##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-Q  [X]
    Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934   [  ]
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
 COMMISSION FILE NUMBER 1-12164 WOLVERINE TUBE, INC. 
  Delaware
    
    63-0970812(State of Incorporation)
    
    (IRS Employer Identification No.)
 200 Clinton Avenue West, Suite 1000Huntsville, Alabama
    
    35801(Address of Principal Executive Offices)
    
    (Zip Code)
 (256) 353-1310 
  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 [X] NO [  ] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). YES [X] NO [  ] Indicate the number of shares outstanding of each class of Common Stock, as of
the latest practicable date: Class
    
    Outstanding as of November 9, 2004Common Stock, $0.01 Par Value
    
    14,902,000 Shares




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FORM 10-Q QUARTERLY REPORT TABLE OF CONTENTS Page No.PART IItem 1.
    
    Financial StatementsConsolidated Statements of Operations (Unaudited) Three-Month and Nine-Month Periods Ended October 3, 2004 and September 28, 2003
    
    
    1Consolidated Balance Sheets October 3, 2004 (Unaudited) and December 31, 2003
    
    
    2Consolidated Statements of Cash Flows (Unaudited) Nine Month Periods Ended October 3, 2004 and September 28, 2003
    
    
    3Notes to Unaudited Consolidated Financial Statements
    
    
    4Item 2.
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    32Item 4.
    
    Controls and Procedures
    
    
    34PART IIItem 6.
    
    Exhibits
    
    
    35EX-10.1  NON-QUALIFIED OPTION AGREEMENTEX-10.2  NON-QUALIFIED OPTION AGREEMENTEX-10.3  RESTRICTED STOCK AGREEMENTEX-10.4  SAR AGREEMENTEX-10.5  AMENDMENT NO. 5 TO CREDIT AGREEMENTEX-10.6  CONSIGNMENT AND FORWARD CONTRACTS AGREEMENTEX-31.1  SECTION 302 CEO CERTIFICATIONEX-31.2  SECTION 302 PFO CERTIFICATIONEX-32.1  SECTION 906 CEO CERTIFICATIONEX-32.2  SECTION 906 PFO CERTIFICATION




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##### Table of Contents



ITEM 1. FINANCIAL STATEMENTS Wolverine Tube, Inc. and Subsidiaries 
 Consolidated Statements of Operations
  Three-month periods ended
    
    Nine-month periods endedOctober 3,
    
    September 28,
    
    October 3,
    
    September 28,(In thousands except per share amounts)
    
    2004
    
    2003
    
    2004
    
    2003Net sales
    
    $
    200,038
    
    
    $
    144,099
    
    
    $
    619,923
    
    
    $
    440,574Cost of goods sold
    
    
    187,713
    
    
    
    137,857
    
    
    
    568,532
    
    
    
    407,105Gross profit
    
    
    12,325
    
    
    
    6,242
    
    
    
    51,391
    
    
    
    33,469Selling, general and administrative expenses
    
    
    9,195
    
    
    
    8,105
    
    
    
    28,694
    
    
    
    23,812Restructuring charges
    
    
    862
    
    
    
    6,438
    
    
    
    1,727
    
    
    
    6,438Operating income/(loss) from continuing operations
    
    
    2,268
    
    
    
    (8,301
    )
    
    
    20,970
    
    
    
    3,219Other expenses:Interest expense, net
    
    
    4,922
    
    
    
    5,269
    
    
    
    15,752
    
    
    
    15,739Amortization and other, net
    
    
    (22
    )
    
    
    244
    
    
    
    1,115
    
    
    
    1,278Loss on extinguishment of debt
    
    
    2,372
    
    
    
    
    
    
    
    3,009
    
    
    
    Goodwill impairment
    
    
    
    
    
    
    23,153
    
    
    
    
    
    
    
    23,153Income/(loss) from continuing operations before
income taxes
    
    
    (5,004
    )
    
    
    (36,967
    )
    
    
    1,094
    
    
    
    (36,951
    )Income tax benefit
    
    
    (2,492
    )
    
    
    (5,245
    )
    
    
    (1,062
    )
    
    
    (5,966
    )Income/(loss) from continuing operations
    
    
    (2,512
    )
    
    
    (31,722
    )
    
    
    2,156
    
    
    
    (30,985
    )Loss from discontinued operations, net of income
tax benefit of $35 and $157, respectively
    
    
    (73
    )
    
    
    
    
    
    
    (325
    )
    
    
    Net income/(loss)
    
    $
    (2,585
    )
    
    $
    (31,722
    )
    
    $
    1,831
    
    
    $
    (30,985
    )Per share data:Earnings/(loss) per common share  basic:Continuing operations
    
    $
    (0.17
    )
    
    $
    (2.58
    )
    
    $
    0.16
    
    
    $
    (2.52
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    (0.02
    )
    
    
    Net income /(loss)
    
    $
    (0.17
    )
    
    $
    (2.58
    )
    
    $
    0.14
    
    
    $
    (2.52
    )Basic weighted average number of common shares
    
    
    14,835
    
    
    
    12,279
    
    
    
    13,246
    
    
    
    12,273Earnings/(loss) per common share  diluted:Continuing operations
    
    $
    (0.17
    )
    
    $
    (2.58
    )
    
    $
    0.16
    
    
    $
    (2.52
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    (0.02
    )
    
    
    Net income /(loss)
    
    $
    (0.17
    )
    
    $
    (2.58
    )
    
    $
    0.14
    
    
    $
    (2.52
    )Diluted weighted average number of common and
common equivalent shares
    
    
    14,835
    
    
    
    12,279
    
    
    
    13,577
    
    
    
    12,273
 The accompanying notes are an integral part of these consolidated financial statements. 1




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Wolverine Tube, Inc. and Subsidiaries 
 Consolidated Balance Sheets
 October 3,
    
    December 31,(In thousands except share and per share amounts)
    
    2004
    
    2003(Unaudited)AssetsCurrent assetsCash and equivalents
    
    $
    34,827
    
    
    $
    46,089Accounts receivable, net
    
    
    108,555
    
    
    
    86,825Inventories
    
    
    126,572
    
    
    
    108,005Prepaid expenses and other
    
    
    12,702
    
    
    
    12,782Total current assets
    
    
    282,656
    
    
    
    253,701Property, plant and equipment, net
    
    
    192,992
    
    
    
    198,542Deferred charges, net
    
    
    12,576
    
    
    
    14,770Goodwill, net
    
    
    77,148
    
    
    
    77,159Assets held for sale
    
    
    3,445
    
    
    
    4,797Investments
    
    
    4,339
    
    
    
    4,289Total assets
    
    $
    573,156
    
    
    $
    553,258Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    66,254
    
    
    $
    47,503Accrued liabilities
    
    
    22,073
    
    
    
    29,787Short-term borrowings
    
    
    659
    
    
    
    1,502Total current liabilities
    
    
    88,986
    
    
    
    78,792Deferred income taxes
    
    
    
    
    
    
    359Long-term debt
    
    
    235,970
    
    
    
    254,284Pension liabilities
    
    
    24,968
    
    
    
    22,316Postretirement benefit obligation
    
    
    17,652
    
    
    
    16,995Accrued environmental remediation
    
    
    1,026
    
    
    
    1,161Total liabilities
    
    
    368,602
    
    
    
    373,907Stockholders equityCommon stock, par value $0.01 per share; 40,000,000 shares
authorized; 14,900,500 and 14,344,806 shares issued as of
October 3, 2004 and December 31, 2003, respectively
    
    
    149
    
    
    
    143Additional paid-in capital
    
    
    90,396
    
    
    
    103,339Retained earnings
    
    
    125,631
    
    
    
    123,926Unearned compensation
    
    
    (392
    )
    
    
    (172
    )Accumulated other comprehensive loss
    
    
    (11,230
    )
    
    
    (10,510
    )Treasury stock, at cost; 2,063,800 shares as of December 31, 2003
    
    
    
    
    
    
    (37,375
    )Total stockholders equity
    
    
    204,554
    
    
    
    179,351Total liabilities and stockholders equity
    
    $
    573,156
    
    
    $
    553,258
 The accompanying notes are an integral part of these consolidated financial
statements. 2




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Wolverine Tube, Inc. and Subsidiaries 
 Consolidated Statements of Cash Flows
  Nine-month periods endedOctober 3,
    
    September 28,(In thousands)
    
    2004
    
    2003Operating ActivitiesIncome/(loss) from continuing operations
    
    $
    2,156
    
    
    $
    (30,985
    )Adjustments to reconcile income/(loss) from continuing
operations to net cash used for operating activities:Depreciation and amortization
    
    
    13,155
    
    
    
    14,117Deferred income tax benefit
    
    
    (1,248
    )
    
    
    (3,956
    )Non-cash portion of restructuring charges
    
    
    1,089
    
    
    
    5,077Goodwill impairment
    
    
    
    
    
    
    23,153Loss on retirement of Senior Notes, net of tax
    
    
    1,986
    
    
    
    Other non-cash items
    
    
    64
    
    
    
    239Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (21,687
    )
    
    
    (19,007
    )Inventories
    
    
    (18,038
    )
    
    
    1,100Refundable income taxes
    
    
    (834
    )
    
    
    6,592Prepaid expenses and other
    
    
    (300
    )
    
    
    (2,728
    )Accounts payable
    
    
    19,623
    
    
    
    341Accrued liabilities including pension,
postretirement benefit and environmental
    
    
    (3,257
    )
    
    
    3,847Net cash used for operating activities
    
    
    (7,291
    )
    
    
    (2,210
    )Investing ActivitiesAdditions to property, plant and equipment
    
    
    (6,266
    )
    
    
    (4,330
    )Disposal of property, plant and equipment
    
    
    258
    
    
    
    12Net cash used for investing activities
    
    
    (6,008
    )
    
    
    (4,318
    )Financing ActivitiesFinancing fees and expenses paid
    
    
    (216
    )
    
    
    (29
    )Net borrowings/(payments) on revolving credit facilities
    
    
    (698
    )
    
    
    292Issuance/(redemption) of Common Stock
    
    
    23,965
    
    
    
    (36
    )Retirement of Senior Notes
    
    
    (20,510
    )
    
    
    Other financing activities
    
    
    (141
    )
    
    
    (4
    )Net cash provided by financing activities
    
    
    2,400
    
    
    
    223Effect of exchange rate on cash and equivalents
    
    
    15
    
    
    
    1,892Net cash used for continuing operations
    
    
    (10,884
    )
    
    
    (4,413
    )Net cash provided by/(used for) discontinued operations
    
    
    (378
    )
    
    
    552Net decrease in cash and equivalents
    
    
    (11,262
    )
    
    
    (3,861
    )Cash and equivalents at beginning of period
    
    
    46,089
    
    
    
