton has been the Vice President of Purchasing and Logistics since February 1999.
He previously held the positions for our Canadian operations of Metal Manager from January 1996
until January 1999 and Corporate Controller from May 1989 to December 1996. Prior to joining our
company, Mr. Morton, a Chartered Accountant, was employed for ten years with Ernst & Young in
Canada. Allan J. Williamson has been the Corporate Controller since February 2004. He previously held
the positions of Group Controller  Tube Group and Wolverine Tube Europe from August 2003 until
January 2004, and Group Controller  Fabricated Products
Group from August 2002 when he joined the Company until July 2003. Prior
to joining our company, Mr. Williamson was Chief Financial Officer and Vice President of Business
Planning of ADS Environmental Services from September 1995 through September 2002, and before that
he was Vice President  Operations Controller from January 1995
through August 1995 for Continental Can Company and Vice President of Finance of General Marble from January 1993 to January 1995. 11




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##### Table of Contents



Risk Factors That May Affect Future Performance This report contains forward-looking statements made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all
statements that do not relate solely to current or historical fact, but address events or
developments that we anticipate will occur in the future. Forward-looking statements include
statements regarding our goals, beliefs, plans or current expectations, taking into account the
information currently available to our management. When we use words such as anticipate,
intend, expect, believe, plan, may, should or would or other words that convey
uncertainty of future events or outcome, we are making forward-looking statements. Statements
relating to future sales, earnings, operating performance, restructuring strategies, capital
expenditures and sources and uses of cash, for example, are forward-looking statements. These forward-looking statements are subject to various risks and uncertainties, including the
risks described below and elsewhere in this report, which could cause actual results to differ
materially from those stated or implied by such forward-looking statements. You should carefully
consider each of the following risks and all other information contained in or incorporated by
reference in this report and in our filings with the SEC. The risks described below and in our
filings with the SEC are not the only ones we face. Additional risks and uncertainties not
presently known to us, or which we currently consider immaterial, also may adversely affect us. If
any of the following risks actually occur, our business, financial condition and results of
operations could be materially and adversely affected. Our significant debt levels may limit our future ability to obtain additional financing and to
pursue business opportunities. As of December 31, 2004, our total debt was $238.2 million, which represented approximately
53% of our total capitalization. We are permitted under our secured revolving credit facility and
the indentures governing our outstanding Senior Notes to incur additional debt under certain
circumstances. There are several important consequences of having significant debt levels, including the
following:  
    a substantial portion of our cash from operating activities must be used to pay principal
and interest on our debt and may not be available for other purposes, thereby reducing the
availability of the Companys cash flow to fund working capital, capital expenditures, research and
development efforts and other general corporate purposes;
    our flexibility in planning for, or reacting to, changes in our business and the
industry in which we operate may be limited;
    adverse economic or industry conditions are more likely to have a negative effect on
our business;
    we may be at a competitive disadvantage to our competitors that have relatively less
indebtedness;
    our ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions or other purposes may be limited; 12




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##### Table of Contents




    our ability to make acquisitions, develop new technologies and products and take
advantage of significant business opportunities may be negatively affected; and
    the need to use cash from operating activities to service and pay its debt and for
operating expenses may limit or impair our future ability to pay dividends, if any, on
our common stock. We may not be able to satisfy our debt obligations. Our ability to pay the required interest and principal payments on our debt depends on the
future performance of our business. The performance of our business is subject to general economic
conditions and other financial and business factors, many of which are beyond our control.
Accordingly, our business may not generate sufficient cash flow from operations, we may not realize
our currently anticipated revenues and operating performance and future borrowings may not be
available to us in an amount sufficient to enable us to pay our debt, or to fund our other
liquidity needs. If we are unable to meet our debt service obligations or fund other liquidity needs, we could
be forced to restructure or refinance our indebtedness, seek additional equity capital or sell
assets. We cannot assure you that we will be able to accomplish those actions on satisfactory
terms, or at all. Despite our significant debt levels, we and our subsidiaries may be able to incur substantially
more debt. This could further exacerbate the risks described above. We and our subsidiaries may be able to incur substantial additional indebtedness in the
future. Although the credit agreement governing our secured revolving credit facility and
indentures governing our outstanding notes contain restrictions on the incurrence of additional
indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the
indebtedness incurred in compliance with these restrictions could be substantial. The amended credit agreement governing our secured revolving credit facility permits us to
borrow up to $40.0 million (subject to a $2.0 million excess availability requirement) as long as
we meet certain accounts receivable and inventory levels and comply with financial and operating
covenants. Further, although the covenants in the credit agreement generally prohibit us from
incurring additional indebtedness, the limited exceptions to this restriction would permit the
Company to incur specific types of indebtedness, for example, up to $2.5 million in purchase money
indebtedness to finance the purchase of fixed assets. The credit agreement also contains a general
exception to this restriction for the incurrence of up to $5.0 million in additional unsecured debt
under certain conditions. The covenants contained in the indenture governing our 10.5% Senior Notes do not limit the
additional indebtedness we may incur so long as we have met the required coverage ratio, which
generally measures our ability to cover our ongoing debt service obligations with our earnings, and
no default has occurred nor is it continuing. These restrictions do not prevent us from incurring
obligations that do not constitute indebtedness. To the extent new debt is added to our and our
subsidiaries currently anticipated debt levels, the substantial leverage risks described above
would increase. 13




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We may not be able to borrow funds under our secured revolving credit facility if we are not able
to meet the conditions to borrowing in that facility, or to renew on acceptable terms upon
expiration of the facility in March 2007, or to obtain alternative financing to satisfy working
capital needs. We view our existing secured revolving credit facility as a source of available
liquidity. This facility contains various conditions, covenants and representations with which we
must be in compliance in order to borrow funds. Should we need to borrow under this facility in
the future, there can be no assurance that we will be in compliance with these conditions,
covenants and representations. By its terms, the secured revolving credit facility expires in
March 2007. We anticipate renewing the facility on terms at least as favorable as the existing
facility, but there can be no assurances of renewal or the terms on which we renew. Alternatively, we are in discussions with our commercial banks regarding new financing
arrangements or restructuring our existing secured revolving credit facility to provide additional
sources of funds. There is no assurance that these discussions will be successful, or will result
in timely additional liquidity to satisfy working capital needs. Our inability to comply with the debt covenants contained in the indentures for our outstanding
notes and in our other debt agreements, including our secured revolving credit facility, could lead
to an acceleration of our debt and possibly bankruptcy. The indentures for our outstanding notes and our agreement governing the secured revolving
credit facility contain a number of significant covenants that limit our ability to, among other
things:  
    incur other indebtedness;
    engage in transactions with affiliates;
    incur liens;
    make certain restricted payments;
    enter into certain business combinations and asset sale transactions; and
    make investments. These restrictions could limit our ability to undertake future financings, make needed capital
expenditures, withstand a future downturn in our business or the economy in general, conduct
operations or otherwise take advantage of business opportunities that may arise. Our secured
revolving credit facility also contains covenants that require the Company to meet certain
financial tests. Changes in economic or business conditions, results of operations or other
factors could make us unable to comply with these covenants and cause us to default under our debt
agreements. A default, if not waived by our lender, could result in acceleration of our debt and
possibly bankruptcy. Since March 2002 when we entered into the credit facility, we and our
creditors have amended the credit facility six times to alter certain financial tests that we must
satisfy, and we have also obtained waivers from time to time from the creditors under this facility
to waive compliance with certain performance covenants contained in the credit facility. 14




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Our profitability is subject to the volatility of markets for raw materials, primarily copper, and
our ability to pass on to our customers any increased costs for raw materials. Our profitability depends upon the margin between the cost to us of copper raw materials, our
fabrication costs associated with converting the metal, the selling price of our copper based
products and the overall supply of copper and other raw materials. Prices for copper raw material
are subject to cyclical price fluctuations. While it is our intention to base the selling prices
of our products upon the associated raw materials costs to us at the time of sale of our finished
products or as set by our purchases for forward delivery or hedging with futures and options
contracts, there can be no assurance that we will be able to pass all increases in copper costs,
and ancillary acquisition costs associated with taking possession of the metal, through to our
customers. Significant increases in the price of copper, if not offset by product price increases,
or the inability to obtain copper or other needed raw materials, would have a material adverse
effect on our consolidated financial condition, results of operations or cash flows. In addition,
certain of our copper products compete with products made of alternative substances, such as
polybutylene plastic. A substantial increase in the price of copper could decrease the relative attractiveness of our copper products, particularly our wholesale products, in cases
where an alternative exists and thereby adversely affect our sales volumes and results of
operations. Our customers operate in industries that are subject to cyclical and seasonal demand and that are
affected by other global economic conditions, which can adversely affect our sales volumes and
profitability. Achievement of our business objectives depends on the continued growth of customer demand for
our products or services. If the copper tube industry does not continue to grow, the demand for
our products and services may not continue to develop. Our business is affected by changes in
demand in our customers markets as well as by global economic conditions that affect our
customers operations. Any significant downturn in our customers businesses could result in a
reduction in demand for our products and could reduce our revenue. Demand for our products, particularly our wholesale products, is cyclical and is significantly
affected by changes in general economic conditions that affect our customers markets and that are
beyond our control. These conditions include the level of economic growth, employment levels,
financing availability, interest rates, consumer confidence, housing demand and construction
activity. Decreases in demand for our products resulting from these conditions can reduce the
prices we receive for our products, our unit sales volumes and our gross profit. In addition, demand in certain of the industries to which we sell our products, including the
residential air conditioning industry, and to a lesser extent, the commercial air conditioning
industry, is seasonal. Our sales to the residential air conditioning industry are generally
greater in the first and second quarters of the year and lower in the third and fourth quarters due
to our customers increase of inventory in anticipation of summer air conditioning sales and
housing starts. Our sales to the residential air conditioning industry also decrease in years with
unseasonably cool summers. Additionally, the federal regulations, effective in January 2006,
that require a 30% improvement in efficiency standards of certain
residential air conditioning units, may not increase demand for our
products to the extent or in the time periods expected. 15




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We face significant competition in many cases from competitors that are larger than us, and that
have manufacturing and financial resources greater than ours. We face significant competition in each of our product lines. We have numerous competitors,
some of which are larger than us and have greater financial resources. We may not be able to
compete successfully and competition may have a negative effect on our business, operating results
or financial condition by reducing volume of products sold and/or selling prices and accordingly
reducing revenues and profits and depleting capital. Minimal product differentiation among
competitors in our wholesale and rod and bar product lines creates a pricing structure where
customers differentiate between products almost exclusively on price. In these product areas,
certain of our competitors have significantly larger market shares than us and tend to be the
industry pricing leaders. If our competitors in these product lines were to significantly reduce
prices, our unit sales and profit margins could be reduced. We currently face limited competition
for certain of our higher value-added commercial products that have higher profit margins. If our
existing competitors expand operations in these product categories or if new competitors enter these product lines, our sales of these higher margin products
could fall and our profitability could be reduced or eliminated. For certain of our higher value-added commercial products, which have higher margins, we
compete primarily on the basis of technological advantages of these products. Technological
improvements by competitors could reduce our advantage in these product lines and thereby reduce
our revenue. We could also be adversely affected if new technologies emerge in the air
conditioning, refrigeration or other consumer industries that reduce or eliminate the need for
copper and copper alloy tube, fabricated products and metal joining products. Certain of our
products, such as plumbing tube, compete with products made of alternative substances, such as
polybutylene plastic. A substantial increase in the price of copper could decrease the relative
attractiveness of copper products in cases where an alternative exists and thereby reduce our
revenue. The loss of any of our major customers could adversely affect our revenues and financial health. In 2004 and 2003, our 10 largest customers accounted for approximately 44% and 46%,
respectively, of our consolidated net sales. If we were to lose any of our relationships with
these customers, our revenues and results of operations and financial condition might suffer. We have experienced net losses in recent periods and we may experience net losses in the future. We have experienced net losses in the past, and may experience net losses in the future.
Competitive price pressure, cyclical demand for our products and an economic downturn in industries
we serve, among other factors, could have a material adverse effect on the prices we receive for
our products, unit sales volumes and gross profit. These factors may in turn reduce our cash flow
and operating results in future periods. If we are unable to generate positive cash flow in the
future, we may not be able to make payments on our debt obligations. 16




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Our business plan calls for the start-up of our Monterrey, Mexico facility. If we are unable to
initiate production or achieve expected cost levels on our anticipated schedule, our revenues and
operating margins could be adversely affected. During 2005, we expect to complete the start-up of our Monterrey, Mexico facility. While we
initially expect to experience increased costs in connection with the start-up of this operation,
we also expect these costs to decrease as we and our employees gain more experience. Delays in the
start-up of the Monterrey, Mexico facility or in achieving the anticipated cost reductions could
adversely affect our revenues and operating margins. Risks associated with the operation of our manufacturing facilities may have a material adverse
effect on our business Our revenues are dependent on the continued operation of our various manufacturing facilities.
The operation of manufacturing plants involves many risks including:  
    the breakdown, failure or substandard performance of equipment;
    inclement weather and natural disasters;
    the need to comply with directives of, and maintain all necessary permits from,
governmental agencies;
    raw material supply disruptions;
    labor force shortages, work stoppages, or other labor difficulties; and
    transportation disruptions. The occurrence of material operational problems, including but not limited to the above
events, may have an adverse effect on the productivity and profitability of a particular
manufacturing facility, or our Company as a whole. Currency fluctuations may place us at a competitive disadvantage and reduce our revenue. Our manufacturing costs, profit margins and competitive position may be affected by the
strength of the currencies in countries where our products are manufactured relative to the
strength of the currencies in the countries where our products are sold. The Company currently has
significant manufacturing operations in Canada which supplies numerous US customers. For the fiscal
year ended December 31, 2004, our Canadian operations accounted for 23% of consolidated net sales.
If the Canadian dollar strengthens materially against the U.S. dollar, our Canadian operations
could be subject to increased competition from U.S. suppliers, which could reduce our revenue from
operations. Our international operations expose us to numerous risks that other companies that are not global
may not face. We have significant manufacturing and/or sales operations in Canada, China, The Netherlands,
Portugal and Mexico. In 2004, foreign operations represented 30% of our consolidated net sales.
As with all companies that have sizeable operations and sales outside the U.S., we are subject to
the risks inherent in conducting business across national boundaries, any one of which could
adversely impact our business. In addition to currency fluctuations, these risks include: 17




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
    economic downturns;
    changes in or interpretations of local law, governmental policy or regulation,
particularly in countries with developing legal systems such as China;
    restrictions on the transfer of funds into or out of the country;
    import and export duties and quotas and other trade barriers;
    domestic and foreign customs and tariffs;
    varying tax systems;
    different regimes controlling the protection of our intellectual property;
    international incidents;
    military outbreaks;
    government instability;
    nationalization of foreign assets; and
    government protectionism. We intend to continue to evaluate opportunities to establish new manufacturing and sales
operations outside the U. S. One or more of the foregoing factors could impair our current or
future international operations and, as a result, harm our overall business. We, and some of our major customers, have unionized employees and we could be adversely affected by
labor disputes affecting us or our major customers. Some of our employees and some employees of our major customers are unionized. At December
31, 2004, approximately 9% of our employees were unionized. Our unionized employees are hourly
workers located at our Montreal facility where various copper and copper alloy tube products and
substantially all of our rod and bar products are manufactured. The current collective bargaining
agreement with the union representing these employees expires on
March 23, 2005, and we are currently in negotiations with this
union regarding a new collective bargaining agreement. If the parties
do not enter into a new agreement, actions such as a strike or lock-out are possible and could
impair our production capabilities or otherwise negatively affect our business. We may engage in acquisitions that could increase our debt and, if any acquisitions are not
successfully integrated with our business, this could increase our costs, divert managements
attention, disrupt existing business relationships and have a negative impact on our results of
operations. We may engage in strategic acquisitions in the future. However, we cannot assure you that
attractive acquisitions will be available to us at reasonable prices. In addition, to facilitate
future acquisitions, we may take actions that could have a detrimental effect on our results of
operations including:  
    the incurrence of substantial debt;
    increased depreciation and amortization expense;
    increased interest expense; or
    decreased operating income. 18




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Acquisitions also entail numerous business risks, including:  
    difficulties in assimilating acquired businesses;
    unanticipated costs, including the assumption of environmental liabilities, that
could materially adversely affect our results of operations;
    diversion of managements attention from other business concerns;
    negative effects on existing business relationships with suppliers and customers;
and
    risks of entering markets in which we have no or limited prior experience. In addition, we may engage in divestitures that could have a negative impact on earnings. We
could divest one or more of our plants or operations in the future that may require a restructuring
of operations or reduce revenues. We could incur significant costs, including remediation costs, as a result of complying with
environmental laws. Our facilities and operations are subject to extensive environmental laws and regulations
imposed by federal, state, provincial and local authorities in the U.S., Canada, China, Portugal
and Mexico relating to the protection of the environment and human health and safety, including
those governing emissions to air, discharges to waterways and the generation, handling, storage,
transportation, treatment and disposal of, and exposure to, hazardous materials. We could incur
substantial costs, including cleanup costs, fines or sanctions, and third-party claims for property
damage or personal injury, as a result of violations of or liabilities under environmental laws.
We have incurred, and in the future may continue to incur, liability under environmental statutes
and regulations with respect to the contamination detected at sites owned or operated by us
(including contamination caused by prior owners and operators of such sites, abutters or other
persons) and the sites at which we disposed of hazardous substances. We have established a reserve
with respect to certain presently estimated environmental remediation costs. This reserve may not
be adequate to cover the ultimate costs of these liabilities (or ones that may be identified in the
future) and the discovery of additional contaminants or the imposition of additional cleanup
obligations could result in significant costs. In addition, we expect that future regulations, and
changes in the text or interpretation of existing regulations, may
subject us to increasingly
stringent standards. Compliance with such requirements may make it necessary, at costs which may
be substantial, for us to retrofit existing facilities with additional pollution-control equipment,
undertake new measures in connection with the storage, transportation, treatment and disposal of
by-products and wastes or take other steps. Our competitive advantage could be reduced if our intellectual property becomes known by our
competitors, or if technological changes reduce our customers need for our products. We own a number of trademarks and patents (in the U.S. and other jurisdictions) on our
products and related manufacturing processes and we have granted licenses with respect to some of
our trademarks and patents. In addition to trademark and patent protection, we rely on trade
secrets, proprietary know-how and technological advances that we seek to protect. If our
intellectual property is not properly protected or is independently discovered by others or
otherwise becomes known, our protection against competitive products could be diminished. Because
we compete primarily on the basis of these technical advantages of our commercial products,
technical improvements by our competitors could reduce our competitive advantage in 19




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these product lines and thereby reduce our unit sales and profits per unit. In addition, the development of new
technologies in the air conditioning, refrigeration or other consumer industries, including
technologies developed in response to the elimination of CFCs and certain refrigerants, could
reduce or eliminate the need for copper and copper alloy based products and thereby reduce our
sales volumes and have a negative impact on our operating results. If our internal computer network and applications suffer disruptions or fail to operate as
designed, our operations will be disrupted and our business may be harmed. We rely on network infrastructure and enterprise applications, and internal technology systems
for our operational, marketing support and sales, and product development activities. The hardware
and software systems related to such activities are subject to damage from earthquakes, floods,
lightning, tornadoes, fire, power loss, telecommunication failures and other similar events. They
are also subject to acts such as computer viruses, physical or electronic vandalism or other
similar disruptions that could cause system interruptions and loss of critical data, and could
prevent us from fulfilling our customers orders. We have developed disaster recovery plans and
backup systems to reduce the potentially adverse effects of such events, as they could impact our
operations. Any event that causes failures or interruption in our hardware or software systems
could result in disruption of our business operations, have a negative impact on our operating
results, and damage our reputation. The recent conflict in Iraq and any future global conflict or terrorist activities may cause the
economic conditions in the U.S. or abroad to deteriorate, which could harm our business. The U.S. and other countries recently engaged in a war in Iraq and military personnel are
still engaged in that country. The duration and outcome of these activities are unknown.
Continued occupation of Iraq, future terrorist attacks against U.S. targets, rumor or threats of
war, additional conflicts involving the U.S. or its allies or trade disruptions may impact our
operations or cause general economic conditions in the U.S. and abroad to deteriorate. A prolonged
economic slowdown or recession in the U.S. or in other areas of the world could reduce the demand
for our products and, therefore, negatively affect our future sales and profits. Any of these
events could have a significant impact on our business, financial condition or results of
operations and may result in the volatility of the market price for our common stock and other
securities. Our stock price may be volatile. The market price of our common stock could be subject to significant fluctuations. Among the
factors that could affect our stock price are:  
    quarterly variations in our operating results;
    changes in revenue or earnings estimates or publication of research reports by
analysts;
    failure to meet analysts or our own revenue or earnings estimates;
    speculation in the press or investment community;
    strategic actions by us or our competitors, such as acquisitions or restructurings;
    the impact of the risks discussed herein and our ability to react effectively to
those risks; 20




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##### Table of Contents




    a change in technology that may add to manufacturing costs;
    actions by institutional stockholders;
    general market conditions; and
    domestic and international economic factors unrelated to our performance. The stock markets in general have experienced extreme volatility that has often been unrelated
to the operating performance of particular companies. These broad market fluctuations may
adversely affect the trading price of our common stock. Limited trading volume of our common stock may contribute to its price volatility. Our common stock is traded on the New York Stock Exchange. During the year ended December 31,
2004, the average daily trading volume of our common stock as reported by Bloomberg L.P. was
approximately 65,000 shares. It is uncertain whether a more active trading market in our common
stock will develop. Also, many investment banks no longer find it profitable to provide securities
research on small-cap and mid-cap companies. If analysts were to discontinue coverage of our
common stock, our trading volume may be further reduced. As a result, relatively small trades may
have a significant impact on the market price of our common stock, which could increase the
volatility and depress the price of such stock. Future sales of our common stock may cause the price of our common stock to decline or impair our
ability to raise capital in the equity markets. In the future, we may sell additional shares of our common stock in public or private
offerings, and we may also issue additional shares of common stock to finance future acquisitions.
Shares of our common stock are also available for future sales pursuant to stock options and/or
restricted stock that we have granted to certain employees and directors, and in the future we may
grant additional stock options and/or restricted stock to our employees and directors. Sales of
substantial amounts of common stock, or the perception that such sales could occur, may adversely
affect prevailing market prices for shares of our common stock and could impair our ability to
raise capital through future offerings. Provisions in our agreements, charter documents, stockholder rights plan and Delaware law may delay
or prevent an acquisition of Wolverine, which could decrease the value of our common stock. Our certificate of incorporation and bylaws and Delaware law contain provisions that could
make it more difficult for a third party to acquire us without the consent of our board of
directors. These provisions include a classified board of directors, removal of directors only for
cause, and the inability of stockholders to act by written consent or to call special meetings. In
addition, our board of directors has the right to issue preferred stock without stockholder
approval, which could be used to dilute the stock ownership of a potential hostile acquirer.
Delaware law also imposes some restrictions on mergers and other business combinations between the
Company and any holder of 15% or more of our outstanding common stock. In addition, we have
adopted a stockholder rights plan that makes it more difficult for a third party to acquire it
without the approval of our board of directors. Although we believe these provisions provide for
an opportunity to receive a higher bid by requiring potential acquirers to 21




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negotiate with our board of directors, these provisions apply even if the offer may be considered beneficial by some
stockholders. 
 Item 2. Properties We have a total of approximately 2.7 million square feet of manufacturing capacity at
facilities located in the United States, Canada, Mexico, Portugal, and China. Our corporate
headquarters is located in Huntsville, Alabama. We maintain various warehouse operations in the
United States and Canada, as well as warehouse and office space in Apeldorn, The Netherlands.
Listed below are our manufacturing facilities: Domestic Facilities Owned/
    
    PropertySize
    
    Plant Size
    
    Year
    
    Number ofEmployees atLocation
    
    Leased
    
    (acres)
    
    (square feet)
    
    Opened
    
    Dec. 31, 2004
    
    DescriptionDecatur, AL
    
    Owned
    
    
    165
    
    
    
    620,000
    
    
    
    1948
    
    
    
    736
    
    
    Produces many of
our copper tube
product lines. A
significant portion
of production in
2004 was industrial
and technical tube
as well as
wholesale tube
products. Decatur
also produces
smooth feedstock
tube for the
Ardmore, Carrollton
and Altoona
facilities.
Beginning in 2005,
technical tube
production will be
relocated to
Shawnee, OK and
Monterrey, Mexico.
This will allow for
increased
production of
industrial and
wholesale tube.
The Decatur
facility also
houses a portion of
our corporate
staff.Shawnee, OK
    
    Owned
    
    
    51
    
    
    
    309,000
    
    
    
    1974
    
    
    
    561
    
    
    Produces a majority
of our copper tube
product lines. A
significant portion
of production is
industrial and
technical tube.
Shawnee also
produces wholesale
tube products. It
produces feedstock
tube for the
Ardmore and
Carrollton
facilities, and is
capable of
supplying tube to
Altoona. Beginning
in 2005, Shawnee
will increase
production of
technical tube, and
decrease production
of wholesale tube.Jackson, TN
    
    Owned
    
    
    35
    
    
    
    240,000
    
    
    
    1998
    
    
    
    109
    
    
    Produces welded
copper enhanced
surface industrial
tube.Altoona, PA (1)
    
    Owned/
Leased
    
    
    32
    
    
    
    210,000
    
    
    
    1956
    
    
    
    252
    
    
    A redraw facility
that produces
higher value added
commercial
products, primarily
precision drawn and
cut tubular
products.Carrollton, TX
    
    Owned
    
    
    9
    
    
    
    165,000
    
    
    
    1999
    
    
    
    325
    
    
    Designs,
manufactures and
provides outsource
project management
of tubular
fabricated products
and assemblies
using various
materials including
copper, copper
alloy, aluminum,
steel and
outsourced
components.
Fabrication
capabilities range
from a single
operation to
complex brazed
assemblies.Booneville, MS
    
    Owned
    
    
    30
    
    
    
    152,000
    
    
    
    1989
    
    
    
    25
    
    
    This facility,
partially closed in
December 2003,
produces feedstock
for our Carrollton,
TX facility.Warwick, RI
    
    Owned
    
    
    3
    
    
    
    70,000
    
    
    
    1978
    
    
    
    145
    
    
    Produces brazing
filler metals,
fluxes and other
specialty alloys.Ardmore, TN
    
    Owned
    
    
    28
    
    
    
    65,000
    
    
    
    1974
    
    
    
    84
    
    
    A redraw facility
that produces
higher margin
commercial products
such as capillary
tube and specialty
fabricated
components, as well
as aluminum tubing.
 22




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(1)
    
    Leased from an industrial development agency at a cost of $3,500 annually in
perpetuity. We lease a 109,000 square foot warehouse in Tanner, AL to service the wholesale products
market in the U.S. employing 26 people. International Facilities Number ofOwned/
    
    Property
    
    Plant Size
    
    Year
    
    Employees atLocation
    
    Leased
    
    Size (acres)
    
    (square feet)
    
    Opened
    
    Dec. 31, 2004
    
    DescriptionMontreal, Quebec
    
    Owned
    
    
    25
    
    
    
    424,000
    
    
    
    1942
    
    
    
    348
    
    
    Produces wholesale
tube products,
copper and copper
alloy tube and
copper and copper
alloy rod and bar
and extruded
shapes.London, Ontario
    
    Owned
    
    
    45
    
    
    
    195,000
    
    
    
    1958
    
    
    
    280
    
    
    Produces wholesale
tube products and
industrial tube.
London also houses
corporate offices
for Wolverine Tube
(Canada) Inc.Shanghai, China (1)
    
    Leased
    
    
    3
    
    
    
    60,000
    
    
    
    1998
    
    
    
    167
    
    
    Produces technical
copper and copper alloy tube from
feedstock supplied
by local copper
tube manufacturers
and also produces
brazed assemblies.Esposende, Portugal
    
    Owned
    
    
    3
    
    
    
    33,000
    
    
    
    2001
    
    
    
    65
    
    
    Produces technical
copper and copper
alloy tube from
feedstock supplied
by European copper
and copper alloy
tube manufacturers
and brazed
assemblies.Monterrey, Mexico (2)
    
    Leased
    
    
    8
    
    
    
    130,000
    
    
    
    2004
    
    
    
    28
    
    
    Produces fabricated
components and
brazed assemblies
from feedstock
supplied by the
Shawnee, OK and
Decatur, AL
facilities.
Expected to begin
producing technical
copper and copper
alloy tube from
feedstock supplied
by the Shawnee, OK
and Montreal, Quebec facilities by
mid-year 2005.
   (1)
    
    Lease expires December 31, 2011.(2)
    
    Lease expires October 1, 2009. We lease a 45,000 square foot warehouse in London, Ontario to service the wholesale
products market in Canada employing 1 employee. We
also lease a facility in Apeldorn, The Netherlands, comprised of a
16,000 square foot warehouse and a 3,000 square foot of office space.
There were 9 employees at the Apeldorn facility at December 31, 2004. We believe that our facilities are adequate for our current and reasonably anticipated future
needs. 
 Item 3. Legal Proceedings Our facilities and operations are subject to extensive environmental laws and regulations, and
we are currently involved in various proceedings relating to environmental matters as described
under Managements Discussion and Analysis of Financial Condition and Results of Operations 
Environmental Matters and incorporated herein by reference. We are not involved in any legal
proceedings that we believe could have a material adverse effect upon our business, operating
results or financial condition. 
 Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the fourth quarter of 2004. 23




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##### Table of Contents



PART II 
  Item 5.
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our Common Stock is traded on the New York Stock Exchange under the symbol WLV. As of March
7, 2005, there were 14,985,570 shares of Common Stock outstanding, held by 273 stockholders of
record. The following table sets forth, for the periods indicated, the range of high and low reported
sale prices for our Common Stock on the New York Stock Exchange: 2004
    
    
    2003Period
    
    High
    
    
    Low
    
    
    High
    
    
    LowFirst Quarter
    
    $
    10.05
    
    
    $
    6.10
    
    
    $
    6.30
    
    
    $
    3.61Second Quarter
    
    
    12.79
    
    
    
    8.06
    
    
    
    6.99
    
    
    
    4.49Third Quarter
    

    
    13.15
    
    
    
    10.40
    
    
    
    5.88
    
    
    
    4.02Fourth Quarter
    
    
    13.09
    
    
    
    9.30
    
    
    
    6.70
    
    
    
    4.19
 We did not declare or pay cash dividends on our Common Stock during the years ended December
31, 2004, 2003 or 2002. We do not currently plan to pay cash dividends on our Common Stock. In
the foreseeable future, any future determination to pay cash dividends will depend on our results
of operations, financial condition, contractual restrictions and other factors deemed relevant by
the Board of Directors. We intend to retain earnings to support the growth of our business. In
addition, our credit agreement and senior note indentures permit us to pay dividends on the Common
Stock only if certain financial and other tests are met. 
 Item 6. Selected Financial Data The historical consolidated financial data presented below should be read in conjunction with
the information set forth under Item 7  Managements Discussion and Analysis of Financial
Condition and Results of Operations and our Consolidated Financial Statements beginning on page
F-1. The balance sheet data presented below as of December 31, 2004 and 2003 and the income
statement data presented below for each of the years in the three-year period ended December 31,
2004, are derived from our audited Consolidated Financial Statements beginning on page F-1. The
other balance sheet and income statement data presented below are derived from our previously
audited Consolidated Financial Statements for the years ended December 31, 2002, 2001 and 2000, which are
not presented herein. 24




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##### Table of Contents



Year Ended December 31,Statement of Operations Data:
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000(In thousands, except per share amounts)Net sales
    
    $
    797,875
    
    
    $
    596,324
    
    
    $
    550,523
    
    
    $
    583,114
    
    
    $
    621,464Cost of goods sold (a)
    
    
    734,194
    
    
    
    555,498
    
    
    
    492,082
    
    
    
    520,874
    
    
    
    536,351Gross profit
    
    
    63,681
    
    
    
    40,826
    
    
    
    58,441
    
    
    
    62,240
    
    
    
    85,113Selling, general and administrative expenses
    
    
    37,259
    
    
    
    32,103
    
    
    
    30,616
    
    
    
    32,254
    
    
    
    31,961Restructuring and other charges (b)
    
    
    2,536
    
    
    
    15,057
    
    
    
    
    
    
    
    1,546
    
    
    
    Operating income/(loss) from continuing operations
    
    
    23,886
    
    
    
    (6,334
    )
    
    
    27,825
    
    
    
    28,440
    
    
    
    53,152Other expense/(income):Interest expense, net
    
    
    20,860
    
    
    
    21,218
    
    
    
    19,681
    
    
    
    13,100
    
    
    
    12,168Loss/(gain) on extinguishment of debt
    
    
    3,009
    
    
    
    
    
    
    
    (1,349
    )
    
    
    
    
    
    
    Amortization and other, net
    
    
    1,261
    
    
    
    1,856
    
    
    
    1,008
    
    
    
    (447
    )
    
    
    417Goodwill impairment
    
    
    
    
    
    
    23,153
    
    
    
    
    
    
    
    
    
    
    
    Income/(loss) from continuing operations before
income taxes
    
    
    (1,244
    )
    
    
    (52,561
    )
    
    
    8,485
    
    
    
    15,787
    
    
    
    40,567Income tax provision/(benefit)
    
    
    (1,888
    )
    
    
    (13,577
    )
    
    
    1,315
    
    
    
    4,345
    
    
    
    14,660Income/(loss) from continuing operations (c)
    
    
    644
    
    
    
    (38,984
    )
    
    
    7,170
    
    
    
    11,442
    
    
    
    25,907Income/(loss) from discontinued operations, net
of tax (d)
    
    
    (262
    )
    
    
    (1,637
    )
    
    
    (1,610
    )
    
    
    (31,240
    )
    
    
    782Net income/(loss) (e)
    
    $
    382
    
    
    $
    (40,621
    )
    
    $
    5,560
    
    
    $
    (19,798
    )
    
    $
    26,689Net income/(loss) applicable to common shares (f)
    
    $
    382
    
    
    $
    (40,621
    )
    
    $
    5,502
    
    
    $
    (20,078
    )
    
    $
    26,409Income/(loss) per common share-basic:Continuing operations
    
    $
    0.05
    
    
    $
    (3.18
    )
    
    $
    0.58
    
    
    $
    0.92
    
    
    $
    2.11Discontinued operations, net of tax
    
    
    (0.02
    )
    