    53,920Cash and equivalents at end of period
    
    $
    34,827
    
    
    $
    50,059
 The accompanying notes are an integral part of these consolidated financial
statements. 3




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Wolverine Tube, Inc. and Subsidiaries 
 Notes to Unaudited Consolidated Financial Statements
 (1) Basis of Reporting for Interim Financial Statements The accompanying unaudited consolidated financial statements include the
accounts of Wolverine Tube, Inc. and its subsidiaries, which are collectively
referred to as Wolverine, the Company, we, our or us, unless the
context otherwise requires. All significant intercompany transactions have
been eliminated in consolidation. We have prepared the unaudited consolidated financial statements included
herein pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations, although we believe
that the disclosures are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with the
financial statements and notes thereto included in our Annual Report on Form
10-K for the year ended December 31, 2003. The accompanying consolidated financial statements presented herewith
reflect all adjustments (consisting of only normal and recurring adjustments)
which, in the opinion of management, are necessary for a fair presentation of
the results of operations for the three and nine-month periods ended October 3,
2004 and September 28, 2003. The results of operations for interim periods are
not necessarily indicative of results to be expected for an entire year. We use our internal operational reporting cycle for quarterly financial
reporting. (2) Earnings/(Loss) Per Share Basic earnings/(loss) per share were computed by dividing net income/(loss) by
the weighted average number of shares outstanding during each period. 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 in accordance with Financial Accounting Standards
Board (FASB) Statement No. 128. 4




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The following table sets forth the computation of basic and diluted
earnings per share: Three-month periods ended
    
    Nine-month periods ended(In thousands, except per share data)
    
    October 3, 2004
    
    September 28, 2003
    
    October 3, 2004
    
    September 28, 2003Income/(loss) from continuing operations
    
    $
    (2,512
    )
    
    $
    (31,722
    )
    
    $
    2,156
    
    
    $
    (30,985
    )Loss from discontinued operations, net
of tax benefit
    
    
    (73
    )
    
    
    
    
    
    
    (325
    )
    
    
    Net income /(loss)
    
    $
    (2,585
    )
    
    $
    (31,722
    )
    
    $
    1,831
    
    
    $
    (30,985
    )Basic weighted average common shares
    
    
    14,835
    
    
    
    12,279
    
    
    
    13,246
    
    
    
    12,273Dilutive stock options and restricted
shares
    
    
    458
    
    
    
    170
    
    
    
    331
    
    
    
    162Diluted weighted average common and
common equivalent shares
    
    
    15,293
    
    
    
    12,449
    
    
    
    13,577
    
    
    
    12,435Earnings/(loss) per common share basic:Continuing operations
    
    $
    (0.17
    )
    
    $
    (2.58
    )
    
    $
    0.16
    
    
    $
    (2.52
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    (0.02
    )
    
    
    Net income/(loss)
    
    $
    (0.17
    )
    
    $
    (2.58
    )
    
    $
    0.14
    
    
    $
    (2.52
    )Earnings/(loss) per common share
diluted:Continuing operations
    
    $
    (0.17
    )
    
    $
    (2.58
    )
    
    $
    0.16
    
    
    $
    (2.52
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    (0.02
    )
    
    
    Net income /(loss)
    
    $
    (0.17
    )
    
    $
    (2.58
    )
    
    $
    0.14
    
    
    $
    (2.52
    )
 We had additional stock options outstanding of 691,859 and 927,104 for the
three and nine month periods ended October 3, 2004, 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. (3) Stock-Based Compensation Plans We account for our stock option compensation plans using the intrinsic
value method prescribed in Accounting Principals Board Opinion No. 25
Accounting for Stock Issued to Employees, and related interpretations, under
which no stock option compensation expense is reflected in net income because
the exercise price of our stock options equals the market price of the
underlying stock on the date of grant. The following table illustrates the
effect on net income and earnings per share if we had applied the fair value
recognition provisions of Statement of Financial Accounting Standard No. 123,
Accounting for Stock-Based Compensation to our stock option compensation
plans. 5




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Three-month periods ended
    
    Nine-month periods endedOctober 3,
    
    September 28,
    
    October 3,
    
    September 28,(In thousands, except per share amounts)
    
    2004
    
    2003
    
    2004
    
    2003Net income/(loss), as reported
    
    $
    (2,585
    )
    
    $
    (31,722
    )
    
    $
    1,831
    
    
    $
    (30,985
    )Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects
    
    
    (136
    )
    
    
    (206
    )
    
    
    (408
    )
    
    
    (618
    )Pro forma net income/(loss)
    
    $
    (2,721
    )
    
    $
    (31,928
    )
    
    $
    1,423
    
    
    $
    (31,603
    )Earnings/(loss) per share:Basic  as reported
    
    $
    (0.17
    )
    
    $
    (2.58
    )
    
    $
    0.14
    
    
    $
    (2.52
    )Basic  pro forma
    
    $
    (0.18
    )
    
    $
    (2.60
    )
    
    $
    0.11
    
    
    $
    (2.58
    )Diluted  as reported
    
    $
    (0.17
    )
    
    $
    (2.58
    )
    
    $
    0.14
    
    
    $
    (2.52
    )Diluted  pro forma
    
    $
    (0.18
    )
    
    $
    (2.60
    )
    
    $
    0.11
    
    
    $
    (2.58
    )
 (4) Interest Expense The following table summarizes interest expense, net: Three-month periods ended
    
    Nine-month periods endedOctober 3,
    
    September 28,
    
    October 3,
    
    September 28(in thousands)
    
    2004
    
    2003
    
    2004
    
    2003Interest expense, net of interest rate swap
    
    $
    5,055
    
    
    $
    5,410
    
    
    $
    16,420
    
    
    $
    16,193Interest income
    
    
    (88
    )
    
    
    (118
    )
    
    
    (524
    )
    
    
    (398
    )Capitalized interest
    
    
    (45
    )
    
    
    (23
    )
    
    
    (144
    )
    
    
    (56
    )Interest expense, net
    
    $
    4,922
    
    
    $
    5,269
    
    
    $
    15,752
    
    
    $
    15,739
 (5) Inventories Inventories are as follows: (In thousands)
    
    October 3, 2004
    
    December 31, 2003Finished products
    
    $
    39,966
    
    
    $
    34,082Work-in-process
    
    
    33,416
    
    
    
    27,484Raw materials
    
    
    25,385
    
    
    
    17,083Supplies
    
    
    27,805
    
    
    
    29,356Totals
    
    $
    126,572
    
    
    $
    108,005
 6




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(6) Debt The following table summarizes long-term debt: (In thousands)
    
    October 3, 2004
    
    December 31, 2003Senior Notes, 10.5%, due April 2009
    
    $
    99,400
    
    
    $
    118,000Discount on 10.5% Senior Notes, original
issue discount amortized over 7 years
    
    
    (771
    )
    
    
    (1,069
    )Senior Notes, 7.375%, due August 2008
    
    
    136,295
    
    
    
    136,308Discount on 7.375% Senior Notes,
original issue discount amortized over
10 years
    
    
    (110
    )
    
    
    (132
    )Capitalized lease
    
    
    113
    
    
    
    Netherlands facility, 5.1%, due on demand
    
    
    496
    
    
    
    1,201Other foreign facilities
    
    
    1,206
    
    
    
    1,478236,629
    
    
    
    255,786Less short-term borrowings
    
    
    (659
    )
    
    
    (1,502
    )Total
    
    $
    235,970
    
    
    $
    254,284
 On June 23, 2004, we sold 2.45 million shares of our common stock in a
private placement at a price of $10.00 per share. After fees, we netted $23.0
million. We used $20.5 million of the proceeds to repurchase $18.6 million in
face value of 10.5% Senior Notes on the open market. On June 30, 2004, we
repurchased $4.125 million in face value of our 10.5% Senior Notes at a premium
of $0.4 million. Unamortized bond discount and prepaid financing fees
associated with the repurchase amounted to $0.2 million. The effect on net
income for the repurchase of the notes in the second quarter 2004 was a charge
of $0.6 million ($0.4 million net of tax). On July 9, 2004, we repurchased
$14.475 million in face value our 10.5% Senior Notes at a premium of $1.5
million. Unamortized bond discount and prepaid financing fees amounted to $0.9
million. The effect on net income of the repurchase of the notes in the third
quarter 2004 was a charge of $2.4 million ($1.6 million net of tax). The
remainder of the proceeds of the private placement was used for other general
corporate purposes. As of October 3, 2004, we had no outstanding borrowings under our secured
revolving credit facility. We had approximately $9.2 million of standby
letters of credit outstanding under the secured revolving facility, and
approximately $27.8 million (subject to a $2.0 million excess availability
requirement) in additional borrowing capacity available thereunder. (7) Contingencies We are subject to extensive environmental regulations imposed by local,
state, federal and provincial authorities in the United States, Canada, China
and Portugal with respect to air emission, discharges to waterways, and the
generation, handling, storage, transportation, treatment and disposal of waste
material, and we have received various communications from regulatory
authorities concerning environmental matters. We have accrued undiscounted
estimated environmental remediation costs of $1.0 million as of October 3,
2004, consisting primarily of $0.8 million for the Ardmore, Tennessee facility
and $0.2 million for the Decatur, Alabama facility. Based upon information
currently available, we believe that the ultimate remediation costs for 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
these 7




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environmental matters could differ materially from the amounts we
estimated and have accrued at October 3, 2004, and could result in additional
exposure if these environmental matters are not resolved as anticipated. (8) Comprehensive Income/(Loss) The following table summarizes comprehensive income/(loss): Three-month periods ended
    
    Nine-month periods endedOctober 3,
    
    September 28,
    
    October 3,
    
    September 28(In thousands)
    
    2004
    
    2003
    
    2004
    
    2003Net income/(loss)
    
    $
    (2,585
    )
    
    $
    (31,722
    )
    
    $
    1,831
    
    
    $
    (30,985
    )Translation adjustment for financial statements
denominated in a foreign currency
    
    
    4,273
    
    
    
    (222
    )
    
    
    1,562
    
    
    
    12,269Unrealized gain/(loss) on cash flow hedges, net
of tax
    
    
    (2,513
    )
    
    
    (100
    )
    
    
    (2,248
    )
    
    
    303Minimum pension liability adjustment, net of tax
    
    
    (71
    )
    
    
    (88
    )
    
    
    (34
    )
    
    
    (330
    )Comprehensive income/(loss)
    
    $
    (896
    )
    
    $
    (32,132
    )
    
    $
    1,111
    
    
    $
    (18,743
    )
 (9) Restructuring Charges Booneville, MS In the third quarter of 2003, we announced our intention to close our
Booneville, Mississippi facility and did so in December 2003. In the fourth
quarter of 2003, we recorded a restructuring charge in the amount of $10.4
million, and established a reserve for certain items associated with the
write-down of impaired assets, relocation of equipment, severance and other
personnel related costs. Because of a significant increase in customer demand,
we are using a limited number of assets at the Booneville facility to provide
additional capacity to meet this increased customer demand. This temporary
measure is anticipated to continue for approximately one year from October 3,
2004, and does not change our strategy regarding this facility. Expenses at
the Booneville facility related to production are charged to continuing
operations, while the plant closing activities continue to be reflected as
restructuring expenses in accordance with FASB Statement No. 146. Given the
temporary and limited timeframe of this matter, the assets of the Booneville
facility continue to be carried at the values established at the end of 2003. For the three and nine-month periods ended October 3, 2004, $11 thousand
and $3.4 million, respectively, were charged against the reserve, relating to
the impaired assets, relocation of equipment, severance and other employee
related costs, the cost of terminating certain operating leases and preparing
the facility for sale. The balance in the reserve at October 3, 2004 is $0.1
million. Restructuring expenses of $66 thousand and $0.8 million were recognized
for the three and nine-month periods ended October 3, 2004, respectively.
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. 8




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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 have been re-deployed or sold, with the exception of
the land and building. The value of the Roxboro facility is accounted for in
assets held for sale in the amount of $2.5 million as of October 3, 2004. We
currently have a sales contract for the property subject to a due diligence
clause. The due diligence period expires on November 19, 2004. The carrying
value of the asset has been reduced to reflect this contract, and other
disposal costs have been estimated and accrued. For the three and nine-month periods ended October 3, 2004, we recognized
charges of $0.8 million and $0.9 million, respectively, primarily for the
write-down of the real property and estimated closing costs discussed above. (10) Industry Segments The Company operates in three business segments: commercial products,
wholesale products and rod, bar and other products. These segments are
distinguishable by their potential end-user application. 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 consist of products sold to a variety of customers
and includes our European distribution business. The commercial products
segment includes manufacturing plants in the US, Canada, China and Portugal.
The wholesale products segment includes manufacturing facilities in the US and
Canada. The rod, bar and other products segment has a manufacturing facility
in Canada. All product segments share a common sales, marketing and
distribution effort. The performance of our operating segments is measured on
sales and gross profit. We do not allocate asset amounts and items of income
and expense below gross profit or depreciation and amortization. 9




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##### Table of Contents



Summarized financial information concerning our reportable segments is
shown in the following table: Rod, Bar(In thousands)
    
    Commercial
    
    Wholesale
    
    & Other
    
    ConsolidatedThree-month period ended October 3, 2004Net sales
    
    $
    147,020
    
    
    $
    38,231
    
    
    $
    14,787
    
    
    $
    200,038Gross profit
    
    
    11,292
    
    
    
    198
    
    
    
    835
    
    
    
    12,325Three-month period ended September 28,
2003Net sales
    
    $
    106,098
    
    
    $
    28,512
    
    
    $
    9,489
    
    
    $
    144,099Gross profit
    
    
    5,874
    
    
    
    38
    
    
    
    330
    
    
    
    6,242Nine-month period ended October 3, 2004Net sales
    
    $
    446,971
    
    
    $
    126,914
    
    
    $
    46,038
    
    
    $
    619,923Gross profit
    
    
    42,290
    
    
    
    5,446
    
    
    
    3,655
    
    
    
    51,391Nine-month period ended September 28, 2003Net sales
    
    $
    332,099
    
    
    $
    80,917
    
    
    $
    27,558
    
    
    $
    440,574Gross profit
    
    
    31,749
    
    
    
    500
    
    
    
    1,220
    
    
    
    33,469
 (11) Discontinued Operations During the year ended December 31, 2001, we decided to discontinue the
operations of Wolverine Ratcliffs, Inc. (WRI), which was previously included
in the rod, bar and other products segment. Accordingly, the operating results
of WRI are reported in discontinued operations in the consolidated financial
statements. In 2002, the Company halted all manufacturing operations at WRI,
substantially liquidated all inventory and net receivables, and took
steps to dispose of the remaining equipment. In the first quarter of 2004, the
remainder of the equipment was sold for $0.8 million, leaving only real
property as assets held for sale. Efforts are continuing to sell the property. 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 $4.75 per
square foot to $5.23 per square foot (in US dollars as of October 3, 2004) over
the term of the lease. The leasing of this facility does not change our intent
to find a buyer for the property. Costs of $1.8 million relating to discontinued WRI operations were charged
to previously established reserves in the first nine months of 2004. These
charges relate primarily to funding pension and post-retirement benefit
obligations and facility carrying costs. For the three and nine month periods
ended October 3, 2004, approximately $73 thousand, net of tax and $0.3 million,
net of tax, respectively, were recognized for the discontinued operations of
WRI. These costs related mainly to personnel and facility maintenance. Assets and liabilities of discontinued WRI operations are reflected in the
consolidated balance sheets as either current or non-current based on the
original classification of the accounts, net of any valuation allowances,
except that property, plant and equipment in the 10




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##### Table of Contents



amount of $0.9 million, net of a valuation allowance, are included as
assets held for sale. We believe that carrying value of these assets have been
appropriately reduced to their estimated recoverable amounts, net of disposal
costs where appropriate. The following table summarizes the net liabilities of the discontinued WRI
operations: (In thousands)
    
    October 3, 2004
    
    December 31, 2003Assets held for sale
    
    $
    945
    
    
    $
    1,697Other assets
    
    
    20
    
    
    
    26Current liabilities
    
    
    (1,481
    )
    
    
    (1,185
    )Other liabilities
    
    
    
    
    
    
    (1,096
    )Net liabilities of discontinued
operations
    
    $
    (516
    )
    
    $
    (558
    )
 (12) Pension Expense US Qualified Retirement Plan The following table summarizes the components of net periodic pension cost
for the US Qualified Retirement Plan: Three-month periods ended
    
    Nine-month periods endedOctober 3,
    
    September 28,
    
    October 3,
    
    September 28,(In thousands)
    
    2004
    
    2003
    
    2004
    
    2003Service cost
    
    $
    1,125
    
    
    $
    992
    
    
    $
    3,303
    
    
    $
    2,878Interest cost
    
    
    2,420
    
    
    
    2,289
    
    
    
    7,104
    
    
    
    6,643Expected return on plan assets
    
    
    (2,891
    )
    
    
    (2,516
    )
    
    
    (8,485
    )
    
    
    (7,300
    )Amortization of prior service cost
    
    
    31
    
    
    
    34
    
    
    
    91
    
    
    
    100Amortization of net actuarial loss
    
    
    319
    
    
    
    276
    
    
    
    937
    
    
    
    800PBGC premium (underfunded plan)
    
    
    83
    
    
    
    
    
    
    
    197
    
    
    
    Net periodic pension cost
    
    $
    1,087
    
    
    $
    1,075
    
    
    $
    3,147
    
    
    $
    3,121
 US Nonqualified Retirement Plan The following table summarizes the components of net periodic pension cost
for the Supplemental Benefit Restoration Plan and the Supplemental Executive
Retirement Plan: Three-month periods ended
    
    Nine-month periods endedOctober 3,
    
    September 28,
    
    October 3,
    
    September 28,(In thousands)
    
    2004
    
    2003
    
    2004
    
    2003Service cost
    
    $
    46
    
    
    $
    21
    
    
    $
    142
    
    
    $
    108Interest cost
    
    
    114
    
    
    
    60
    
    
    
    344
    
    
    
    306Amortization of prior service cost
    
    
    95
    
    
    
    51
    
    
    
    279
    
    
    
    263Net periodic pension cost
    
    $
    255
    
    
    $
    132
    
    
    $
    765
    
    
    $
    677
 11




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##### Table of Contents



Canadian Plans The following table summarizes the components of net periodic pension cost
for the Canadian pension plans: Three-month periods ended
    
    Nine-month periods endedOctober 3,
    
    September 28,
    
    October 3,
    
    September 28,(In thousands)
    
    2004
    
    2003
    
    2004
    
    2003Service cost
    
    $
    137
    
    
    $
    114
    
    
    $
    434
    
    
    $
    276Interest cost
    
    
    327
    
    
    
    273
    
    
    
    1,035
    
    
    
    663Expected return on plan assets
    
    
    (299
    )
    
    
    (248
    )
    
    
    (943
    )
    
    
    (602
    )Amortization of prior service cost
    
    
    20
    
    
    
    18
    
    
    
    69
    
    
    
    44Amortization of net actuarial loss
    
    
    47
    
    
    
    23
    
    
    
    134
    
    
    
    56Net periodic pension cost
    
    $
    232
    
    
    $
    180
    
    
    $
    729
    
    
    $
    437
 Postretirement Benefit Obligation The following table summarizes the components of the net periodic costs for
postretirement benefits: Three-month periods ended
    
    Nine-month periods endedOctober 3,
    
    September 28,
    
    October 3,
    
    September 28,(In thousands)
    
    2004
    
    2003
    
    2004
    
    2003Service cost
    
    $
    184
    
    
    $
    166
    
    
    $
    551
    
    
    $
    498Interest cost
    
    
    255
    
    
    
    261
    
    
    
    762
    
    
    
    783Amortization of prior service cost
    
    
    38
    
    
    
    34
    
    
    
    114
    
    
    
    102Amortization of deferred gain
    
    
    5
    
    
    
    (19
    )
    
    
    15
    
    
    
    (57
    )Net periodic pension cost
    
    $
    482
    
    
    $
    442
    
    
    $
    1,442
    
    
    $
    1,326
 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 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 Financial Accounting Standards Board (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. We believe that 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 FAS 106. 12




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##### Table of Contents



(13) Consolidating Financial Information The following tables present 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) Limited;
Wolverine European Holdings BV; Wolverine Tube Europe BV; Wolverine Tube, BV;
Wolverine Tubagem (Portugal), Lda; Wolverine Joining Technologies Canada, Inc.;
and Wolverine Europe (EURL). Each Subsidiary Guarantor is wholly-owned by
Wolverine Tube, Inc. The guarantees of 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 the Company believes that 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 manufacturing operations located in Alabama,
Oklahoma, Tennessee, and Mississippi and certain corporate management, sales
and marketing, information services and finance functions mostly located in
Alabama but in the case of sales, regionally located near our major customers. 13




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##### Table of Contents



Wolverine Tube, Inc. and Subsidiaries
Consolidating Statements of Operations
For the Three Months Ended October 3, 2004
(Unaudited) Non-Subsidiary
    
    Guarantor(In thousands)
    
    Parent
    
    Guarantors
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedNet sales
    
    $
    113,498
    
    
    $
    39,159
    
    
    $
    63,581
    
    
    $
    (16,200
    )
    