    
    (0.13
    )
    
    
    (0.13
    )
    
    
    (2.58
    )
    
    
    0.06Net income/(loss) per share
    
    $
    0.03
    
    
    $
    (3.31
    )
    
    $
    0.45
    
    
    $
    (1.66
    )
    
    $
    2.17Basic weighted average common shares
    
    
    13,650
    
    
    
    12,275
    
    
    
    12,231
    
    
    
    12,077
    
    
    
    12,153Income/(loss) per common share-diluted:Continuing operations
    
    $
    0.05
    
    
    $
    (3.18
    )
    
    $
    0.58
    
    
    $
    0.91
    
    
    $
    2.08Discontinued operations, net of tax
    
    
    (0.02
    )
    
    
    (0.13
    )
    
    
    (0.13
    )
    
    
    (2.54
    )
    
    
    0.06Net income/(loss) per share
    
    $
    0.03
    
    
    $
    (3.31
    )
    
    $
    0.45
    
    
    $
    (1.63
    )
    
    $
    2.14Diluted weighted average common and
common equivalent shares
    
    
    13,992
    
    
    
    12,275
    
    
    
    12,362
    
    
    
    12,307
    
    
    
    12,344
 Year Ended December 31,Other Data:
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000(In thousands, except per pound amounts)Pounds shipped
    
    

    339,417
    
    
    
    327,354
    
    
    
    310,240
    
    
    
    308,177
    
    
    
    334,846Depreciation and amortization
    
    $
    17,407
    
    
    $
    19,009
    
    
    $
    18,416
    
    
    $
    18,679
    
    
    $
    17,040Capital expenditures
    
    
    11,302
    
    
    
    5,969
    
    
    
    7,747
    
    
    
    27,612
    
    
    
    31,676Average monthly COMEX price of copper per pound (g)
    
    
    1.29
    
    
    
    0.81
    
    
    
    0.72
    
    
    
    0.73
    
    
    
    0.84
 December 31,Balance Sheet Data:
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000(In thousands)Total assets
    
    $
    587,458
    
    
    $
    553,258
    
    
    $
    550,720
    
    
    $
    539,427
    
    
    $
    584,937Total long-term debt
    
    
    237,022
    
    
    
    254,284
    
    
    
    255,712
    
    
    
    247,698
    
    
    
    231,163Redeemable cumulative preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,000
    
    
    
    2,000Stockholders equity
    
    $
    209,502
    
    
    $
    179,351
    
    
    $
    200,635
    
    
    $
    201,412
    
    
    $
    228,449
   (a)
    
    In 2001, we incurred charges that are included in cost of goods sold of approximately $1.4
million, related to realized and anticipated reductions in demand for our product, and for the
write-down of slow moving or obsolete inventory.(b)
    
    In 2004 and 2003, restructuring charges of $2.5 million ($1.7 million after tax) and $15.1
million ($9.9 million after tax), respectively were incurred (see Note 22 of the Notes to
Consolidated Financial Statements). For 2001, restructuring and other charges of
approximately $1.5 million ($1.0 million after tax) were recognized The 2001 restructuring
charge included $1.1 million in severance benefits for approximately 40 salaried and hourly
employees and $0.2 million write-off of impaired assets and $0.2 million related to a
previously closed facility.(c)
    
    Income from continuing operations for 2001 and 2000, adjusted to exclude amortization
of expense recognized related to goodwill would have been $14.1 million and $28.2 million.(d)
    
    The operating results of Wolverine Ratcliffs, Inc. include losses of $0.3 million, $1.6
million, $1.6 million and $7.3 million (in each case net of tax) for the years ended 2004,
2003, 2002 and 2001, respectively, and have been classified as discontinued operations. In
addition, we recorded an estimated $23.9 million (net of tax) loss on the disposal of the
Wolverine Ratcliffs operations in 2001 (see Note 3 of the Notes to Consolidated Financial
Statements). 25




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##### Table of Contents



(e)
    
    Net/(loss) income for 2001 and 2000, adjusted to exclude amortization expense related to
goodwill, would have been $(16.9) million and $29.2 million.(f)
    
    Reflects the payment of preferred stock dividends and accretion of preferred stock redemption
requirements.(g)
    
    Source: Metals Week. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations The following discussion of our consolidated operating results and financial condition for the
three years ended December 31, 2004, and should be read in conjunction with the Consolidated
Financial Statements and related notes beginning on page F-1. Overview Wolverine is a world-class quality manufacturer of copper and copper alloy tube, fabricated
and metal joining products, and copper and copper alloy rod and bar products. Our focus is on
custom-engineered, higher value-added tubular products, fabricated and metal joining products which
enhance performance and energy efficiency in many applications, including commercial and
residential heating, ventilation and air conditioning, refrigeration, home appliances, automotive,
industrial equipment, power generation, petro-chemicals and chemical processing. We believe that
we have the broadest product offering of any North American manufacturer of copper and copper alloy
tube, which allows the offering of packaged solutions and cross selling opportunities. Our
principal product lines are commercial products, wholesale products and rod, bar and other
products. Executive Summary Our business continues to be impacted by the significant increase in copper prices over the
last 18 months. The run up in copper prices that began in the second half of 2003 continued
throughout all of 2004. Average monthly copper prices in 2004 have ranged from a low of $1.10 per
pound to a high of $1.46 per pound. This increase in copper prices is the result of several
factors, including an imbalance between the current world supply and demand for copper, exacerbated
by Asian demand, and financial speculation in this commodity market. As a result of these factors,
in addition to higher raw material costs for copper, suppliers in 2004 increased premiums charged
on purchases of copper above the COMEX published prices for all grades of material. This situation
has also, in many cases, shortened the payment terms to raw material suppliers. We expect these
trends to continue for 2005. Our terms of sale with our commercial products customers generally allow us to pass through
the COMEX published price of copper on the day of shipment. More recently, we have been successful
in passing along to our customers, in the form of surcharges, some or all of the premiums being
paid for copper. We were successful in 2004 in increasing our average sales revenue per pound
(excluding the cost of metal) from $0.975 in 2003 to $1.045 in 2004, while maintaining tight
controls on our costs. Average cost to manufacture per pound was $0.857 per pound in 2004 as
compared to $0.850 per pound in 2003. 26




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##### Table of Contents



Due to the increase in copper prices in 2004, we have had to invest more dollars in working
capital relative to inventory and accounts receivable, partly offset by an increase in payables.
This effect has been minimized by improved accounts receivable days sales outstanding. The
increased working capital demands caused by the increase in copper prices has reduced our
liquidity, and has caused us to occasionally draw on our secured revolving credit facility. Due to
the seasonality of our business, we generally are a user of cash in the first half of the year, and
generate cash in the second half of the year. In early 2005, the Company decided to take advantage of the special 85% dividends received
deduction on the repatriation of certain foreign earnings offered under the American Jobs Creation
Act of 2004. On February 28, 2005 the Company repatriated approximately $10.2 million in
previously unremitted earnings from its Chinese subsidiary. These funds had historically been
considered as unavailable for use in the U.S. due to significant tax payments that would be due upon
repatriation. The repatriation of these funds was mostly used to reduce the Companys domestic
borrowings. The Company will take a tax charge of approximately $0.5 million in the first quarter
2005 associated with the repatriation. Demand for our products has generally increased as the overall general economy has improved.
In addition, more and more of our customers are outsourcing fabricated components which are
benefiting our fabricated products group. However, because of the increase in copper prices and
the reluctance of wholesale distributors to stock material in an uncertain commodity market, sales
of our wholesale products declined in 2004 versus 2003. General The following general factors should be considered in analyzing our results of operations: Critical Accounting Policies We base this discussion and analysis of results of operations, cash flow and financial condition on
our consolidated financial statements, which have been prepared in accordance with generally
accepted accounting principles in the U.S. Uses of Estimates The preparation of the financial statements in conformity with generally accepted accounting
principles in the U.S. requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities
at the date of the financial statements, as well as amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates. Inventory Inventories are stated at the lower of cost or market. Cost is determined using the first-in,
first-out (FIFO) method. Inventory costs include material, labor, and factory overhead. Our
maintenance and operating supplies inventory is valued using various methods across our facilities
to determine cost. In assessing the ultimate realization of inventories, we are required to make
judgments as to future demand requirements and compare these with our current 27




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##### Table of Contents



inventory levels. Obsolete or unsaleable inventories are reflected at their estimated net
realizable values. Derivatives and Hedging Activities Our earnings and cash flows are subject to fluctuations due to changes in commodity prices,
foreign currency exchange rates and interest rates. We use derivative financial instruments to
manage commodity prices, foreign currency exchange rates and interest rate exposures, though not for
speculative purposes. Derivatives used are primarily commodity forward contracts, foreign currency
forward contracts and interest rate swaps. We apply the provisions of Statement of Financial Accounting Standard No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended by Statement of Financial Accounting
Standard No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, and
by Statement of Financial Accounting Standard No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities, (collectively referred to as SFAS 133), for most of the
Companys derivatives. Some of our derivatives are designated as either a hedge of a recognized
asset or liability or an unrecognized firm commitment (fair value hedge), or a hedge of a
forecasted transaction (cash flow hedge). For fair value hedges, both the effective and
ineffective portion of the changes in the fair value of the derivative, along with any gain or loss
on the hedged item that is attributable to the hedged risk, are recorded directly to earnings. The
effective portion of changes in fair value of derivatives that are designated as cash flow hedges
are recorded in accumulated other comprehensive income, until the hedged item is realized, when the
gain/(loss) previously included in accumulated other comprehensive income is recognized in
earnings. Our foreign currency hedges are accounted for under Statement of Financial Accounting
Standard No. 52 (SFAS 52), Foreign Currency Translation. Long-lived assets The values assigned to long-lived assets such as property, plant and equipment, assets held
for sale and goodwill are reviewed as appropriate. We estimate the depreciable lives of property,
plant and equipment, and review the assets for impairment if events, or changes in circumstances,
indicate that we may not recover the carrying amount of an asset. On January 1, 2002, we adopted Statement of Financial Accounting Standard No. 142 (SFAS
142), Goodwill and Other Intangible Assets. This statement addresses financial accounting and
reporting for acquired goodwill and other intangible assets. SFAS 142 presumes that goodwill has
an indefinite useful life and, thus should not be amortized, but rather tested at least annually
for impairment using a lower of cost or fair value approach. During 2004, we conducted the
required annual goodwill impairment review, and based upon the results of this review, determined
that there is no impairment of goodwill for 2004. In 2003, we conducted a goodwill impairment
review and based on the results of that review, recorded an impairment charge of $23.2 million. If
we fail to achieve estimated growth rates and/or profit projections, if interest rates increase, or
if other estimates or assumptions change in the future, we may record additional impairment charges
for goodwill in the future. 28




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##### Table of Contents



Income Taxes For financial reporting purposes, we determine our current and deferred tax liabilities in
accordance with the liability method of accounting for income taxes as specified in Statement of
Financial Accounting Standard No. 109 (SFAS 109), Accounting for Income Taxes. Under SFAS 109,
deferred tax liabilities and assets are recorded for the expected future tax consequences of events
that have been recognized in our financial statements or tax returns. Property, plant and
equipment, inventories, prepaid pension, postretirement benefit obligations, and certain other
accrued liabilities are the primary sources of these temporary differences. Deferred income tax
also includes operating loss and tax credit carryforwards. Pension and Postretirement Benefit Costs Net pension and postretirement cost was $7.7 million, $8.1 million and $6.3 million,
respectively, for the years ended December 31, 2004, 2003 and 2002. Total estimated pension and
postretirement expense in 2005 is expected to be approximately $9.6 million. These expenses are
primarily included in cost of goods sold, and selling, general and administrative expenses. Lesser
amounts are included in restructuring charges and discontinued operations. In 2004 and 2003, we
did not make a contribution to our U.S. qualified defined benefit pension plans. In 2002, we made
a $5.0 million voluntary contribution to our U.S. qualified defined benefit pension plans. In
2004, 2003 and 2002, we made a $1.1 million, $0.6 million and $0.1 million contribution,
respectively, to our Canadian defined benefit pension plans. In 2003, we also transferred $4.3
million to a rabbi trust to partially fund the vested benefit obligations to certain executives
under our nonqualified supplemental executive retirement plan. Our pension and postretirement benefit costs are developed from actuarial valuations.
Inherent in these valuations are key assumptions including discount rates and expected long-term
rates of return on plan assets. Material changes in our pension and postretirement benefit costs
may occur in the future due to changes in these assumptions, changes in the number of plan
participants, changes in the level of benefits provided, changes to the level of contributions to
these plans and other factors. Estimates and assumptions concerning our pension and postretirement
obligations and related periodic costs can be found in Notes 12 and 13 of the Notes to Consolidated
Financial Statements. Components of Cost of Goods Sold The cost of raw materials, principally copper, is a substantial portion of our cost of goods
sold. The rise and fall of copper prices and other metal affects the levels of our net sales,
costs of goods sold and the carrying value of inventory, even in the absence of increases or
decreases in business activity. We enter into commodity forward contracts to sell copper in an
effort to protect the value of our inventory against decreases in copper prices. Thus, while these
hedges are in place, and if copper prices continue to increase, our gross margin may be affected. Variability of Wholesale Product Gross Profit Gross profit attributable to sales of our wholesale products has fluctuated and may continue
to fluctuate substantially from period to period. Gross profit/(loss) from sales of these products
was $5.9 million in 2004, $(0.3) million in 2003 and $4.4 million in 2002. Gross profit 29




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derived from the sale of wholesale products is mainly affected by changes in selling prices
and the cost of metal. Selling prices for these products are affected principally by general
economic conditions, especially the rate of housing starts, general commercial building activity,
industry competition and manufacturing capacity, industry production levels and other market
factors. All of these factors are beyond our control. Wholesale products are also the only
significant product group for which we are not able to pass metal price changes directly to our
customers. Impact of Product Mix Our products range from higher value-added and higher margin commercial products to
commodity-type products such as wholesale tube products and rod and bar products. Our overall
profitability from period to period is affected by the mix of sales within these categories. We
have substantial sales in Canada, and our product mix in that market, as compared to the U.S.
market, reflects a much higher percentage of our commodity-type products. Cyclical and Seasonal Nature of Demand Demand for our products, particularly our wholesale products, is cyclical and is significantly
affected by changes in general economic conditions that affect our customers markets. Demand in
some industries to which we sell, including the residential air conditioning industry and, to a
lesser extent, the commercial air conditioning industry, is also seasonal. Our sales to the
residential air conditioning market have historically been greater in the first and second quarters
of the year and lower in the third and fourth quarters because manufacturers typically increase
inventories in the early part of the year in anticipation of summer air conditioning sales and
housing starts. In addition, sales of industrial tube are adversely affected in years with
unusually cool summers. In 2005, we expect that, due to the federally mandated change in the SEER standard, the second
quarter will continue to be our strongest, with the third and fourth quarters relatively strong,
while the first quarter will be relatively weak. Results of Continuing Operations Year-Ended December 31, 2004, Compared with Year-Ended December 31, 2003 Total pounds shipped in 2004 were 339.4 million, versus 327.3 million pounds shipped during
2003, an increase of 12.1 million pounds or 3.7%. The increase/(decrease) in pounds shipped by
business segment was as follows: For the Year Ended December 31,%In thousands, except for
    
    
    
    
    
    
    
    
    
    Increase/
    
    
    Increase/percentages
    
    2004
    
    
    2003
    
    
    (Decrease)
    
    
    (Decrease)Commercial products
    
    
    225,996
    
    
    
    217,499
    
    
    
    8,497
    
    
    
    3.9
    %Wholesale products
    
    
    89,078
    
    
    
    90,005
    
    
    
    (927
    )
    
    
    (1.0
    )%Rod, bar and other
products
    
    
    24,343
    
    
    
    19,850
    
    
    
    4,493
    
    
    
    22.6
    %Total
    
    
    339,417
    
    
    
    327,354
    
    
    
    12,063
    
    
    
    3.7
    %
 30




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##### Table of Contents



The increase in shipments of commercial products was primarily due to improvements in the
heating, ventilation and air conditioning (HVAC) and consumer appliance markets, continued
improvement in commercial construction and the continuation of favorable outsourcing trends by
customers to our fabricated products facilities. Wholesale shipments decreased reflecting slower
demand due to the hurricanes that impacted Florida in the third quarter of 2004, and cautious
purchasing by distributors and wholesalers due to erratic and rising copper prices. Rod and bar
products shipments increased due to market share gains. Net sales increased by $201.6 million, or 33.8%, to $797.9 million for the year ended December
31, 2004 from $596.3 million for the year ended December 31, 2003. The increase in net sales by
business segment was as follows: For the Year Ended December 31,In thousands, except for
    
    
    
    
    
    
    
    
    
    $
    
    
    %percentages
    
    2004
    
    
    2003
    
    
    Increase
    
    
    IncreaseCommercial products
    
    $
    570,666
    
    
    $
    442,471
    
    
    $
    128,195
    
    
    
    29.0
    %Wholesale products
    
    
    165,215
    
    
    
    115,112
    
    
    
    50,103
    
    
    
    43.5
    %Rod, bar and other
products
    
    
    61,994
    
    
    
    38,741
    
    
    
    23,253
    
    
    
    60.0
    %Total
    
    $
    797,875
    
    
    $
    596,324
    
    
    $
    201,551
    
    
    
    33.8
    %
 Overall, the increase in revenue is due to a combination of three factors: A 59% rise in
year over year average copper prices, an 7.2% improvement in selling prices (excluding copper), and
a 3.7% rise in volume. For the 2004 year, the average monthly COMEX copper price was $1.29 per
pound, as compared to $0.81 per pound in 2003. The 7.2% improvement in selling prices reflected a
richer mix of products sold, as well as improved pricing. Gross profit increased $22.9 million, or 56.0%, to $63.7 million in 2004 from $40.8 million in
2003. The increase in gross profit is mainly attributable to improved selling prices, the increase
in sales volumes, a richer mix of products sold, the elimination of overhead from our Booneville,
MS facility, tight cost controls associated with volume efficiencies and cost reduction programs,
all partly offset by the impact of the strengthening Canadian dollar on manufacturing costs.
Average sales revenue per pound (excluding metal) increased 7.2%, to $1.045 per pound in 2004 from
$0.975 per pound in 2003, while the per pound cost to manufacture
increased overall less than 1% in
2004 to $0.857 per pound from $0.850 per pound in 2003. Gross profit as a whole increased to
$0.188 per pound in 2004 from $0.125 per pound in 2003. The increase in gross profit by business
segment was as follows: For the Year Ended December 31,In thousands, except for
    
    
    
    
    
    
    
    
    
    $
    
    
    %percentages
    
    2004
    
    
    2003
    
    
    Increase
    
    
    IncreaseCommercial products
    
    $
    52,918
    
    
    $
    38,997
    
    
    $
    13,921
    
    
    
    35.7
    %Wholesale products
    
    
    5,924
    
    
    
    (271
    )
    
    
    6,195
    
    
    NM
    *Rod, bar and other products
    
    
    4,839
    
    
    
    2,100
    
    
    
    2,739
    
    
    
    130.4
    %Total
    
    $
    63,681
    
    
    $
    40,826
    
    
    $
    22,855
    
    
    
    56.0
    %
 * Not Meaningful (NM) The improvement in gross profit for commercial products is due to a combination of price
increases and product mix, and increases due to increased volumes. Manufacturing costs 31




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decreased due to increased operational efficiencies and cost reduction programs. Average sales
revenue per pound in 2004 for commercial products (excluding metal) rose 3.8% to $1.247 per pound
from $1.201 per pound in 2003. Average cost to manufacture per pound decreased 1% to $1.014 per
pound in 2004 versus $1.021 in 2003. Gross profit for wholesale products increased primarily due to increases in selling prices,
partly offset by metal valuation and the impact of the strengthening Canadian dollar on
manufacturing costs. Average sales revenue per pound in 2004 for wholesale products (excluding
metal) increased 22.9%, to $0.580 per pound in 2004 from $0.472 per pound in 2003. Average cost to
manufacture per pound increased 8.2% or $0.039 per pound, from $0.475 in 2003 to $0.514 in 2004. Gross profit for rod, bar and other products benefited from increased volumes, improved
selling prices, partly reduced by increased manufacturing costs related
to metal valuation and the impact
of the strengthening Canadian dollar on manufacturing costs. Average sales revenue per pound in
2004 (excluding metal) increased 12.5% to $0.872 per pound in 2004 versus $0.775 in 2003. Average
cost to manufacture per pound was basically flat at $0.674 per pound as compared to $0.669 per
pound in 2003. Selling, general and administrative (SG&A) expenses were $37.3 million for 2004 versus $32.1
million for 2003, an increase of 5.2 million, or 16.2%. The increase in SG&A expense for 2004 as
compared to 2003 is mostly the result of increased employee costs, including increased incentive
compensation, increased employee benefit costs, and higher recruiting and relocation costs. In
addition, SG&A costs were also impacted in 2004 by increased professional fees, including fees
associated in complying with the internal control requirements of Section 404 of the Sarbanes-Oxley
Act of 2002, as well as other professional fees. The Company incurred restructuring expenses in 2004 of $2.5 million, as compared to $15.1
million in 2003. The restructuring expenses incurred in 2004 were mostly for severance and benefit
curtailment charges related to the transfer of equipment from our Decatur, Alabama facility to our
Shawnee, Oklahoma and Monterrey, Mexico facilities, expenses related to the ramp-down of the
Booneville, Mississippi facility, and for the sale of our previously closed Roxboro, North Carolina
facility. See Note 22 to the Notes to the Consolidated Financial Statements for more information. Operating income from continuing operations was $23.9 million for the year ended December 31,
2004, as compared to an operating loss of $(6.3) million for the year ended December 31, 2003. Net interest expense decreased $0.3 million to $20.9 million in 2004 from $21.2 million in
2003 due to lower interest costs related to the $18.6 million reduction in outstanding bonds, an
increase in interest expense related to increased average borrowings under the secured revolving
credit facility, an increase in interest expense related to rising
short term interest rates, offset by a
reduction in interest expense due to increased capitalized interest and an increase in interest income (see Note 11 to the Consolidated Financial
Statements). 32




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In 2004, the Company incurred charges of $3.0 million ($2.0 million net of tax), associated
with a loss on the extinguishment of debt, related to the repurchase of $18.6 million of our 10.5%
Senior Notes. Amortization and other, net was $1.3 million of expense in 2004, as compared to $1.9
million of expense in 2003. Amortization and other, net in 2004 included $0.2 million of foreign
currency losses. In 2004, we conducted the required annual goodwill impairment review, and based upon the
results of this review, determined that there is no impairment of goodwill for 2004. If we are
unable to achieve our estimated growth rates and profit projections, if interest rates increase or
if our other estimates or assumptions change in the future, we may be required to record impairment
charges in the future. In the third quarter of 2003, we incurred a charge of $23.2 million related
to the write-off of all of the goodwill associated with the Tube Group. A net tax benefit of $1.9 million was recorded in 2004 as compared to a net tax benefit of
$13.6 million in 2003. The effective tax rate in 2004 was (152%). The effective tax rate recorded
in 2004 reflects federal tax benefits generated in the United States, where tax rates are generally
higher than in our foreign jurisdictions and where we had significant pre-tax losses. The higher
effective rate on adjusted pre-tax losses also reflects lower foreign tax rates and tax holidays
applicable to our profitable operations in China, Portugal and Canada. A $13.6 million tax benefit
was recorded in 2003 on pretax losses from continuing operations of $52.6 million, yielding an
overall effective tax rate of 25.9%. Adjusting the pre-tax loss to exclude $20.3 million of the
$23.2 million charge for the impairment of goodwill, which is not tax deductible, yields an
adjusted effective tax rate of 42.1% for 2003. Consolidated income from continuing operations in 2004 increased by $39.6 million to $0.6
million, or $0.05 per diluted share, from a loss of $(39.0) million, or $(3.18) per diluted share,
in 2003. Year-Ended December 31, 2003, Compared with Year-Ended December 31, 2002 Total pounds shipped increased by 17.1 million pounds, or 5.5%, to 327.3 million in 2003 from
310.2 million in 2002. The increase/(decrease) in pounds shipped by business segment was as
follows: For the Year Ended December 31,%In thousands, except for
    
    
    
    
    
    
    
    
    
    Increase/
    
    
    Increase/percentages
    
    2003
    
    
    2002
    
    
    (Decrease)
    
    
    (Decrease)Commercial products
    
    
    217,499
    
    
    
    209,590
    
    
    
    7,909
    
    
    
    3.8
    %Wholesale products
    
    
    90,005
    
    
    
    79,064
    
    
    
    10,941
    
    
    
    13.8
    %Rod, bar and other
products
    
    
    19,850
    
    
    
    21,586
    
    
    
    (1,736
    )
    
    
    (8.0
    %)Total
    
    
    327,354
    
    
    
    310,240
    
    
    
    17,114
    
    
    
    5.5
    %
 The increase in shipments of commercial products was primarily due to increased shipments
of industrial tube, partially offset by declines in shipments of alloy products. Shipments of
industrial tube were strong due to the success in obtaining market share penetration for this
product in the U.S. Shipments of alloy products declined due to weaker industrial demand in the
economy. Wholesale products shipped increased due to the expansion of our 33




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customer base for these products. Pounds of rod and bar products shipped decreased due to
a weaker U.S. industrial environment. Net sales from continuing operations increased by $45.8 million, or 8.3%, to $596.3 million
for the year ended December 31, 2003 from $550.5 million for the year ended December 31, 2002. The
increase in sales by business segment was as follows: For the Year Ended December 31,In thousands,except for
    
    
    
    
    
    
    
    
    
    $
    
    
    %percentages
    
    2003
    
    
    2002
    
    
    Increase
    
    
    IncreaseCommercial products
    
    $
    442,471
    
    
    $
    421,234
    
    
    $
    21,237
    
    
    
    5.0
    %Wholesale products
    
    
    115,112
    
    
    
    93,938
    
    
    
    21,174
    
    
    
    22.5
    %Rod, bar and other
products
    
    
    38,741
    
    
    
    35,351
    
    
    
    3,390
    
    
    
    9.6
    %Total
    
    $
    596,324
    
    
    $
    550,523
    
    
    $
    45,801
    
    
    
    8.3
    %
 Net sales of commercial products increased in 2003 due to increased shipments
of industrial tube, an increase in COMEX copper prices and a favorable mix of fabricated products,
partially offset by lower volumes of alloy products and modest reductions in unit fabrication
revenues for industrial tube and joining products. Sales of wholesale products increased due to
increased shipments, as well as an increase in revenue per pound. Average sales revenue per pound
(excluding metal) was down $0.03 to $0.975 in 2003. Rod, bar and other products are primarily
those products sold from our distribution center in The Netherlands. The average monthly COMEX copper price for 2003 was $0.81 per pound, as compared to $0.72 per
pound in 2002, an increase of approximately 13.1%. Gross profit decreased $17.6 million, or 30.1%, to $40.8 million in 2003 from $58.4 million in
2002. Gross profit in 2003 was negatively impacted by the increase in metal costs for wholesale
products, decreased shipments of rod and bar products, and a modest decline in fabrication revenues
per pound for commercial products. We also incurred approximately $7.6 million of additional cost
in 2003 compared with 2002 for natural gas, healthcare, pensions and workers compensation
expenses. Gross profit also declined approximately $3.7 million due to the translation impact of
the Canadian dollar to the weak U.S. dollar. Approximately 50 percent of sales from our Canadian
operations are denominated in U.S. dollars. Additionally, gross profit declined $5.7 million due
to a loss on our copper forward contracts that we put in place to hedge against a decrease in the
valuation of our copper inventory. These losses were not entirely offset by gains on the sale of
physical inventory at prevailing market prices. Copper prices spiked sharply, especially during the fourth quarter of 2003, resulting in a
loss on our hedge positions that were not offset by the purchase of inventory, due in part to the
curtailment of our operations for the two-week holiday period in December 2003. Gross profit in
2003 also declined approximately $1.2 million because of manufacturing inefficiencies and
professional expenses related to union activities at our Decatur, Alabama and Shawnee, Oklahoma
plants. The Decatur workforce voted to remain union free while approximately 37 maintenance
employees at our Shawnee facility elected to be represented by the Arkansas Regional Council of
Carpenters/United Brotherhood of Carpenters and Joiners of America. Further, gross profit in 2003
declined because of the northeastern power outages in August 2003 which caused our London, Ontario
plant to lose approximately two production days and normal production at the plant to be
interrupted for approximately another week due to rolling black- 34




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outs. Gross profit in 2003 benefited from a $0.8 million cash payment resulting from a class
action litigation settlement in the copper market in the second quarter of 2003. The decrease in
gross profit by business segment was as follows: For the Year Ended December 31,In thousands, except for
    
    
    
    
    
    
    
    
    
    $
    
    
    %percentages
    
    2003
    
    
    2002
    
    
    Decrease
    
    
    DecreaseCommercial products
    
    $
    38,997
    
    
    $
    51,736
    
    
    $
    (12,739
    )
    
    
    (24.6
    %)Wholesale products
    
    
    (271
    )
    
    
    4,352
    
    
    
    (4,623
    )
    
    NMRod, bar and other products
    
    
    2,100
    
    
    
    2,353
    
    
    
    (253
    )
    
    
    (10.8
    %)Total
    
    $
    40,826
    
    
    $
    58,441
    
    
    $
    (17,615
    )
    
    
    (30.1
    %)
 Gross profit from commercial products decreased primarily due to specific cost increases that
are discussed in more detail above as well as the decline in average sales revenue per pound
(excluding metal). Wholesale products gross profit decreased due to an increase in metal costs which we were not
able to completely pass on to our customers, as well as specific cost increases that are discussed
in more detail above, offset somewhat by increased volumes. Metal costs increased due to an
increase in COMEX copper prices, as well as an imbalance in market supply and demand and
higher costs of recycled metal used in the production of wholesale products. Gross profit from rod, bar and other products decreased due to decreased shipments of rod and
bar products, partially offset by an increase in gross profit from the activities of our
distribution center in The Netherlands which also benefited from a strong Euro. Gross profit was
also impacted by specific cost increases that are discussed above. Consolidated SG&A expenses for the year ended December 31, 2003 increased by $1.5 million, or
4.9%, to $32.1 million, from $30.6 million in 2002. The increase in selling, general and
administrative expenses were mainly due to a $0.7 million increase in salary expense and a $1.3
million increase in pension expense, offset by a $0.9 million reduction in employee related
expenses, primarily associated with incentive pay that is tied to financial performance. Salary
expense increased due to merit and cost of living pay increases and due to the fact that selling,
general and administrative expenses in the first quarter of 2002 included a 10% pay reduction for
salaried employees which was subsequently restored. Pension expense increased primarily due to the
impact of the decline in fair value of plan assets at January 1, 2003. Operating income/(loss) from continuing operations was a loss of $(6.3) million for the year
ended December 31, 2003, as compared to income of $27.8 million in 2002. The operating loss in
2003 was primarily due to the aforementioned $17.6 reduction to gross profit, $1.5 million increase
in selling, general and administrative expenses, and $15.1 million of restructuring charges, as
described under Restructuring and Other Charges below. Consolidated net interest expense increased $1.5 million to $21.2 million in 2003 from $19.7
million in 2002. Interest expense increased $1.5 million in 2003 because on March 27, 2002, we
issued $120.0 million in principal amount of 10.5% Senior Notes replacing approximately $97.3
million of borrowings under our old revolving credit facility which had an average interest rate of
4.9% in the first quarter of 2002. Consolidated net interest expense is net of interest income and
capitalized interest of $0.6 million and $0.1 million, respectively, for 2003 35




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and $0.5 million and $0.7 million, respectively, for 2002. Consolidated net interest expense
in 2002 was also net of interest income from loans to the discontinued operations of Wolverine
Ratcliffs, Inc. of $0.8 million. Interest expense was reduced $1.1 million in 2003 and $0.3
million in 2002 from the benefit of our interest rate swap on $50 million notional amount of our
7.375% Senior Notes which we entered into in the fourth quarter of 2002. During the third and fourth quarters of 2002, we purchased $13.2 million of our 7.375% Senior
Notes in the open market at an average of 90% of face value and with an effective yield of 9.6% and
$2.0 million of our 10.5% Senior Notes at 95% of face value with an effective yield of 11.6%. We
recorded a $1.3 million gain from the extinguishment of these Senior Notes and realized a $0.5
million reduction in interest expense in 2003. Amortization and other, net was $1.9 million in 2003, as compared to $1.0 million in 2002.
Amortization and other, net in 2003 included $0.2 million of foreign currency losses. Amortization
and other, net in 2002 included $0.3 million of income related to the administration and collection
of receivables sold to us by our discontinued operations. Amortization expense in 2003 increased
$0.2 million to $1.5 million compared to $1.3 million in 2002 due to the deferred financing fees
incurred when we obtained our new financing in March 2002 . During the third quarter of 2003, we evaluated the carrying value of goodwill. Updated
valuations for each reporting unit were completed using a discounted cash flow approach based on
forward-looking information regarding market share, revenues and costs. Our valuation was based on
a 3% to 5% long-term growth rate, a discount rate of 14% and two reporting units, The Tube Group
and The Fabricated Products Group. The Tube Group consists of our Decatur, Shawnee, Jackson,
Booneville, Montreal, London, Shanghai and Esposende facilities for which we had $23.2 million of
goodwill. The Fabricated Products Group consists of our Altoona, Carrollton, Warwick, Ardmore and
Apeldorn facilities for which we have $77.2 million of goodwill. Based on the results of this
review, the fair value of The Tube Group reporting unit was less than its carrying value and we
recorded a goodwill impairment charge of $23.2 million in the third quarter of 2003. The fair
value of The Tube Group reporting unit decreased significantly from the value derived when we
tested for impairment in 2002 due to a decrease in the long-term growth rate from 4% to 3%, a
reduction in our projections of future profitability and an increase in the discount rate from 12%
to 14%. The fair value of The Fabricated Products Group reporting unit exceeded its carrying value
assuming a 5% growth rate, and thus, no impairment charge was recorded. A net tax benefit of $13.6 million was recorded in 2003 as compared to tax expense of $1.3
million in 2002. The effective tax rate in 2002 was 15.5%. The effective tax rate in 2002
reflects the favorable outcome of a tax audit in Canada that had been provided for and was
concluded in 2002. We recorded a $13.6 million tax benefit in 2003 on pretax losses from
continuing operations of $52.6 million, yielding an overall effective tax rate of 25.9%. Adjusting
our pre-tax loss to exclude $20.3 million of the $23.2 million charge for the impairment of
goodwill, which is not tax deductible, yields an adjusted effective tax rate of 42.1% for 2003.
The effective tax rate recorded in 2003 reflects federal tax benefits generated in the United
States, where tax rates are generally higher than in our foreign jurisdictions and where we had
significant pre-tax losses. The higher effective rate on adjusted pre-tax losses also reflects
lower foreign tax rates and tax holidays applicable to our profitable operations in China, Portugal
and Canada. A valuation allowance was recorded against all state net operating losses generated in 36