    $
    200,038Cost of goods sold
    
    
    109,711
    
    
    
    34,563
    
    
    
    59,639
    
    
    
    (16,200
    )
    
    
    187,713Gross profit
    
    
    3,787
    
    
    
    4,596
    
    
    
    3,942
    
    
    
    
    
    
    
    12,325Selling, general and administrative expenses
    
    
    7,153
    
    
    
    883
    
    
    
    1,159
    
    
    
    
    
    
    
    9,195Restructuring charges
    
    
    889
    
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    862Operating income/(loss) from continuing operations
    
    
    (4,255
    )
    
    
    3,740
    
    
    
    2,783
    
    
    
    
    
    
    
    2,268Other expense/(income):Interest expense, net
    
    
    5,103
    
    
    
    (11
    )
    
    
    (170
    )
    
    
    
    
    
    
    4,922Amortization and other, net
    
    
    5,310
    
    
    
    (3,431
    )
    
    
    471
    
    
    
    
    
    
    
    2,350Income/(loss) from continuing operations before
income taxes
    
    
    (14,668
    )
    
    
    7,182
    
    
    
    2,482
    
    
    
    
    
    
    
    (5,004
    )Income tax provision/(benefit)
    
    
    (5,724
    )
    
    
    2,573
    
    
    
    659
    
    
    
    
    
    
    
    (2,492
    )Income/(loss) from continuing operations
    
    
    (8,944
    )
    
    
    4,609
    
    
    
    1,823
    
    
    
    
    
    
    
    (2,512
    )Loss from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    (73
    )
    
    
    
    
    
    
    (73
    )Equity in earnings of subsidiaries
    
    
    6,432
    
    
    
    
    
    
    
    
    
    
    
    (6,432
    )
    
    
    Net income/(loss)
    
    $
    (2,512
    )
    
    $
    4,609
    
    
    $
    1,750
    
    
    $
    (6,432
    )
    
    $
    (2,585
    )
 Wolverine Tube, Inc. and Subsidiaries
Consolidating Statements of Operations
For the Three Months Ended September 28, 2003
(Unaudited) Non-Subsidiary
    
    Guarantor(In thousands)
    
    Parent
    
    Guarantors
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedNet sales
    
    $
    76,236
    
    
    $
    29,476
    
    
    $
    49,059
    
    
    $
    (10,672
    )
    
    $
    144,099Cost of goods sold
    
    
    76,658
    
    
    
    26,383
    
    
    
    45,488
    
    
    
    (10,672
    )
    
    
    137,857Gross profit
    
    
    (422
    )
    
    
    3,093
    
    
    
    3,571
    
    
    
    
    
    
    
    6,242Selling, general and administrative expenses
    
    
    6,136
    
    
    
    886
    
    
    
    1,083
    
    
    
    
    
    
    
    8,105Restructuring charges
    
    
    5,858
    
    
    
    194
    
    
    
    386
    
    
    
    
    
    
    
    6,438Operating income/(loss)
    
    
    (12,416
    )
    
    
    2,013
    
    
    
    2,102
    
    
    
    
    
    
    
    (8,301
    )Other expense/(income):Interest expense, net
    
    
    5,442
    
    
    
    (4
    )
    
    
    (169
    )
    
    
    
    
    
    
    5,269Amortization and other, net
    
    
    2,786
    
    
    
    (2,265
    )
    
    
    (277
    )
    
    
    
    
    
    
    244Goodwill impairment
    
    
    23,153
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,153Income/(loss) from continuing operations
before income taxes
    
    
    (43,797
    )
    
    
    4,282
    
    
    
    2,548
    
    
    
    
    
    
    
    (36,967
    )Income tax provision/(benefit)
    
    
    (6,448
    )
    
    
    1,520
    
    
    
    (317
    )
    
    
    
    
    
    
    (5,245
    )Income/(loss) from continuing operations,
net of tax
    
    
    (37,349
    )
    
    
    2,762
    
    
    
    2,865
    
    
    
    
    
    
    
    (31,722
    )Equity in earnings of subsidiaries
    
    
    5,627
    
    
    
    
    
    
    
    
    
    
    
    (5,627
    )
    
    
    Net income/(loss)
    
    $
    (31,722
    )
    
    $
    2,762
    
    
    $
    2,865
    
    
    $
    (5,627
    )
    
    $
    (31,722
    )
 14




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##### Table of Contents



Wolverine Tube, Inc. and Subsidiaries
Consolidating Statements of Operations
For the Nine Months Ended October 3, 2004
(Unaudited) Non-Subsidiary
    
    Guarantor(In thousands)
    
    Parent
    
    Guarantors
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedNet sales
    
    $
    336,513
    
    
    $
    126,614
    
    
    $
    206,726
    
    
    $
    (49,930
    )
    
    $
    619,923Cost of goods sold
    
    
    316,647
    
    
    
    110,015
    
    
    
    191,800
    
    
    
    (49,930
    )
    
    
    568,532Gross profit
    
    
    19,866
    
    
    
    16,599
    
    
    
    14,926
    
    
    
    
    
    
    
    51,391Selling, general and administrative expenses
    
    
    22,844
    
    
    
    2,550
    
    
    
    3,300
    
    
    
    
    
    
    
    28,694Restructuring charges
    
    
    1,754
    
    
    
    (27
    )
    
    
    
    
    
    
    
    
    
    
    1,727Operating income/(loss) from continuing operations
    
    
    (4,732
    )
    
    
    14,076
    
    
    
    11,626
    
    
    
    
    
    
    
    20,970Other expense/(income):Interest expense, net
    
    
    16,450
    
    
    
    (30
    )
    
    
    (668
    )
    
    
    
    
    
    
    15,752Amortization and other, net
    
    
    8,140
    
    
    
    (10,094
    )
    
    
    6,078
    
    
    
    
    
    
    
    4,124Income/(loss) from continuing operations before
income taxes
    
    
    (29,322
    )
    
    
    24,200
    
    
    
    6,216
    
    
    
    
    
    
    
    1,094Income tax provision/(benefit)
    
    
    (10,747
    )
    
    
    8,714
    
    
    
    971
    
    
    
    
    
    
    
    (1,062
    )Income/(loss) from continuing operations
    
    
    (18,575
    )
    
    
    15,486
    
    
    
    5,245
    
    
    
    
    
    
    
    2,156Loss from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    (325
    )
    
    
    
    
    
    
    (325
    )Equity in earnings of subsidiaries
    
    
    20,731
    
    
    
    
    
    
    
    
    
    
    
    (20,731
    )
    
    
    Net income/(loss)
    
    $
    2,156
    
    
    $
    15,486
    
    
    $
    4,920
    
    
    $
    (20,731
    )
    
    $
    1,831
 Wolverine Tube, Inc. and Subsidiaries
Consolidating Statements of Operations
For the Nine Months Ended September 28, 2003
(Unaudited) Non-Subsidiary
    
    Guarantor(In thousands)
    
    Parent
    
    Guarantors
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedNet sales
    
    $
    234,593
    
    
    $
    94,779
    
    
    $
    144,990
    
    
    $
    (33,788
    )
    
    $
    440,574Cost of goods sold
    
    
    225,164
    
    
    
    82,720
    
    
    
    133,009
    
    
    
    (33,788
    )
    
    
    407,105Gross profit
    
    
    9,429
    
    
    
    12,059
    
    
    
    11,981
    
    
    
    
    
    
    
    33,469Selling, general and administrative expenses
    
    
    18,160
    
    
    
    2,508
    
    
    
    3,144
    
    
    
    
    
    
    
    23,812Restructuring charges
    
    
    5,858
    
    
    
    194
    
    
    
    386
    
    
    
    
    
    
    
    6,438Operating income/(loss)
    
    
    (14,589
    )
    
    
    9,357
    
    
    
    8,451
    
    
    
    
    
    
    
    3,219Other expense/(income):Interest expense, net
    
    
    16,180
    
    
    
    (11
    )
    
    
    (430
    )
    
    
    
    
    
    
    15,739Amortization and other, net
    
    
    6,427
    
    
    
    (7,696
    )
    
    
    2,547
    
    
    
    
    
    
    
    1,278Goodwill impairment
    
    
    23,153
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,153Income/(loss) before income taxes
    
    
    (60,349
    )
    
    
    17,064
    
    
    
    6,334
    
    
    
    
    
    
    
    (36,951
    )Income tax provision/(benefit)
    
    
    (11,982
    )
    
    
    6,089
    
    
    
    (73
    )
    
    
    
    
    
    
    (5,966
    )Income/(loss), net of tax
    
    
    (48,367
    )
    
    
    10,975
    
    
    
    6,407
    
    
    
    
    
    
    
    (30,985
    )Equity in earnings of subsidiaries
    
    
    17,382
    
    
    
    
    
    
    
    
    
    
    
    (17,382
    )
    
    
    Net income/(loss)
    
    $
    (30,985
    )
    
    $
    10,975
    
    
    $
    6,407
    
    
    $
    (17,382
    )
    
    $
    (30,985
    )
 15




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##### Table of Contents



Wolverine Tube, Inc. and Subsidiaries
Consolidating Balance Sheets
October 3, 2004
(Unaudited) Non-Subsidiary
    
    Guarantor(In thousands)
    
    Parent
    
    Guarantors
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedAssetsCurrent assetsCash and equivalents
    
    $
    6,640
    
    
    $
    
    
    
    $
    28,187
    
    
    $
    
    
    
    $
    34,827Accounts receivable, net
    
    
    7,671
    
    
    
    68,942
    
    
    
    31,942
    
    
    
    
    
    
    
    108,555Inventories
    
    
    59,159
    
    
    
    35,698
    
    
    
    31,715
    
    
    
    
    
    
    
    126,572Prepaid expenses and other
    
    
    10,593
    
    
    
    1,289
    
    
    
    820
    
    
    
    
    
    
    
    12,702Total current assets
    
    
    84,063
    
    
    
    105,929
    
    
    
    92,664
    
    
    
    
    
    
    
    282,656Property, plant and equipment, net
    
    
    123,552
    
    
    
    29,144
    
    
    
    40,296
    
    
    
    
    
    
    
    192,992Deferred charges, net
    
    
    10,618
    
    
    
    221
    
    
    
    1,737
    
    
    
    
    
    
    
    12,576Goodwill, net
    
    
    
    
    
    
    75,505
    
    
    
    1,643
    
    
    
    
    
    
    
    77,148Assets held for sale
    
    
    2,500
    
    
    
    
    
    
    
    945
    
    
    
    
    
    
    
    3,445Investments
    
    
    4,301
    
    
    
    
    
    
    
    38
    
    
    
    
    
    
    
    4,339Investments in subsidiaries
    
    
    431,630
    
    
    
    302
    
    
    
    
    
    
    
    (431,932
    )
    
    
    Total assets
    
    $
    656,664
    
    
    $
    211,101
    
    
    $
    137,323
    
    
    $
    (431,932
    )
    
    $
    573,156Liabilities and Stockholders EquityCurrent liabilitiesAccounts payable
    
    $
    31,670
    
    
    $
    16,327
    
    
    $
    18,257
    
    
    $
    
    
    
    $
    66,254Accrued liabilities
    
    
    4,141
    
    
    
    12,445
    
    
    
    5,487
    
    
    
    
    
    
    
    22,073Short-term borrowings
    
    
    
    
    
    
    
    
    
    
    659
    
    
    
    
    
    
    
    659Intercompany balances
    
    
    145,660
    
    
    
    (130,835
    )
    
    
    (14,825
    )
    
    
    
    
    
    
    Total current liabilities
    
    
    181,471
    
    
    
    (102,063
    )
    
    
    9,578
    
    
    
    
    
    
    
    88,986Deferred income taxes
    
    
    1,866
    
    
    
    7,385
    
    
    
    (9,251
    )
    
    
    
    
    
    
    Long-term debt
    
    
    234,814
    
    
    
    
    
    
    
    1,156
    
    
    
    
    
    
    
    235,970Pension liabilities
    
    
    22,389
    
    
    
    
    
    
    
    2,579
    
    
    
    
    
    
    
    24,968Postretirement benefit obligation
    
    
    10,554
    
    
    
    
    
    
    
    7,098
    
    
    
    
    
    
    
    17,652Accrued environmental remediation
    
    
    1,016
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    1,026Total liabilities
    
    
    452,110
    
    
    
    (94,678
    )
    
    
    11,170
    
    
    
    
    
    
    
    368,602Stockholders equity
    
    
    204,554
    
    
    
    305,779
    
    
    
    126,153
    
    
    
    (431,932
    )
    
    
    204,554Total liabilities and stockholders equity
    
    $
    656,664
    
    
    $
    211,101
    
    
    $
    137,323
    
    
    $
    (431,932
    )
    
    $
    573,156
 16




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##### Table of Contents



Wolverine Tube, Inc. and Subsidiaries
Consolidating Balance Sheets
December 31, 2003 Non-Subsidiary
    
    Guarantor(In thousands)
    
    Parent
    
    Guarantors
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedAssetsCurrent 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
    
    
    12,156
    
    
    
    408
    
    
    
    218
    
    
    
    
    
    
    
    12,782Total 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
 17




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##### Table of Contents



Wolverine Tube, Inc. and Subsidiaries
Consolidating Statements of Cash Flows
For the Nine Months ended October 3, 2004
(Unaudited) Non-Subsidiary
    
    Guarantor(In thousands)
    
    Parent
    
    Guarantors
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedOperating ActivitiesIncome from continuing operations
    
    $
    2,156
    
    
    $
    15,486
    
    
    $
    5,245
    
    
    $
    (20,731
    )
    
    $
    2,156Depreciation and amortization
    
    
    8,171
    
    
    
    2,637
    
    
    
    2,347
    
    
    
    
    
    
    
    13,155Other non-cash items
    
    
    (158
    )
    
    
    40
    
    
    
    23
    
    
    
    
    
    
    
    (95
    )Loss on early retirement of debt
    
    
    1,986
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,986Equity in earnings of subsidiaries
    
    
    (20,731
    )
    
    
    
    
    
    
    
    
    
    
    20,731
    
    
    
    Changes in operating assets and liabilities
    
    
    (6,541
    )
    
    
    (9,693
    )
    
    
    (8,259
    )
    
    
    
    
    
    
    (24,493
    )Net cash provided by/(used for) operating activities
    
    
    (15,117
    )
    
    
    8,470
    
    
    
    (644
    )
    
    
    
    
    
    
    (7,291
    )Investing ActivitiesAdditions to property, plant and equipment
    
    
    (4,133
    )
    
    
    (1,212
    )
    
    
    (921
    )
    
    
    
    
    
    
    (6,266
    )Other
    
    
    (2
    )
    
    
    273
    
    
    
    (13
    )
    
    
    
    
    
    
    258Net cash used for investing activities
    
    
    (4,135
    )
    
    
    (939
    )
    
    
    (934
    )
    
    
    
    
    
    
    (6,008
    )Financing ActivitiesIssuance of Common Stock
    
    
    23,965
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,965Retirement of senior Notes
    
    
    (20,510
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,510
    )Financing fees and expenses paid
    
    
    (216
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (216
    )Net payments on revolving credit facilities
    
    
    1,068
    
    
    
    (1,067
    )
    
    
    (699
    )
    
    
    
    
    
    
    (698
    )Intercompany borrowings (payments)
    
    
    12,515
    
    
    
    (6,458
    )
    
    
    (6,057
    )
    
    
    
    
    
    
    Other financing activities
    
    
    99
    
    
    
    
    
    
    
    (240
    )
    
    
    
    
    
    
    (141
    )Net cash provided by/(used for) financing activities
    
    
    16,921
    
    
    
    (7,525
    )
    
    
    (6,996
    )
    
    
    
    
    
    
    2,400Effect of exchange rate on cash and equivalents
    
    
    435
    
    
    
    
    
    
    
    (420
    )
    
    
    
    
    
    
    15Net cash provided by/(used for) continuing
operations
    
    
    (1,896
    )
    
    
    6
    
    
    
    (8,994
    )
    
    
    
    
    
    
    (10,884
    )Net cash used for discontinued operations
    
    
    
    
    
    
    
    
    
    
    (378
    )
    
    
    
    
    
    
    (378
    )Net increase/(decrease) in cash and equivalents
    
    
    (1,896
    )
    
    
    6
    
    
    
    (9,372
    )
    
    
    
    
    
    
    (11,262
    )Cash and equivalents at beginning of period
    
    
    8,536
    
    
    
    (6
    )
    
    
    37,559
    
    
    
    
    
    
    
    46,089Cash and equivalents at end of period
    
    $
    6,640
    
    
    $
    
    
    
    $
    28,187
    
    
    $
    
    
    
    $
    34,827
 18




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##### Table of Contents



Wolverine Tube, Inc. and Subsidiaries
Consolidating Statements of Cash Flows
For the Nine Months ended September 28, 2003
(Unaudited) Non-Subsidiary
    
    Guarantor(In thousands)
    
    Parent
    
    Guarantors
    
    Subsidiaries
    
    Eliminations
    
    ConsolidatedOperating ActivitiesNet income/(loss)
    
    $
    (30,985
    )
    
    $
    10,975
    
    
    $
    6,407
    
    
    $
    (17,382
    )
    
    $
    (30,985
    )Depreciation and amortization
    
    
    9,338
    
    
    
    2,614
    
    
    
    2,165
    
    
    
    
    
    
    
    14,117Other non-cash items
    
    
    (3,715
    )
    
    
    35
    
    
    
    (37
    )
    
    
    
    
    
    
    (3,717
    )Non-cash portion of restructuring charge
    
    
    5,077
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,077Goodwill impairment
    
    
    23,153
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,153Equity in earnings of subsidiaries
    
    
    (17,382
    )
    
    
    
    
    
    
    
    
    
    
    17,382
    
    
    
    Changes in operating assets and liabilities
    
    
    7,307
    
    
    
    (9,592
    )
    
    
    (7,570
    )
    
    
    
    
    
    
    (9,855
    )Net cash provided by/(used for) operating activities
    
    
    (7,207
    )
    
    
    4,032
    
    
    
    965
    
    
    
    
    
    
    
    (2,210
    )Investing ActivitiesAdditions to property, plant and equipment
    
    
    (3,346
    )
    
    
    (520
    )
    
    
    (464
    )
    
    
    
    
    
    
    (4,330
    )Other
    
    
    6
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    12Net cash used for investing activities
    
    
    (3,340
    )
    
    
    (520
    )
    
    
    (458
    )
    
    
    
    
    
    
    (4,318
    )Financing ActivitiesFinancing fees and expenses paid
    
    
    (29
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29
    )Net (payments) borrowings on revolving credit
facilities
    
    
    (925
    )
    
    
    925
    
    
    
    292
    
    
    
    
    
    
    
    292Intercompany borrowings (payments)
    
    
    6,695
    
    
    
    (4,437
    )
    
    
    (2,258
    )
    
    
    
    
    
    
    Issuance of common stock
    
    
    (36
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36
    )Other financing activities
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    (4
    )Net cash provided by/(used for) financing activities
    
    
    5,705
    
    
    
    (3,512
    )
    
    
    (1,970
    )
    
    
    
    
    
    
    223Effect of exchange rate on cash and equivalents
    
    
    (83
    )
    
    
    
    
    
    
    1,975
    
    
    
    
    
    
    
    1,892Net cash provided by/(used for) continuing
operations
    
    
    (4,925
    )
    
    
    
    
    
    
    512
    
    
    
    
    
    
    
    (4,413
    )Net cash provided by discontinued operations
    
    
    
    
    
    
    
    
    
    
    552
    
    
    
    
    
    
    
    552Net increase/(decrease) in cash and equivalents
    
    
    (4,925
    )
    
    
    
    
    
    
    1,064
    
    
    
    
    
    
    
    (3,861
    )Cash and equivalents at beginning of period
    
    
    22,462
    
    
    
    
    
    
    
    31,458
    
    
    
    
    
    
    
    53,920Cash and equivalents at end of period
    
    $
    17,537
    
    
    $
    
    
    
    $
    32,522
    
    
    $
    
    
    
    $
    50,059
 
 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 19




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##### Table of Contents



and cross selling opportunities. Our principal product lines are
commercial products, wholesale products and rod, bar and other products. Our business continues to be impacted by the significant increase in
copper prices over the last year. This increase in the price of copper 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, our
suppliers are charging us premiums 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 in order to
guarantee supply. Generally, our terms of sale with our commercial products customers 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, a portion of the premiums being paid for copper. The increase in copper prices has had two profound effects on our
financial position and results of operations. First, 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 and inventory turns. Secondly, earnings in the third quarter of 2004 were negatively impacted
by $1.9 million (net of tax) as a result of our metal valuation and copper
hedge accounting. We hedge our base metals inventory by selling copper
forward. Generally accepted accounting principles (GAAP) requires valuing
this hedge position on the last day of the financial reporting period. Our
inventory is valued on a FIFO (first in, first out) basis. As the price of
copper increases, we recognize a loss on our hedge position, offset by the
increased value in our FIFO inventory. With the sharp rise in copper prices at
the end of the third quarter, the loss on the hedge position exceeded the
increase in value of the physical inventory, resulting in the $1.9 million
negative earnings impact mentioned above. Subsequent to quarter end, copper
prices declined. If copper were to remain at these prices, or lower, we should
recapture, at a minimum, the hedge loss realized in the third quarter. Demand for our products generally continues to increase 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. Volume in the our wholesale products segment was negatively impacted by
recent hurricanes in Florida, as well as wholesalers and distributors concerns
with holding inventory due to the erratic copper market. Results of Operations The following discussion summarizes the significant factors affecting the
consolidated operating results and financial condition of the Company for the
three and nine-month periods ended October 3, 2004 and September 28, 2003.
This discussion should be read in conjunction with the unaudited consolidated
financial statements and notes to the unaudited consolidated financial
statements contained in Item 1 above, and the consolidated financial statements
and 20