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2003 and 2002 because we do not believe that there will be adequate taxable income generated
in the carryforward periods through operations or reversal of timing differences to realize these
operating loss carryforwards. Consolidated income/(loss) from continuing operations in 2003 decreased by $46.2 million to a
loss of $(39.0) million, or $(3.18) per diluted share, from $7.2 million, or $0.58 per diluted
share, in 2002. Restructuring and Other Charges In 2004, we recognized restructuring charges of $2.5 million ($1.7 million net of tax). These
restructuring charges were for severance and benefit curtailment charges related to the transfer of
technical tube production from our Decatur, Alabama facility to our Shawnee, Oklahoma and
Monterrey, Mexico facilities in the amount of $0.5 million; $0.6 million of expenses related to the
ramp-down of our Booneville, Mississippi facility; and $1.4 million related to the sale of our
Roxboro, North Carolina facility closed in 1999. At December 31, 2004, remaining reserves for
restructuring charges are $0.4 million with respect to the Booneville, Mississippi closure and $0.2
million for severance costs at the Decatur, Alabama facility. In 2003, we recorded restructuring charges totaling $15.1 million ($9.9 million net of tax).
The 2003 restructuring charges included: $10.4 million related to the ramp-down of our Booneville,
Mississippi facility; a $2.6 million write-down of assets held for sale in Roxboro, North Carolina;
a $1.1 million charge related to a workforce reduction; a $0.3 million charge related to the
write-off of impaired assets at our Altoona, Pennsylvania facility; and $0.7 million of other
charges. A breakdown of these restructuring charges is as follows: Booneville, MS In the third quarter of 2003, we announced our intention to close our Booneville, Mississippi
facility. This facility produced both smooth and enhanced industrial tube, which was primarily
used by residential and commercial air conditioner manufacturers and employed approximately 140
people. In the fourth quarter of 2003, a restructuring charge was recorded in the amount of $10.4
million, and a reserve established for certain items associated with the write-down of impaired
assets, relocation of equipment, severance and other personnel related costs. The transfer of
production was substantially completed from the Booneville plant to our other facilities by
December 31, 2003. The $10.4 million charge for the Booneville facility included an $8.9 million
write-off of impaired assets (including $2.6 million of spare parts and supplies related to these
assets), $0.3 million of severance costs, and $1.2 million of other costs required for the closure
of the facility. Annual savings from this closure and reallocation of production is expected to be
approximately $3.0 million. Because of a significant increase in both internal and external customer demand for products
manufactured at the Booneville facility, we continue to use a limited number of Booneville assets
to provide additional capacity to meet this increased customer demand. Expenses at the Booneville
facility related to production continue to be charged to operations, while the plant closing
activities are reflected as restructuring expenses in accordance with Statement of Financial
Accounting Standard No. 146 (SFAS 146), Accounting for Costs 37




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Associated with Exit or Disposal Activities. The remaining assets of the Booneville facility
continue to be carried at values established at the end of 2003. Restructuring expenses of $0.6 million were recognized for the year ended December 31, 2004.
These costs were related mostly to employee medical, facility maintenance, lease termination and
other costs associated with the removal of equipment and preparation for the eventual sale of the
Booneville facility. The remaining balance in the reserve at December 31, 2004 is $0.4 million. Roxboro, NC We closed our Roxboro, North Carolina facility in 1999. All of the assets of this former
facility were re-deployed or sold, including the sale of the remaining real property during 2004
for $2.5 million. For the twelve month period ended December 31, 2004, we recognized restructuring
charges of $1.4 million, primarily for the write-down of the real property and estimated closing
costs related to the sale of this former facility. Workforce Reduction In the third quarter of 2003, the Company enacted a workforce reduction program to terminate
approximately 6% of its workforce, or about 200 employees throughout all of its facilities in North
America. A reserve in the amount of $1.1 million was established in the third quarter 2003 to
cover the costs of implementing the workforce reduction program. At December 31, 2003,
approximately $0.7 million against the $1.1 million liability for severance benefits had been paid.
At December 31, 2003, there remained $0.4 million of restructuring cost representing our remaining
cash obligations. The remaining amount of the reserve was paid out in 2004. Liquidity and Capital Resources The following table set forth selected information concerning our financial condition: December 31,
    
    
    December 31,2004
    
    
    2003(In thousands)Cash and cash equivalents
    
    $
    35,017
    
    
    $
    46,089Working capital
    
    
    201,965
    
    
    
    174,909Total debt
    
    
    238,241
    
    
    
    255,786Current ratio
    
    
    3.16
    
    
    
    3.22
 Sources of Liquidity Our principal sources of liquidity are cash and cash equivalents, cash provided by operations,
and borrowings under our bank credit facility. Cash and cash equivalents.During 2004, cash and cash equivalents decreased by $11.1 million.
Cash and cash equivalents as of December 31, 2004 and 2003 was $35.0 million and $46.1 million,
respectively, of which $23.8 million and $37.6 million, respectively, was held by subsidiaries
located outside the U.S.. In early 2005, the Company developed a repatriation plan 38




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to take advantage of a special 85% dividends received deduction on the repatriation of certain
foreign earnings offered under the American Jobs Creation Act of 2004. On February 28, 2005, the
Company repatriated approximately $10.2 million in previously unremitted earnings from its Chinese
subsidiary. These funds have historically been considered as being indefinitely invested, and
thus unavailable for use in the U.S. The repatriation of these funds was mostly used to reduce the
Companys domestic borrowings. Approximately $10.9 million and $2.5 million of cash included in cash on hand was restricted
as of December 31, 2004 and 2003, respectively, and is not available for general corporate use.
Restricted cash at December 31, 2004 includes $7.6 million related to deposits for margin calls on
our metal and natural gas hedge program, $1.8 million to secure a letter of credit for the loan
made by the Portuguese government, $0.8 million as collateral to secure the Companys travel and
purchase credit card programs, $0.4 million as a deposit for the Monterrey, Mexico facility lease
and $0.3 million in escrow related to the sale of the Companys former Roxboro, NC facility. At
December 31, 2003, restricted cash included $1.7 million to secure a letter of credit for the loan
made by the Portuguese government and $0.8 million as collateral to secure the Companys travel and
purchase credit card programs Cash generated from/(used for) operations.Cash used for operating activities in 2004 was
$8.6 million. Cash provided by operating activities in 2003 and 2002 were $0.2 million and $41.4
million, respectively. Increased working capital requirements from rising copper prices negatively
impacted cash from operations in 2004. Generally, the primary factors affecting our ability to
generate cash from operations are our ability to market and sell our products, our ability to
maintain prices of our products, and our ability to minimize costs and realize operational
efficiencies. Borrowings under our secured revolving credit facility.As of December 31, 2004, there was
$1.0 million outstanding under the secured revolving credit facility. We also had approximately
$9.2 million of standby letters of credit issued under the secured revolving credit facility and
approximately $26.6 million (subject to a $2.0 million excess availability requirement) in
additional borrowing availability thereunder at December 31, 2004. As of December 31, 2003, there
were no borrowings outstanding under the secured revolving credit facility. We had approximately
$7.9 million of standby letters of credit issued under the secured revolving credit facility and
approximately $29.2 million (subject to a $2.0 million excess availability requirement) in
additional borrowing availability thereunder at December 31, 2003. Our ability to borrow under our
secured revolving credit facility depends on the amount of available borrowing base, and our
compliance with all financial and other covenants contained in the agreement. See Financing
Agreements  Secured Revolving Credit Facility. Proceeds from the issuance of common stock.In 2004, we completed a private placement of 2.45
million shares of our common stock that resulted in approximately $23.0 million of net proceeds.
We used $20.5 million of the proceeds to repurchase $18.6 million of the 10.5% Senior Notes. The
remaining $2.5 million of net proceeds from the equity offering was used for general corporate
purposes. 39




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Uses of Liquidity Our principal uses of liquidity are working capital needs, capital expenditures and interest
and principal payments on our debt (including repurchases of our Senior Notes). Working capital needs.As noted above, net cash used by operating activities in 2004 was $8.6
million, as compared to cash provided by operating activities of $0.2 million for 2003 and $41.4
million in 2002. The increase in cash used by operations during 2004 is primarily the result of
increased working capital needs caused by the significant increase in the price of copper, and, to
a lesser extent, the increase in sales volume. Our business typically produces greater sales and
requires a greater use of cash for working capital purposes in the first half of the year, as
compared to the second half of the year when working capital is normally liquidated. The continued
rise in copper prices during the third and fourth quarters of 2004 prolonged our inability to
reduce our working capital during the second half of 2004, as is usually the case. Capital expenditures.In 2004, capital expenditures totaled $11.3 million versus $6.0 million
in 2003 and $7.7 million in 2002. Capital expenditures include asset replacement, environmental
and safety compliance, cost reduction, productivity improvement items, and, in 2004, expenditures
for our new Mexico manufacturing facility. The increase in capital
expenditures in 2004 over 2003 relates primarily to the transfer and
installation of equipment from our Booneville, Mississippi facility to our Decatur, Alabama facility, an increase in production capacity
for fin tube at our Shanghai, China facility, and an increase in
capabilities for the manufacture of fabricated products at our
Carrollton, Texas facility. We expect to spend approximately $12 million on capital
expenditures in 2005. Payments related to our outstanding debt.In 2004, we made interest payments on our debt
totaling $21.5 million, versus payments of $22.5 million in 2003 and $19.1 million in 2002. The
increase in interest payments from 2002 to 2003 results from the refinancing of existing debt and
the issuance of our 10.5% Senior Notes. The decrease in interest expense from 2003 to 2004 relates
to the repurchase in the second and third quarters of 2004 of $18.6 million of our 10.5% Senior
Notes. Funding of pension obligations.In 2004 and 2003, we did not make any contributions to our
U.S. qualified defined benefit pension plans. In 2002, we made a $5.0 million voluntary
contribution to our U.S. qualified defined benefit pension plans. In 2004, 2003 and 2002, we made
contributions of $1.1 million, $0.6 million and $0.1 million, respectively, to our Canadian defined
benefit pension plans. In 2003, we transferred $4.3 million to a rabbi trust to partially fund the
vested benefit obligations to certain executives under our Supplemental Executive Retirement Plan
(SERP). In 2005, we do not anticipate any mandatory contribution requirements to our U.S. qualified defined benefit pension plan by funding regulations or
laws. We will evaluate and may make voluntary contributions in 2005. We expect to make
contributions of $0.1 million to our SERP fund in 2005 to cover expected normal payouts. We also
anticipate paying $1.6 million as a lump sum distribution under our SERP to an executive who will
retire in 2005. In addition, we expect to make a $1.4 million contribution to our Canadian pension
plans in 2005. Outlook In early 2005, we borrowed on our secured revolving credit facility to fund normal
working capital requirement increases as is typical in the first and second quarters of our fiscal
year, and to fund the purchase of approximately 6.1 million pounds of finished goods inventory from
a foreign manufacturer. On February 2, 2005, Standard and Poors Ratings Services (S&P) lowered its rating on our
outstanding debt to B from B+, and placed us on CreditWatch with negative implications 40




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due to S&Ps expectation for very limited liquidity during the first half of 2005. On March
9, 2005, S&P removed the Company from CreditWatch and re-affirmed its B rating with an outlook of
stable. While the rating downgrade by S&P does not affect the amount or pricing of our existing
credit facilities, the action taken by S&P may affect our ability to obtain additional credit in
the future. On February 23, 2005, we amended our secured revolving credit facility to provide up to $40.0
million in availability (subject to a $2.0 million excess availability
requirement). We are also in discussions with our commercial banks to provide an
additional source of liquidity of between $25.0 million and $35.0 million. It is anticipated that this
liquidity will be available to us no later than early May 2005. With the available borrowing capacity under our secured revolving credit facility, our current
cash balances, and anticipated cash flow from continuing operations, we believe that we will be
able to satisfy existing working capital needs, interest obligations and capital expenditure
requirements. Off-Balance Sheet Arrangements As of December 31, 2004, we do not have any off-balance sheet arrangements that either have,
or are reasonably likely to have, a material current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources. Contractual Obligations and Commercial Commitments The following table provides a summary of our contractual obligations and commercial
commitments as of December 31, 2004. As of December 31, 2004, the total other non-current
liabilities included in our Consolidated Balance Sheet not presented below were $47.3 million consisting
primarily of accrued pension, post retirement and environmental costs. Refer to Notes 12, 13, 14,
and 15 of the Notes to the Consolidated Financial Statements. Payments due or expiring by periodLess than 1
    
    
    
    
    
    
    
    
    
    
    More than(In thousands)
    
    Total
    
    
    year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5 yearsContractual obligations:Long-term debt
    
    $
    238,241
    
    
    $
    1,219
    
    
    $
    1,691
    
    
    $
    235,331
    
    
    $
    Operating leases
    
    
    7,924
    
    
    
    2,756
    
    
    
    3,376
    
    
    
    975
    
    
    
    817Commitments for capital
expenditures
    
    
    2,138
    
    
    
    2,138
    
    
    
    
    
    
    
    
    
    
    
    Other purchase obligations
    
    
    1,002
    
    
    
    1,002
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    249,305
    
    
    $
    7,115
    
    
    $
    5,067
    
    
    $
    236,306
    
    
    $
    817Other commercial commitments
(by scheduled expiration
dates):Standby letters of credit
    
    $
    9,257
    
    
    $
    6,727
    
    
    $
    2,530
    
    
    
    
    
    
    
    
 At December 31, 2004 we also had commitments to purchase approximately 125 million pounds
of copper during 2005, to be priced when purchased at COMEX plus an average fixed spread of $0.05
per pound. During 2004, the average monthly COMEX price of copper ranged 41




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from $1.10 to $1.46 per pound. These commitments were negotiated in the normal course of
business and represent a portion of our copper requirements for 2005, which we anticipate will
exceed 375 million pounds. Financing Agreements Secured Revolving Credit Facility We and our U.S. and Canadian subsidiaries originally entered into our secured revolving credit
facility in March 2002, and we and our lenders have subsequently amended this facility six times,
including two amendments in 2004. As amended through December 31, 2004, the secured revolving
credit facility provided maximum aggregate borrowing availability of up to $37.5 million, subject
to a $2.0 million excess availability requirement. In February 2005, we further amended the
facility to increase the maximum aggregate borrowing availability to $40.0 million, subject to the
same excess availability requirements. The aggregate amount available under the secured revolving credit
facility includes a $12.0 million sub-limit for letters of credit issued on behalf of us and our
U.S. subsidiaries and a $7.5 million sub-limit for advances to, and letters of credit issued on
behalf of, our Canadian subsidiaries. The terms of the secured revolving credit facility include: Borrowing base: At any time before the maturity of the facility, we may draw, repay and
re-borrow amounts available under the borrowing base up to the maximum aggregate availability
discussed above. Generally, the borrowing base equals the sum of (i) 85% of our eligible accounts
receivable and (ii) the lesser of 60% of our eligible inventory and $17.5 million. The
administrative agent may establish reserve requirements, and the reserve requirements and
eligibility standards may be adjusted during the term. Interest and fees: In a March 2004 amendment, we adjusted the interest rate calculation under
the secured revolving credit facility such that borrowings generally bear interest, at our option,
at either (i) the Eurodollar rate plus a margin between 2.00% to 2.75%, depending on our fixed
charge coverage ratio, or (ii) the greater of the prime rate, adjusted federal funds rate or an
equivalent rate of interest plus a margin between 0.50% to 1.25%, depending on our fixed charge
coverage ratio. As of December 31, 2004, our interest rate on outstanding borrowings was 6.25%.
We generally pay accrued interest monthly on outstanding principal amounts, quarterly in the case
of Eurodollar loans. In addition, we pay fees and expenses based on unused borrowing availability,
outstanding letters of credit and administrative and legal costs. Maturity: In the March 2004 amendment, we extended the maturity date of our secured revolving
credit facility to March 31, 2007, at which time all amounts we borrow under the facility will be
due. We also extended the maturity date applicable to the $7.5 million sub-limit for our Canadian
subsidiaries to March 29, 2005. In February 2005, we further extended the Canadian maturity date
to March 29, 2006, at which time all amounts borrowed under that sub-limit will be due. In the
event the Canadian sub-facility is not extended past this new maturity date, we will be permitted
to repay such amounts from other available borrowings under the facility. Security and guarantees: The obligations under the secured revolving credit facility are
secured by a lien on all of our U.S. and Canadian inventory and accounts receivable and those of 42




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our U.S. and Canadian subsidiaries, as well as by 65% of the stock of certain of our foreign
subsidiaries. In addition, the $7.5 million Canadian sub-facility is guaranteed by us and our U.S.
subsidiaries. Covenants and events of default: The secured revolving credit facility contains certain
covenants which, among other things, limit our ability to incur additional indebtedness and liens;
enter into transactions with affiliates; make acquisitions; pay dividends; redeem or repurchase
capital stock or senior notes; make investments or loans; make negative pledges; consolidate,
merge, or effect asset sales; or change the nature of our business. We are also required to
satisfy certain financial covenants, including a minimum consolidated EBITDA test, a minimum fixed
charge coverage ratio test, minimum ongoing excess and gross availability tests and a capital
expenditure limitation. The 2004 amendments to the facility adjusted certain of these covenants.
The secured revolving credit facility includes customary events of default for credit facilities of
this size and type, including, without limitation, a payment default, a default in performance of
certain covenants and a default on certain of our other indebtedness. Our lenders may accelerate
all our obligations under the facility upon the occurrence of an event of default. As of December 31, 2004, we had $1.0 million of borrowings and $9.2 million of standby letters
of credit outstanding under the secured revolving credit facility, leaving approximately $26.6
million (subject to a $2 million excess availability requirement) in additional borrowing
availability thereunder. Silver Consignment and Forward Contracts Arrangement Under a consignment and forward contracts arrangement with Bank of America Precious Metals,
Inc. (BofA), as successor to Fleet Precious Metals, Inc., BofA extends to us a silver consignment facility
pursuant to which BofA consigns certain amounts of silver to us upon request, as well as a silver
forward contracts facility, pursuant to which we may contract to purchase certain amounts of silver
from BofA in the future for a set price. On September 29, 2004, we amended this arrangement to
increase the maximum value of consigned silver available to us at any time under the consignment
facility to the lesser of $17.0 million dollars or the value of 2.4 million fine troy ounces of
silver. This amendment eliminated, subject to certain conditions, the covenants contained in the
arrangement requiring a minimum consolidated year to date EBITDA and a minimum consolidated year to
date operating income after fiscal year 2004. On January 13, 2005, we further amended the
arrangement to increase the forward contract limit to $700,000, which permits us to have up to
$3.5 million in aggregate fair value of forward contracts
outstanding under this facility. As of December 31, 2004, the value of consigned silver in our inventory under the consignment
arrangement was $13.9 million. The value of silver committed to under the forward contracts
facility was $0.7 million. 10.5% Senior Notes due 2009 At December 31, 2004 we had outstanding $99.4 million in principal amount of our 10.5% Senior
Notes. Our 10.5% Senior Notes were issued pursuant to an indenture, dated as of March 27, 2002,
between us and Wachovia Bank, National Association (successor to First Union National Bank), as
trustee. Our 10.5% Senior Notes: 43




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
    have interest payment dates on April 1 and October 1 of each year;
    are redeemable after the dates and at the prices (expressed in percentages of principal
amount on the redemption date), as set forth below: Year
    
    PercentageApril 1, 2006
    
    
    105.250
    %April 1, 2007
    
    
    102.625
    %April 1, 2008 and thereafter
    
    
    100.000
    %
  
    are senior unsecured obligations and are equal priority in right of payment with any of
our existing and future senior unsecured indebtedness;
    are guaranteed by certain of our subsidiaries; and
    are subject to the terms of the indenture governing our 10.5% Senior Notes, which
contains certain covenants, including covenants that limit our ability to, among other
things, incur indebtedness, make certain restricted payments, dispose of certain assets,
enter into affiliate transactions or engage in sale/leaseback transactions. 7.375% Senior Notes due 2008 At December 31, 2004 we had outstanding $136.8 million in principal amount of our 7.375%
Senior Notes. Our 7.375% Senior Notes were issued pursuant to an indenture, dated as of August 4,
1998, between us and Wachovia Bank, National Association (successor to First Union National Bank),
as trustee. Our 7.375% Senior Notes:  
    have interest payment dates on February 1 and August 1 of each year;
    are redeemable at our option at a redemption price equal to the greater of (a) 100% of
the principal amount of our 7.375% Senior Notes to be redeemed, or (b) the sum of the
present value of the remaining scheduled payments of principal and interest thereon from
the redemption date to the maturity date, discounted to the redemption date on a semiannual
basis at the Treasury Rate plus 25 basis points, plus, in each case, accrued interest
thereon to the date of redemption;
    are senior unsecured obligations and are equal priority in right of payment with any of
our existing and future senior unsecured indebtedness;
    are guaranteed by certain of our subsidiaries, all of which are also guarantors under
the 10.5% Senior Notes issued in March 2002;
    are subject to the terms of the indenture governing our 7.375% Senior Notes, which
contains certain covenants, including covenants that limit our ability to incur
indebtedness secured by certain liens and to engage in sale/leaseback transactions. Other Credit Facilities We have a credit facility with a Netherlands bank, payable on demand and providing for
available credit up to 1.8 million euros. At December 31, 2004, we had outstanding borrowings in
U.S. dollars of $1.0 million. In 2002, we obtained an interest free loan from the Portuguese government in the amount of
1.9 million euros that matures in 2008. Based on the performance of our Portugal facility 44




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and the terms of the loan, the Portuguese government forgave 40% of the loan in 2003, or 0.7
million euros. Accordingly, we classified 0.7 million euros of the loan as deferred income in
2003, and are amortizing this into income over the life of the equipment purchased with the loan
proceeds. The loan balance at December 31, 2004 is 1.1 million euros which equates to $1.5
million U.S. dollars (based on current exchange rates). The loan
provides for annual payments in U.S. dollars of
$0.2 million in 2005, $0.2 million in 2006, $0.4 million in 2007 and $0.7 million in 2008. Market Risks We are exposed to various market risks, including changes in interest rates, commodity prices
and foreign currency rates. Market risk is the potential loss arising from adverse changes in
market rates and prices. We do not enter into derivatives or other financial instruments for
trading or speculative purposes. In the ordinary course of business, we enter into various types
of transactions involving financial instruments to manage and reduce the impact of changes in
interest rates, commodity prices and foreign exchange rates. Interest Rate Risk The fair market value of long-term fixed interest rate debt is subject to interest rate risk.
Generally, the fair market value of fixed interest rate debt will increase as interest rates fall
and decrease as interest rates rise. The estimated fair value of our total long-term fixed
interest rate debt as of December 31, 2004 and 2003 was $243.7 million and $246.9 million,
respectively, versus a carrying value of $235.3 million and $253.5 million as of December 31, 2004
and 2003, respectively. A 1% increase from prevailing interest rates would result in a decrease in
fair value of this debt by approximately $5.9 million as of December 31, 2004. The estimated fair
market value of our debt is based upon the indicative bid price for our Senior Notes which
approximates their trade value. The yield implicit in the value of the 7.375% Senior Notes is
7.70% and 6.93% for the 10.5% Senior Notes as of December 31, 2004. Generally, changes in the
market value of our fixed-rate debt do not affect us, unless we repurchase the debt in the open
market. In October 2002, we completed an interest rate swap on $50.0 million notional amount of our
7.375% Senior Notes. The terms of the interest rate swap are a semi-annual payment date of
February 1 and August 1, a floating rate option of the six-month LIBOR rate plus a spread of 3.76%
and a termination date of August 1, 2008. The interest rate swap is accounted for as a fair value hedge and because the terms of the
debt and the payments to be received on the swap coincide, the hedge is considered perfectly
effective against the changes in the fair value of the debt over its term. The swap agreement was
executed in order to (i) convert a portion of the Senior Notes fixed-rate debt into floating-rate
debt; (ii) maintain a capital structure containing appropriate amounts of fixed and floating-rate
debt; and (iii) reduce net interest payments and expense in the near-term. As of December 31, 2004, we recorded the fair market value of the interest rate swap of $0.7
million as accrued liabilities with a corresponding decrease to the hedged debt. Interest payments
are recognized through interest expense and are made and received on the first day of each February
and August, which commenced on February 1, 2003 and will end on the maturity date. Since the
interest rate is not known until the end of each semi-annual interest period, estimates are used
during such period based upon published forward-looking LIBOR rates. Any 45




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differences between the estimated interest expense and the actual interest payment are
recorded to interest expense at the end of each semi-annual interest period. The interest rate
swap resulted in a reduction to interest expense in 2004 and 2003 of $0.7 million and $1.1 million,
respectively. We anticipate that under the terms of the swap, and with rising short-term interest
rates, our interest expense will increase in 2005 by approximately $0.2 million. Our obligations
under this swap agreement are secured on the same basis as our obligations under our secured
revolving credit facility. For the year ended December 31, 2004, the interest rate swap effectively converted $50 million
of fixed rate 7.375% Senior Notes to a variable rate of 6.065%. Commodity Price Risk In most cases, the price our customers pay for a product includes a metal charge that
represents the market value of the copper used in that product as of the date we ship the product
to the customer. However, as an accommodation to our customers, we often enter into fixed price
commitments to purchase copper on their behalf in order to fix the price of copper in advance of
shipment. We account for these transactions as cash flow hedges under SFAS 133. As of December
31, 2004, we had entered into contracts hedging the raw material requirements for committed and
anticipated future customer sales through December 2006 having an aggregate notional value of $10.5
million. At December 31, 2003, we had entered into contracts hedging the raw material requirements
for committed and anticipated future sales through December 2004 having an aggregate notional value
of $20.6 million. The fair value of these derivative assets is recognized in prepaid expenses and
other in the Consolidated Balance Sheet. For fiscal year 2004, the ineffectiveness associated with this type of cash flow hedge was
insignificant. The hedge ineffectiveness was recognized in the consolidated statement
of operations under cost of goods sold. At December 31, 2004 and 2003, the net deferred amount
recognized in accumulated other comprehensive loss was a net gain of $1.1 million and $3.0 million,
respectively. The Company expects $1.1 million of this gain to be transferred out of accumulated
other comprehensive loss and recognized in earnings over the next 12 months. A 10% decline in
commodity prices would reduce the estimated fair value of the outstanding contracts at December 31,
2004 by $1.4 million. We have firm-price purchase commitments with some of our copper suppliers under which we agree
to buy copper at a price set in advance of the actual delivery of that copper to us. Under these
arrangements, we assume the risk of a price decrease in the market price of copper between the time
this price is fixed, and the time the copper is delivered. In order to reduce our market exposure
to price decreases, at the time we enter into a firm-price purchase commitment, we also often enter
into commodity forward contracts to sell a like amount of copper at the then-current price for
delivery to the counter party at a later date. We account for these transactions as cash flow
hedges under SFAS 133. At December 31, 2004, we had entered into contracts hedging the raw
material requirements for committed future purchases through March 2005 having an aggregate
notional value of $26.1 million. At December 31, 2003, we had entered into contracts hedging the
raw material requirements for committed future purchases through February 2004 having an aggregate
notional value of $5.5 million. The fair value of these derivative liabilities is recognized in
accrued liabilities in the Consolidated Balance Sheet. For fiscal year 2004, the ineffectiveness associated with this type of cash
flow hedge was an insignificant gain. The hedge ineffectiveness was recognized in the
consolidated statement of operations under cost of goods sold. At December 31, 2004 and 2003, the
net deferred amount recognized in accumulated other comprehensive loss was a net loss of $0.9
million and $0.5 million, respectively. The Company expects $0.9 million of this loss to be
transferred out of accumulated other comprehensive loss and recognized in earnings over the next 3
months. A 10% increase in commodity prices would further increase the loss on the outstanding
contracts at December 31, 2004 by another $2.7 million. We have entered into
commodity forward contracts to sell copper having an aggregate notional value of
$64.1 million at December 31, 2004 in order to hedge or protect the value of the
copper carried in our inventory from price decreases. At December 31, 2003, we
had entered into commodity forward contracts to sell copper having an aggregate
notional value of $32.7 million. During 2003 and the first three quarters of
2004, these forward contracts were not designated as hedges, and were marked to
market each period, with the corresponding gains and losses recorded in cost of
goods sold. Beginning in the fourth quarter of 2004, we began accounting for
these forward contracts as fair value hedges under SFAS 133. The fair value of
these derivative liabilities is recognized in accrued liabilities in the
Consolidated Balance Sheet. For fiscal year 2004, the ineffectiveness associated
with this type of fair value hedge was a net loss of $0.5 million. The hedge
ineffectiveness was recognized in the consolidated statement of operations in
cost of goods sold. The estimated fair value of the contracts outstanding based
upon forward rates at December 31, 2004 was a net loss of approximately $1.8
million and $3.8 million at December 31, 2003. A 10% increase in commodity
prices would further increase the estimated loss on the outstanding contracts by
another $6.6 million at December 31, 2004. 46




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We have also entered into commodity futures contracts to purchase natural gas to reduce our
risk of future price increases. We account for these transactions as cash flow hedges under SFAS
133. The fair value of these derivative assets is recognized in prepaid expenses and other assets in the Consolidated Balance Sheet.
At December 31, 2004, we had commodity futures contracts to purchase natural gas for the period
January 2005 through December 2006 with an aggregate notional amount of $11.9 million. As of
December 31, 2003, we had commodity futures contracts to purchase natural gas for the period
February 2004 through December 2004 with an aggregate notional amount of $6.0 million. For fiscal
year 2004, there was no recognized ineffectiveness. At December 31, 2004 and 2003, the net
deferred gain recognized in accumulated other comprehensive loss was a net gain of $0.1 million and
$0.3 million, respectively. The Company expects $53 thousand of this net gain to be transferred
out of accumulated other comprehensive loss and recognized in earnings over the next 12 months.
The effect of a 10% decline in natural gas commodity prices at December 31, 2004 would result in
the decline in value of the futures contracts of approximately $1.2 million. Foreign Currency Risk Our foreign currency exposures relate primarily to changes in exchange rates among the U.S.
dollar, Canadian dollar, Euro and British Pound Sterling. Some of our operations use foreign
exchange forward contracts to hedge fixed purchase and sales commitments denominated in a foreign
currency. We do not enter into forward exchange contracts for trading or speculative purposes.
These forward contracts and the underlying hedged receivables and payables are carried at their
fair values with any associated gains and losses recognized in current period earnings. As of December 31, 2004, we had forward exchange contracts outstanding to purchase foreign
currency through December 2005 with an aggregate notional amount of $8.8 million. The amount of
the impact of these hedges on the consolidated statement of
operations for 2004 was a net gain of $0.8 million, and was recognized in the consolidated statement of operations under amortization and
other, net. At December 31, 2004, the outstanding forward exchange contracts to purchase foreign
currency had an unrealized net gain of $0.3 million. A 10% adverse change in quoted foreign currency
exchange rates at December 31, 2004 would result in a decline in value of these forward exchange
contracts by approximately $1.1 million. We also had forward exchange contracts outstanding to
sell foreign currency at December 31, 2004 with an aggregate notional amount of $1.7 million. The
amount of the impact of these hedges on the consolidated statement of operations for 2004 was a net
loss of $0.1 million, and was recognized in the consolidated statement of operations under
amortization and other, net. At December 31, 2004, the outstanding forward exchange contracts to
sell foreign currency had an unrealized loss of $0.1 million. A 10% adverse change in quoted
foreign currency exchange rates at December 31, 2004 would result in a decline in value of these
forward exchange contracts by approximately $0.3 million. As of December 31, 2003, we had forward exchange contracts outstanding to purchase foreign
currency with an aggregate notional amount of $11.4 million and to sell foreign currency with an
aggregate notional amount of $0.9 million. As of December 31, 2003, we had an insignificant
unrealized gain associated with these forward contracts. The potential loss in fair value for
these forward contracts from a 10% adverse change in quoted foreign currency exchange rates would
have been approximately $1.2 million. Material Limitations The disclosures with respect to the above noted risks do not take into account the underlying
commitments or anticipated transactions. If the underlying items were included in the analysis,
the gains or losses on the forward contracts may be offset. Actual results will be determined by a
number of factors that are not generally under our control and could vary significantly from those
factors disclosed. 47




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We are exposed to credit losses in the event of nonperformance by counterparties on the above
instruments, as well as credit or performance risk with respect to our hedged customers
commitments. Although nonperformance is possible, we do not anticipate nonperformance by any of
these parties. Environmental Matters Our facilities and operations are subject to extensive environmental laws and regulations.
During the year ended December 31, 2004, we spent approximately $0.2 million on environmental
matters, which included remediation costs, monitoring costs, legal and other costs. We had a
reserve of $1.0 million at December 31, 2004 for undiscounted environmental remediation costs which
is reflected in our Consolidated Balance Sheet. We expect to spend approximately $2.1 million for
capital expenditures for regulatory matters, relating to environmental, health and safety during
2005. Based upon currently available information, we believe that the costs of the environmental
matters described below are not reasonably likely to have a material adverse effect on our
business, financial condition or results of operations. However, actual costs related to
environmental matters could differ materially from the amounts we estimated and accrued at December
31, 2004 and could result in additional exposure if these environmental matters are not resolved as
anticipated. Decatur, Alabama In 1999, we entered into a Consent Order under Section 3008(h) of the Resource Conservation
and Recovery Act. This order incorporated the Corrective Measures Study, commonly referred to as
the CMS, submitted to the Environmental Protection Agency (the EPA) regarding a waste burial site
at the Decatur, Alabama facility. The order also included an upgrade to an existing chrome ground
water remediation system. Part of the ground water contamination plume had previously been detected underneath a section
of property not owned by us. Since December 2002, samples taken from the adjoining property
indicate there are no longer detectable levels of chrome beyond our property. We believe that due
to our remediation efforts, this plume has retracted and attenuated, and will continue to do so. In July of 2000, we notified the EPA and the Alabama Department of Environmental Management
(ADEM) that low levels of volatile organic compounds and petroleum hydrocarbons had been detected
in the ground water at the Decatur, Alabama facility during an expansion of the facility. On June
13, 2001, we received a letter from ADEM stating that a preliminary assessment would be
forthcoming, but no further correspondence has been received to date. If and when the assessment
is received, we will take the necessary steps to comply with the findings of the assessment, and if
needed, to re-assess the sufficiency of our reserves. The estimated remaining assessment, monitoring, remedial, legal and other costs related to the
environmental matters at our Decatur, Alabama facility are $0.2 million as of December 31, 2004. 48




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Ardmore, Tennessee On December 28, 1995, we entered into a Consent Order and Agreement with the Tennessee
Division of Superfund (Tennessee Division), relating to the Ardmore, Tennessee facility, under
which we agreed to conduct an assessment on whether volatile organic compounds detected in and near
the municipal drinking water supply are related to the Ardmore facility and, if necessary, to
undertake an appropriate response. That site assessment revealed contamination, including elevated
concentrations of volatile organic compounds, in the soil in areas of the Ardmore facility, and
also revealed elevated levels of certain volatile organic compounds in the shallow residuum ground
water zone at the Ardmore facility. The water currently delivered to residents by the municipality is treated prior to human
consumption, and thus does not contain volatile organic compounds above acceptable drinking water
standards. We do not know whether the municipality may have delivered untreated water to its water
consumers prior to the installation of the water treatment process. However, due to dilution with
non-contaminated water, which we believe occurs in the operation of the municipal well system, it
is unlikely that any consumer was exposed in the past to volatile organic compounds above
acceptable drinking water standards. No notice or threat of any claim has been made from the
municipality or its residents with respect to the drinking water. The Tennessee Division has approved an interim corrective measures action plan. The interim
corrective measures will use the dual phase extraction system. Installation of the system is
expected to begin in April 2005, and be operational in July 2005. Based on recent testing
efforts at the facility and available information, it is estimated that costs of between $0.8
million and $2.0 million will be incurred to complete the investigation and remediate this site. Altoona, Pennsylvania On August 26, 1999, we entered our Altoona, Pennsylvania facility into the State of
Pennsylvania Department of Environmental Protection Act II Program. This program addresses
contamination issues related to closed hazardous waste lagoons and oil contamination of soil. The
previous site owner closed the hazardous waste lagoons at this site in 1982. A Remedial
Investigation/Feasibility Study (RIFS) was submitted to the Pennsylvania Department of
Environmental Protection on April 20, 2004. Remaining costs which may be needed to complete the
investigation phase of the program are estimated to be $2,000. No active remediation is
anticipated at this site. However, we are still awaiting a response from the Pennsylvania
Department of Environmental Protection to our RIFS. Impact of Recently Issued Accounting Standards See Note 2, Summary of Significant Accounting Policies  Recent Accounting Pronouncements, of
the Notes to Consolidated Financial Statements. 49




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Item 7A. Quantitative and Qualitative Disclosures about Market Risk The information required by this item is contained in Item 7  Managements Discussion and
Analysis of Financial Condition and Results of Operations and is incorporated herein by reference. 
 Item 8. Financial Statements and Supplementary Data PageConsolidated Statements of OperationsFor the years ended December 31, 2004, 2003 and 2002.
    
    
    F-1Consolidated Balance SheetsDecember 31, 2004 and 2003.
    
    
    F-2Consolidated Statements of Stockholders EquityFor the years ended December 31, 2004, 2003 and 2002.
    
    
    F-3Consolidated Statements of Cash FlowsFor the years ended December 31, 2004, 2003 and 2002.
    
    
    F-4Notes to Consolidated Financial Statements.
    
    
    F-5Report of Independent Registered Public Accounting Firm.
    
    
    F-49Report
of Independent Registered Public Accounting Firm.
    
    
    F-50Report of Independent Registered Public Accounting Firm.
    
    
    F-51
 
  Item 9.
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure On August 19, 2004, Ernst & Young LLP resigned as the registered public accounting firm of
Wolverine. The reports of Ernst & Young LLP on Wolverines audited consolidated financial statements as
of and for each of the years ended December 31, 2003 and December 31, 2002 did not contain any
adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope, or accounting principles. In connection with Ernst & Young LLPs audits for the fiscal years ended December 31, 2003 and
December 31, 2002, and during the subsequent interim period through August 19, 2004, Wolverine has
had no disagreements with Ernst & Young LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which disagreements, if not
resolved to the satisfaction of Ernst & Young LLP, would have caused Ernst & Young LLP to make
reference to the subject matter of the disagreement in their report on Wolverines consolidated
financial statements for such periods. In addition, during the 50




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fiscal years ended December 31,
2002 and 2003, and through August 19, 2004, there have been no reportable events
as described in Item 304(a)(1)(v) of Regulation S-K. Wolverine
provided Ernst & Young LLP with a copy of the foregoing
disclosures in connection with the filing of Wolverines Current
Report on Form 8-K/A on August 25, 2004. A copy of Ernst & Young
LLPs letter addressed to the Securities and Exchange Commission, dated August 25, 2004, stating
its agreement with such disclosures is attached as Exhibit 16.1
to that Current Report, as well as this Annual Report. Also on August 19, 2004, Wolverine engaged KPMG LLP as its registered public accounting firm.
Wolverines decision to engage KPMG LLP was approved by its audit committee and its board of
directors. During the fiscal years ended December 31, 2002 and
2003, and through August 19, 2004, Wolverine has not
consulted with KPMG LLP regarding either (i) the application of accounting principles to a proposed
or completed specified transaction or the type of audit opinion that might be rendered on
Wolverines consolidated financial statements, or (ii) any matter that was either the subject of a
disagreement as described in Item 304(a)(1)(iv) of Regulation S-K or a reportable event as
described in Item 304(a)(1)(v) of Regulation S-K. 
 Item 9A. Controls and Procedures Evaluation of Disclosure
Controls and Procedures Under
the supervision and with the participation of management, including
our Chief Executive Officer, Dennis J. Horowitz, and our Chief
Financial Officer, James E. Deason, we carried out an evaluation
of the effectiveness of our disclosure controls and procedures (as
defined in Rule 13a-15(c) under the Securities Exchange Act of
1934, as amended (the Exchange Act)) as of the end of the
period covered by this report. Based upon that evaluation, Messrs.
Horowitz and Deason have concluded that, as of the end of the period covered by
this report, our disclosure controls and procedures were effective. Changes in Internal
Control over Financial Reporting Based
upon the evaluation performed by our management, which was conducted
with the participation of Messrs. Horowitz and Deason, there has been
no change in our internal control over financial reporting during the
fourth quarter of 2004 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting. Managements Report on Internal Control over Financial Reporting Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting as such term is defined in
Exchange Act Rule 13a-15(f). Management, with the participation
of Messrs. Horowitz and Deason, assessed the effectiveness of our
internal control over financial reporting as of December 31,
2004. In making this assessment, management used the framework set
forth in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
Based upon this assessment, our management concluded that, as of
December 31, 2004, our internal control over financial reporting
was effective. Our independent registered public accounting firm,
KPMG LLP, has issued an attestation report on managements
assessment of our internal control over financial reporting, which
report is included herein. 51




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Item 9B. Other
Information None. 52




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PART III 
 Item 10. Directors and Executive Officers of the Registrant The information required by this item with respect to our directors, audit committee, and our
audit committee financial experts is incorporated by reference from the information under the
caption Election of Directors contained in our definitive proxy statement for the 2005 Annual
Meeting of Stockholders. The required information concerning our executive officers is contained
in Part I of this report. The required information concerning our adoption of a code of ethics
that applies to our chief executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions and the availability of this code of
ethics upon written request is contained in Part I 
Item 1. Business  General of this report. The
required information concerning compliance with Section 16(a) of the Exchange Act is
incorporated by reference from the information under the caption Section 16(a) Beneficial Ownership
Reporting Compliance contained in our definitive proxy statement for the 2005 Annual Meeting of
Stockholders. 
 Item 11. Executive Compensation The information required by this item is incorporated by reference from the information under
the captions Executive Compensation and Company Stock Price Performance in our definitive proxy
statement for the 2005 Annual Meeting of Stockholders. 
  Item 12.
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item is incorporated by reference from the information under
the caption Stock Ownership of Certain Beneficial Owners and Management and Executive
Compensation  Equity Compensation Plan Information in our definitive proxy statement for the 2005
Annual Meeting of Stockholders. 
 Item 13. Certain Relationships and Related Transactions The information required by this item is incorporated by reference from the information
contained under the caption Executive Compensation  Certain Relationships and Related
Transactions in our definitive proxy statement for the 2005 Annual Meeting of Stockholders. 
 Item 14. Principal Accounting Fees and Services The information required by this item is incorporated by reference from the information under
the caption Ratification of Appointment of Independent Auditors  Principal Accounting Firm Fees
and Ratification of Appointment of Independent Auditors  Audit Committees Pre-Approval Policies
and Procedures contained in our definitive proxy statement for the 2005 Annual Meeting of
Stockholders. 53




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PART IV 
 Item 15. Exhibits and Financial Statement Schedules (a) Index to exhibits, financial statements and schedules.  (1)
    The following consolidated financial statements and reports are included beginning on page F-1 hereof:Consolidated Statements of Operations  For the years ended December 31, 2004, 2003, and
2002.Consolidated Balance Sheets  December 31, 2004 and 2003.Consolidated Statements of Stockholders Equity  For the years ended December 31, 2004,
2003 and 2002.Consolidated Statements of Cash Flows  For the years ended December 31, 2004, 2003 and
2002.Notes to Consolidated Financial Statements.Report of Independent Registered Public Accounting Firm.Report of Independent Registered Public Accounting Firm.Report of Independent Registered Public Accounting Firm.(2)
    The following consolidated financial statement schedule of the Company is included on
page S-1 hereof:SCHEDULE II           Valuation and Qualifying AccountsAll other financial statements and schedules not listed have been omitted since the
required information is included in the consolidated financial statements or the notes
thereto, or is not applicable or required.(3)
    Exhibits required by Item 601 of Regulation S-K: The following exhibits are included in this Form 10-K: Exhibit No.
    
    Description10.47
    
    Ninth Amendment and Agreement to Consignment and Forward
Contracts Agreement dated as of January 13, 2005, among the
Company, certain of the Companys subsidiaries and Bank of
America Precious Metals, Inc. (as successor to Fleet Precious Metals,
Inc.)21
    
    List of Subsidiaries23.1
    
    Consent of Independent Registered Public Accounting
Firm
 54




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Exhibit No.
    
    Description23.2
    
    Consent of Independent Registered
Public Accounting Firm.31.1
    
    Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 The following exhibits are incorporated by reference: Exhibit No.
    
    Description3.1
    
    Restated Certificate of Incorporation of the Company, as
amended through May 1, 1998 (incorporated by reference to
Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q
for the period ended July 4, 1998).3.2
    
    Secretarys Certificate, dated February 6, 2004, attached to
a complete copy of the Bylaws of the Company, as amended May
22, 1997 (incorporated by reference to Exhibit 3.3 to the
Companys Annual Report on Form 10-K for the period ended
December 31, 2003).4.1
    
    Rights Agreement, dated as of February 13, 1996, between the
Company and Society National Bank, as Rights Agent
(incorporated by reference to Exhibit 4.0 to the Companys
Registration Statement on Form 8-A, filed on February 22,
1996).4.2
    
    Indenture, dated as of August 4, 1998, among the Company,
certain of the Companys subsidiaries and Wachovia Bank, N.A.
(successor to First Union National Bank) as Trustee
(incorporated by reference to Exhibit 4.1 to the Companys
Quarterly Report on Form 10-Q for the period ended July 4,
1998).4.3
    
    Indenture, dated as of March 27, 2002, among the Company,
certain of the Companys subsidiaries and Wachovia Bank, N.A.
(successor to First Union National Bank), as Trustee
(incorporated by reference to Exhibit 4.3 to the Companys
Annual Report on Form 10-K for the period ended December 31,
2001).10.1
    
    Credit Agreement, dated as of March 27, 2002, among the
Company, certain of the Companys subsidiaries, the lenders
named therein, Wachovia Bank, N.A. as Administrative Agent
and Congress Financial Corporation (Canada), as Canadian
Agent (incorporated by reference to Exhibit 10.29 to the
Companys Annual Report on Form 10-K for the period ended
December 31, 2001).
 55




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Exhibit No.
    
    Description10.2
    
    Amendment No. 1 to Credit Agreement, dated as of September
27, 2002, by and among the Company, certain of the Companys
subsidiaries, the lenders named therein, Wachovia Bank, N.A.
as Administrative Agent and Congress Financial Corporation
(Canada), as Canadian Agent (incorporated by reference to
Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q
for the period ended September 29, 2002).10.3
    
    Amendment No. 2 to Credit Agreement, dated as of March 25,
2003, by and among the Company, certain of the Companys
subsidiaries, the lenders named therein, Wachovia Bank, N.A.
as Administrative Agent and Congress Financial Corporation
(Canada), as Canadian Agent (incorporated by reference to
Exhibit 10.21 to the Companys Annual Report on Form 10-K for
the period ended December 31, 2002).10.4
    
    Amendment No. 3 to Credit Agreement, dated as of September
28, 2003, by and among the Company, certain of the Companys
subsidiaries, the lenders named therein, Wachovia Bank, N.A.
as Administrative Agent and Congress Financial Corporation
(Canada), as Canadian Agent (incorporated by reference to
Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q
for the period ended September 28, 2003).10.5
    
    Amendment No. 4 to Credit Agreement, dated as of March 31,
2004, by and among the Company, certain of the Companys
subsidiaries, the lenders named therein, Wachovia Bank, N.A.
as Administrative Agent and Congress Financial Corporation
(Canada), as Canadian Agent (incorporated by reference to
Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q
for the period ended April 4, 2004).10.6
    
    Amendment No. 5 to Credit Agreement, dated as of September
27, 2004, by and among the Company, certain of the Companys
subsidiaries, the lenders named therein, Wachovia Bank, N.A.
as Administrative Agent and Congress Financial Corporation
(Canada), as Canadian Agent (incorporated by reference to
Exhibit 10.5 to the Companys Quarterly Report on Form 10-Q
for the period ended October 3, 2004).10.7
    
    Amendment No. 6 to Credit Agreement, dated as of February 23,
2005, by and among the Company, certain of the Companys
subsidiaries, the lenders named therein, Wachovia Bank, N.A.
as Administrative Agent and Congress Financial Corporation
(Canada), as Canadian Agent (incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K
filed on March 1, 2005).10.8
    
    Pledge Agreement, dated as of March 27, 2002, by and among
the Company, certain of the Companys subsidiaries and
Wachovia Bank, N.A. as Administrative Agent (incorporated by
reference to Exhibit 99.2 to the Companys Current Report on
Form 8-K filed on June 24, 2004).10.9
    
    First Amendment to Pledge Agreement, dated as of August 30,
2002, by and among the Company, certain of the Companys
subsidiaries and Wachovia Bank, N.A. as Administrative Agent
(incorporated by reference to Exhibit 10.2 to the Companys
Quarterly Report on Form 10-Q for the period ended September
29, 2002).
 56




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Exhibit No.
    
    Description10.10
    
    Joinder Agreement, dated as of September 27, 2002, by and
among Wolverine Joining Technologies, LLC, Small Tube
Manufacturing, LLC, Wolverine Finance, LLC, the Company and
Wachovia Bank, N.A. as Administrative Agent (incorporated by
reference to Exhibit 10.3 to the Companys Quarterly Report
on Form 10-Q for the period ended September 29, 2002).10.11
    
    Consignment, Forward Contracts and Trading Line Agreement,
dated as of March 28, 2001, among the Company, certain of the
Companys subsidiaries and Bank of America Precious Metals,
Inc., as successor to Fleet Precious Metals, Inc. (incorporated by
reference to Exhibit 10.2 to the Companys Quarterly Report
on Form 10-Q for the period ended April 4, 2004).10.12
    
    First Amendment and Agreement, and Limited Waiver, to
Consignment, Forward Contracts and Trading Line Agreement,
dated as of August 8, 2001, among the Company, certain of the
Companys subsidiaries and Bank of America Precious Metals,
Inc., as successor to Fleet Precious Metals, Inc. (incorporated by
reference to Exhibit 10.3 to the Companys Quarterly Report
on Form 10-Q for the period ended April 4, 2004).10.13
    
    Second Amendment and Agreement to Consignment, Forward
Contracts and Trading Line Agreement, dated as of April 16,
2002, among the Company, certain of the Companys
subsidiaries and Bank of America Precious Metals, Inc.,
as successor to Fleet Precious Metals, Inc. (incorporated by
reference to Exhibit 10.4 to the Companys Quarterly Report
on Form 10-Q for the period ended April 4, 2004).10.14
    
    Third Amendment and Agreement to Consignment, Forward
Contracts and Trading Line Agreement, dated as of October 1,
2002, among the Company, certain of the Companys
subsidiaries and Bank of America Precious Metals, Inc.,
as successor to Fleet Precious Metals, Inc. (incorporated by
reference to Exhibit 10.5 to the Companys Quarterly Report
on Form 10-Q for the period ended April 4, 2004).10.15
    
    Fourth Amendment and Agreement to Consignment, Forward
Contracts and Trading Line Agreement, dated as of March 27,
2003, among the Company, certain of the Companys
subsidiaries and Bank of America Precious Metals, Inc.,
as successor to Fleet Precious Metals, Inc. (incorporated by
reference to Exhibit 10.6 to the Companys Quarterly Report
on Form 10-Q for the period ended April 4, 2004).10.16
    
    Fifth Amendment and Agreement to Consignment, Forward
Contracts and Trading Line Agreement, dated as of September
28, 2003, among the Company, certain of the Companys
subsidiaries and Bank of America Precious Metals, Inc.,
as successor to Fleet Precious Metals, Inc. (incorporated by
reference to Exhibit 10.7 to the Companys Quarterly Report
on Form 10-Q for the period ended April 4, 2004).
 57




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Exhibit No.
    
    Description10.17
    
    Sixth Amendment and Agreement to Consignment, Forward
Contracts and Trading Line Agreement, dated as of December
31, 2003, among the Company, certain of the Companys
subsidiaries and Bank of America Precious Metals, Inc.,
as successor to Fleet Precious Metals, Inc. (incorporated by
reference to Exhibit 10.8 to the Companys Quarterly Report
on Form 10-Q for the period ended April 4, 2004).10.18
    
    Seventh Amendment and Agreement to Consignment and Forward
Contracts Agreement, dated as of March 31, 2004, among the
Company, certain of the Companys subsidiaries and Bank of
America Precious Metals, Inc., as successor to Fleet Precious
Metals, Inc. (incorporated by reference to Exhibit 10.9 to
the Companys Quarterly Report on Form 10-Q for the period
ended April 4, 2004).10.19
    
    Eighth Amendment and Agreement to Consignment and Forward
Contracts Agreement, dated as of September 29, 2004, among
the Company, certain of the Companys subsidiaries and Bank
of America Precious Metals, Inc., as successor to Fleet Precious
Metals, Inc. (incorporated by reference to Exhibit 10.1 to
the Companys Current Report on Form 8-K filed on October 4,
2004).10.20*
    
    Wolverine Tube, Inc. 1993 Equity Incentive Plan (incorporated
by reference to Exhibit 10.7 to the Companys Registration
Statement on Form S-1 (File No. 33-65148)).10.21*
    
    Form of Non-Qualified Option Agreement under the Wolverine
Tube, Inc. 1993 Equity Incentive Plan (incorporated by
reference to Exhibit 10.15 to the Companys Quarterly Report
on Form 10-Q for the period ended July 2, 1994).10.22*
    
    1993 Stock Option Plan for Outside Directors of Wolverine
Tube, Inc. (incorporated by reference to Exhibit 10.8 to the
Companys Registration Statement on Form S-1 (File No.
33-65148)).10.23*
    
    Amendment One to Amended and Restated 1993 Stock Option Plan
for Outside Directors of Wolverine Tube, Inc. (incorporated
by reference to Exhibit 10.1 to the Companys Quarterly
Report on Form 10-Q for the period ended April 1, 2001).10.24*
    
    2001 Stock Option Plan for Outside Directors of Wolverine
Tube, Inc. (incorporated by reference to Appendix B to the
Companys Proxy Statement dated April 12, 2001).10.25*
    

    Form of Non-Qualified Option Agreement under the Companys
1993 Stock Option Plan for Outside Directors and 2001 Stock
Option Plan for Outside Directors (incorporated by reference
to Exhibit 10.1 to the Companys Quarterly Report on Form
10-Q for the period ended October 3, 2004).10.26*
    
    Wolverine Tube, Inc. 2003 Equity Incentive Plan (incorporated
by reference to Exhibit 10.1 to the Companys Quarterly
Report on Form 10-Q for the period ended June 29, 2003).10.27*
    
    First Amendment to the Wolverine Tube, Inc. 2003 Equity
Incentive Plan (incorporated by reference to Exhibit 10.2 to
the Companys Quarterly Report on Form 10-Q for the period
ended June 29, 2003).
 58




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Exhibit No.
    
    Description10.28*
    
    Form of Non-Qualified Option Agreement under the Wolverine
Tube, Inc. 2003 Equity Incentive Plan (incorporated by
reference to Exhibit 10.2 to the Companys Quarterly Report
on Form 10-Q for the period ended October 3, 2004).10.29*
    
    Form of Restricted Stock Agreement under the Wolverine Tube,
Inc. 2003 Equity Incentive Plan (incorporated by reference to
Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q
for the period ended October 3, 2004).10.30*
    
    Form of SAR Agreement under the Wolverine Tube, Inc. 2003
Equity Incentive Plan (incorporated by reference to Exhibit
10.4 to the Companys Quarterly Report on Form 10-Q for the
period ended October 3, 2004).10.31*
    
    Wolverine Tube, Inc. Long Term Incentive Plan (incorporated
by reference to Exhibit 10.2 to the Companys Quarterly
Report on Form 10-Q for the period ended April 3, 1999).10.32*
    
    Wolverine Tube, Inc. 2003 Annual Performance Incentive Plan
(incorporated by reference to Exhibit 10.22 to the Companys
Annual Report on Form 10-K for the period ended December 31,
2002).10.33*
    
    Wolverine Tube, Inc. Supplemental Benefit Restoration Plan
(incorporated by reference to Exhibit 10.1 to the Companys
Quarterly Report on Form 10-Q for the period ended June 30,
2002).10.34*
    
    Wolverine Tube, Inc. 2002 Supplemental Executive Retirement
Plan (incorporated by reference to Exhibit 10.2 to the
Companys Quarterly Report on Form 10-Q for the period ended

June 30, 2002).10.35*
    
    2002 Change in Control, Severance and Non-Competition
Agreement, dated as of July 12, 2002, by and between the
Company and Dennis J. Horowitz (incorporated by reference to
Exhibit 10.3 to the Companys Quarterly Report on Form 10-Q
for the period ended June 30, 2002).10.36*
    
    2002 Change in Control, Severance and Non-Competition
Agreement, dated as of July 12, 2002, by and between the
Company and James E. Deason (incorporated by reference to
Exhibit 10.4 to the Companys Quarterly Report on Form 10-Q
for the period ended June 30, 2002).10.37*
    
    2002 Change in Control, Severance and Non-Competition
Agreement, dated as of July 12, 2002, by and between the
Company and Johann R. Manning, Jr. (incorporated by reference
to Exhibit 10.5 to the Companys Quarterly Report on Form
10-Q for the period ended June 30, 2002).10.38*
    
    2002 Change in Control, Severance and Non-Competition
Agreement, dated as of July 12, 2002, by and between the
Company and Keith Weil (incorporated by reference to Exhibit
10.6 to the Companys Quarterly Report on Form 10-Q for the
period ended June 30, 2002).10.39*
    
    2002 Change in Control, Severance and Non-Competition
Agreement, dated as of July 12, 2002, by and between the
Company and Massoud Neshan (incorporated by reference to
Exhibit 10.20 to the Companys Annual Report on Form 10-K for
the period ended December 31, 2002).
 59




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Exhibit No.
    
    Description10.40*
    
    2004 Change in Control, Severance and Non-Competition
Agreement, dated as of December 1, 2004, by and between the
Company and Thomas Sabol (incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K
filed on December 1, 2004).10.41*
    
    Deferred Compensation Trust Agreement, dated February 13,
2001, by and between the Company and AmSouth Bank, as Trustee
(incorporated by reference to Exhibit 10.1 to the Companys
Quarterly Report on Form 10-Q for the period ended March 30,
2003).10.42*
    
    Amendment Number One to Deferred Compensation Trust
Agreement, dated May 7, 2003, by and between the Company and
AmSouth Bank, as Trustee (incorporated by reference to
Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q
for the period ended March 30, 2003).10.43*
    
    Consultant Agreement, dated as of
February 10, 2005, by and between the Company and James E.
Deason (incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K filed on
February 16, 2005).10.44
    
    Form of Indemnity Agreement (incorporated by reference to
Exhibit 10.13 to the Companys Annual Report on Form 10-K for
the period ended December 31, 1994).10.45
    
    Form of Director Indemnification
Agreement (incorporated by reference to Exhibit 10.2 to the
Companys Current Report on Form 8-K filed on
February 16, 2005).10.46
    
    Form of Officer Indemnification
Agreement (incorporated by reference to Exhibit 10.3 to the
Companys Current Report on Form 8-K filed on
February 16, 2005).16.1
    
    Letter, dated August 25, 2004, to Securities and Exchange
Commission from Ernst & Young LLP (incorporated by reference
to Exhibit 16.1 to the Companys Current Report on Form 8-K/A
filed on August 25, 2004).18.1
    
    Letter, dated March 11, 2002, from Ernst & Young LLP
regarding preference of a change in method of accounting for
inventories (incorporated by reference to Exhibit 18.1 to the
Companys Annual Report on Form 10-K for the period ended
December 31, 2001).
   *
    
    Management contract or compensatory plan or arrangement. 60




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SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Huntsville, State of Alabama, on the 11th day of March 2005. WOLVERINE TUBE, INC. By:
    
    /s/ James E. DeasonName: James E. DeasonTitle: Executive Vice President,
Chief Financial Officer,
Secretary and Director
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons in the capacities and on the dates indicated. Signature
    
    Title
    
    DateBy:
    
    /s/ Dennis J. Horowitz
    
    Chairman, Chief
    
    March 11, 2005Executive Officer and DirectorDennis J. Horowitz
    
    (Principal Executive Officer)By:
    
    /s/ James E. Deason
    
    Executive Vice President, Chief
    
    March 11, 2005Financial Officer, Secretary andJames E. Deason
    
    Director (Principal Financial Officerand Principal Accounting Officer)By:
    
    /s/ Jan K. Ver Hagen
    
    Director
    
    March 11, 2005Jan K. Ver HagenBy:
    
    /s/ W. Barnes Hauptfuhrer
    
    Director
    
    March 11, 2005W. Barnes HauptfuhrerBy:
    
    /s/ Thomas P. Evans
    
    Director
    
    March 11, 2005Thomas P. EvansBy:
    
    /s/ John L. Duncan
    
    Director
    
    March 11, 2005John L. DuncanBy:
    
    /s/ Chris A. Davis
    
    Director
    
    March 11, 2005Chris A. DavisBy:
    
    /s/ Gail O. Neuman
    
    Director
    
    March 11, 2005Gail O. Neuman
 61




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Wolverine Tube, Inc. and Subsidiaries 
 Consolidated Statements of Operations
 Year ended December 31,2004
    
    
    2003
    
    
    2002(In thousands except per share amounts)Net sales
    
    $
    797,875
    
    
    $
    596,324
    
    
    $
    550,523Cost of goods sold
    
    
    734,194
    
    
    
    555,498
    
    
    
    492,082Gross profit
    
    
    63,681
    
    
    
    40,826
    
    
    
    58,441Selling, general and administrative expenses
    
    
    37,259
    
    
    
    32,103
    
    
    
    30,616Restructuring and other charges
    
    
    2,536
    
    
    
    15,057
    
    
    
    Operating income/(loss) from continuing operations
    
    
    23,886
    
    
    
    (6,334
    )
    
    
    27,825Other expense/(income):Interest expense, net
    
    
    20,860
    
    
    
    21,218
    
    
    
    19,681(Gain)/loss on extinguishment of debt
    
    
    3,009
    
    
    
    
    
    
    
    (1,349
    )Amortization and other, net
    
    
    1,261
    
    
    
    1,856
    
    
    
    1,008Goodwill impairment
    
    
    
    
    
    
    23,153
    
    
    
    Income/(loss) from continuing operations before
income taxes
    
    
    (1,244
    )
    
    
    (52,561
    )
    
    
    8,485Income tax provision /(benefit)
    
    
    (1,888
    )
    
    
    (13,577
    )
    
    
    1,315Income/(loss) from continuing operations
    
    
    644
    
    
    
    (38,984
    )
    
    
    7,170Loss from discontinued operations, net of income
tax benefit of ($0.1) million, ($0.8) million
and ($0.9) million for 2004, 2003 and 2002,
respectively
    
    
    (262
    )
    
    
    (1,637
    )
    
    
    (1,610
    )Net income/(loss)
    
    
    382
    
    
    
    (40,621
    )
    
    
    5,560Less preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    (58
    )Net income/(loss) applicable to common shares
    
    $
    382
    
    
    $
    (40,621
    )
    
    $
    5,502Income/(loss) per common sharebasic:Continuing operations
    
    $
    0.05
    
    
    $
    (3.18
    )
    
    $
    0.58Discontinued operations
    
    
    (0.02
    )
    
    
    (0.13
    )
    
    
    (0.13
    )Net income/(loss) per common sharebasic
    
    $
    0.03
    
    
    $
    (3.31
    )
    
    $
    0.45Basic weighted average number of common shares
    
    
    13,650
    
    
    
    12,275
    
    
    
    12,231Income/(loss) per common sharediluted:Continuing operations
    
    $
    0.05
    
    
    $
    (3.18
    )
    
    $
    0.58Discontinued operations
    
    
    (0.02
    )
    
    
    (0.13
    )
    
    
    (0.13
    )Net income/(loss) per common sharediluted
    
    $
    0.03
    
    
    $
    (3.31
    )
    
    $
    0.45Diluted weighted average number of common and
common equivalent shares
    
    
    13,992
    
    
    
    12,275
    
    
    
    12,362
 The accompanying notes are an integral part of the consolidated financial statements. F-1




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##### Table of Contents



Wolverine Tube, Inc. and Subsidiaries 
 Consolidated Balance Sheets
 December 31,2004
    
    
    2003(In thousands except share and per share amounts)AssetsCurrent assetsCash and equivalents
    
    $
    35,017
    
    
    $
    46,089Accounts receivable, net
    
    
    93,964
    
    
    
    86,825Inventories
    
    
    151,979
    
    
    
    108,005Prepaid expenses and other
    
    
    6,905
    
    
    
    7,201Deferred taxes, current
    
    
    7,707
    
    
    
    5,581Total current assets
    
    
    295,572
    
    
    
    253,701Property, plant and equipment, net
    
    
    194,966
    
    
    
    198,542Deferred charges, net
    
    
    11,892
    
    
    
    14,770Deferred income taxes, non-current
    
    
    1,008
    
    
    
    Goodwill, net
    
    
    77,312
    
    
    
    77,159Assets held for sale
    
    
    1,147
    
    
    
    4,797Investments
    
    
    5,561
    
    
    
    4,289Total assets
    
    $
    587,458
    
    
    $
    553,258Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    59,912
    
    
    $
    47,503Accrued liabilities
    
    
    32,476
    
    
    
    29,787Short-term borrowings
    
    
    1,219
    
    
    
    1,502Total current liabilities
    
    
    93,607
    
    
    
    78,792Deferred income taxes
    
    
    
    
    
    
    359Long-term debt
    
    
    237,022
    
    
    
    254,284Pension liabilities
    
    
    27,915
    
    
    
    22,316Postretirement benefit obligation
    
    
    18,422
    
    
    
    16,995Accrued environmental remediation
    
    
    990
    
    
    
    1,161Total liabilities
    
    
    377,956
    
    
    
    373,907Stockholders equityCommon Stock, par value $0.01 per share; 40,000,000 shares
authorized, 14,927,577 and 14,344,806 shares issued as of
December 31, 2004 and 2003, respectively
    
    
    149
    
    
    
    143Additional paid-in capital
    
    
    90,571
    
    
    
    103,339Retained earnings
    
    
    124,350
    
    
    
    123,926Unearned compensation
    
    
    (309
    )
    
    
    (172
    )Accumulated other comprehensive loss, net
    
    
    (5,259
    )
    
    
    (10,510
    )Treasury stock, at cost 2,063,800 shares as of December 31, 2003
    
    
    
    
    
    
    (37,375
    )Total stockholders equity
    
    
    209,502
    
    
    
    179,351Total liabilities and stockholders equity
    
    $
    587,458
    
    
    $
    553,258
 The accompanying notes are an integral part of the consolidated financial statements. F-2




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##### Table of Contents



Wolverine Tube, Inc. and Subsidiaries 
 Consolidated Statements of Stockholders Equity
 Accumu-lated OtherRedeemable
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    Unearned
    
    
    Comprehensive
    
    
    
    
    
    
    Total(In thousands except number of
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Compen-
    
    
    Income
    
    
    Treasury
    
    
    Stock-holdersshares)
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    sation
    
    
    (Loss)
    
    
    Stock
    
    
    EquityBalance at December 31, 2001
    
    
    20,000
    
    
    $
    2,000
    
    
    
    14,276,831
    
    
    $
    143
    
    
    $
    103,759
    
    
    $
    159,045
    
    
    $
    (165
    )
    
    $
    (21,898
    )
    
    $
    (39,472
    )
    
    $
    201,412Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,560
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,560Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,201
    
    
    
    
    
    
    
    2,201Change in fair value of
derivatives and
reclassification
adjustments, net of tax
of $884
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,641
    
    
    
    
    
    
    
    1,641Minimum pension liability,
net of tax benefit of $7,166
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,535
    )
    
    
    
    
    
    
    (11,535
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,133
    )Common Stock issued
    
    
    
    
    
    
    
    
    