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related notes included in the Companys Annual Report on Form 10-K for the
year ended December 31, 2003. For the Three Months Ended October 3, 2004 Compared to the Three Months Ended
September 28, 2003 Pounds shipped continued to improve in the third quarter of 2004 for two
of our three business segments. The commercial products and rod, bar and other
products business segments showed continued growth in the third quarter of
2004, while our wholesale products segment declined from the previous years
third quarter. Total shipments for the third quarter 2004 were 84.5 million
pounds as compared to 80.5 million pounds in the third quarter of 2003, an
increase of 4.0 million pounds or 4.9%. The change in pounds shipped by
business segment was as follows: For the Three Months Ended %In thousands, except for
    
    October 3,
    
    September 28,
    
    Increase/
    
    Increase/percentages
    
    2004
    
    2003
    
    (Decrease)
    
    (Decrease)Commercial products
    
    
    58,404
    
    
    
    53,469
    
    
    
    4,935
    
    
    
    9.2Wholesale products
    
    
    20,510
    
    
    
    22,415
    
    
    
    (1,905
    )
    
    
    (8.5
    )Rod, bar and other products
    
    
    5,563
    
    
    
    4,636
    
    
    
    927
    
    
    
    20.0Total
    
    
    84,477
    
    
    
    80,520
    
    
    
    3,957
    
    
    
    4.9
 The increase in pounds shipped in the commercial products segment was due
primarily to improvements in the HVAC and consumer appliance markets, continued
improvement in commercial construction and the continuation of favorable
outsourcing trends by customers to our fabricated products facilities. The
decrease in pounds shipped in the wholesale products segment reflects slower
demand due to the hurricanes that impacted Florida in the third quarter of
2004, and cautious purchasing by distributors and wholesalers due to the
erratic copper market. The increase in pounds shipped in the rod, bar and
other products segment is due to market share gains and the improvement in the
economy in general. Net sales for the third quarter ended October 3, 2004 were $200.0 million
compared to $144.1 million in the third quarter of 2003, an increase of $55.9
million or 38.8%. The increase in sales by business segment was as follows: For the Three Months Ended In thousands, except for
    
    October 3,
    
    September 28,
    
    $
    
    %percentages
    
    2004
    
    2003
    
    Increase
    
    IncreaseCommercial products
    
    $
    147,020
    
    
    $
    106,098
    
    
    $
    40,922
    
    
    
    38.6Wholesale products
    
    
    38,231
    
    
    
    28,512
    
    
    
    9,719
    
    
    
    34.1Rod, bar and other products
    
    
    14,787
    
    
    
    9,489
    
    
    
    5,298
    
    
    
    55.8Total
    
    $
    200,038
    
    
    $
    144,099
    
    
    $
    55,939
    
    
    
    38.8
 Overall, the increase in revenue is due to a combination of three factors:
a 61% rise in year over year copper prices, a 12% improvement in selling
prices (excluding copper), and a 5% 21




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increase in volume. For the third quarter
of 2004, the average COMEX copper price was $1.29 per pound, as compared to
$0.80 per pound during the same period in 2003. The 12% improvement in selling
prices reflected a richer mix of products sold, as well as improved pricing. Gross profit for the third quarter of 2004 was $12.3 million versus $6.2
million for the third quarter of 2003, an increase of $6.1 million or 97.5%.
The increase in gross profit by business segment was as follows: For the Three Months Ended In thousands, except for
    
    October 3,
    
    September 28,
    
    $
    
    %percentages
    
    2004
    
    2003
    
    Increase
    
    IncreaseCommercial products
    
    $
    11,292
    
    
    $
    5,874
    
    
    $
    5,418
    
    
    
    92.2Wholesale products
    
    
    198
    
    
    
    38
    
    
    
    160
    
    
    
    421.1Rod, bar and other products
    
    
    835
    
    
    
    330
    
    
    
    505
    
    
    
    153.0Total
    
    $
    12,325
    
    
    $
    6,242
    
    
    $
    6,083
    
    
    
    97.5
 The increase in gross profit is mainly attributable to the increase in
sales volume and improved selling prices. Gross profit was negatively impacted
in the third quarter 2004 by a $3.3 million (pre-tax) loss on metal accounting
and hedging activities, and by the unfavorable impact of the strengthening
Canadian dollar on our manufacturing costs. Unit manufacturing costs were 85.5
cents per pound in the third quarter of 2004, compared with 85.7 cents per
pound in the third quarter of 2003. Unit manufacturing costs for the third
quarter 2004 includes a one cent per pound increase in manufacturing costs
related to the strengthening of the Canadian dollar versus the US dollar. Gross profit for the commercial products segment improved in the third
quarter of 2004 from higher volumes and improved selling prices. Gross profit
for the commercial products segment was negatively impacted by slightly higher
manufacturing costs, resulting from a richer mix of products manufactured and
the negative currency translation impact. Gross profit for our wholesale
segment increased slightly in the third quarter of 2004 as a result of an
improvement in pricing. Gross profit margins were negatively impacted in the
third quarter of 2004 as a result of our metal accounting and hedging losses,
with 61% of these losses, or $1.7 million, allocated to the wholesale products
segment. Gross profit for the rod, bar and other products segment increased
due to increased volumes and improved pricing. Selling, general and administrative (SG&A) expenses were $9.2 million in
the third quarter of 2004 versus $8.1 million in the third quarter of 2003, and
increase of $1.1 million or 13.6%. The increase in SG&A expense in the third
quarter of 2004 as compared to 2003 is mainly the result of increased incentive
compensation accruals in the amount of $0.7 million related to improved
operating performance, higher pension and post retirement costs of $0.4 million
which resulted from lowering the discount rate used from 7.0% in 2003 to
6.25% in 2004, and an increase in other employee benefit costs of $0.3 million
primarily for recruiting and relocation. These increases were offset by a
decrease in salary expense of $0.2 million associated
with a reduction in headcount from the restructuring announced in the
third quarter of 2003, and a reduction in depreciation expense of $0.2 million. 22




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Interest expense (net) in the third quarter of 2004 was $4.9 million, as
compared to $5.3 million in the same period in 2003, a decrease of $0.4 million
or 7.5%. This decrease is the result of the repurchase of $18.6 million of our
10.5% Senior Notes during the second and third quarters of 2004. The loss from continuing operations in the third quarter of 2004 of $2.5
million includes the effect of $2.4 million ($1.6 million net of tax) or $0.11
per share, of non-recurring charges related to the repurchase of $14.5 million
of our 10.5% Senior Notes. The loss from continuing operations also includes
$3.3 million ($2.2 million net of tax), or $0.15 per share, of charges relating
to timing losses on our metal hedging positions and the effects of currency
translation adjustments. Restructuring charges in the third quarter of 2004
included in the loss from continuing operations were $0.8 million ($0.5 million
net of tax), or $0.03 per share, mostly related to the valuation write-down of
our long idled Roxboro, North Carolina facility. A tax benefit was recorded for the third quarter of 2004 of $2.5 million,
or approximately 50% of taxable income, as compared to a tax benefit of $5.2
million, or approximately 14% of taxable income, for the same quarter a year
ago. This tax benefit reflects a greater proportion of earnings in
jurisdictions where the tax rate is lower due to income tax holidays, and to a
greater extent, from losses which were incurred in jurisdictions where the tax
rates are higher. In addition, for the quarter ended October 3, 2004, we
realized approximately $0.5 million in additional tax benefits from reconciling
our tax returns for 2003 to our tax accounts. For the Nine Months Ended October 3, 2004 Compared to the Nine Months ended
September 28, 2003 Pounds shipped for our three business segments continue to show
improvement during the first nine months of 2004 as compared with the same time
period in 2003. Total shipments for the first nine months in 2004 were 269.2
million pounds compared to 247.3 million pounds for the first nine months of
2003, an increase of 21.9 million pounds or 8.9%. The increase in pounds
shipped by business segment was as follows: For the Nine Months Ended In thousands, except for
    
    October 3,
    
    September
    
    
    
    
    
    %percentages
    
    2004
    
    28, 2003
    
    Increase
    
    IncreaseCommercial products
    
    
    181,776
    
    
    
    167,723
    
    
    
    14,053
    
    
    
    8.4Wholesale products
    
    
    69,327
    
    
    
    65,897
    
    
    
    3,430
    
    
    
    5.2Rod, bar and other products
    
    
    18,078
    
    
    
    13,665
    
    
    
    4,413
    
    
    
    32.3Total
    
    
    269,181
    
    
    
    247,285
    
    
    
    21,896
    
    
    
    8.9
 The increase in pounds shipped in the commercial products segment is due
primarily to improvements in the HVAC and consumer appliance markets, continued
improvement in commercial construction and the continuation of favorable
outsourcing trends by customers to our fabricated products facilities. The
increase in pounds shipped in the wholesale products
segment reflects generally better market conditions, increased commercial
construction offset somewhat by slower demand in Florida due to the recent
hurricanes, and by recent cautious 23




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purchasing by distributors and wholesalers
due to the erratic copper market. The increase in pounds shipped in the rod,
bar and other products segment is due to market gains from an improving economy
and by the exit of a competitor from this market segment. Net sales for the first nine months of 2004 were $619.9 million compared
to $440.6 million in the first nine months of 2003, an increase of $179.3
million or 40.7%. The increase in revenue by business segment was as follows: For the Nine Months Ended In thousands, except for
    
    October 3,
    
    September 28,
    
    $
    
    %percentages
    
    2004
    
    2003
    
    Increase
    
    IncreaseCommercial products
    
    $
    446,971
    
    
    $
    332,099
    
    
    $
    114,872
    
    
    
    34.6Wholesale products
    
    
    126,914
    
    
    
    80,917
    
    
    
    45,997
    
    
    
    56.8Rod, bar and other products
    
    
    46,038
    
    
    
    27,558
    
    
    
    18,480
    
    
    
    67.1Total
    
    $
    619,923
    
    
    $
    440,574
    
    
    $
    179,349
    
    
    