    
    49,408
    
    
    
    
    
    
    
    89
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89Tax benefit from stock
options exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39Redemption of preferred
stock
    
    
    (20,000
    )
    
    
    (2,000
    )
    
    
    
    
    
    
    
    
    
    
    (1,097
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,097
    
    
    
    1,000Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (58
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (58
    )Issuance of restricted
stock award and
amortization of unearned
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    423
    
    
    
    
    
    
    
    (137
    )
    
    
    
    
    
    
    
    
    
    
    286Balance at December 31, 2002
    
    
    
    
    
    
    
    
    
    
    14,326,239
    
    
    
    143
    
    
    
    103,213
    
    
    
    164,547
    
    
    
    (302
    )
    
    
    (29,591
    )
    
    
    (37,375
    )
    
    
    200,635Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,621
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,621
    )Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,383
    
    
    
    
    
    
    
    17,383Change in fair value of
derivatives and
reclassification
adjustments, net of tax
of $1,032
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,918
    
    
    
    
    
    
    
    1,918Minimum pension liability,
net of tax benefit of $132
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (220
    )
    
    
    
    
    
    
    (220
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,540
    )Issuance of restricted
stock award and
amortization of unearned
compensation
    
    
    
    
    
    
    
    
    
    
    18,567

    
    
    
    
    
    
    
    126
    
    
    
    
    
    
    
    130
    
    
    
    
    
    
    
    
    
    
    
    256Balance at December 31, 2003
    
    
    
    
    
    
    
    
    
    
    14,344,806
    
    
    
    143
    
    
    
    103,339
    
    
    
    123,926
    
    
    
    (172
    )
    
    
    (10,510
    )
    
    
    (37,375
    )
    
    
    179,351Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    382
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    382Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    7,565
    
    
    
    
    
    
    
    7,566Change in fair value of
derivatives and
reclassification
adjustments, net of tax
of $118
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,433
    )
    
    
    
    
    
    
    (1,433
    )Minimum pension liability,
net of tax expense of $454
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (881
    )
    
    
    
    
    
    
    (881
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,634Common stock issued
    
    
    
    
    
    
    
    
    
    
    2,450,000
    
    
    
    25
    
    
    
    22,808
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,833Retirement of treasury stock
    
    
    
    
    
    
    
    
    
    
    (2,063,800
    )
    
    
    (21
    )
    
    
    (37,354
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,375
    
    
    
    Exercise of non-qualified
stock options
    
    
    
    
    
    
    
    
    
    
    155,482
    
    
    
    2
    
    
    
    1,314
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,316Issuance of restricted
stock award and
amortization of unearned
compensation
    
    
    
    
    
    
    
    
    
    
    41,089
    
    
    
    
    
    
    
    464
    
    
    
    
    
    
    
    (137
    )
    
    
    
    
    
    
    
    
    
    
    327Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41Balance at December 31, 2004
    
    
    
    
    
    $
    
    
    
    
    14,927,577
    
    
    $
    149
    
    
    $
    90,571
    
    
    $
    124,350
    
    
    $
    (309
    )
    
    $
    (5,259
    )
    
    $
    
    
    
    $
    209,502
 The accompanying notes are an integral part of these consolidated financial statements. F-3




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##### Table of Contents



Wolverine Tube, Inc. and Subsidiaries 
 Consolidated Statements of Cash Flows
 Year ended December 31,(In thousands)
    
    2004
    
    
    2003
    
    
    2002Operating ActivitiesIncome/(loss) from continuing operations
    
    $
    644
    
    
    $
    (38,984
    )
    
    $
    7,170Adjustments to reconcile income/(loss) from continuing
operations to net cash provided by operating activities:Depreciation
    
    
    15,862
    
    
    
    17,443
    
    
    
    17,060Amortization
    
    
    1,545
    
    
    
    1,566
    
    
    
    1,356Deferred income taxes
    
    
    (4,954
    )
    
    
    (12,541
    )
    
    
    (937
    )Non-cash portion of restructuring and other charges
    
    
    1,665
    
    
    
    12,016
    
    
    
    Goodwill impairment
    
    
    
    
    
    
    23,153
    
    
    
    Loss/(gain) on retirement of Senior Notes
    
    
    3,009
    
    
    
    
    
    
    
    (1,349
    )Other non-cash items
    
    
    156
    
    
    
    366
    
    
    
    627Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (5,499
    )
    
    
    (17,202
    )
    
    
    797Inventories
    
    
    (41,668
    )
    
    
    (8,751
    )
    
    
    10,564Refundable income taxes
    
    
    838
    
    
    
    9,077
    
    
    
    (15
    )Prepaid expenses and other
    
    
    1,713
    
    
    
    (1,200
    )
    
    
    (2,078
    )Accounts payable
    
    
    11,714
    
    
    
    4,334
    
    
    
    (702
    )Accrued liabilities, including pension, postretirement
benefit and environmental
    
    
    6,333
    
    
    
    10,972
    
    
    
    8,943Net cash provided by/(used for) operating activities
    
    
    (8,642
    )
    
    
    249
    
    
    
    41,436Investing ActivitiesAdditions to property, plant and equipment
    
    
    (11,302
    )
    
    
    (5,969
    )
    
    
    (7,747
    )Sale of Roxboro, NC facility
    
    
    2,500
    
    
    
    
    
    
    
    Investment in rabbi trust
    
    
    
    
    
    
    (4,289
    )
    
    
    Other
    
    
    82
    
    
    
    12
    
    
    
    Net cash used for investing activities
    
    
    (8,720
    )
    
    
    (10,246
    )
    
    
    (7,747
    )Financing ActivitiesFinancing fees and expenses paid
    
    
    (151
    )
    
    
    (52
    )
    
    
    (8,687
    )Net borrowings from /(repayments of) revolving credit facilities
    
    
    1,009
    
    
    
    (1,122
    )
    
    
    (98,372
    )Proceeds from issuance of Senior Notes
    
    
    
    
    
    
    
    
    
    
    118,546Retirement of Senior Notes
    
    
    (20,510
    )
    
    
    
    
    
    
    (13,901
    )Principal borrowing on long-term debt
    
    
    
    
    
    
    
    
    
    
    2,021Issuance of common stock
    
    
    24,164
    
    
    
    
    
    
    
    89Redemption of preferred stock
    
    
    
    
    
    
    
    
    
    
    (1,000
    )Dividends paid on preferred stock
    
    
    
    
    
    
    
    
    
    
    (58
    )Other financing activities
    
    
    (346
    )
    
    
    (6
    )
    
    
    Net cash provided by/(used for) financing activities
    
    
    4,166
    
    
    
    (1,180
    )
    
    
    (1,362
    )Effect of exchange rate on cash and equivalents
    
    
    2,386
    
    
    
    2,645
    
    
    
    874Net cash provided by/(used for) continuing operations
    
    
    (10,810
    )
    
    
    (8,532
    )
    
    
    33,201Net cash provided by/(used for) discontinued operations
    
    
    (262
    )
    
    
    701
    
    
    
    (2,020
    )Net increase/(decrease) in cash and equivalents
    
    
    (11,072
    )
    
    
    (7,831
    )
    
    
    31,181Cash and equivalents at beginning of year
    
    
    46,089
    
    
    
    53,920
    
    
    
    22,739Cash and equivalents at end of year
    
    $
    35,017
    
    
    $
    46,089
    
    
    $
    53,920Supplemental disclosure of cash flow:Interest paid
    
    $
    21,549
    
    
    $
    22,510
    
    
    $
    19,074Income taxes (refunded), net
    
    $
    (173
    )
    
    $
    (9,012
    )
    
    ($
    7,359
    )
 The accompanying notes are an integral part of the consolidated financial statements. F-4




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##### Table of Contents



Wolverine Tube, Inc. and Subsidiaries 
 Notes to Consolidated Financial Statements
 1. Nature of Operations Wolverine Tube, Inc. (Wolverine) manufactures and distributes copper and copper alloy
tubular products, fabricated and metal joining products, as well as rod and bar products. Our
focus is developing and manufacturing high value added tubular products with superior heat transfer
capabilities used in engineered applications. Our major customers headquarters are primarily in
North America and include commercial and residential air conditioning and refrigeration equipment
manufacturers, appliance manufacturers, automotive manufacturers, industrial equipment
manufacturers, utilities and other power generating companies, refining and chemical processing
companies and plumbing wholesalers. 2. Summary of Significant Accounting Policies The significant accounting policies followed by us are described below. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Wolverine and its
subsidiaries. All significant intercompany transactions and accounts have been eliminated in
consolidation. Uses of Estimates The preparation of financial statements in conformity with generally accepted accounting
principles in the United States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, and the disclosure of contingent assets and
liabilities at the date of the financial statements, as well as amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates. Revenue Recognition Policy Revenues are generally recognized when title to products transfer to an unaffiliated customer,
and the product is shipped. Sales are made under normal terms and usually do not require
collateral. Revenues are recorded net of estimated returns and allowances and volume discounts.
The reserve for returns and allowances and volume discounts is calculated as a percentage of sales
based on historical return and volume discount percentages. Cash Equivalents We consider all highly liquid short-term investments purchased with a maturity of three months
or less to be cash equivalents. Cash equivalents are carried at cost, which approximates market
value. Approximately $10.9 million and $2.5 million of cash included in cash on hand was restricted as of December 31, 2004 and 2003, respectively, and is not available for general corporate use. F-5




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##### Table of Contents



Allowance for Doubtful Accounts Allowance for doubtful accounts ensure that trade receivables are not overstated due to issues
of collectability. Bad debt reserves are established for certain customers based upon a variety
of factors: including past due receivables, macroeconomic conditions, significant one-time events
and historical experience. Specific reserves for individual accounts may be established due to
customers inability to meet their financial obligations, such as in the case of bankruptcy filings
or the deterioration in a customers operating results or financial position. As circumstances
related to customers change, estimates of the recoverability of receivables are adjusted. Inventories Inventories are stated at the lower of cost or market. Cost is determined using the first-in,
first-out (FIFO) method. Inventory costs include material, labor, and factory overhead. Our
maintenance and operating supplies inventory is valued using various methods across our facilities
to determine cost. Obsolete or unsaleable inventories are reflected at their estimated net
realizable values. Total inventories in 2004 and 2003 included the following classifications (in thousands): 2004
    
    
    2003(In thousands)Finished products
    
    $
    61,376
    
    
    $
    34,082Work-in-process
    
    
    35,920
    
    
    
    27,484Raw materials
    
    
    27,653
    
    
    
    17,083Supplies
    
    
    27,030
    
    
    
    29,356Totals
    
    $
    151,979
    
    
    $
    108,005
 Property, Plant and Equipment Land, buildings and equipment are carried at cost. Expenditures for maintenance and repairs
are charged directly against income, while major renewals/betterments are capitalized. When
properties are retired or otherwise disposed of, the original cost and accumulated depreciation are
removed from the respective accounts, and the profit or loss resulting from the disposal is
reflected in income. Depreciation is provided over the estimated useful lives of the assets,
generally on the straight-line method for financial reporting purposes (furniture and fixtures 2 
9 years, software 3 -5 years, tooling 3  10 years, buildings and improvements 3  39 years and
machinery and equipment 5  30 years), and on accelerated methods for tax purposes. Assets with a
useful life of greater than one year, and whose productive capacity has physical substance and
provides future benefits that are easily measurable are capitalized. Impairment of Long-Lived Assets Impairments of long-lived assets are recognized under the provisions of Financial Accounting
Standards Board (FASB) Statement of Financial Accounting Standard No. 144
(SFAS 144), Accounting for the Impairment or Disposal of Long-Lived Assets. When facts and
circumstances indicate that long-lived assets used in operations may be impaired, and the F-6




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undiscounted cash flows estimated to be generated from those assets are less than their carrying
values, an impairment charge is recorded equal to the excess of the carrying value over fair value.
Long-lived assets held for disposal are valued at the lower of the carrying amount or estimated
fair value less cost to sell. Employment Related Benefits Employment-related benefits associated with pensions and postretirement health care are expensed as actuarially determined. The recognition of expense is impacted by estimates made by management,
such as discount rates used to value certain liabilities, investment rates of return, increases in future wage amounts and future health care costs. The Company uses
third-party specialists to assist management in appropriately measuring the expense and liabilities associated with employment-related benefits. Income Taxes Under Statement of Financial Accounting Standard No. 109 (SFAS 109), Accounting for Income
Taxes, deferred tax liabilities and assets are recorded for the expected future tax consequences of
events that have been recognized in our financial statements or tax returns. Property, plant and
equipment, inventories, prepaid pension, postretirement benefit obligations, and certain other
accrued liabilities are the primary sources of these temporary differences. Deferred income tax
also includes operating loss and tax credit carryforwards. Goodwill Goodwill is evaluated utilizing Statement of Financial Accounting Standard No. 142 (SFAS
142), Goodwill and Other Intangible Assets. Under this statement, goodwill is presumed to have an
indefinite useful life and, thus, is not amortized, but tested no less than annually for impairment
using a lower of cost or fair value approach. Goodwill had been amortized through 2001. We ceased
the amortization of goodwill at the beginning of 2002, as required by SFAS 142. During the third quarter of 2003, we conducted a goodwill impairment review, and computed
updated valuations for each reporting unit using a discounted cash flow approach based on
forward-looking information regarding market share, revenues and costs. The valuation used a 3% to
5% long-term growth rate, a discount rate of 14% and consisted of two reporting units, The Tube
Group and The Fabricated Products Group. The Tube Group includes the Decatur, AL; Shawnee, OK;
Jackson, TN; Booneville, MS; Montreal, Quebec, Canada; London, Ontario, Canada; Shanghai, China and
Esposende, Portugal facilities for which we had $23.2 million of goodwill. The Fabricated Products
Group includes the Altoona, PA; Carrollton, TX; Warwick, RI; Ardmore, TN and Apeldorn, The
Netherlands facilities for which we have $77.2 million of goodwill. Based on the results of this 2003 review, the fair value of The Tube Group reporting unit was
less than its carrying value, and a goodwill impairment charge of $23.2 million was recorded in the
third quarter of 2003. The decrease in value was primarily the result of decreasing the long-term
growth rate from 4% to 3%, a reduction in the projection of future profitability and an increase in
the discount rate from 12% to 14%. The fair value of The Fabricated Products Group reporting unit
exceeded its carrying value in 2003, and thus, no impairment charge was recorded. During 2004, we conducted the required annual goodwill impairment review, and based upon the
results of this review, determined that there is no impairment of goodwill for 2004. If
we are unable to achieve our estimated growth rates and profit projections, if interest rates
increase or if our other estimates or assumptions change in the future, we may be required to
record impairment charges in the future. F-7




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At December 31, 2004 and 2003, we had $77.3 million and $77.2 million of goodwill, net of $10.7 million and $10.6 million, respectively, of accumulated
amortization. Investments We hold a portfolio of marketable debt securities in a rabbi trust to partially fund benefit
obligations to certain executives under our Supplemental Executive Retirement Plan (SERP). We
mark these securities to market through income. Realized and unrealized gains and losses on these
securities, which are designated as trading assets, have not been significant. Earnings/(Loss) Per Common Share Basic earnings/(loss) per share were computed by dividing net income/(loss) by the weighted
average number of common shares outstanding. Where applicable, diluted earnings/(loss) per share
were calculated by including the effect of all dilutive securities, including stock options and
unvested restricted stock. To the extent that stock options and unvested restricted stock are
anti-dilutive, they are excluded from the calculation of diluted earnings/(loss) per share. Derivatives and Hedging Activities Our earnings and cash flows are subject to fluctuations due to changes in commodity prices,
foreign currency exchange rates and interest rates. We use derivative financial instruments to
manage commodity prices, foreign currency exchange rates and interest rate exposures, though not for
speculative purposes. Derivatives used are primarily commodity forward contracts, foreign currency
forward contracts and interest rate swaps. We apply the provisions of Statement of Financial Accounting Standard No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended by Statement of Financial Accounting
Standard No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, and
by Statement of Financial Accounting Standard No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities, (collectively referred to as SFAS 133), for most of the
Companys derivatives. Some of our derivatives are designated as either a hedge of a recognized
asset or liability or an unrecognized firm commitment (fair value hedge), or a hedge of a
forecasted transaction (cash flow hedge). For fair value hedges, both the effective and
ineffective portion of the changes in the fair value of the derivative, along with any gain or loss
on the hedged item that is attributable to the hedged risk, are recorded directly to earnings. The
effective portion of changes in fair value of derivatives that are designated as cash flow hedges
are recorded in accumulated other comprehensive income, until the hedged item is realized, when the
gain/(loss) previously included in accumulated other comprehensive income is recognized in
earnings. Our foreign currency
hedges are accounted for under Statement of Financial Accounting Standard No. 52 (SFAS 52),
Foreign Currency Translation. F-8




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Fair Values of Financial Instruments We use the following methods in estimating fair value disclosures for financial instruments: Cash and equivalents, accounts receivable and accounts payable: The carrying amount
reported in the Consolidated Balance Sheets for these assets approximates their fair value. Investments: Assets held in our rabbi trust are marked to market each period based on
quoted market prices. Revolving credit facility and long-term debt: The carrying amount of our borrowings under
our revolving credit facilities approximates fair value. The fair value of our 7.375% Senior Notes
and our 10.5% Senior Notes and any derivative financial instruments are based upon quoted market
prices. Derivatives: The fair value of our interest rate, foreign currency and commodity
derivative instruments are determined by reference to quoted market prices. The following table summarizes fair value information for our financial instruments: 2004
    
    
    2004
    
    
    2003
    
    
    2003Assets/(liabilities)
    
    Carrying value
    
    
    Fair value
    
    
    Carrying value
    
    
    Fair value(In thousands)Investments in Rabbi Trust
(trading portfolio)
    
    $
    4,316
    
    
    $
    4,316
    
    
    $
    4,289
    
    
    $
    4,289Senior Notes
    
    
    (235,318
    )
    
    
    (243,729
    )
    
    
    (253,549
    )
    
    
    (246,900
    )Other debt
    
    
    (3,469
    )
    
    
    (3,469
    )
    
    
    (2,679
    )
    
    
    (2,679
    )Interest rate swap
    
    
    (653
    )
    
    
    (653
    )
    
    
    (442
    )
    
    
    (442
    )Foreign currency exchange contracts
    
    
    225
    
    
    
    225
    
    
    
    5
    
    
    
    5Commodity forward contracts
    
    
    (1,518
    )
    
    
    (1,518
    )
    
    
    (1,286
    )
    
    
    (1,286
    )
 Environmental Expenditures Environmental expenditures that pertain to our current operations and relate to future
revenues are expensed or capitalized consistent with our capitalization policy. Expenditures that
result from the remediation of an existing condition caused by past operations, and that do not
contribute to future revenues, are expensed. Liabilities, which are undiscounted, are recognized
for remedial activities when the cleanup is probable and the cost can be reasonably estimated. Stock Options At December 31, 2004, we had stock-based employee and outside director compensation plans,
which are described more fully in Note 19. We account for these plans under the recognition and
measurement principles of Accounting Principles Board Opinion No. 25 (APB 25), Accounting for
Stock Issued to Employees, and related interpretations. No employee or outside
director stock-based compensation cost is reflected in the statements of operations, as all options granted F-9




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under those plans had an exercise price equal to the market value of the underlying Common Stock on the date of grant. The following table illustrates the effect on net income/(loss) and earnings per share as if we had
applied the fair value recognition provisions of Statement of Financial Accounting Standard No. 123
(SFAS 123), Accounting for Stock-Based Compensation, to our stock option compensation plans: 2004
    
    
    2003
    
    
    2002(In thousands, except per share amounts)Net income/(loss) applicable to common shares, as reported
    
    $
    382
    
    
    $
    (40,621
    )
    
    $
    5,502Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards, net
of related tax effects
    
    
    (494
    )
    
    
    (825
    )
    
    
    (2,246
    )Pro forma net (loss) income applicable to common shares
    
    $
    (112
    )
    
    $
    (41,446
    )
    
    $
    3,256(Loss) earnings per share:Basic  as reported
    
    $
    0.03
    
    
    $
    (3.31
    )
    
    $
    0.45Basic  pro forma
    
    $
    (0.01
    )
    
    $
    (3.38
    )
    
    $
    0.27Diluted  as reported
    
    $
    0.03
    
    
    $
    (3.31
    )
    
    $
    0.45Diluted  pro forma
    
    $
    (0.01
    )
    
    $
    (3.38
    )
    
    $
    0.27
 The weighted average fair value of options granted during 2004 estimated on the date of
grant using the Black-Scholes pricing model was $5.21. The fair value for these options was
estimated at the date of grant using the following weighted average assumptions for 2004, 2003 and
2002, respectively: risk free interest rates of 3.42%, 2.98% and 3.67%; volatility factors of the
expected market price of our Common Stock of 0.462, 0.432 and 0.385; and weighted average expected
lives of the options of 4.4, 5.9 and 5.6 years. For purposes of pro forma disclosures, the
estimated fair value of the options is amortized to expense over the options vesting period. The
effects of applying SFAS 123 for pro forma disclosure may not be representative of the effects on
reported pro forma net income/(loss) in future years Translation to U.S. Dollars Assets and liabilities denominated in foreign currency are translated to U.S. dollars at rates
of exchange at the balance sheet date. Revenues and expenses are translated at average exchange
rates during the period. Translation adjustments arising from changes in exchange rates are
included in the accumulated other comprehensive loss component of stockholders equity. Realized
exchange gains and losses are included in Amortization and other, net in the consolidated
statements of operations. Foreign currency exchange losses were $0.2 million in 2004, $0.2 million
in 2003 and zero in 2002. Research and Development Costs Expenditures relating to the development of new products and processes, including significant
improvements and refinements to existing products, are expensed as incurred. The amounts charged
to expense were $3.5 million in 2004, $2.9 million in 2003 and $3.1 million in 2002. F-10




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Recent Accounting Pronouncements In December 2004, Statement of Financial Accounting Standard No. 123R (SFAS 123R),
Share-Based Payment, was issued. This statement amends SFAS 123, and requires companies to
recognize in their financial statements the compensation cost relating to share-based payment
transactions. The effective date of this standard is for interim and annual periods beginning
after June 15, 2005. Historically, we have elected to follow the intrinsic value method in accounting for employee
stock options as prescribed under APB 25, and its related interpretations, under which no
compensation cost has been recognized. Upon the adoption of SFAS No. 123R, we will be required to
recognize in income the cost of employee services received in exchange for equity instruments
granted as measured at grant-date fair value. The cost of the options granted would be recognized
over the requisite service period, normally the vesting period. We have not yet determined the
effects of adopting SFAS 123R, and have not determined whether the adoption will result in amounts
that are similar to the current pro forma disclosures under SFAS 123, or whether they will be
material to the consolidated financial statements. In December 2004, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 153 (SFAS 153), Exchanges of Nonmonetary Assets  An Amendment of APB
Opinion No. 29. SFAS 153 eliminates the exception to fair value accounting for exchanges of
similar productive assets contained in Accounting Principles Board Opinion No. 29 (APB 29), and
replaces it with a general exception for exchange transactions that do not have commercial
substance. The exception in APB 29 required certain nonmonetary asset exchanges to be recorded on
a carryover basis with no gain/loss recognition. Under SFAS 153, exchange transactions with
commercial substance are required to be accounted for at fair value with gain/loss recognition on
assets surrendered in exchange transactions. The Company will be required to adopt SFAS 153 on
July 1, 2005, and believes the adoption of this standard will not have a material impact on its
consolidated financial statements. In November 2004, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 151 (SFAS 151), Inventory Costs, an amendment of ARB No. 43, Chapter 4,
to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs
and spoilage. SFAS 151 requires that these costs be recognized as current-period charges. In
addition, this Statement requires that allocation of fixed production overheads be based on the
normal capacity of the production facilities. SFAS 151 is effective for inventory costs incurred
during fiscal years beginning after June 15, 2005. The Company will adopt SFAS 151 on January 1,
2006. and has not yet evaluated what effects the adoption of SFAS 151, if any, will have on its
consolidated financial statements. In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003
was enacted. The law provides, among other things, prescription drug benefit coverage for
Medicare-eligible retirees beginning in 2006, and includes federal subsidies for employers who
provide prescription drug coverage to retirees that is actuarially equivalent (or better) than the
new Medicare prescription drug benefit. Employers whose retiree prescription drug plans are
actuarially equivalent to the new Medicare prescription coverage may be eligible for tax-free F-11




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reimbursements of 28% for a portion of the drug costs of retirees who do not take the Medicare drug
benefit. On May 19, 2004, the FASB released FASB Staff Position (FSP) No. FAS 106-2, which
provides guidance on the accounting and disclosure requirements related to the new law, and is
effective for financial reporting periods beginning after June 15, 2004. We believe that our
prescription drug coverage for retirees is not actuarially equivalent to the new Medicare
prescription drug benefit and, thus, have not recognized any impact of the 28% subsidy in 2004.
The effect of any reduction in prescription drug benefit cost for 2006 as a result of the new
Medicare provision will not significantly change our cost of retiree prescription drug coverage.
We believe that effects of the new law, including the subsidy, are not a significant event under
SFAS 106. 3. Discontinued Operations During the year ended December 31, 2001, we discontinued the operations of Wolverine
Ratcliffs, Inc. (WRI), which was previously included in the rod, bar and other products segment.
Operating results of the discontinued WRI operations for 2004, 2003 and 2002, in excess of the
previous provision for losses recorded in the fourth quarter of 2001, are as follows: 2004
    
    
    2003
    
    
    2002(In thousands)Net sales
    
    $
    
    
    
    $
    
    
    
    $
    12,063Loss before income tax benefit
    
    $
    (389
    )
    
    $
    (2,406
    )
    
    $
    (2,546
    )Income tax benefit
    
    
    (127
    )
    
    
    (769
    )
    
    
    (936
    )Net loss
    
    $
    (262
    )
    
    $
    (1,637
    )
    
    $
    (1,610
    )
 In the first quarter of 2004, the remainder of the equipment from WRI was sold for $0.8
million, leaving only real property valued at $1.1 million as assets held for sale (see Note 6).
We do not believe that there are any material contingent liabilities related to discontinued
operations, such as product or environmental liabilities or litigation, that are expected to remain
with us after the disposal of the WRI operations. On September 21, 2004, we entered into a lease agreement commencing December 1, 2004 for the
rental of approximately 36,000 square feet of this facility with a local manufacturing company.
The lease is for a five-year term, and calls for escalating annual rental payments ranging from
$4.98 per square foot to $5.48 per square foot (in US dollars as of December 31, 2004) over the
term of the lease. On February 16, 2005, we entered into an agreement for the sale of the land and building with
a value of $1.1 million U.S. dollars, which approximates the carrying value. The transaction is
currently scheduled to close in May 2005. F-12




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4. Prepaid Expenses and Other Prepaid expenses and other are as follows at December 31: 2004
    
    
    2003(In thousands)Prepaid expenses
    
    $
    5,684
    
    
    $
    4,345Other assets recording the fair value of hedging
instruments
    
    
    1,221
    
    
    
    2,856Totals
    
    $
    6,905
    
    
    $
    7,201
 5. Derivatives In most cases, the price our customers pay for a product includes a metal charge that
represents the market value of the copper used in that product as of the date we ship the product
to the customer. However, as an accommodation to our customers, we often enter into fixed price
commitments to purchase copper on their behalf in order to fix the price of copper in advance of
shipment. We account for these transactions as cash flow hedges under SFAS 133. As of December
31, 2004, we had entered into contracts hedging the raw material requirements for committed and
anticipated future customer sales through December 2006 having an aggregate notional value of $10.5
million. At December 31, 2003, we had entered into contracts hedging the raw material requirements
for committed and anticipated future sales through December 2004 having an aggregate notional value
of $20.6 million. The fair value of these derivative assets is recognized in prepaid expenses and
other in the Consolidated Balance Sheet. For fiscal year 2004, the ineffectiveness associated with this type of cash flow hedge was
insignificant. The hedge ineffectiveness was recognized in the consolidated statement
of operations under cost of goods sold. At December 31, 2004 and 2003, the net deferred amount
recognized in accumulated other comprehensive loss was a net gain of $1.1 million and $3.0 million,
respectively. The Company expects $1.1 million of this gain to be transferred out of accumulated
other comprehensive loss and recognized in earnings over the next 12 months. A 10% decline in
commodity prices would reduce the estimated fair value of the outstanding contracts at December 31,
2004 by $1.4 million. We have firm-price purchase commitments with some of our copper suppliers under which we agree
to buy copper at a price set in advance of the actual delivery of that copper to us. Under these
arrangements, we assume the risk of a price decrease in the market price of copper between the time
this price is fixed, and the time the copper is delivered. In order to reduce our market exposure
to price decreases, at the time we enter into a firm-price purchase commitment, we also often enter
into commodity forward contracts to sell a like amount of copper at the then-current price for
delivery to the counter party at a later date. We account for these transactions as cash flow
hedges under SFAS 133. At December 31, 2004, we had entered into contracts hedging the raw
material requirements for committed future purchases through March 2005 having an aggregate
notional value of $26.1 million. At December 31, 2003, we had entered into contracts hedging the
raw material requirements for committed future purchases through February 2004 having an aggregate
notional value of $5.5 million. The fair value of these derivative liabilities is recognized in
accrued liabilities in the Consolidated Balance Sheet. For fiscal year 2004, the ineffectiveness associated with this type of cash
flow hedge was an insignificant gain. The hedge ineffectiveness was recognized in the
consolidated statement of operations under cost of goods sold. At December 31, 2004 and 2003, the
net deferred amount recognized in accumulated other comprehensive loss was a net loss of $0.9
million and $0.5 million, respectively. The Company expects $0.9 million of this loss to be
transferred out of accumulated other comprehensive loss and recognized in earnings over the next 3
months. A 10% increase in commodity prices would further increase the loss on the outstanding
contracts at December 31, 2004 by another $2.7 million. We have entered into
commodity forward contracts to sell copper having an aggregate notional value of
$64.1 million at December 31, 2004 in order to hedge or protect the value of the
copper carried in our inventory from price decreases. At December 31, 2003, we
had entered into commodity forward contracts to sell copper having an aggregate
notional value of $32.7 million. During 2003 and the first three quarters of
2004, these forward contracts were not designated as hedges, and were marked to
market each period, with the corresponding gains and losses recorded in cost of
goods sold. Beginning in the fourth quarter of 2004, we began accounting for
these forward contracts as fair value hedges under SFAS 133. The fair value of
these derivative liabilities is recognized in accrued liabilities in the
Consolidated Balance Sheet. For fiscal year 2004, the ineffectiveness associated
with this type of fair value hedge was a net loss of $0.5 million. The hedge
ineffectiveness was recognized in the consolidated statement of operations in
cost of goods sold. The estimated fair value of the contracts outstanding based
upon forward rates at December 31, 2004 was a net loss of approximately $1.8
million and $3.8 million at December 31, 2003. A 10% increase in commodity
prices would further increase the estimated loss on the outstanding contracts by
another $6.6 million at December 31, 2004. F-13




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We have also entered into commodity futures contracts to purchase natural gas to reduce our
risk of future price increases. We account for these transactions as cash flow hedges under SFAS
133. The fair value of these derivative assets is recognized in prepaid expenses and other assets in the Consolidated Balance Sheet.
At December 31, 2004, we had commodity futures contracts to purchase natural gas for the period
January 2005 through December 2006 with an aggregate notional amount of $11.9 million. As of
December 31, 2003, we had commodity futures contracts to purchase natural gas for the period
February 2004 through December 2004 with an aggregate notional amount of $6.0 million. For fiscal
year 2004, there was no recognized ineffectiveness. At December 31, 2004 and 2003, the net
deferred gain recognized in accumulated other comprehensive loss was a net gain of $0.1 million and
$0.3 million, respectively. The Company expects $53 thousand of this net gain to be transferred
out of accumulated other comprehensive loss and recognized in earnings over the next 12 months.
The effect of a 10% decline in natural gas commodity prices at December 31, 2004 would result in
the decline in value of the futures contracts of approximately $1.2 million. Our foreign currency exposures relate primarily to changes in exchange rates among the U.S.
dollar, Canadian dollar, Euro and British Pound Sterling. Some of our operations use foreign
exchange forward contracts to hedge fixed purchase and sales commitments denominated in a foreign
currency. We do not enter into forward exchange contracts for trading or speculative purposes.
These forward contracts and the underlying hedged receivables and payables are carried at their
fair values with any associated gains and losses recognized in current period earnings. As of December 31, 2004, we had forward exchange contracts outstanding to purchase foreign
currency through December 2005 with an aggregate notional amount of $8.8 million. The amount of
the impact of these hedges on the consolidated statement of
operations for 2004 was a net gain of
$0.8 million, and was recognized in the consolidated statement of operations under amortization and
other, net. At December 31, 2004, the outstanding forward exchange contracts to purchase foreign
currency had an unrealized net gain of $0.3 million. A 10% adverse change in quoted foreign currency
exchange rates at December 31, 2004 would result in a decline in value of these forward exchange
contracts by approximately $1.1 million. We also had forward exchange contracts outstanding to
sell foreign currency at December 31, 2004 with an aggregate notional amount of $1.7 million. The
amount of the impact of these hedges on the consolidated statement of operations for 2004 was a net
loss of $0.1 million, and was recognized in the consolidated statement of operations under
amortization and other, net. At December 31, 2004, the outstanding forward exchange contracts to
sell foreign currency had an unrealized loss of $0.1 million. A 10% adverse change in quoted
foreign currency exchange rates at December 31, 2004 would result in a decline in value of these
forward exchange contracts by approximately $0.3 million. As of December 31, 2003, we had forward exchange contracts outstanding to purchase foreign
currency with an aggregate notional amount of $11.4 million and to sell foreign currency with an
aggregate notional amount of $0.9 million. As of December 31, 2003, we had an insignificant
unrealized gain associated with these forward contracts. The potential loss in fair value for
these forward contracts from a 10% adverse change in quoted foreign currency exchange rates would
have been approximately $1.2 million. In October 2002, we completed an interest rate swap on $50.0 million notional amount of our
7.375% Senior Notes. The terms of the interest rate swap are a semi-annual payment date of
February 1 and August 1, a floating rate option of the six-month LIBOR rate plus a spread of 3.76%
and a termination date of August 1, 2008. The interest rate swap is accounted for as a fair value
hedge and because the terms of the debt and the payments to be received on the swap coincide, the
hedge is considered perfectly effective against the changes in the fair value of the debt over its
term. As of December 31, 2004, the fair market value of the interest rate swap of $0.7 million was
recorded in accrued liabilities (Note 9) with a corresponding decrease to the hedged debt. As of
December 31, 2003, the fair value of the interest rate swap of $0.4 million was recorded as other
liabilities with a corresponding decrease to the hedged debt. Interest
payments are recognized through interest expense, and are made and received on the first day
of each February and August, commencing February 1, 2003, and ending on the maturity date. Since
the interest rate is not known until the end of each semi-annual interest period, estimates are
used during such period based upon published forward-looking LIBOR rates. Any differences between
the estimated interest expense and the actual interest payment are recorded to interest expense at
the end of each semi-annual interest period. The interest rate swap reduced interest expense in
2004 and 2003 by $0.7 million and $1.1 million, respectively. The disclosures with respect to the above noted risks do not take into account the underlying
commitments or anticipated transactions. If the underlying items were included in F-14




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the analysis,
the gains or losses on the futures contracts may be offset. Actual results will be determined by a
number of factors that are not generally under our control and could vary significantly from those
factors disclosed. We are exposed to credit losses in the event of nonperformance by counterparties on the above
instruments, as well as credit or performance risk with respect to our hedged customers
commitments. Although nonperformance is possible, we do not anticipate nonperformance by any of
these parties. 6. Assets Held for Sale During 2004, we sold our previously closed Roxboro, North Carolina facility for $2.5 million,
which was the carrying value of the property after write-downs of $0.8 million that were taken in
2004. The WRI property, as discussed in Note 3, is the only remaining asset held for sale as of
December 31, 2004. On September 21, 2004, we entered into a lease agreement, commencing December
1, 2004, for the rental of approximately 36,000 square feet of this facility with a local
manufacturing company. The lease is for a five-year term, and calls for escalating annual rental
payments ranging from $4.98 per square foot to $5.48 per square foot
(in U.S. dollars as of December
31, 2004) over the term of the lease. On February 16, 2005, we entered into an agreement for the sale of the WRI land and building
for $1.1 million U.S. dollars, which approximates the carrying value. The transaction is currently
scheduled to close in May 2005. 7. Property, Plant and Equipment Property, plant and equipment at December 31 are as follows: 2004
    
    
    2003(In thousands)Land and improvements
    
    $
    13,005
    
    
    $
    13,806Building and improvements
    
    
    52,277
    
    
    
    53,160Machinery and equipment
    
    
    294,497
    
    
    
    280,465Construction-in-progress
    
    
    4,772
    
    
    
    4,276364,551
    
    
    
    351,707Less accumulated depreciation
    
    
    (169,585
    )
    
    
    (153,165
    )Totals
    
    $
    194,966
    
    
    $
    198,542
 8. Deferred Charges Deferred charges include debt issuance costs, patents and an intangible pension asset. Debt
issuance costs are deferred and amortized over the terms of the debt to which they relate using a method which approximates the
interest method. F-15




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##### Table of Contents



Deferred charges are as follows at December 31: 2004
    
    
    2003(In thousands)Deferred debt issuance cost
    
    $
    9,873
    
    
    $
    10,668Patents and other
    
    
    2,342
    
    
    
    2,444Unrecognized prior service cost for pensions
    
    
    4,739
    
    
    
    5,12116,954
    
    
    
    18,233Less accumulated amortization
    
    
    (5,062
    )
    
    
    (3,463
    )Totals
    
    $
    11,892
    
    
    $
    14,770
 Deferred charges other than unrecognized prior service cost for pensions are subject to
amortization. Net deferred debt issuance costs of $5.2 million
will be amortized utilizing a method which approximates the interest method over a weighted
average remaining life of 4.2 years resulting in $1.4 million of amortization expense in each of
the next four succeeding years beginning in 2005. We recorded $1.4 million of amortization expense
related to deferred debt issuance costs and patents and other in each of the years for the three
year period ending December 31, 2004. 9. Accrued Liabilities Accrued liabilities are as follows at December 31: 2004
    
    
    2003(In thousands)Interest
    
    $
    6,764
    
    
    $
    6,953Income taxes
    
    
    2,254
    
    
    
    2,842Reserve for restructuring
    
    
    524
    
    
    
    4,235Fair value of derivatives and unsettled derivative
liabilities (Note 5)
    
    
    10,873
    
    
    
    4,285Other
    
    
    12,061
    
    
    
    11,472Totals
    
    $
    32,476
    
    
    $
    29,787
 10. Financing Arrangements and Debt Long-term debt consists of the following at December 31: 2004
    
    
    2003(In thousands)Secured revolving credit facility, due March 2007
    
    $
    1,000
    
    
    $
    Senior Notes, 10.5%, due April 2009
    
    
    99,400
    
    
    
    118,000Discount on 10.5% Senior Notes, original issue
discount amortized over 7 years
    
    
    (729
    )
    
    
    (1,069
    )Senior Notes, 7.375%, due August 2008
    
    
    136,097
    
    
    
    136,308Discount on 7.375% Senior Notes, original issue
discount amortized over 10 years
    
    
    (103
    )
    
    
    (132
    )Netherlands facility, 5.13%, due on demand
    
    
    976
    
    
    
    1,201Other foreign facilities
    
    
    1,494
    
    
    
    1,478Capitalized leases
    
    
    106
    
    
    
    238,241
    
    
    
    255,786Less short-term borrowings
    
    
    (1,219
    )
    
    
    (1,502
    )Totals
    
    $
    237,022
    
    
    $
    254,284
 F-16




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##### Table of Contents



Aggregate maturities of long-term debt are as follows: (In thousands)2005
    
    $
    1,2192006
    
    
    2432007
    
    
    1,4482008
    
    
    136,6482009
    
    
    98,683Totals
    
    $
    238,241
 Revolving Credit Facility Our secured revolving credit facility, as amended, provides for up to $40 million in available
borrowing capacity, subject to certain limits and collateral availability. The facility has a
maturity of March 2007. As of December 31, 2004, we had $1.0 million of borrowings and $9.2 million of standby letters
of credit outstanding under the secured revolving credit facility, leaving approximately $26.6
million (subject to a $2 million excess availability requirement) in additional borrowing
availability thereunder. As of December 31, 2003, there were approximately $7.9 million of standby
letters of credit outstanding that were collateralized with the secured revolving credit facility
and approximately $29.2 million (subject to a $2 million excess availability requirement) in
additional borrowing availability thereunder. Silver Consignment and Forward Contracts Arrangement As of December 31, 2004, the value of consigned silver in our inventory under a consignment
and forward contracts arrangement with BofA Precious Metals, Inc (successor to Fleet Precious Metals, Inc.)
was $13.9 million. Under this arrangement, BofA makes available to us at any time silver up to the
lesser of $17.0 million dollars or the value of 2.4 million fine troy ounces of silver, and allows
us to contract to purchase certain amounts of silver from BofA in the future for a set price. The
value of silver committed to under the forward contracts facility at December 31, 2004 was $0.7
million. 10.5% Senior Notes due 2009 There is $99.4 million in principal amount of 10.5% Senior Notes outstanding at December 31,
2004. The 10.5% Senior Notes were issued pursuant to an Indenture, dated as of March 27, 2002,
between us and Wachovia Bank, N.A., as Trustee. The 10.5% Senior Notes (i) have interest payment
dates of April 1 and October 1 of each year; (ii) are redeemable after the dates and at the prices
(expressed in percentages of principal amount on the redemption date), as set forth below: Year
    
    PercentageApril 1, 2006
    
    
    105.250
    %April 1, 2007
    
    
    102.625
    %April 1, 2008 and thereafter
    
    
    100.000
    %
 F-17




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##### Table of Contents



(iii) are senior unsecured obligations and are senior in right of payment to any of our future
subordinated obligations, (iv) are guaranteed by certain of our subsidiaries and (v) are subject to
the terms of the indenture governing our 10.5% Senior Notes, which contain certain covenants,
including covenants that limit our ability to incur indebtedness, make certain restricted payments
and dispose of certain assets. 7.375% Senior Notes due 2008 There is $136.8 million in principal amount of 7.375% Senior Notes outstanding at December 31,
2004. The 7.375% Senior Notes were issued pursuant to an Indenture, dated as of August 4, 1998,
between us and Wachovia Bank, N.A., as Trustee. The 7.375% Senior Notes: (i) have interest payment
dates of February 1 and August 1 of each year; (ii) are redeemable at our option at a redemption
price equal to the greater of (a) 100% of the principal amount of the Senior Notes to be redeemed,
or (b) the sum of the present value of the remaining scheduled payments of principal and interest
thereon from the redemption date to the maturity date, discounted to the redemption date on a
semiannual basis at a rate based upon the yield of the specified treasury securities plus 25 basis
points, plus, in each case, accrued interest thereon to the date of redemption; (iii) are senior
unsecured obligations and are pari passuin right of payment with any of our existing and future
senior unsecured indebtedness, including borrowings under the Facility; (iv) are guaranteed by
certain of our subsidiaries; and (v) are subject to the terms of the Indenture, which limits our
ability to incur indebtedness secured by certain liens and to engage in sale/leaseback
transactions. Our financing agreements also contain covenants that among other things, require us to
maintain certain financial ratios and place other restrictions and limitations on us, including
restrictions on our payment of dividends, limitations on the issuance of additional debt and
limitations on investments, contingent obligations, the redemption of capital stock and the sale or
transfer of assets. Other Credit Facilities We have a credit facility with a Netherlands bank, payable on demand and providing for
available credit up to 1.8 million euros. At December 31, 2004 and 2003, we had outstanding
borrowings in U.S. dollars of $1.0 and $1.2 million under this facility, respectively. In 2002, we obtained an interest free loan
from the Portuguese government in the amount of 1.9
million euros that matures in 2008. Based on the performance of our Portugal facility, the
Portuguese government forgave 40% of the loan, or 0.7 million euros in 2003. Accordingly, we
classified 0.7 million euros of the loan as deferred income in 2003, and are amortizing this into
income over the life of the equipment purchased with the loan proceeds. The loan balance at
December 31, 2004 is 1.1 million euros which equates to $1.5 million U.S. dollars (based on
current exchange rates). The loan provides for annual payments in U.S. dollars of $0.2 million in 2005, $0.2
million in 2006, $0.4 million in 2007 and $0.7 million in 2008. F-18




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##### Table of Contents



11. Interest Expense The following table summarizes interest expense, net : Year Ended December 31,2004
    
    
    2003
    
    
    2002(in thousands)Interest expense  bonds and other
    
    $
    22,002
    
    
    $
    22,934
    
    
    $
    20,081Interest expense  revolver
    
    
    344
    
    
    
    40
    
    
    
    1,078Effect of interest rate swap
    
    
    (655
    )
    
    
    (1,123
    )
    
    
    (289
    )Interest income
    
    
    (637
    )
    
    
    (556
    )
    
    
    (481
    )Capitalized interest
    
    
    (194
    )
    
    
    (77
    )
    
    
    (708
    )Interest expense, net
    
    $
    20,860
    
    
    $
    21,218
    
    
    $
    19,681
 12. Retirement and Pension Plans We have 401(k) plans covering substantially all of our U.S. employees. We provide, at our
discretion, a match of employee salaries contributed to the plans. We recorded expense with
respect to these plans of $0.7 million in 2004, $0.4 million in 2003 and $0.3 million in 2002. U.S. Qualified Retirement Plan We have a U.S. Retirement Plan that is a noncontributory defined benefit pension plan covering
the majority of all our U.S. employees fulfilling minimum age and service requirements. Benefits
are based upon years of service and a prescribed formula based upon the employees compensation. The weighted average asset allocations for our U.S. Retirement Plan at December 31 are as
follows: 2004
    
    2003Equity securities
    
    
    59
    %
    
    
    58
    %Debt securities
    
    
    38
    
    
    
    40Cash and equivalents
    
    
    3
    
    
    
    2Total
    
    
    100
    %
    
    
    100
    %
 The investment policy of our U.S. Retirement Plan states that investments in assets
should be in accordance with the maximum and minimum ranges for each asset category as follows: Minimum
    
    MaximumEquity securities
    
    
    30
    %
    
    
    60
    %Debt securities
    
    
    40
    
    

    
    70Cash and equivalents
    
    
    0
    
    
    
    30
 The investment policy of our U.S. Retirement Plan states that all assets selected for the
portfolio must have a readily ascertainable market value and must be readily marketable. The
policy expressly prohibits certain types of assets or transactions including commodities, futures, F-19




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##### Table of Contents



foreign securities (other than those listed on the New York Stock Exchange), private placements,
warrants, purchasing of securities on margin, selling short, options, derivatives, interest rate
swaps, limited partnerships and real estate. The investment policy of our U.S. Retirement Plan states that investments in equity securities
must be of good quality and diversified so as to avoid undue exposure to any single economic
sector, industry or group or individual security. The policy states that investments in debt
securities should be rated A or better, allowing debt securities with a rating of BBB as long
as the total amount rated BBB does not exceed 10% of the debt securities portfolio at the time of
purchase and as long as the debt securities portfolio maintains an overall rating of at least A.
The investment policy limits the debt securities of any one issuer, excluding investments in U.S.
Government guaranteed obligations, and states that no debt securities should have a maturity of
longer than thirty years at the time of purchase. On December 31, 2004, our annual measurement date, the accumulated benefit obligation for our
U.S. Retirement Plan exceeded the fair value of pension plan assets. This difference is primarily
the result of the change in the discount rate assumption to 6.00% in 2004 from 6.25% in 2003. As a
result and in accordance with Statement of Financial Accounting Standard No. 87 (SFAS 87),
Employers Accounting for Pensions, we have an additional minimum pension liability of $20.2
million, reflected as a component of accumulated other comprehensive loss of $19.4 million and an
intangible asset of $0.8 million which is included in net deferred charges, and is equal to the
amount of unrecognized prior service cost. The amount charged to other comprehensive loss before
tax during 2004 arising from the change in the additional minimum pension liability was $2.6
million, which decreased stockholders equity. The $20.2 million additional minimum pension
liability reflects a reduction in prepaid pension assets of $1.6 million and a $18.6 million
pension liability. In conjunction with the recognition of the additional minimum pension
liability, we also recorded a deferred tax asset and an amount to accumulated other comprehensive loss of $0.9
million. The accumulated benefit obligation at December 31, 2004 and 2003 was $149.7 million and $140.0
million, respectively. The amounts recognized in the Consolidated Balance Sheets before taxes are
as follows at December 31: 2004
    
    
    2003(In thousands)Accrued benefit liability
    
    $
    (18,587
    )
    
    $
    (12,264
    )Intangible asset
    
    
    765
    
    
    
    885Accumulated other comprehensive loss
    
    
    19,396
    
    
    
    16,845Net amount recognized
    
    $
    1,574
    
    
    $
    5,466
 Certain assumptions utilized in determining the benefit obligations for the U.S.
Retirement Plan for the years ended December 31 are as follows: 2004
    
    2003Discount rate
    
    
    6.00
    %
    
    
    6.25
    %Rate of increase in compensation
    
    
    3.50
    %
    
    
    3.50
    %
 F-20




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##### Table of Contents



A summary of the components of net periodic pension cost for the U.S. Retirement Plan for
the years ended December 31 is as follows: 2004
    
    
    2003
    
    
    2002(In thousands)Service cost
    
    $
    4,358
    
    
    $
    3,963
    
    
    $
    3,991Interest cost
    
    
    9,371
    
    
    
    9,145
    
    
    
    9,087Expected return on plan assets
    
    
    (11,194
    )
    
    
    (10,052
    )
    
    
    (11,835
    )Amortization of prior service cost
    
    
    120
    
    
    
    137
    
    
    
    136Amortization of net actuarial loss
    
    
    1,236
    
    
    
    1,102
    
    
    
    Effect of curtailment
    
    
    
    
    
    
    102
    
    
    
    Net periodic pension cost
    
    $
    3,891
    
    
    $
    4,397
    
    
    $
    1,379
 The amortization of our net actuarial loss in 2004 of $1.2 million is the amortization of
total unrecognized losses as of January 1, 2004 that exceeds 10% of our projected benefit
obligation, approximately $15.3 million, and is being amortized over the expected average remaining
years of service of the plan participants which is 12 years. Certain assumptions utilized in determining the net periodic benefit cost for the years ended
December 31 are as follows: 2004
    
    
    2003
    
    
    2002Discount rate
    
    
    6.25
    %
    
    
    7.00
    %
    
    
    7.25
    %Rate of increase in compensation
    
    
    3.50
    %
    
    
    3.50
    %
    
    
    4.00
    %Expected long-term rate of return on plan
assets
    
    
    9.00
    %
    
    
    9.00
    %
    
    
    9.50
    %
 The expected long-term rate of return on plan assets is selected by taking into account
the expected weighted averages of the investments of the assets, the fact that the plan assets are
actively managed to mitigate downside risks, the historical performance of the market in general
and the historical performance of the U.S. Retirement Plan assets over the past ten years. For the
ten year period ended December 31, 2004 and 2003, the U.S. Retirement Plan assets have provided a
weighted rate of return of 11.7% and 10.8%, respectively. The following table sets forth a reconciliation of the projected benefit obligation for the
years ended December 31: 2004
    
    
    2003(In thousands)Benefit obligation at the beginning of the year
    
    $
    153,488
    
    
    $
    132,132Service costs
    
    
    4,358
    
    
    
    3,962Interest costs
    
    
    9,371
    
    
    
    9,145Actuarial loss
    
    
    5,272
    
    
    
    16,180Benefits paid
    
    
    (7,485
    )
    
    
    (6,906
    )Curtailment
    
    
    
    
    
    
    (1,025
    )Benefit obligation at the end of the year
    
    $
    165,004
    
    
    $
    153,488
 The actuarial loss for the year ended December 31, 2004 results from a $5.4 million loss
due to the change in the discount rate to 6.00% from 6.25% and a $0.1 million gain due to personnel
experience different than assumed. The actuarial loss for the year ended December 31, F-21




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##### Table of Contents



2003 results from a $1.7 million loss due to personnel experience different than assumed, and
a $14.5 million loss due to the change in the discount rate to 6.25% from 7.0%. The following table sets forth a reconciliation of the plan assets for the years ended December 31: 2004
    
    
    2003(In thousands)Fair value of plan assets at the beginning of the year
    
    $
    127,768
    
    
    $
    114,899Actual return on plan assets
    
    
    10,866
    
    
    
    19,775Benefits paid
    
    
    (7,485
    )
    
    
    (6,906
    )Fair value of plan assets at the end of the year
    
    $
    131,149
    
    
    $
    127,768
 In 2005 and with regard to the U.S. Retirement Plan, we do not anticipate any mandatory
contribution requirements by funding regulations or laws, and we will evaluate and may make
voluntary contributions in 2005. The following table sets forth the funded status of the plan and the amounts recognized in our
Consolidated Balance Sheets at December 31: 2004
    
    
    2003(In thousands)Unfunded status
    
    $
    (33,855
    )
    
    $
    (25,720
    )Unrecognized net actuarial loss
    
    
    34,664
    
    
    
    30,301Unrecognized prior service costs
    
    
    765
    
    
    
    885Prepaid pensions
    
    $
    1,574
    
    
    $
    5,466
 The expected future benefits payments for the plan are as follows: (in thousands)2005
    
    $
    7,4142006
    
    
    7,7592007
    
    
    8,2112008
    
    
    8,6342009
    
    
    9,0932010 - 2014
    
    
    50,485
 U.S. Nonqualified Pension Plans We have two nonqualified pension plans in the United States. The Supplemental Benefit
Restoration Plan (the Restoration Plan) was established as of January 1, 1994 and is a
non-funded, defined benefit pension plan that provides benefits to employees identical to the
benefits provided by the U.S. Retirement Plan, except that under the U.S. Retirement Plan final
average annual compensation for purposes of determining plan benefits is currently capped at
$205,000. Benefits under the Restoration Plan are not subject to this limitation. However,
Restoration Plan benefits are offset by any benefits payable from the U.S. Retirement Plan. On January 1, 2002, the Supplemental Executive Retirement Plan (the Executive Plan) was
established to provide retirement benefits to executives who are employed at the level of senior
vice president or above and who are approved for participation by the Compensation F-22




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##### Table of Contents



Committee upon the recommendation of the Chief Executive Officer. In general, the Executive
Plan provides a monthly benefit to a participant at the normal retirement age of 65 of 55% of
average pay reduced by benefits under the U.S. Retirement Plan, the Restoration Plan and Social
Security. The annual benefit payable to the Chief Executive Officer is increased by $6,000 for
each year of service. Benefits become fully vested upon a change in control and are immediately
payable in the event of a termination of employment following the change in control. The U.S. nonqualified pension plans use a December 31 measurement date. On December 31, 2004, the accumulated benefit obligation for our nonqualified pension plans of
$7.1 million exceeded the plans accrued liability of $4.2 million. The plan had unrecognized
prior service cost of $3.2 million and thus an intangible asset equal to the additional minimum
liability of $2.9 million was established. The amounts recognized in the Consolidated Balance
Sheets before taxes are as follows at December 31: 2004
    
    
    2003(In thousands)Accrued benefit liability
    
    $
    (7,118
    )
    
    $

    (6,330
    )Intangible asset
    
    
    2,935
    
    
    
    3,174Net amount recognized
    
    $
    (4,183
    )
    
    $
    (3,156
    )
 Certain assumptions utilized in determining the benefit obligations for the nonqualified
pension plans for the years ended December 31 are as follows: 2004
    
    
    2003Discount rate
    
    
    6.00
    %
    
    
    6.25
    %Rate of increase in compensation
    
    
    3.50
    %
    
    
    3.50
    %
 A summary of the components of net periodic pension cost for the nonqualified pension
plans for the years ended December 31 is as follows: 2004
    
    
    2003
    
    
    2002(In thousands)Service cost
    
    $
    202
    
    
    $
    152
    
    
    $
    566Interest cost
    
    
    494
    
    
    
    430
    
    
    
    230Amortization of prior service cost
    
    
    367
    
    
    
    368
    
    
    
    173Amortization of net actuarial loss
    
    
    43
    
    
    
    
    
    
    
    13Net periodic pension cost
    
    $
    1,106
    
    
    $
    950
    
    
    $
    982
 Certain assumptions utilized in determining the net periodic benefit cost for the years
ended December 31 are as follows: 2004
    
    
    2003
    
    
    2002Discount rate
    
    
    6.25
    %
    
    
    7.00
    %
    
    
    7.25
    %Rate of increase in compensation
    
    
    3.50
    %
    
    
    3.50
    %
    
    
    4.00
    %
 F-23




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##### Table of Contents



The following table sets forth a reconciliation of the projected benefit obligation for
the years ended December 31: 2004
    
    
    2003(In thousands)Benefit obligation at the beginning of the year
    
    $
    7,406
    
    
    $
    3,899Service costs
    
    
    202
    
    
    
    152Interest costs
    
    
    494
    
    
    
    430Amendments
    
    
    
    
    
    
    2,471Actuarial loss
    
    
    463
    
    
    
    531Benefits paid
    
    
    (80
    )
    
    
    (77
    )Benefit obligation at the end of the year
    
    $
    8,485
    
    
    $
    7,406
 The following table sets forth a reconciliation of the plan assets for the years ended
December 31: 2004
    
    
    2003(In thousands)Fair value of plan assets at the beginning of the year
    
    $
    
    
    
    $
    Company contributions
    
    
    80
    
    
    
    77Benefits paid
    
    
    (80
    )
    
    
    (77
    )Fair value of plan assets at the end of the year
    
    $
    
    
    
    $
    
 In 2005, we anticipate contributing $0.1 million to the U.S. nonqualified pension plans,
which represents the equivalent of the normal amount of benefits we anticipate paying. We also
anticipate paying a lump sum distribution of $1.6 million to an executive who will retire in 2005,
whose retirement had previously been assumed to occur in 2009. The following table sets forth the funded status of the plan and the amounts recognized in our
Consolidated Balance Sheets at December 31: 2004
    
    
    2003(In thousands)Unfunded status
    
    $
    (8,485
    )
    
    $
    (7,406
    )Unrecognized net actuarial loss
    
    
    1,151
    
    
    
    731Unrecognized prior service costs
    
    
    3,151
    
    
    
    3,519Accrued benefit cost
    
    $
    (4,183
    )
    
    $
    (3,156
    )
 The expected future benefits payments for the plan is as follows: (in thousands)2005
    
    $
    802006
    
    
    802007
    
    
    5,8622008
    
    
    802009
    
    
    1,8262010 - 2014
    
    
    393
 F-24




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##### Table of Contents



Canadian Plans We sponsor a defined contribution profit-sharing retirement plan for our London, Ontario
facility employees who are required to contribute 4% of regular wages, subject to a maximum
contribution limit specified by Canadian income tax regulations. Company contributions were $0.4
million in 2004, $0.4 million in 2003 and $0.5 million in 2002. We previously sponsored defined benefit pension plans for employees at our discontinued
Wolverine Ratcliffs, Inc. facility (the WRI Plans). The WRI Plans covered employees at our
Fergus, Ontario facility whose operations were discontinued in 2002. The remainder of the benefits
payable under the WRI Plans were settled in 2004. An additional contribution of $0.1 million was
deposited in 2004 to ensure full settlement of benefits owed to affected participants. The pension
liability recorded for the WRI Plan at December 31, 2003 was $1.1 million. We also have established two noncontributory defined benefit pension plans covering
substantially all our employees at the Montreal, Quebec facility (Canadian Plans). The two plans
are the Wolverine Tube (Canada) Inc. Pension Plan for Salaried Employees (the Salaried Plan) and
the Wolverine Tube (Canada) Inc. Pension Plan for Operational Employees (the Operational Plan).
We contribute the actuarially determined amounts annually into the plans. Benefits for the hourly
employees are based on years of service and a negotiated rate. Benefits for salaried employees are
based on years of service and the employees highest annual average compensation over five
consecutive years. The investment policy of our Canadian Plans states that all assets selected for the portfolio
must have a readily ascertainable market value and must be readily marketable. The policy
expressly limits the use of certain types of assets or transactions including commodities, futures,
private placements, warrants, purchasing of securities on margin, selling short, options,
derivatives, interest rate swaps and limited partnerships. The investment policy of our Canadian Plans states that investments in equity securities must
be of good quality and diversified so as to avoid undue exposure to any single economic sector,
industry or group or individual security. The policy states that investments in debt securities
should be rated BBB or better. The investment policy limits the debt securities of any one
issuer, excluding investments in federal government guaranteed obligations. The investment policy of our Canadian Plans state that investments in assets should be in
accordance with the maximum and minimum ranges for each asset category as follows: Minimum
    
    
    MaximumCanadian equity securities
    
    
    15
    %
    
    
    35
    %Foreign equity securities
    
    
    20
    
    
    
    30Debt securities
    
    
    33
    
    
    
    53Cash and equivalents
    
    
    0
    
    
    
    15
 The expected long-term rate of return on plan assets is selected by taking into account
the expected weighted averages of the investments of the assets, the fact that the plan assets are F-25




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##### Table of Contents



actively managed to mitigate downside risks, the historical performance of the market in
general and the historical performance of the Canadian Plans assets over the past ten years. For
the ten year period ending December 31, 2004 and 2003, the Canadian Plans assets have provided a
weighted average rate of return of 9.5% and 7.8%, respectively. The discount rate utilized in determining the benefit obligations for the Canadian Plans were
6.0% and 6.25% for the years ended December 31, 2004 and 2003, respectively. The expected rate of
increase in compensation used in accounting for the Salaried Plan was 3.0% for the years ended
December 31, 2004, 2003 and 2002. The rate of increase in compensation is not applicable in
accounting for the Operational Plan for the same periods. Salaried Plan The weighted average asset allocation for our Salaried Plan at December 31 is as follows: 2004
    
    
    2003Canadian equity securities
    
    
    32
    %
    
    
    34
    %Foreign equity securities
    
    
    27
    
    
    
    30Debt securities
    
    
    40
    
    
    
    36Cash and equivalents
    
    
    1
    
    
    
    Total
    
    
    100
    %
    
    
    100
    %
 At December 31, 2004, the annual measurement date, the fair value of plan assets for the
Salaried Plan exceeded the accumulated benefit obligation. The accumulated benefit obligation at
December 31, 2004 and 2003 for the Salaried Plan was $8.1 million and $6.8 million, respectively.
The amounts recognized in the Consolidated Balance Sheets before taxes are as follows at December
31: 2004
    
    
    2003(In thousands)Prepaid benefit cost
    
    $
    1,222
    
    
    $
    Accrued benefit liability
    
    
    
    
    
    
    (81
    )Accumulated other comprehensive loss
    
    
    
    
    
    
    1,059Net amount recognized
    
    $
    1,222
    
    
    $
    978
 A summary of the components of net periodic pension cost for the Salaried Plan for the
years ended December 31 is as follows: 2004
    
    
    2003
    
    
    2002(In thousands)Service cost
    
    $
    200
    
    
    $
    207
    
    
    $
    190Interest cost
    
    
    486
    
    
    
    444
    
    
    
    420Expected return on plan assets
    
    
    (501
    )
    
    
    (396
    )
    
    
    (529
    )Effect of settlement
    
    
    
    
    
    
    
    
    
    
    454Amortization of net actuarial loss
    
    
    100
    
    
    
    107
    
    
    
    4Net periodic pension cost
    
    $
    285
    
    
    $
    362
    
    
    $
    539
 F-26




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##### Table of Contents



Certain assumptions utilized in determining the net periodic benefit cost for the
Salaried Plan for the years ended December 31 is as follows: 2004
    
    
    2003
    
    
    2002Discount rate
    
    
    6.25
    %
    
    
    6.75
    %
    
    
    7.00
    %Expected long-term rate of return on plan assets
    
    
    7.50
    %
    
    
    7.50
    %
    
    
    8.50
    %
 The following table sets forth a reconciliation of the benefit obligation for the
Salaried Plan for the years ended December 31: 2004
    
    
    2003(In thousands)Benefit obligation at the beginning of the year
    
    $
    7,886
    
    
    $
    5,837Service costs
    
    
    200
    
    
    
    207Interest costs
    
    
    486
    
    
    
    444Actuarial loss
    
    
    780
    
    
    
    466Benefits paid
    
    
    (545
    )
    
    
    (424
    )Foreign currency exchange rate changes
    
    
    654
    
    
    
    1,356Benefit obligation at the end of the year
    
    $
    9,461
    
    
    $
    7,886
 The following table sets forth a reconciliation of the plans assets for the Salaried Plan
for the years ended December 31: 2004
    
    
    2003(In thousands)Fair value of plan assets at the beginning of the year
    
    $
    6,768
    
    
    $
    4,595Actual return on plan assets
    
    
    1,353
    
    
    
    868Company contribution
    
    
    445
    
    
    
    618Benefits paid
    
    
    (545
    )
    
    
    (424
    )Foreign currency exchange rate changes
    
    
    597
    
    
    
    1,111Fair value of plan assets at the end of the year
    
    $
    8,618
    
    
    $
    6,768
 In 2005, we anticipate providing approximately $0.7 million in contributions to the
Salaried Plan. The following table sets forth the funded status of the Salaried Plan and the amounts
recognized in our Consolidated Balance Sheets at December 31: 2004
    
    
    2003(In thousands)Funded status
    
    $
    (842
    )
    
    $
    (1,117
    )Unrecognized net actuarial loss
    
    
    2,064
    
    
    
    2,095Prepaid benefit cost
    
    $
    1,222
    
    
    $
    978
 The expected future benefits payments for the Salaried Plan is as follows: (in thousands)2005
    
    $
    5542006
    
    
    5802007
    
    
    5732008
    
    
    5822009
    
    
    5752010 - 2014
    
    
    3,138
 F-27




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##### Table of Contents



Operational Plan The weighted average asset allocation for our Operational Plan December 31 is as follows: 2004
    
    
    2003Canadian equity securities
    
    
    33
    %
    
    
    32
    %Foreign equity securities
    
    
    30
    
    
    
    29Debt securities
    
    
    36
    
    
    
    37Cash and equivalents
    
    
    1
    
    
    
    2Total
    
    
    100
    %
    
    
    100
    %
 At December 31, 2004, the annual measurement date, the accumulated benefit obligation for
the Operational Plan exceeded the fair value of pension plan assets. This difference is primarily
the result of changing the discount rate assumption to 6.00% in 2004 from 6.25% in 2003. As a
result and in accordance with SFAS 87, we have an additional minimum pension liability of $2.0
million, reflected as an accumulated other comprehensive loss of $1.0 million and an intangible
asset of $1.0 million which is included in net deferred charges equal to the amount of unrecognized
prior service cost. The change to accumulated other comprehensive loss before tax during 2004
arising from the change in the reduction of the additional minimum pension liability was $0.1
million, which increased stockholders equity. To record the $2.0 million additional minimum
pension liability, we decreased prepaid pension assets by $0.2 million and recorded a $1.8 million
pension liability. In conjunction with the reduction of the additional minimum pension liability,
we also recorded a deferred tax liability and accumulated other comprehensive income of $0.1
million. The accumulated benefit obligation at December 31, 2004 and 2003 for the Operational Plan was
$16.6 million and $14.8 million, respectively. The amounts recognized in the Consolidated Balance
Sheets before taxes are as follows at December 31: 2004
    
    
    2003(In thousands)Accrued benefit liability
    
    $
    (2,211
    )
    
    $
    (2,544
    )Intangible asset
    
    
    1,039
    
    
    
    1,062Accumulated other comprehensive loss
    
    
    1,009
    
    
    
    1,149Net amount recognized
    
    $
    (163
    )
    
    $
    (333
    )
 A summary of the components of net periodic pension cost for the Operational Plan for the
years ended December 31 is as follows: 2004
    
    
    2003
    
    
    2002(In thousands)Service cost
    
    $
    355
    
    
    $
    327
    
    
    $
    276Interest cost
    
    
    908
    
    
    
    837
    
    
    
    732Expected return on plan assets
    
    
    (897
    )
    
    
    (768
    )
    
    
    (917
    )Amortization of prior service cost
    
    
    94
    
    
    
    87
    
    
    
    77Amortization of net actuarial (gain)
    
    
    
    
    
    
    
    
    
    
    (14
    )Net periodic pension cost
    
    $
    460
    
    
    $
    483
    
    
    $
    154
 F-28




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##### Table of Contents



Certain assumptions utilized in determining the net periodic benefit cost for the years
ended December 31 is as follows: 2004
    