    40.7
 The increase in revenue for the first nine months of 2004 versus 2003 is
mainly a combination of three factors: the 63% rise in year over year copper
prices, a 7% improvement in selling prices (excluding copper), and the 8.9%
increase in volume. Gross profit for the first nine months of 2004 was $51.4 million versus
$33.5 million for the first nine months of 2003, an increase of $17.9 million
or 53.6%. The increase in gross profit by business segment was as follows: For the Nine Months Ended In thousands, except for
    
    October 3,
    
    September 28,
    
    $
    
    %percentages
    
    2004
    
    2003
    
    Increase
    
    IncreaseCommercial products
    
    $
    42,290
    
    
    $
    31,749
    
    
    $
    10,541
    
    
    
    33.2Wholesale products
    
    
    5,446
    
    
    
    500
    
    
    
    4,946
    
    
    
    989.2Rod, bar and other products
    
    
    3,655
    
    
    
    1,220
    
    
    
    2,435
    
    
    
    199.6Total
    
    $
    51,391
    
    
    $
    33,469
    
    
    $
    17,922
    
    
    
    53.6
 Overall, the increase in gross profit is mainly attributable to the
increase in sales volume and price. Unit manufacturing costs were 84.0 cents
per pound in the first nine months of 2004, compared to 82.6 cents per pound in
the same period in 2003. Unit manufacturing costs for the first nine months
of 2004 reflects a richer mix of products manufactured, and a $0.02 cent per
pound increase in manufacturing cost related to the strengthening of the
Canadian dollar versus the US dollar. Gross profit for the commercial products segment improved in the first
nine months of 2004 versus 2003 from higher volumes and improved selling
prices, which were in part negatively impacted in 2004 as compared to 2003 by
slightly higher manufacturing costs. Gross
profit for the wholesale products segment increased in the first nine
months of 2004 as compared to 2003 as a result of an overall improvement in
pricing. Gross profit for the rod, bar and other 24




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products segment increased
due to increased volumes and improved pricing, largely affected by the exiting
of a competitor in 2003. SG&A expenses were $28.7 million in the first nine months of 2004 versus
$23.8 million in the same period in 2003, an increase of $4.9 million or 20.6%.
The increase in SG&A expense for 2004 as compared to 2003 is mostly the result
of increased incentive compensation accruals in the amount of $2.9 million
related to improved operating performance, higher pension and post retirement
costs of $0.9 million which resulted from lowering the discount rate used from
7.0% in 2003 to 6.25% in 2004, an increase in other employee benefit costs of
$0.9 million primarily for recruiting and relocation, and higher professional
fees in the amount of $1.0 million, mostly related to compliance with the
Sarbanes-Oxley Act of 2002, and the internal control requirements of Section
404 as well as other professional expenses. These increases were offset by a
decrease in salary expense of $0.7 million associated with a reduction in
headcount from the restructuring announced in the third quarter of 2003, and a
reduction in depreciation expense of $0.3 million. Interest expense (net) in the first nine months of 2004 was $15.8 million,
as compared to $15.7 million in the same period in 2003, an increase of $0.1
million or 0.6%. This increase is the result of higher levels of borrowing on
our revolving credit facility necessary to fund working capital caused by
higher copper prices, reduced by the decreased interest expense related to the
repurchase of $18.6 million of our 10.5% Senior Notes during the second and
third quarters of 2004, and by increased levels of interest income and
capitalized interest. Income from continuing operations for the first nine months of 2004 of
$2.2 million includes the effects of $3.0 million ($2.0 million net of tax) or
$0.15 per share, of non-recurring charges related to the repurchase of $18.6
million of our 10.5% Senior Notes. Restructuring charges in the first nine
months of 2004 included in income from continuing operations were $1.7 million
($1.1 million net of tax), or $0.08 per share, mostly related to the valuation
write-down of the our long idled Roxboro, North Carolina facility. A tax benefit in the amount of $1.1 million, or approximately 100% of
taxable income, was recorded for the first nine months of 2004 as compared to a
tax benefit of $6.0 million, or approximately 16% of taxable income, for the
same period a year ago. This tax benefit reflects a greater proportion of
earnings in jurisdictions where the tax rate is lower due to income tax
holidays, and to a greater extent, from losses which were incurred in
jurisdictions where the tax rates are higher. In addition, for the quarter
ended October 3, 2004, we realized approximately $0.5 million in additional tax
benefits from reconciling our tax returns for 2003 to our tax accounts. Restructuring and Other Charges Booneville, MS In the third quarter of 2003, we announced our intention to close our
Booneville, Mississippi facility, and did so in December 2003. In the fourth
quarter of 2003, we recorded a restructuring charge in the amount of $10.4
million, and established a reserve for certain items 25




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associated with the
write-down of impaired assets, relocation of equipment, severance and other
personnel related costs. Because of a significant increase in customer demand,
we are using a limited number of assets at the Booneville facility to provide
additional capacity to meet this increased customer demand. This temporary
measure is anticipated to continue for approximately one year from October 3,
2004, and does not change our strategy regarding this facility. Expenses at
the Booneville facility related to production are charged to continuing
operations, while the plant closing activities continue to be reflected as
restructuring expenses in accordance with FASB Statement No. 146. Given the
temporary and limited timeframe of this matter, the assets of the Booneville
facility continue to be carried at the values established at the end of 2003. For the three and nine-month periods ended October 3, 2004, $11 thousand
and $3.4 million, respectively, were charged against the reserve, relating to
the impaired assets, relocation of equipment, severance and other employee
related costs, the cost of terminating certain operating leases and preparing
the facility for sale. The balance in the reserve at October 3, 2004 is $0.1
million. Restructuring expenses of $66 thousand and $0.8 million were recognized
for the three and nine-month periods ended October 3, 2004, respectively.
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. Roxboro, NC We closed our Roxboro, North Carolina facility in 1999. All of the assets
of this former facility have been re-deployed or sold, with the exception of
the land and building. The value of the Roxboro facility is accounted for in
assets held for sale in the amount of $2.5 million as of October 3, 2004. We
currently have a sales contract for the property subject to a due diligence
clause. The due diligence period expires on November 19, 2004. The carrying
value of the asset has been reduced to reflect this contract, and other
disposal costs have been estimated and accrued. For the three and nine-month periods ended October 3, 2004, we recognized
charges of $0.8 million and $0.9 million, respectively, have been recognized
related primarily for the write-down of the real property and estimated closing
costs discussed above. Liquidity and Capital Resources The following table set forth selected information concerning our
financial condition: October 3, 2004
    
    December 31,(In thousands)
    
    (Unaudited)
    
    2003Cash
    
    $
    34,827
    
    
    $
    46,089Working capital
    
    
    193,670
    
    
    
    174,909Total debt
    
    
    236,629
    
    
    
    255,786Current ratio
    
    
    3.18
    
    
    
    3.22
 26




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Sources of Liquidity Our principal sources of liquidity are cash from operations, borrowings
under our bank credit facility and cash on hand. As of October 3, 2004, we had
$27.8 million (subject to a $2.0 million excess availability requirement) in
additional borrowing capacity available under our revolving credit facility.
There was no outstanding balance on the revolving credit facility as of October
3, 2004. Factors Affecting Liquidity 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. Our ability to borrow under our revolving credit
facility depends on the amount of the available borrowing base, and our
compliance with all financial and other covenants contained in the agreement. Under our consignment and forward contracts arrangement with Fleet
Precious Metals, Inc. (Fleet), Fleet extends to us a silver consignment
facility pursuant to which Fleet will consign 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 Fleet 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. The new consignment limit
represents a 42% increase from the previous dollar limit of $12.0 million
dollars, and a 20% increase from the previous troy ounce limit of 2.0 million
troy ounces. This amendment will eliminate, subject to certain conditions, the
financial covenants contained in the Agreement requiring a minimum consolidated
year to date EBITDA and a minimum consolidated year to date operating income
after fiscal year 2004. The amendment also includes a clarifying provision
specifically incorporating an existing covenant under our bank credit facility
to maintain $2.0 million in excess availability thereunder. As of October 3, 2004, the value of consigned silver in our inventory
under the consignment arrangement was $11.9 million. Uses of Liquidity Our principal uses of liquidity are working capital needs, capital
expenditures and interest payments on our debt. Net cash used by operating
activities in the nine months ending October 3, 2004 was $7.3 million compared
with $2.2 million during the first nine months of 2003. The increase in cash
used by operations during 2004 is primarily the result of increased working
capital needs caused by the significant run-up in the price of copper, and 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 and second quarters of the
year, as compared to the second 27




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half of the year when working capital is
liquidated. The continued rise in copper prices during the third quarter
prolonged our inability to reduce our working capital during this period.
Excluding from cash on hand at the end of the second quarter funds intended for
the repurchase of 10.5% Senior Notes in the amount of $16.0 million, our cash
position improved from the second quarter 2004 to the third quarter 2004. In the first nine months of 2004, capital expenditures totaled $6.3
million versus $4.3 million during the first nine months of 2003. We expect to
spend between $10.5 million and $12.0 million for capital expenditure items in
the fiscal year 2004. Capital expenditures include asset replacement,
environmental and safety compliance, cost reduction, productivity improvement
items, and expenditures for our new Mexico manufacturing facility. For the three and nine month periods ended October 3, 2004, we made
interest payments totaling $10.4 million and $21.9 million, respectively. On June 23, 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. In the second quarter of 2004, we used $4.5 million of the proceeds
to repurchase $4.1 million of the 10.5% Senior Notes. Early in the third
quarter of 2004, we repurchased an additional $14.5 million of Senior Notes for
$16.0 million. The remaining $2.5 million of net proceeds from the equity
offering was used for general corporate purposes. Cash and cash equivalent balances as of October 3, 2004 and December 31,
2003 were $34.8 million and $46.1 million, respectively, of which $28.2 million
and $37.6 million, respectively, were held by subsidiaries located outside of
the US. Historically, we believed that we would have to pay the difference
between the foreign taxes and US taxes on funds located outside of the US upon
the repatriation of these funds back to the US. However, given the provisions
of the recent tax law changes regarding the repatriation of funds and the
reduced tax consequences thereof, we are considering the repatriation of a
portion of cash held outside the US. 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. Environmental Matters We are subject to extensive environmental regulations imposed by local,
state, federal and provincial authorities in the United States, Canada, China
and Portugal with respect to air emission, discharges to waterways, and the
generation, handling, storage, transportation, treatment and disposal of waste
material, and we have received various communications from regulatory
authorities concerning environmental matters. We have accrued undiscounted
estimated environmental remediation costs of $1.0 million as of October 3,
2004, consisting
primarily of $0.8 million for the Ardmore, Tennessee facility and $0.2
million for the Decatur, Alabama facility. Based upon information currently
available, we believe that the ultimate 28