    
    2003
    
    
    2002Discount rate
    
    
    6.25
    %
    
    
    6.75
    %
    
    
    7.00
    %Expected long-term rate of return on plan
assets
    
    
    7.50
    %
    
    
    7.50
    %
    
    
    8.50
    %
 The following table sets forth a reconciliation of the benefit obligation for the
Operational Plan for the years ended December 31: 2004
    
    
    2003(In thousands)Benefit obligation at the beginning of the year
    
    $
    14,759
    
    
    $
    11,091Service costs
    
    
    355
    
    
    
    327Interest costs
    
    
    908
    
    
    
    838Actuarial loss
    
    
    481
    
    
    
    801Benefits paid
    
    
    (1,019
    )
    
    
    (858
    )Foreign currency exchange rate changes
    
    
    1,145
    
    
    
    2,560Benefit obligation at the end of the year
    
    $
    16,629
    
    
    $
    14,759
 The following table sets forth a reconciliation of the plans assets for the Operational
Plan for the years ended December 31: 2004
    
    
    2003(In thousands)Fair value of plan assets at the beginning of the year
    
    $
    12,215
    
    
    $
    9,460Actual return on plan assets
    
    
    1,586
    
    
    
    1,458Company contribution
    
    
    641
    
    
    
    Benefits paid
    
    
    (1,019
    )
    
    
    (858
    )Foreign currency exchange rate changes
    
    
    995
    
    
    
    2,155Fair value of plan assets at the end of the year
    
    $
    14,418
    
    
    $
    12,215
 In 2005, we anticipate providing approximately $0.7 million in contributions to the
Operational Plan. The following table sets forth the funded status of the plans and the amounts recognized for
the Operational Plan in our Consolidated Balance Sheets at December 31: 2004
    
    
    2003(In thousands)Funded status
    
    $
    (2,211
    )
    
    $
    (2,544
    )Unrecognized net actuarial loss
    
    
    1,009
    
    
    
    1,149Unrecognized prior service costs
    
    
    1,039
    
    
    
    1,062Accrued benefit cost
    
    $
    (163
    )
    
    $
    (333
    )
 F-29




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##### Table of Contents



The expected future benefits payments for the Operational Plan are as follows: (in thousands)2005
    
    $
    9942006
    
    
    1,0462007
    
    
    1,0212008
    
    
    1,0512009
    
    
    1,0372010 - 2014
    
    
    5,181
 13. Postretirement Benefit Obligation We sponsor a defined benefit health care plan and life insurance plan that provides
postretirement medical benefits and life insurance to substantially all our full-time U.S. and
Canadian employees who have worked ten years after age 50 to 52, and spouses of employees who die
while employed after age 55 and have at least five years of service. This plan is contributory,
with retiree contributions being adjusted annually. Net periodic postretirement benefit cost for the years ended December 31 includes the
following components: 2004
    
    
    2003
    
    
    2002(In thousands)Service cost
    
    $
    676
    
    
    $
    692
    
    
    $
    613Interest cost
    
    
    1,081
    
    
    
    1,080
    
    
    
    1,034Amortization of prior service cost
    
    
    179
    
    
    
    145
    
    
    
    126Amortization of deferred gain
    
    
    (7
    )
    
    
    (82
    )
    
    
    (126
    )Effect of special termination benefits
    
    
    328
    
    
    
    98
    
    
    
    (386
    )Effect of curtailment
    
    
    
    
    
    
    20
    
    
    
    Net periodic postretirement benefit cost
    
    $
    2,257
    
    
    $
    1,953
    
    
    $
    1,261
 The change in benefit obligation for the years ended December 31 includes the following
components: 2004
    
    
    2003(In thousands)Benefit obligation at the beginning of the year
    
    $
    18,125
    
    
    $
    15,088Service cost
    
    
    676
    
    
    
    692Interest cost
    
    
    1,081
    
    
    
    1,080Participants contributions
    
    
    787
    
    
    
    633Amendments
    
    
    93
    
    
    
    Actuarial loss
    
    
    443
    
    
    
    1,727Benefits paid
    
    
    (2,193
    )
    
    
    (2,393
    )Special termination benefits
    
    
    328
    
    
    
    98Curtailment
    
    
    
    
    
    
    (43
    )Foreign currency exchange rate changes
    
    
    568
    
    
    
    1,243Benefit obligation at the end of the year
    
    $
    19,908
    
    
    $
    18,125
 F-30




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##### Table of Contents



The following table sets forth the status of the plan and the amounts recognized in our
Consolidated Balance Sheets at December 31: 2004
    
    
    2003(In thousands)Benefit obligation at end of year
    
    $
    19,908
    
    
    $
    18,125Unrecognized net actuarial (loss)
    
    
    (1,036
    )
    
    
    (628
    )Unrecognized prior service cost
    
    
    (450
    )
    
    
    (502
    )Net postretirement benefit obligation
    
    $
    18,422
    
    
    $
    16,995
 The weighted average discount rate used in determining the postretirement benefit
obligation was 6.00% at December 31, 2004 and 6.25% at December 31, 2003. The weighted average
discount rate used to determine net periodic benefit cost was 6.25% at December 31, 2004 and 7.00%
at December 31, 2003. For purposes of determining the cost and obligation for pre-medicare postretirement medical
benefits, a 5% annual rate of increase in the per capita cost of covered benefits (i.e., health
care trend rate) was assumed for our U.S. plan. A 7.5% annual rate of increase in the health care
trend rate was assumed for our Canadian plan, and is expected to decrease 1% per year to an
ultimate rate of 4.5%. Assumed health care cost trend rates have a significant effect on the
amounts reported for health care plans. A one percent change in the assumed health care cost trend
rate would have had the following effects: 1% Increase
    
    
    1% Decrease(In thousands)Effect on total of service and interest cost components
    
    $
    89
    
    
    $
    (75
    )Effect on postretirement benefit obligation
    
    $
    1,421
    
    
    $
    (1,342
    )
 14. Environmental Remediation We are subject to extensive environmental regulations imposed by federal, state, provincial
and local authorities in the U.S., Canada, China, Portugal and Mexico with respect to emissions to
air, discharges to waterways, and the generation, handling, storage, transportation, treatment and
disposal of waste materials. We have received various communications from regulatory authorities
concerning certain environmental matters. We have accrued undiscounted estimated environmental remediation costs of $1.0 million at
December 31, 2004, consisting of $0.2 million for the Decatur facility and $0.8 million for the
Ardmore facility. Based on information currently available, we believe that the costs of these
matters are not reasonably likely to have a material effect on our business, financial condition or
results of operations. However, actual costs related to environmental matters could differ
materially from the amounts we estimated and accrued at December 31, 2004 and could amount to an
aggregate exposure of $2.1 million if these environmental matters are not resolved as anticipated. F-31




---



##### Table of Contents



15. Litigation Our facilities and operations are subject to extensive environmental laws and regulations, and
we are currently involved in various proceedings relating to environmental matters (See Note 14).
We are not involved in any legal proceedings that we believe could have a material adverse effect
upon our business, operating results or financial condition. 16. Income Taxes The components of income/(loss) from continuing operations before income taxes for the years
ended December 31 are as follows: 2004
    
    
    2003
    
    
    2002(In thousands)U.S.
    
    $
    (9,000
    )
    
    $
    (62,579
    )
    
    $
    (6,933
    )Foreign
    
    
    7,756
    
    
    
    10,018
    
    
    
    15,418Total
    
    $
    (1,244
    )
    
    $
    (52,561
    )
    
    $
    8,485
 The provision for income taxes for the years ended December 31 consists of the following: 2004
    
    
    2003
    
    
    2002(In thousands)Continuing operationsCurrent expense/(benefit):U.S. Federal
    
    $
    21
    
    
    $
    (1,163
    )
    
    $
    (5,308
    )Foreign
    
    
    (441
    )
    
    
    1,478
    
    
    
    2,185State
    
    
    60
    
    
    
    446
    
    
    
    693Total current
    
    
    (360
    )
    
    
    761
    
    
    
    (2,430
    )Deferred expense/(benefit):U.S.
    
    
    (3,444
    )
    
    
    (13,570
    )
    
    
    2,547Foreign
    
    
    1,916
    
    
    
    (768
    )
    
    
    1,198Total deferred
    
    
    (1,528
    )
    
    
    (14,338
    )
    
    
    3,745Total income tax expense/(benefit)
continuing operations
    
    
    (1,888
    )
    
    
    (13,577
    )
    
    
    1,315Income tax benefit  discontinued operations
    
    
    (127
    )
    
    
    (769
    )
    
    
    (936
    )Total income tax expense/(benefit)
    
    $
    (2,015
    )
    
    $
    (14,346
    )
    
    $
    379
 F-32




---



##### Table of Contents



Deferred income taxes included in our Consolidated Balance Sheets reflect the net tax effects of
temporary differences between the carrying amount of assets and liabilities for financial reporting
purposes and the carrying amount for income tax return purposes. Significant components of our
deferred tax assets and liabilities are as follows at December 31: 2004
    
    
    2003(In thousands)Deferred tax liabilities:Basis of property, plant and equipment
    
    $
    (31,683
    )
    
    $
    (31,653
    )Prepaid pension
    
    
    
    
    
    
    (4,689
    )Other
    
    
    (6,107
    )
    
    
    (2,011
    )Total deferred tax liabilities
    
    
    (37,790
    )
    
    
    (38,353
    )Deferred tax assets:Environmental remediation
    
    
    602
    
    
    
    826Net operating loss carryforward
    
    
    24,673
    
    
    
    25,056Restructuring reserves
    
    
    2,871
    
    
    
    2,353Inventory valuations
    
    
    3,619
    
    
    
    546Pension obligation
    
    
    15,871
    
    
    
    14,766Other
    
    
    2,438
    
    
    
    3,597Total deferred tax assets
    
    
    50,074
    
    
    
    47,144Valuation allowance
    
    
    (3,569
    )
    
    
    (3,569
    )Total deferred tax assets net of valuation allowance
    
    
    46,505
    
    
    
    43,575Net deferred tax asset
    
    $
    8,715
    
    
    $
    5,222
 Reconciliation of differences between the statutory U.S. federal income tax rate and our
effective tax rate follows for the years ended December 31: 2004
    
    
    2003
    
    
    2002(In thousands)Income tax expense at federal statutory rate
    
    $
    (423
    )
    
    $
    (18,397
    )
    
    $
    2,885Increase (decrease) in taxes resulting from:State and local taxes, net of federal benefit
    
    
    40
    
    
    
    533
    
    
    
    443Effect of difference in U.S. and foreign rates
    
    
    (1,309
    )
    
    
    (1,765
    )
    
    
    (1,858
    )Goodwill impairment and other permanent
differences
    
    
    (218
    )
    
    
    7,099
    
    
    
    21Other
    
    
    22
    
    
    
    (1,047
    )
    
    
    (176
    )Income tax expense continuing operations
    
    $
    (1,888
    )
    
    $
    (13,577
    )
    
    $
    1,315
 At December 31, 2004, we have U.S. federal, state and foreign net operating loss
carryforwards of $30 million, $149 million and $27 million, respectively. These net operating loss
carryforwards expire at various times beginning in 2016 through 2024. We have established
valuation allowances of $3.6 million at December 31, 2004 and 2003, respectively, to offset a
portion of the deferred tax assets relating to state net operating losses. We have a contractual tax holiday agreement with the Chinese government. Under this
agreement, the tax rate was 7.5% beginning January 1, 2002 and will remain at this rate for the
next three years, increasing in 2005 to a 15% maximum rate. We also have $1.1 million in
government tax credits which may be used to offset tax liabilities in Portugal through 2008. These
credits are not reflected in deferred tax assets at December 31, 2004 or 2003. F-33




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##### Table of Contents



Prior to the passage of the American Jobs Creation Act of 2004 (the Act), the undistributed
earnings of our foreign subsidiaries were considered to be indefinitely reinvested, and in
accordance with APB Opinion No. 23 (APB 23), Accounting for Income Taxes  Special Areas, no
provision for U.S. federal or state income taxes had been provided on these undistributed earnings.
The Act provides for a special 85% dividends received deduction on the repatriation of certain
foreign earnings. At December 31, 2004, the undistributed earnings of our foreign subsidiaries
amounted to approximately $68.4 million. As a result of the Act, the Company in 2005 decided to
repatriate approximately $10.2 million in undistributed foreign earnings from its Chinese
subsidiary. The Company will take a tax charge for U.S. federal income taxes of approximately $0.5
million in the first quarter 2005 associated with the repatriation of these funds. Foreign
withholding taxes of $4.2 million would also be payable upon remittance of any previously
unremitted earnings at December 31, 2004. The exact amount of the charge depends on the pending
technical corrections to the legislation and expected interpretive guidance to be issued by the
Internal Revenue Service. 17. Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss at December 31, are as follows : Unrealized
    
    
    MinimumForeign
    
    
    Gain (Loss) on
    
    
    Pension
    
    
    AccumulatedCurrency
    
    
    Cash Flow
    
    
    Liability
    
    
    OtherTranslation
    
    
    Hedges, Net of
    
    
    Adjustment,
    
    
    ComprehensiveAdjustment
    
    
    Tax
    
    
    Net of Tax
    
    
    Loss(In thousands)Balance at December 31, 2001
    
    $
    (20,001
    )
    
    $
    (1,897
    )
    
    $
    
    
    
    $
    (21,898
    )Activity in 2002
    
    
    2,201
    
    
    
    (140
    )
    
    
    (11,535
    )
    
    
    (9,474
    )Reclassification adjustment
for realized
cash flow hedge losses
    
    
    
    
    
    
    1,781
    
    
    
    
    
    
    
    1,781Balance at December 31, 2002
    
    
    (17,800
    )
    
    
    (256
    )
    
    
    (11,535
    )
    
    
    (29,591
    )Activity in 2003
    
    
    17,383
    
    
    
    1,662
    
    
    
    (220
    )
    
    
    18,825Reclassification adjustment
for realized cash flow hedge
losses
    
    
    
    
    
    
    256
    
    
    
    
    
    
    
    256Balance at December 31, 2003
    
    
    (417
    )
    
    
    1,662
    
    
    
    (11,755
    )
    
    
    (10,510
    )Activity in 2004
    
    
    7,565
    
    
    
    229
    
    
    
    (881
    )
    
    
    6,913Reclassification adjustment
for realized cash
flow hedge losses
    
    
    
    
    
    
    (1,662
    )
    
    
    
    
    
    
    (1,662
    )Balance at December 31, 2004
    
    $
    7,148
    
    
    $
    229
    
    
    $
    (12,636
    )
    
    $
    (5,259
    )
 18. Common Stock All holders of Common Stock are entitled to receive dividends when and if declared by our
Board of Directors (the Board), provided that all dividend requirements of the cumulative
preferred stock have been paid. Additionally, the payment of dividends on our Common Stock is
restricted under the terms of our various financing agreements. To date, no dividends have been
paid to the holders of the Common Stock and there are no immediate plans to declare a dividend.
The Board has adopted a Stockholder Rights Plan designed to protect the Company and its
stockholders from coercive, unfair or inadequate takeover bids. Pursuant to the Stockholder F-34




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##### Table of Contents



Rights Plan, a dividend of one Preferred Share Purchase Right (a Right) was declared for each
share of Common Stock outstanding at the close of business on February 23, 1996. The Rights are
generally not exercisable until ten days after a person or group acquires, or commences a tender
offer that could result in the party acquiring, 15% of the outstanding shares of Common Stock.
Each Right, should it become exercisable, will enable the owner to buy one one-thousandth of a
share of newly created Series A Junior Participating Preferred Stock at an exercise price of $175,
and, in certain circumstances, to purchase shares of Common Stock at a substantially reduced price.
The Board is generally entitled to redeem the Rights at $0.01 per Right at any time prior to the
date they become exercisable. The Rights will expire on February 23, 2006. 19. Stock-Based Compensation Plans The 2003 Equity Incentive Plan (the 2003 Equity Plan) was adopted by the Board of Directors
on March 25, 2003 and was approved by the stockholders on May 14, 2003, and was amended on July 24,
2003. The 2003 Equity Plan provides for the issuance of awards in the form of stock options,
restricted shares, stock appreciation rights and other additional awards to key executives and
employees. The maximum number of shares of Common Stock that may be issued under the plan is
limited to 850,000 shares, provided that no more than 250,000 shares may be issued in the form of
awards other than options or stock appreciation rights. The duration of the 2003 Equity Plan is
ten years. On March 22, 2001, the Board of Directors adopted the 2001 Stock Option Plan for Outside
Directors (the 2001 Directors Plan) providing for the issuance of options for the purchase of up
to 250,000 shares of our Common Stock. The 2001 Directors Plan allows us to compensate and
reward our directors. The terms of the 2001 Directors Plan provides for the issuance of stock
options to outside directors at the fair market value on the date of grant. The initial options
granted at the time the Director joins the Board vest at 33.3% per year, but must be held one year
before exercising. All subsequent grants vest immediately. All options terminate on the tenth
anniversary of the date of grant. The 1993 Equity Incentive Plan (the 1993 Equity Plan) provided for the issuance of stock
options, restricted shares, stock appreciation rights, and other additional awards to key
executives and employees. The maximum number of shares provided for under the 1993 Equity Plan was
2,075,000 at a price as determined by our Compensation Committee. All options granted under the
plan were issued at the market value at the date of the grant. Options granted prior to 1999 under
the 1993 Equity Plan vested 20% on each anniversary thereafter and terminate on the tenth
anniversary of the date of grant. Options granted in 1999 and subsequent years under the 1993
Equity Plan vested 33.3% on each anniversary thereafter and terminate on the tenth anniversary of
the date of grant. Options granted under prior plans remain outstanding but are governed by the
provisions of the 1993 Equity Plan. The 1993 Equity Plan was terminated by its terms in 2003. In the third quarter of 2001, we made available to our U.S. and Canadian stock option holders
under the 1993 Equity Plan and the 1993 Directors Plan the right to exchange options whose
exercise price was $20.00 per share or greater, for new options to purchase one share for F-35




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##### Table of Contents



every two shares exchanged. We made the exchange offer available because a large number of
stock options had exercise prices that were significantly higher than current trading prices of our
Common Stock, and thus the stock options did not provide our employees and outside directors the
incentive to acquire and maintain stock ownership in the Company and to participate in the
Companys long-term growth and success. As a result of this exchange of options, 836,860 shares
with an average option price of $30.48 were canceled, 38,000 of which were under the 1993
Directors Plan. On April 11, 2002, six months and six business days after the date the options
were cancelled, we granted 383,075 stock options, 19,000 of which were under the 1993 Directors
Plan. New options granted under the 1993 Equity Plan have an exercise price of $8.60 per share,
which was the closing price of our Common Stock on April 11, 2002. New options granted under the
1993 Directors Plan have an exercise price of $8.84 per share which was determined by the average
market price of our stock on April 11, 2002 and the four preceding trading days. A stock option
holder must have continued to have been employed by us or provide service to us through April 11,
2002 in order to have been eligible to receive the new options granted. Our stock option plans are summarized as follows: 2003 Equity
    
    
    2001
    
    
    1993
    
    
    1993 Equity
    
    
    
    
    
    
    Weighted-Incentive
    
    
    Directors
    
    
    Directors
    
    
    Incentive
    
    
    
    
    
    
    Average ExercisePlan
    
    
    Plan
    
    
    Plan
    
    
    Plan
    
    
    Option Price
    
    
    Price(Number of Shares)Outstanding at
December 31, 2001
    
    
    
    
    
    
    
    
    
    
    116,665
    
    
    
    835,674
    
    
    $
    5.28-$37.68
    
    
    $
    13.46Granted
    
    
    
    
    
    
    26,362
    
    
    
    59,724
    
    
    
    570,638
    
    
    $
    6.13-$11.35
    
    
    $
    8.63Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,990
    )
    
    $
    5.28-$  7.39
    
    
    $

    6.01Forfeited
    
    
    
    
    
    
    
    
    
    
    (16,205
    )
    
    
    (89,400
    )
    
    $
    8.60-$37.68
    
    
    $
    19.19Outstanding at December
31, 2002
    
    
    
    
    
    
    26,362
    
    
    
    160,184
    
    
    
    1,288,922
    
    
    $
    6.13-$25.25
    
    
    $
    11.04Granted
    
    
    2,000
    
    
    
    101,520
    
    
    
    6,000
    
    
    
    366,026
    
    
    $
    4.05-$  5.86
    
    
    $
    4.34Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    (5,000
    )
    
    
    (155,715
    )
    
    $
    4.05-$22.25
    
    
    $
    10.57Outstanding at December
31, 2003
    
    
    2,000
    
    
    
    127,882
    
    
    
    161,184
    
    
    
    1,499,233
    
    
    $
    4.05-$25.25
    
    
    $
    9.30Granted
    
    
    239,245
    
    
    
    6,000
    
    
    
    
    
    
    
    
    
    
    $
    10.54-$10.74
    
    
    $
    10.55Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (168,247
    )
    
    $
    4.05-$11.90
    
    
    $
    6.64Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41,354
    )
    
    $
    4.05-$22.25
    
    
    $
    10.39Outstanding at December
31, 2004
    
    
    241,245
    
    
    
    133,882
    
    
    
    161,184
    
    
    
    1,289,632
    
    
    $
    4.05-$25.25
    
    
    $
    9.70Exercisable at:December 31, 2002
    
    
    
    
    
    
    26,362
    
    
    
    160,184
    
    
    
    723,813
    
    
    $
    7.39-$25.25
    
    
    $
    11.12December 31, 2003
    
    
    
    
    
    
    127,882
    
    
    
    161,184
    
    
    
    912,810
    
    
    $
    5.28-$25.25
    
    
    $
    10.71December 31, 2004
    
    
    667
    
    
    
    133,882
    
    
    
    161,184
    
    
    
    1,000,464
    
    
    $
    4.05-$25.25
    
    
    $
    10.60
 F-36




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##### Table of Contents



There were no options outstanding issued prior to August 1993. The number of options
outstanding, weighted average exercise price, weighted average remaining contractual life, vested
options and the weighted average exercise price of vested options outstanding at December 31, 2004
were 1,825,943, $9.70, 6.5 years, 1,296,197 and $10.60, respectively. The range of exercise prices of the exercisable options and outstanding options at December
31, 2004 are as follows: Number of
    
    
    Number of
    
    
    Weighted AverageWeighted Average Exercise Price
    
    Exercisable Shares
    
    
    Outstanding Shares
    
    
    Remaining Life$0.00 -   $4.11
    
    
    44,240
    
    
    
    274,893
    
    
    
    8.2$4.12 -   $8.23
    
    
    109,187
    
    
    
    111,520
    
    
    
    8.1$8.24 -   $12.34
    
    
    808,054
    
    
    
    1,104,814
    
    
    
    6.4$12.35 - $16.45
    
    
    297,466
    
    
    
    297,466
    
    
    
    5.1$16.46 - $20.57
    
    
    29,100
    
    
    
    29,100
    
    
    
    4.9$20.58 - $24.68
    
    
    7,000
    
    
    
    7,000
    
    
    
    4.1$24.69 - $28.79
    
    
    1,150
    
    
    
    1,150
    
    
    
    0.2Totals
    
    
    1,296,197
    
    
    
    1,825,943
    
    
    
    6.5
 In 2004, we awarded 41,089 shares of restricted stock under the 2003 Equity Plan, with a
fair value at the date of grant of $10.54 per share. These restricted shares vest 50% annually at
the anniversary date of the grant. We recorded compensation expense with respect to restricted
stock awards of approximately $0.3 million in 2004 which is recognized on a straight-line basis
over the two year vesting period of the restricted stock grants. 20. Commitments We lease certain assets such as motorized vehicles, distribution and warehousing space,
computers, office equipment and production testing equipment. Terms of the leases, including
purchase options, renewals and maintenance costs, vary by lease. Minimum future rental commitments
under our operating leases having non-cancelable lease terms in excess of one year totaled
approximately $5.2 million as of December 31, 2004 and are payable as follows: $1.7 million in
2006, $0.9 million in 2007, $0.8 million in 2008, $0.6 million in 2009, $0.4 million in 2010 and
$0.8 million thereafter. Rental expense for operating leases was $3.8 million in 2004, $3.9
million in 2003 and $4.9 million in 2002. At December 31, 2004, we had commitments of $2.1 million for capital expenditures. At December 31, 2004, we had commitments to purchase $0.7 million of silver. At December 31, 2004, we had commitments to purchase approximately 125.4 million pounds of
copper in 2005 from suppliers to be priced at COMEX at date of shipment plus an average premium of
approximately $0.05 per pound. Based upon a copper price of $1.45 per pound, this commitment
totals approximately $188.1 million. F-37




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##### Table of Contents



21. Industry Segments and Foreign Operations Our reportable segments are based on our three product lines: commercial products, wholesale
products and rod, bar and other products. Commercial products consist primarily of high
value-added products sold directly to original equipment manufacturers. Wholesale products are
commodity-type plumbing tube products, which are primarily sold to plumbing wholesalers and
distributors. Rod, bar and other products consists of products sold to a variety of customers and
includes our European distribution business. The accounting policies for each of the reportable segments are the same as those described in
Note 2. We evaluate the performance of our operating segments based on sales and gross profit;
however, we do not allocate asset amounts and items of income and expense below gross profit or
depreciation and amortization. Summarized financial information concerning our reportable segments is shown in the following
table: Rod, BarCommercial
    
    
    Wholesale
    
    
    & Other
    
    
    Consolidated(In thousands)Year ended December 31, 2004:Sales
    
    $
    570,666
    
    
    $
    165,215
    
    
    $
    61,994
    
    
    $
    797,875Gross profit
    
    
    52,918
    
    
    
    5,924
    
    
    
    4,839
    
    
    
    63,681Year ended December 31, 2003:Sales
    
    $
    442,471
    
    
    $
    115,112
    
    
    $
    38,741
    
    
    $
    596,324Gross profit/(loss)
    
    
    38,997
    
    
    
    (271
    )
    
    
    2,100
    
    
    
    40,826Year ended December 31, 2002:Sales
    
    $
    421,234
    
    
    $
    93,938
    
    
    $
    35,351
    
    
    $
    550,523Gross profit
    
    
    51,736
    
    
    
    4,352
    
    
    
    2,353
    
    
    
    58,441
 Our manufacturing operations are primarily conducted in the U.S. and Canada. We also
have manufacturing facilities in Shanghai, China, Esposende, Portugal and Monterrey, Mexico. In 2004, 2003 and 2002, no customer accounted for as much as 10% of our net sales. Sales by customer location and long-lived assets by geographic location of our facilities are
as follows: Other ForeignU.S.
    
    
    Canada
    
    
    Operations
    
    
    Consolidated(In thousands)Year ended December 31, 2004:Sales
    
    $
    558,892
    
    
    $
    186,680
    
    
    $
    52,303
    
    
    $
    797,875Long-lived assets
    
    
    238,992
    
    
    
    34,831
    
    
    
    18,063
    
    
    
    291,886Year ended December 31, 2003:Sales
    
    $
    436,278
    
    
    $
    79,439
    
    
    $
    80,607
    
    
    $
    596,324Long-lived assets
    
    
    252,077
    
    
    
    33,106
    
    
    
    14,374
    
    
    
    299,557Year ended December 31, 2002:Sales
    
    $
    417,000
    
    
    $
    78,000
    
    
    $
    56,000
    
    
    $
    551,000Long-lived assets
    
    
    288,459
    
    
    
    30,563
    
    
    
    12,679
    
    
    
    331,701
 F-38




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##### Table of Contents



22. Restructuring and Other Charges In 2004, we recognized restructuring charges of $2.5 million ($1.7 million net of tax). These
restructuring charges were related to severance and benefit curtailment charges for the transfer of
technical tube production from our Decatur, Alabama facility to our Shawnee, Oklahoma and
Monterrey, Mexico facilities in the amount of $0.5 million; $0.6 million of expenses related to the
ramp-down of the our Booneville, Mississippi facility; and $1.4 million related to the sale of our
Roxboro, North Carolina facility closed in 1999. At December 31, 2004, remaining reserves for
restructuring charges are $0.4 million for the Booneville, Mississippi closure and $0.2 million for
severance at Decatur, Alabama. In 2003, we recorded restructuring charges totaling $15.1 million ($9.9 million net of tax).
The 2003 restructuring charges included: $10.4 million related to the closure of our Booneville,
Mississippi facility; a $2.6 million write-down of assets held for sale in Roxboro, North Carolina;
a $1.1 million charge related to a workforce reduction; a $0.3 million charge related to the
write-off of impaired assets at our Altoona, Pennsylvania facility; and $0.7 million of other
charges. A
breakdown of these restructuring charges is as follows: Booneville, MS In the third quarter of 2003, we announced our intention to close our Booneville, Mississippi
facility. This facility produced both smooth and enhanced industrial tube, which was primarily
used by residential and commercial air conditioner manufacturers and employed approximately 140
people. In the fourth quarter of 2003, a restructuring charge was recorded in the amount of $10.4
million, and a reserve established for certain items associated with the write-down of impaired
assets, relocation of equipment, severance and other personnel related costs. The transfer of
production was substantially completed from the Booneville plant to our other facilities by
December 31, 2003. The $10.4 million charge for the Booneville facility included an $8.9 million
write-off of impaired assets (including $2.6 million of spare parts and supplies related to these
assets), $0.3 million of severance costs, and $1.2 million of other costs required for the closure
of the facility. Annual savings from this closure and reallocation of production is expected to be
approximately $3.0 million. Because of a significant increase in customer demand, we continue using a limited number of
assets at the Booneville facility to provide additional capacity to meet this increased customer
demand. Expenses at the Booneville facility related to production continue to be charged to
operations, while the plant closing activities are reflected as restructuring expenses in
accordance with SFAS 146. The remaining assets of the Booneville facility continue to be carried
at values established at the end of 2003. Restructuring expenses of $0.6 million were recognized for the year ended December 31, 2004.
These costs were related mostly to employee medical, facility maintenance, lease termination and
other costs associated with the removal of equipment and preparation for the eventual sale of the
Booneville facility. The remaining balance in the reserve at December 31, 2004 is $0.4 million. F-39




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##### Table of Contents



Roxboro, NC We closed our Roxboro, North Carolina facility in 1999. All of the assets of this former
facility were re-deployed or sold, including the sale of the remaining real property during 2004
for $2.5 million. For the twelve month period ended December 31, 2004, we recognized restructuring
charges of $1.4 million, primarily for the write-down of the real property and estimated closing
costs related to the sale of this former facility. Workforce Reduction In the third quarter of 2003, the Company enacted a workforce reduction program to terminate
approximately 6% of its workforce, or about 200 employees throughout all of its facilities in North
America. A reserve in the amount of $1.1 million was established in the third quarter 2003 to
cover the costs of implementing the workforce reduction program. At December 31, 2003,
approximately $0.7 million against the $1.1 million liability for severance benefits had been paid.
At December 31, 2003, there remained $0.4 million of restructuring cost representing our remaining
cash obligations. The remaining amount of the reserve was paid out in 2004. 23. Earnings/(Loss) Per Share The following table sets forth the computation of earnings/(loss) per share for the years
ended December 31: 2004
    
    
    2003
    
    
    2002(In thousands, except per share amounts)Income/(loss) from continuing operations
    
    $
    644
    
    
    $
    (38,984
    )
    
    $
    7,170Loss from discontinued operations, net of tax
    
    
    (262
    )
    
    
    (1,637
    )
    
    
    (1,610
    )Net income/(loss)
    
    
    382
    
    
    
    (40,621
    )
    
    
    5,560Dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    (58
    )Net income/(loss) available to common shares
    
    $
    382
    
    
    $
    (40,621
    )
    
    $
    5,502Basic weighted average common shares
    
    
    13,650
    
    
    
    12,275
    
    
    
    12,231Dilutive stock options
    
    
    342
    
    
    
    
    
    
    
    131Diluted weighted average common and common
equivalent shares
    
    
    13,992
    
    
    
    12,275
    
    
    
    12,362Earnings/(loss) per common sharebasic:Continuing operations
    
    $
    0.05
    
    
    $
    (3.18
    )
    
    $
    0.58Discontinued operations
    
    
    (0.02
    )
    
    
    (0.13
    )
    
    
    (0.13
    )Net income/(loss) per common share basic
    
    $
    0.03
    
    
    $
    (3.31
    )
    
    $
    0.45Earnings/(loss) per common sharediluted (1):Continuing operations
    
    $
    0.05
    
    
    $
    (3.18
    )
    
    $
    0.58Discontinued operations
    
    
    (0.02
    )
    
    
    (0.13
    )
    
    
    (0.13
    )Net income/(loss) per common share diluted
    
    $
    0.03
    
    
    $
    (3.31
    )
    
    $
    0.45
   (1)
    To the extent that stock options and unvested restricted stock are anti-dilutive, they
are excluded from the calculation of diluted earnings/(loss) per share in accordance with SFAS 128. We had additional stock options outstanding of 937,104, 1,431,767, and 1,465,300 at
December 31, 2004, 2003 and 2002, respectively, which were not included in the computation of
potentially dilutive securities, because the options exercise prices were greater than the average
market price of the common shares. F-40




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##### Table of Contents



24. Quarterly Results of Operations (Unaudited) The following is a summary of the unaudited quarterly results of operations for the years
ended December 31, 2004 and 2003: 2004
    
    April 4
    
    
    July 4
    
    
    October 3
    
    
    December 31(In thousands, except per share amounts)Net sales
    
    $
    205,805
    
    
    $
    214,080
    
    
    $
    200,038
    
    
    $
    177,952Gross profit
    
    
    17,485
    
    
    
    21,581
    
    
    
    12,325
    
    
    
    12,290Net income/(loss) from continuing operations
    
    
    1,368
    
    
    
    3,300
    
    
    
    (2,512
    )
    
    
    (1,512
    )Income/(loss) from discontinued operations,
net of tax
    
    
    
    
    
    
    (252
    )
    
    
    (73
    )
    
    
    63Net income/(loss)
    
    $
    1,368
    
    
    $
    3,048
    
    
    $
    (2,585
    )
    
    ($
    1,449
    )Basic earnings/(loss) per common share:Continuing operations
    
    $
    0.11
    
    
    $
    0.26
    
    
    $
    (0.17
    )
    
    ($
    0.10
    )Discontinued operations
    
    
    
    
    
    
    (0.02
    )
    
    
    
    
    
    
    Net income/(loss)
    
    $
    0.11
    
    
    $
    0.24
    
    
    $
    (0.17
    )
    
    ($
    0.10
    )Diluted earnings/(loss) per common share:Continuing operations
    
    $
    0.11
    
    
    $
    0.26
    
    
    ($
    0.17
    )
    
    ($
    0.10
    )Discontinued operations
    
    
    
    
    
    
    (0.02
    )
    
    
    
    
    
    
    Net income/(loss)
    
    $
    0.11
    
    
    $
    0.24
    
    
    ($
    0.17
    )
    
    ($
    0.10
    )
 2003
    
    March 30
    
    
    June 29
    
    
    September 28 (1)
    
    
    December 31(2)(In thousands, except per share amounts)Net sales
    
    $
    143,497
    
    
    $
    152,978
    
    
    $
    144,099
    
    
    $
    155,750Gross profit
    
    
    14,622
    
    
    
    12,605
    
    
    
    6,242
    
    
    
    7,357Income from continuing operations
    
    
    638
    
    
    
    99
    
    
    
    (31,722
    )
    
    
    (7,999
    )Loss from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,637
    )Net income/(loss)
    
    $
    638
    
    
    $
    99
    
    
    $
    (31,722
    )
    
    $
    (9,636
    )Basic earnings/(loss) per common share:Continuing operations
    
    $
    0.05
    
    
    $
    0.01
    
    
    $
    (2.58
    )
    
    $
    (0.65
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.13
    )Net income/(loss)
    
    $
    0.05
    
    
    $
    0.01
    
    
    $
    (2.58
    )
    
    $
    (0.78
    )Diluted earnings/(loss) per common share:Continuing operations
    
    $
    0.05
    
    
    $
    0.01
    
    
    $
    (2.58
    )
    
    $
    (0.65
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.13
    )Net income/(loss)
    
    $
    0.05
    
    
    $
    0.01
    
    
    $
    (2.58
    )
    
    $
    (0.78
    )
   (1)
    During the quarter ended September 28, 2003, we recognized restructuring and other charges
of approximately $6.4 million ($4.3 million net of tax) (see Note 22) and a goodwill impairment
charge of $23.2 million (see Note 2) were recognized.(2)

    During the quarter ended December 31, 2003, restructuring and other charges of approximately
$8.7 million ($5.6 million net of tax) (see Note 22) were recognized. F-41




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##### Table of Contents



25. Condensed Consolidating Financial Information The following tables present condensed consolidating financial information for: (a) Wolverine
Tube, Inc. (the Parent) on a stand-alone basis; (b) on a combined basis, the guarantors of the
10.5% Senior Notes and 7.375% Senior Notes (Subsidiary Guarantors), which include TF Investor,
Inc.; Tube Forming, L.P.; Wolverine Finance, LLC; Wolverine China Investments, LLC; Small Tube
Manufacturing, LLC; Wolverine Joining Technologies, LLC; WT Holding Company, Inc. and Tube Forming
Holdings, Inc.; and (c) on a combined basis, the Non-Guarantor Subsidiaries, which include
Wolverine Tube (Canada) Inc.; 3072452 Nova Scotia Company; 3072453 Nova Scotia Company; 3072996
Nova Scotia Company; Wolverine Tube Canada Limited Partnership; Wolverine Tube (Shanghai) Co.,
Limited; Wolverine European Holdings BV; Wolverine Tube Europe BV; Wolverine Tube, BV; Wolverine
Tubagem (Portugal), Lda; Wolverine Joining Technologies Canada, Inc.; Wolverine Europe; Wolverine
Asia, Limited; WLVN de Latinoamerica, S. de R.L. de C.V.; and WLV Mexico, S. de R.L. de C.V. Each
of the Subsidiary Guarantors is wholly-owned by Wolverine Tube, Inc. The guarantees issued by each
of the Subsidiary Guarantors are full, unconditional, joint and several. Accordingly, separate
financial statements of the wholly-owned Subsidiary Guarantors are not presented because the
Subsidiary Guarantors are jointly, severally and unconditionally liable under the guarantees, and
we believe separate financial statements and other disclosures regarding the Subsidiary Guarantors
are not material to investors. Furthermore, there are no significant legal restrictions on the
Parents ability to obtain funds from its subsidiaries by dividend or loan. The Parent is comprised of Alabama, Oklahoma, Tennessee, and Mississippi manufacturing
operations and certain corporate management, sales and marketing, information services and finance
functions. Wolverine Tube, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the Year Ended December 31, 2004 Subsidiary
    
    
    Non-GuarantorParent
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(In thousands)Net sales
    
    $
    434,851
    
    
    $
    157,620
    
    
    $
    268,198
    
    
    $
    (62,794
    )
    
    $
    797,875Cost of goods sold
    
    
    408,699
    
    
    
    138,304
    
    
    
    249,985
    
    
    
    (62,794
    )
    
    
    734,194Gross profit
    
    
    26,152
    
    
    
    19,316
    
    
    
    18,213
    
    
    
    
    
    
    
    63,681Selling, general and administrative expenses
    
    
    29,414
    
    
    
    3,346
    
    
    
    4,499
    
    
    
    
    
    
    
    37,259Restructuring and other charges
    
    
    2,563
    
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    2,536Operating income from continuing operations
    
    
    (5,825
    )
    
    
    15,997
    
    
    
    13,714
    
    
    
    
    
    
    
    23,886Other expenses (income):Interest expense, net
    
    
    21,736
    
    
    
    (39
    )
    
    
    (837
    )
    
    
    
    
    
    
    20,860Loss on extinguishment of debt
    
    
    3,009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,009Amortization and other, net
    
    
    7,788
    
    
    
    (13,069
    )
    
    
    6,542
    
    
    
    
    
    
    
    1,261Equity in
earnings of subsidiaries
    
    
    24,953
    
    
    
    
    
    
    
    
    
    
    
    (24,953
    )
    
    
    Income/(loss) from continuing operations
before income taxes
    
    
    (13,405
    )
    
    
    29,105
    
    
    
    8,009
    
    
    
    (24,953
    )
    
    
    (1,244
    )Income tax expense/(benefit) provision
    
    
    (13,787
    )
    
    
    10,448
    
    
    
    1,451
    
    
    
    
    
    
    
    (1,888
    )Income/(loss) from continuing operations
    
    
    382
    
    
    
    18,657
    
    
    
    6,558
    
    
    
    (24,953
    )
    
    
    644Loss from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    (262
    )
    
    
    
    
    
    
    (262
    )Net income
    
    $
    382
    
    
    $
    18,657
    
    
    $
    6,296
    
    
    $
    (24,953
    )
    
    $
    382
 F-42




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##### Table of Contents



Wolverine Tube, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the Year Ended December 31, 2003 Non-Subsidiary
    
    
    GuarantorParent
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(In thousands)Net sales
    
    $
    318,244
    
    
    $
    123,524
    
    
    $
    199,438
    
    
    $
    (44,882
    )
    
    $
    596,324Cost of goods sold
    
    
    310,968
    
    
    
    107,229
    
    
    
    182,183
    
    
    
    (44,882
    )
    
    
    555,498Gross profit
    
    
    7,276
    
    
    
    16,295
    
    
    
    17,255
    
    
    
    
    
    
    
    40,826Selling, general and administrative expenses
    
    
    24,318
    
    
    
    3,296
    
    
    
    4,489
    
    
    
    
    
    
    
    32,103Restructuring charges
    
    
    14,157
    
    
    
    503
    
    
    
    397
    
    
    
    
    
    
    
    15,057Operating income/(loss) from continuing
operations
    
    
    (31,199
    )
    
    
    12,496
    
    
    
    12,369
    
    
    
    
    
    
    
    (6,334
    )Other expenses (income):Interest expense, net
    
    
    21,829
    
    
    
    (13
    )
    
    
    (598
    )
    
    
    
    
    
    
    21,218Amortization and other, net
    
    
    8,915
    
    
    
    (10,151
    )
    
    
    3,092
    
    
    
    
    
    
    
    1,856Goodwill impairment
    
    
    23,153
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,153Equity in earnings of subsidiaries
    
    
    23,886
    
    
    
    
    
    
    
    
    
    
    
    (23,886
    )
    
    
    Income/(loss) from continuing operations
before income taxes
    
    
    (61,210
    )
    
    
    22,660
    
    
    
    9,875
    
    
    
    (23,886
    )
    
    
    (52,561
    )Income tax expense/(benefit) provision
    
    
    (20,589
    )
    
    
    8,099
    
    
    
    (1,087
    )
    
    
    
    
    
    
    (13,577
    )Income/(loss) from continuing operations
    
    
    (40,621
    )
    
    
    14,561
    
    
    
    10,962
    
    
    
    (23,886
    )
    
    
    (38,984
    )Loss from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    (1,637
    )
    
    
    
    
    
    
    (1,637
    )Net income/(loss)
    
    $
    (40,621
    )
    
    $
    14,561
    
    
    $
    9,325
    
    
    $
    (23,886
    )
    
    $
    (40,621
    )
 Wolverine Tube, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the Year Ended December 31, 2002 Non-Subsidiary
    
    
    GuarantorParent
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(In thousands)Net sales
    
    $
    293,035
    
    
    $
    119,340
    
    
    $
    177,766
    
    
    $
    (39,618
    )
    
    $
    550,523Cost of goods sold
    
    
    271,871
    
    
    
    102,591
    
    
    
    157,238
    
    
    
    (39,618
    )
    
    
    492,082Gross profit
    
    
    21,164
    
    
    
    16,749
    
    
    
    20,528
    
    
    
    
    
    
    
    58,441Selling, general and administrative expenses
    
    
    24,137
    
    
    
    2,904
    
    
    
    3,575
    
    
    
    
    
    
    
    30,616Operating income/(loss) from continuing
operations
    
    
    (2,973
    )
    
    
    13,845
    
    
    
    16,953
    
    
    
    
    
    
    
    27,825Other expenses (income):Interest expense, net
    
    
    20,489
    
    
    
    (24
    )
    
    
    (784
    )
    
    
    
    
    
    
    19,681Gain on extinguishment of debt
    
    
    (1,349
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,349
    )Amortization and other, net
    
    
    4,145
    
    
    
    (5,041
    )
    
    
    1,904
    
    
    
    
    
    
    
    1,008Equity in earnings of subsidiaries
    
    
    23,405
    
    
    
    
    
    
    
    
    
    
    
    (23,405
    )
    
    
    Income/(loss) from continuing operations
before income taxes
    
    
    (2,853
    )
    
    
    18,910
    
    
    
    15,833
    
    
    
    (23,405
    )
    
    
    8,485Income tax expense/(benefit) provision
    
    
    (9,530
    )
    
    
    7,461
    
    
    
    3,384
    
    
    
    
    
    
    
    1,315Income/(loss) from continuing operations
    
    
    6,677
    
    
    
    11,449
    
    
    
    12,449
    
    
    
    (23,405
    )
    
    
    7,170Income/(loss) from discontinued operations,
net of tax
    
    
    (1,117
    )
    
    
    (801
    )
    
    
    308
    
    
    
    
    
    
    
    (1,610
    )Net income
    
    $
    5,560
    
    
    $
    10,648
    
    
    $
    12,757
    
    
    $
    (23,405
    )
    
    $
    5,560
 F-43




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##### Table of Contents



Wolverine Tube, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
December 31, 2004 Non-Subsidiary
    
    
    GuarantorParent
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(In thousand)AssetsCurrent assetsCash and equivalents
    
    $
    11,191
    
    
    $
    
    
    
    $
    23,826
    
    
    $
    
    
    
    $
    35,017Accounts receivable, net
    
    
    6,822
    
    
    
    59,750
    
    
    
    27,392
    
    
    
    
    
    
    
    93,964Inventories
    
    
    73,423
    
    
    
    39,681
    
    
    
    38,875
    
    
    
    
    
    
    
    151,979Prepaid expenses and other
    
    
    3,677
    
    
    
    1,400
    
    
    
    1,828
    
    
    
    
    
    
    
    6,905Deferred
taxes, current
    
    
    8,175
    
    
    
    211
    
    
    
    (679
    )
    
    
    
    
    
    
    7,707Total current assets
    
    
    103,288
    
    
    
    101,042
    
    
    
    91,242
    
    
    
    
    
    
    
    295,572Property, plant and equipment, net
    
    
    120,889
    
    
    
    28,672
    
    
    
    45,405
    
    
    
    
    
    
    
    194,966Deferred charges, net
    
    
    9,930
    
    
    
    300
    
    
    
    1,662
    
    
    
    
    
    
    
    11,892Deferred taxes, non-current
    
    
    (982
    )
    
    
    (7,385
    )
    
    
    9,375
    
    
    
    
    
    
    
    1,008Goodwill, net
    
    
    
    
    
    
    75,390
    
    
    
    1,922
    
    
    
    
    
    
    
    77,312Assets held for sale
    
    
    
    
    
    
    
    
    
    
    1,147
    
    
    
    
    
    
    
    1,147Prepaid pension and other
    
    
    4,316
    
    
    
    
    
    
    
    1,245
    
    
    
    
    
    
    
    5,561Investments in subsidiaries
    
    
    445,423
    
    
    
    325
    
    
    
    (2,288
    )
    
    
    (443,460
    )
    
    
    Total assets
    
    $
    682,864
    
    
    $
    198,344
    
    
    $
    149,710
    
    
    $
    (443,460
    )
    
    $
    587,458Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    23,725
    
    
    $
    16,919
    
    
    $
    19,268
    
    
    $
    
    
    
    $
    59,912Accrued liabilities
    
    
    13,204
    
    
    
    13,882
    
    
    
    5,390
    
    
    
    
    
    
    
    32,476Short-term borrowings
    
    
    
    
    
    
    24
    
    
    
    1,195
    
    
    
    
    
    
    
    1,219Intercompany balances
    
    
    163,267
    
    
    
    (141,515
    )
    
    
    (21,752
    )
    
    
    
    
    
    
    Total current liabilities
    
    
    200,196
    
    
    
    (110,690
    )
    
    
    4,101
    
    
    
    
    
    
    
    93,607Long-term
debt
    
    
    235,665
    
    
    
    82
    
    
    
    1,275
    
    
    
    
    
    
    
    237,022Pension liabilities
    
    
    25,705
    
    
    
    
    
    
    
    2,210
    
    
    
    
    
    
    
    27,915Postretirement benefit obligation
    
    
    10,806
    
    
    
    
    
    
    
    7,616
    
    
    
    
    
    
    
    18,422Accrued environmental remediation
    
    
    990
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    990Total liabilities
    
    
    473,362
    
    
    
    (110,608
    )
    
    
    15,202
    
    
    
    
    
    
    
    377,956Stockholders equity
    
    
    209,502
    
    
    
    308,952
    
    
    
    134,508
    
    
    
    (443,460
    )
    
    
    209,502Total liabilities and stockholders equity
    
    $
    682,864
    
    
    $
    198,344
    
    
    $
    149,710
    
    
    $
    (443,460
    )
    
    $
    587,458
 F-44




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##### Table of Contents



Wolverine Tube, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
December 31, 2003 non-Subsidiary
    
    
    GuarantorParent
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(In thousands)AssetsCurrent assetsCash and equivalents
    
    $
    8,530
    
    
    $
    
    
    
    $
    37,559
    
    
    $
    
    
    
    $
    46,089Accounts receivable, net
    
    
    7,119
    
    
    
    54,931
    
    
    
    24,775
    
    
    
    
    
    
    
    86,825Inventories
    
    
    45,833
    
    
    
    33,139
    
    
    
    29,033
    
    
    
    
    
    
    
    108,005Prepaid expenses and other
    
    
    6,575
    
    
    
    408
    
    
    
    218
    
    
    
    
    
    
    
    7,201Deferred taxes, current
    
    
    5,581
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,581Total current assets
    
    
    73,638
    
    
    
    88,478
    
    
    
    91,585
    
    
    
    
    
    
    
    253,701Property, plant and equipment, net
    
    
    126,642
    
    
    
    30,838
    
    
    
    41,062
    
    
    
    
    
    
    
    198,542Deferred charges, net
    
    
    13,087
    
    
    
    291
    
    
    
    1,392
    
    
    
    
    
    
    
    14,770Goodwill, net
    
    
    
    
    
    
    75,505
    
    
    
    1,654
    
    
    
    
    
    
    
    77,159Assets held for sale
    
    
    3,100
    
    
    
    
    
    
    
    1,697
    
    
    
    
    
    
    
    4,797Investments
    
    
    4,289
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,289Investments in subsidiaries
    
    
    409,796
    
    
    
    302
    
    
    
    
    
    
    
    (410,098
    )
    
    
    Total assets
    
    $
    630,552
    
    
    $
    195,414
    
    
    $
    137,390
    
    
    $
    (410,098
    )
    
    $
    553,258Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    17,813
    
    
    $
    12,966
    
    
    $
    16,724
    
    
    $
    
    
    
    $
    47,503Accrued liabilities
    
    
    15,441
    
    
    
    8,073
    
    
    
    6,273
    
    
    
    
    
    
    
    29,787Short-term borrowings
    
    
    
    
    
    
    
    
    
    
    1,502
    
    
    
    
    
    
    
    1,502Intercompany balances
    
    
    131,590
    
    
    
    (123,304
    )
    
    
    (8,286
    )
    
    
    
    
    
    
    Total current liabilities
    
    
    164,844
    
    
    
    (102,265
    )
    
    
    16,213
    
    
    
    
    
    
    
    78,792Deferred income taxes
    
    
    3,098
    
    
    
    7,385
    
    
    
    (10,124
    )
    
    
    
    
    
    
    359Long-term debt
    
    
    253,107
    
    
    
    
    
    
    
    1,177
    
    
    
    
    
    
    
    254,284Pension liabilities
    
    
    18,594
    
    
    
    
    
    
    
    3,722
    
    
    
    
    
    
    
    22,316Postretirement benefit obligation
    
    
    10,406
    
    
    
    
    
    
    
    6,589
    
    
    
    
    
    
    
    16,995Accrued environmental remediation
    
    
    1,152
    
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    1,161Total liabilities
    
    
    451,201
    
    
    
    (94,880
    )
    
    
    17,586
    
    
    
    
    
    
    
    373,907Stockholders equity
    
    
    179,351
    
    
    
    290,294
    
    
    
    119,804
    
    
    
    (410,098
    )
    
    
    179,351Total liabilities and stockholders equity
    
    $
    630,552
    
    
    $
    195,414
    
    
    $
    137,390
    
    
    $
    (410,098
    )
    
    $
    553,258
 F-45




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##### Table of Contents



Wolverine Tube, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Year Ended December 31, 2004 Non-Subsidiary
    
    
    GuarantorParent
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(In thousands)Operating ActivitiesIncome/(loss) from continuing operations
    
    $
    382
    
    
    $
    18,657
    
    
    $
    6,558
    
    
    $
    (24,953
    )
    
    $
    644Depreciation and amortization
    
    
    10,766
    
    
    
    3,454
    
    
    
    3,187
    
    
    
    
    
    
    
    17,407Loss on early retirement of debt
    
    
    3,009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,009Other non-cash items
    
    
    100
    
    
    
    56
    
    
    
    
    
    
    
    
    
    
    
    156Equity in earnings of subsidiaries
    
    
    (24,953
    )
    
    
    
    
    
    
    
    
    
    
    24,953
    
    
    
    Changes in operating assets and liabilities
    
    
    (18,810
    )
    
    
    (2,381
    )
    
    
    (8,667
    )
    
    
    
    
    
    
    (29,858
    )Net cash provided by/(used for) operating
activities
    
    
    (29,506
    )
    
    
    19,786
    
    
    
    1,078
    
    
    
    
    
    
    
    (8,642
    )Investing ActivitiesAdditions to property, plant and equipment
    
    
    (5,903
    )
    
    
    (1,284
    )
    
    
    (4,115
    )
    
    
    
    
    
    
    (11,302
    )Sale of Roxboro, NC facility
    
    
    2,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,500Investment in WLV Latin America
    
    
    (703
    )
    
    
    (36
    )
    
    
    739
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    82
    
    
    
    
    
    
    
    
    
    
    
    82Net cash used for investing activities
    
    
    (4,106
    )
    
    
    (1,238
    )
    
    
    (3,376
    )
    
    
    
    
    
    
    (8,720
    )Financing ActivitiesFinancing fees and expenses paid
    
    
    (151
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (151
    )Intercompany borrowings (payments)
    
    
    29,408
    
    
    
    (17,271
    )
    
    
    (12,137
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    21,898
    
    
    
    
    
    
    
    2,266
    
    
    
    
    
    
    
    24,164Retirement of Senior Notes
    
    
    (20,510
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,510
    )Other
    
    
    2,279
    
    
    
    (1,277
    )
    
    
    (339
    )
    
    
    
    
    
    
    663Net cash provided by/(used for) financing
activities
    
    
    32,924
    
    
    
    (18,548
    )
    
    
    (10,210
    )
    
    
    
    
    
    
    4,166Effect of exchange rate on cash and
equivalents
    
    
    3,349
    
    
    
    
    
    
    
    (963
    )
    
    
    
    
    
    
    2,386Net cash provided by/(used for) continuing
operations
    
    
    2,661
    
    
    
    
    
    
    
    (13,471
    )
    
    
    
    
    
    
    (10,810
    )Net cash used for discontinued operations
    
    
    
    
    
    
    
    
    
    
    (262
    )
    
    
    
    
    
    
    (262
    )Net increase/decrease in cash and equivalents
    
    
    2,661
    
    
    
    
    
    
    
    (13,733
    )
    
    
    
    
    
    
    (11,072
    )Cash and equivalents at beginning of period
    
    
    8,530
    
    
    
    
    
    
    
    37,559
    
    
    
    
    
    
    
    46,089Cash and equivalents at end of period
    
    $
    11,191
    
    
    $
    
    
    
    $
    23,826
    
    
    $
    
    
    
    $
    35,017
 F-46




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##### Table of Contents



Wolverine Tube, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Year Ended December 31, 2003 Non-Subsidiary
    
    
    GuarantorParent

    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(In thousands)Operating ActivitiesIncome/(loss) from continuing operations
    
    $
    (40,621
    )
    
    $
    14,561
    
    
    $
    10,962
    
    
    $
    (23,886
    )
    
    $
    (38,984
    )Depreciation and amortization
    
    
    12,532
    
    
    
    3,538
    
    
    
    2,939
    
    
    
    
    
    
    
    19,009Deferred income taxes
    
    
    (11,776
    )
    
    
    
    
    
    
    (765
    )
    
    
    
    
    
    
    (12,541
    )Other non-cash items
    
    
    316
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    366Non-cash portion of restructuring charge
    
    
    11,690
    
    
    
    326
    
    
    
    
    
    
    
    
    
    
    
    12,016Goodwill impairment
    
    
    23,153
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,153Equity in earnings of subsidiaries
    
    
    (23,886
    )
    
    
    
    
    
    
    
    
    
    
    23,886
    
    
    
    Changes in operating assets and liabilities
    
    
    13,889
    
    
    
    (11,217
    )
    
    
    (5,442
    )
    
    
    
    
    
    
    (2,770
    )Net cash provided by/(used for) operating
activities
    
    
    (14,703
    )
    
    
    7,258
    
    
    
    7,694
    
    
    
    
    
    
    
    249Investing ActivitiesAdditions to property, plant and equipment
    
    
    (4,450
    )
    
    
    (634
    )
    
    
    (885
    )
    
    
    
    
    
    
    (5,969
    )Investments in rabbi trust
    
    
    (4,289
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,289
    )Other
    
    
    6
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    12Net cash used for investing activities
    
    
    (8,733
    )
    
    
    (634
    )
    
    
    (879
    )
    
    
    
    
    
    
    (10,246
    )Financing ActivitiesFinancing fees and expenses paid
    
    
    (52
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (52
    )Net (payments) borrowings on revolving
credit facilities
    
    
    (551
    )
    
    
    551
    
    
    
    (1,122
    )
    
    
    
    
    
    
    (1,122
    )Intercompany borrowings (payments)
    
    
    9,915
    
    
    
    (7,175
    )
    
    
    (2,740
    )
    
    
    
    
    
    
    Other financing activities
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    (6
    )Net cash provided by/(used for) financing
activities
    
    
    9,312
    
    
    
    (6,624
    )
    
    
    (3,868
    )
    
    
    
    
    
    
    (1,180
    )Effect of exchange rate on cash and
equivalents
    

    
    193
    
    
    
    
    
    
    
    2,452
    
    
    
    
    
    
    
    2,645Net cash provided by/(used for) continuing
operations
    
    
    (13,931
    )
    
    
    
    
    
    
    5,399
    
    
    
    
    
    
    
    (8,532
    )Net cash provided by discontinued operations
    
    
    
    
    
    
    
    
    
    
    701
    
    
    
    
    
    
    
    701Net increase/(decrease) in cash and
equivalents
    
    
    (13,931
    )
    
    
    
    
    
    
    6,100
    
    
    
    
    
    
    
    (7,831
    )Cash and equivalents at beginning of period
    
    
    22,461
    
    
    
    
    
    
    
    31,459
    
    
    
    
    
    
    
    53,920Cash and equivalents at end of period
    
    $
    8,530
    
    
    $
    
    
    
    $
    37,559
    
    
    $
    
    
    
    $
    46,089
 F-47




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##### Table of Contents



Wolverine Tube, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Year Ended December 31, 2002 Non-Subsidiary
    
    
    GuarantorParent
    
    
    Guarantors
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    Consolidated(In thousands)Operating ActivitiesIncome from continuing operations
    
    $
    6,677
    
    
    $
    11,449
    
    
    $
    12,449
    
    
    $
    (23,405
    )
    
    $
    7,170Depreciation and amortization
    
    
    12,392
    
    
    
    3,381
    
    
    
    2,643
    
    
    
    
    
    
    
    18,416Other non-cash items
    
    
    (4,623
    )
    
    
    2,720
    
    
    
    244
    
    
    
    
    
    
    
    (1,659
    )Equity in earnings of subsidiaries
    
    
    (23,405
    )
    
    
    
    
    
    
    
    
    
    
    23,405
    
    
    
    Changes in operating assets and liabilities
    
    
    13,267
    
    
    
    2,638
    
    
    
    1,604
    
    
    
    
    
    
    
    17,509Net cash provided by operating activities
    
    
    4,308
    
    
    
    20,188
    
    
    
    16,940
    
    
    
    
    
    
    
    41,436Investing ActivitiesAdditions to property, plant and equipment
    
    
    (5,120
    )
    
    
    (986
    )
    
    
    (1,641
    )
    
    
    
    
    
    
    (7,747
    )Other
    
    
    (1
    )
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    Net cash used for investing activities
    
    
    (5,121
    )
    
    
    (986
    )
    
    
    (1,640
    )
    
    
    
    
    
    
    (7,747
    )Financing ActivitiesFinancing fees and expenses paid
    
    
    (8,687
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,687
    )Net payments on revolving credit facilities
    
    
    (97,907
    )
    
    
    
    
    
    
    (465
    )
    
    
    
    
    
    
    (98,372
    )Intercompany borrowings (payments)
    
    
    27,309
    
    
    
    (18,351
    )
    
    
    (8,958
    )
    
    
    
    
    
    
    Net increase in note payable
    
    
    
    
    
    
    
    
    
    
    2,021
    
    
    
    
    
    
    
    2,021Proceeds from issuance of Senior Notes
    
    
    118,546
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    118,546Retirement of Senior Notes
    
    
    (13,901
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,901
    )Issuance of common stock
    
    
    89
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89Redemption of preferred stock
    
    
    (1,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,000
    )Dividends paid on preferred stock
    
    
    (58
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (58
    )Net cash provided by/(used for) financing
activities
    
    
    24,391
    
    
    
    (18,351
    )
    
    
    (7,402
    )
    
    
    
    
    
    
    (1,362
    )Effect of exchange rate on cash and
equivalents
    
    
    
    
    
    
    (50
    )
    
    
    924
    
    
    
    
    
    
    
    874Net cash provided by continuing operations
    
    
    23,578
    
    
    
    801
    
    
    
    8,822
    
    
    
    
    
    
    
    33,201Net cash used for discontinued operations
    
    
    (1,117
    )
    
    
    (801
    )
    
    
    (102
    )
    
    
    
    
    
    
    (2,020
    )Net increase in cash and equivalents
    
    
    22,461
    
    
    
    
    
    
    
    8,720
    
    
    
    
    
    
    
    31,181Cash and equivalents at beginning of period
    
    
    
    
    
    
    
    
    
    
    22,739
    
    
    
    
    
    
    
    22,739Cash and equivalents at end of period
    
    $
    22,461
    
    
    $
    
    
    
    $
    31,459
    
    
    $
    
    
    
    $
    53,920
 F-48




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##### Table of Contents



Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders
Wolverine Tube, Inc. We have audited the accompanying consolidated balance sheet of Wolverine Tube, Inc. and
Subsidiaries (the Company) as of December 31, 2004, and the related consolidated statement of
operations, stockholders equity, and cash flows for the year
then ended. In connection with our audit of the
consolidated financial statements, we also have audited the
accompanying financial statement schedule II. These
consolidated financial statements and schedule are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated
financial statements and schedule based on our
audit. We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable basis for our
opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Wolverine Tube, Inc. and Subsidiaries as of December
31, 2004, and the results of their operations and their cash flows for the year ended December 31,
2004, in conformity with U.S. generally accepted accounting
principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects
the information set forth therein. We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of Wolverine Tube, Inc.s internal control over
financial reporting as of December 31, 2004, based on criteria established in Internal
ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated March 11, 2005 expressed an unqualified opinion on
managements assessment of, and the effective operation of, internal control over financial
reporting. /s/ KPMG LLPBirmingham, AlabamaMarch 11, 2005
 F-49




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##### Table of Contents



Report of Independent Registered Public Accounting Firm The Board of Directors and Shareholders
Wolverine Tube, Inc. We have audited the
accompanying consolidated balance sheet of Wolverine Tube, Inc. and
Subsidiaries as of December 31, 2003, and the related consolidated statements of
operations, stockholders equity and cash flows for each of the two years in the period ended
December 31, 2003. Our audits also included the 2003 and 2002 data in the financial statement schedule listed in the index
at Item 15(a) (2). These financial statements and schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial statements and schedule
based on our audits. We conducted our audits in
accordance with the standards of the Public Company Accounting Overnight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial
statements referred to above present fairly, in all material
respects, the consolidated financial position of Wolverine Tube, Inc. and Subsidiaries at December 31,
2003, and the consolidated results of their operations and their cash flows for each
of the two years in the period ended December 31, 2003, in conformity with U.S. generally
accepted accounting principles. Also, in our opinion, the 2003 and 2002 data in the related financial statement
schedule, when considered in relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein. As discussed in Note 2 to the consolidated financial statements, in fiscal 2002 the Company
changed its method of accounting for goodwill. /s/ Ernst & Young LLPFebruary 26, 2004Birmingham, Alabama
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##### Table of Contents



Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders Wolverine Tube, Inc.: We have audited managements assessment, included in the accompanying Managements Report on
Internal Control over Financial Reporting,that Wolverine Tube, Inc. maintained effective internal
control over financial reporting as of December 31, 2004, based on the criteria established in
Internal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Management of Wolverine Tube, Inc. is responsible for maintaining
effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an opinion on
managements assessment and an opinion on the effectiveness of the internal control over financial
reporting of Wolverine Tube, Inc. based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion. A companys internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles. A companys internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the companys assets that could have
a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. In our opinion, managements assessment that Wolverine Tube, Inc. maintained effective
internal control over financial reporting as of December 31, 2004, is fairly stated, in all
material respects, based on criteria established in Internal
ControlIntegrated Framework issued by
the F-51




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##### Table of Contents



COSO. Also, in our opinion, Wolverine Tube, Inc. maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2004, based on the criteria
established in Internal ControlIntegrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheet of Wolverine Tube, Inc. and
subsidiaries as of December 31, 2004, and the related consolidated statement of operations,
stockholders equity, and cash flows for the year then ended, and our report dated
March 11, 2005 expressed an unqualified opinion on those consolidated financial statements. /s/ KPMG LLPBirmingham, AlabamaMarch 11, 2005
 F-52




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##### Table of Contents



Wolverine Tube, Inc. and SubsidiariesSchedule IIValuation and Qualifying Accounts Balance
    
    
    Charged to
    
    
    Charged to
    
    
    
    
    
    
    Balance atBeginning of
    
    
    Cost and
    
    
    Other
    
    
    
    
    
    
    End ofDescription
    
    Period
    
    
    Expenses
    
    
    Accounts
    
    
    Deductions
    
    
    Period(In thousands)Year ended December 31, 2004:Deducted from assets accounts:Reserve for sales returns and allowances
    
    $
    658
    
    
    $
    10
    
    
    $
    
    
    
    $
    (158
    ) (1)
    
    $
    510Allowances for doubtful accounts
    
    
    437
    
    
    
    350
    
    
    
    
    
    
    
    (338
    ) (2)
    
    
    449Year ended December 31, 2003:Deducted from assets accounts:Reserve for sales returns and allowances
    
    $
    508
    
    
    $
    327
    
    
    $
    
    
    
    $
    (177
    ) (1)
    
    $
    658Allowances for doubtful accounts
    
    
    481
    
    
    
    238
    
    
    
    (247
    )
    
    
    (35
    ) (2)
    
    
    437Year ended December 31, 2002:Deducted from assets accounts:Reserve for sales returns and allowances
    
    $
    699
    
    
    $
    249
    
    
    $
    (187
    )
    
    $
    (253
    ) (1)
    
    $
    508Allowances for doubtful accounts
    
    
    1,823
    
    
    
    492
    
    
    
    
    
    
    
    (1,834
    ) (2)
    
    
    481
   (1) Reduction of reserve, net of translation adjustments, for actual sales
returns and allowances.  (2) Uncollectible accounts written off from both continuing and discontinued
operations, net of translation adjustments and recoveries. S-1




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##### Table of Contents



Exhibit Index ExhibitNumber
    
    Description10.47
    
    Ninth Amendment and Agreement to Consignment and
Forward Contracts Agreement dated as of January 13,
2005, among the Company, certain of the Companys
subsidiaries and Bank of America Precious Metals, Inc. as successor to Fleet Precious Metals, Inc.21
    
    List of Subsidiaries23.1
    
    Consent of Independent Registered Public
Accounting Firm23.2
    
    Consent of Independent Registered
Public Accounting Firm31.1
    
    Certification of the Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.