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remediation costs for 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 these
environmental matters could differ materially from the amounts we estimated and
have accrued at October 3, 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. In December 2002, a sample
taken from the adjoining property indicated there were no longer detectable
levels of chrome beyond our property. We believe that due to our remediation
efforts, this plume has retracted 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 October 3, 2004. 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 29




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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. We have proposed to the Tennessee Division that an interim corrective
measure be implemented at the facility. The interim measure will consist of a
system to extract water and vapors from the areas of highest concentration.
The system can be expanded to conduct additional remediation efforts, if
required. 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 develop the
remediation plans for 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 $15,000. 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. Subsequent Events On October 7, 2004, an election was held by the National Labor Relations
Board (NLRB) regarding the de-certification of the Arkansas Regional Council
of Carpenters/United Brotherhood of Carpenters and Joiners of America
representing the 47 maintenance department employees at our Shawnee, Oklahoma
facility, which comprises approximately 12% of the hourly workforce at this
location. On October 19, 2004, the NLRB certified that a majority of the
employees voted that no labor organization be the exclusive representative of
the employees within the bargaining unit at the Shawnee facility. On October 13, 2004, Wolverine announced that it will commence
manufacturing operations in a leased facility in Monterrey, Mexico. This
130,000 square foot facility will produce a variety of fabricated products and
technical tube. We will initially invest approximately $5.0 million, of which
approximately $3.0 million is existing equipment that is being re-deployed from
other Company locations. This facility is expected to have a slightly negative
impact on earnings for the fourth quarter of 2004, and to be accretive to
earnings in the full year 2005. Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995 Certain of the statements contained in this report are made pursuant to
the Safe Harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward-looking statements 30




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include statements regarding our goals,
beliefs, plans, or current expectations, taking into account the information
currently available to our management. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For
example, 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. All
statements which address operating performance, events, or developments that we
expect or anticipate will occur in the future, including statements relating to
future sales, earnings, operating performance, restructuring strategies,
property, plant and equipments expenditures and sources and uses of cash, are
forward-looking statements. These forward-looking statements are subject to
various risks and uncertainties that could cause actual results to differ
materially from those stated or implied by such forward-looking statements. We
undertake no obligation to publicly release any revision of any forward-looking
statements contained herein to reflect events or circumstances occurring after
the date hereof, or to reflect the occurrence of unanticipated events. With respect to expectations of future sales, earnings, operating
performance, restructuring strategies, property, plant and equipment
expenditures and sources and uses of cash, factors that could affect actual
results include, without limitation:  -
    
    our significant amount of debt and the restrictive covenants
contained in our debt agreements;-
    
    our ability to service debt and incur additional debt;-
    
    our ability to dispose of properties held for sale and realize their carrying values;-
    
    our ability to achieve growth rates and profit projections assumed
in the valuation of goodwill;-
    
    the impact of interest rates on the valuations of our pension liabilities and goodwill;-
    
    cyclicality, seasonality and weather conditions, which affect the sales of our products;-
    
    the length and magnitude of recovery from the recent economic downturn;-
    
    costs and cost savings related to the closing of our Booneville, Mississippi facility;-
    
    the extent of recovery in United States commercial construction activity;-
    
    the impact of competitive factors in our industry, including the
effect of pricing, product lines and other actions taken by our
competitors;-
    
    our ability to maintain our relationships with our major customers;-
    
    demand for our products;-
    
    our ability to achieve, and the timeliness with which we achieve,
anticipated results from our capital improvement plans, cost reduction
initiatives, product and process development activities, productivity
and efficiency initiatives, global expansion activities, market share
penetration efforts and working capital management programs;-
    
    our potential exposure to environmental liabilities;-
    
    economic, political and currency risks relating to our international operations;-
    
    our ability, and the ability of our customers, to maintain
satisfactory relations with employees;-
    
    costs for labor and benefits including healthcare and pension
costs;-
    
    extraordinary fluctuations in price and availability in the markets
for raw materials and our ability to hedge the cost of raw materials
effectively; 31




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-
    
    extraordinary fluctuations in the cost and availability of fuel and
energy resources and our ability to hedge these costs;-
    
    risks to our competitive position from changing technology or the
loss of our intellectual property;-
    
    business and economic risks relating to government regulations that
impact our industry;-
    
    the mix of our geographic and product revenues;-
    
    potential disruption of production resulting from the relocation of
equipment among our facilities;-
    
    sufficient levels of credit and cash generated from operations to
cover extraordinary fluctuations in the cost of raw materials, and;-
    
    various other factors, many of which are beyond our ability to control or predict. 
 ITEM 3. Quantitative and Qualitative Disclosures About Market Risk We are exposed to various market risks, including changes in interest
rates, commodity prices, foreign currency exchange rates and interest rates.
Market risk is the potential loss arising from adverse changes in market rates
and prices. 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 commodity prices, foreign currency exchange rates and interest
rates. We do not enter into derivatives or other financial instruments for
trading or speculative purposes. Commodity Price Risks 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. As of October 3, 2004, we have entered into
contracts hedging the raw material requirements for committed and anticipated
future sales through May 2005 having a notional value of $9.0 million. The
estimated fair value of these outstanding contracts based upon forward rates at
October 3, 2004 was a gain of approximately $2.1 million. A 10% decline in
commodity prices would reduce the estimated gain on these contracts by $1.1
million as of October 3, 2004. We also enter into commodity forward contracts to sell copper in order to
reduce the risk of price decreases with respect to firm-price purchase
commitments. As of October 3, 2004, we have entered into contracts hedging raw
material requirements for committed future purchases through December 2004
having a notional value of $22.8 million. The estimated fair value of these
outstanding contracts based upon forward rates at October 3, 2004 was a loss of
$1.8 million. A 10% increase in commodity prices would have further increased
the estimated loss on these contracts by another $2.5 million at October 3,
2004. We import copper strip from Europe into the US for use at our Jackson,
Tennessee facility. Copper suppliers in Europe base the cost of copper to us
on the price of copper on the London Metals Exchange (LME). Sales to our
customers in North America are based on the price of copper on COMEX, a US
based commodity exchange. In order to mitigate any
unfavorable difference in the price of copper on the LME versus COMEX, we
enter into commodity forward contracts to purchase copper on the LME and to
sell copper on the COMEX. 32




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As of October 3, 2004, we have entered into
contracts on COMEX to sell copper hedging the raw material requirements for
committed future purchases through December 2004 having a notional value of
$4.4 million. The estimated fair value of these outstanding contracts based
upon forward rates at October 3, 2004 was a loss of $0.5 million. A 10%
increase in commodity prices would further increase the estimated loss on these
contracts by another $0.5 million at October 3, 2004. In conjunction with
these COMEX forward sale contracts, we have also simultaneously entered into
commodity forward contracts to buy copper on the LME through November 2004 with
an offsetting notional value of $4.3 million. The estimated fair value of
these outstanding contracts based upon forward rates at October 3, 2004 was a
gain of $0.4 million. A 10% decrease in commodity prices would decrease the
estimated gain on these contracts by approximately $0.5 million at October 3,
2004. We have entered into commodity forward contracts to sell copper having a
notional value of $50.3 million at October 3, 2004 in order to hedge or protect
the value of the copper carried in our inventory from price decreases. These
forward contracts are not designated as effective hedges and, as such, are
marked to market each month with gains and losses recorded in cost of goods
sold. The estimated fair value of these outstanding contracts based upon
forward rates at October 3, 2004 was a loss of approximately $6.0 million. A
10% increase in commodity prices would further increase the estimated loss on
these contracts by another $5.6 million as of October 3, 2004. We have also entered into commodity futures contracts to purchase natural
gas to reduce our risk of future price increases. As of October 3, 2004, we
had commodity futures contracts to purchase natural gas for the period November
2004 through November 2006 with a notional value of $9.5 million and an
unrealized gain of approximately $1.0 million. The effect of a 10% decline in
natural gas prices would reduce the estimated gain by approximately $1.0
million. Foreign Currency Exchange Risk We are subject to exposure from fluctuations in foreign currencies. Foreign
currency exchange forward contracts may be used from time to time to hedge the
variability in cash flows from the forecasted payment or receipt of currencies
other than the functional currency. We do not enter into forward exchange
contracts for speculative purposes. These forward currency exchange 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. These contracts cover periods commensurate with known or expected
exposures, generally within 8 months. As of October 3, 2004, we had forward
exchange contracts outstanding to purchase foreign currency with a notional
amount of $4.1 million, and to sell foreign currency with a notional amount of
$0.3 million. The estimated fair value of these forward exchange contracts to
purchase foreign currency was a gain in the amount of $0.1 million and to sell
foreign currency with a gain in the amount of $4 thousand. The potential loss
in fair value for these forward exchange contracts from a 10% adverse change in
quoted foreign currency exchange rates would be a decrease in the gain by
approximately $1.2 million. We also use foreign currency forward exchange contracts to hedge our
inventory currency risk in Canada. These contracts are denominated in US and
Canadian dollars. As of October 3, 33




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2004, we had foreign currency forward
exchange contracts outstanding through December 2004 to purchase foreign
currency with a notional amount of $7.4 million. As of October 3, 2004, we had
an unrealized gain of $0.5 million associated with these foreign currency
forward exchange contracts. The effect of a 10% adverse change in exchange
rates would increase the estimated gain by approximately $0.9 million. Interest Rate Risk In October 2002, we entered into an interest rate swap transaction on
$50.0 million of our 7.375% Senior Notes. The interest rate swap calls for
semi-annual interest payments on February 1 and August 1, a floating interest
rate based upon the six-month LIBOR rate plus a spread of 3.76%, and an August
1, 2008 maturity date. The interest rate swap resulted in a reduction to
interest expense for the three months ended October 3, 2004 and September 28,
2003 of $0.2 million and $0.3 million, respectively and $0.6 million and $0.9
million for the nine month periods of 2004 and 2003, respectively. As of October 3, 2004, the fair market value of the interest rate swap was
$0.5 million, which was included in other liabilities with a corresponding
decrease to the hedged debt. Equal and offsetting unrealized gains and losses
are included in other income expense. For the three and nine-month periods
ended October 3, 2004, the interest rate swap effectively converted $50 million
of fixed rate 7.375% Senior Notes to variable rates of 6.07% and 5.02%,
respectively. 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
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. 
 ITEM 4. CONTROLS AND PROCEDURES Under the supervision of, and with the participation of management,
including our Chief Executive Officer, Dennis J. Horowitz, and our Chief
Financial Officer, James E. Deason, the Company carried out an evaluation of
the effectiveness of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) 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, the Companys disclosure controls and procedures have
been designed and are effective to provide reasonable assurance that
information required to be disclosed in the 34




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reports filed or submitted under
the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the Securities and Exchange
Commission. These disclosure controls and procedures include, without
limitation, controls and procedures designed to provide reasonable assurance
that information required to be disclosed in such reports is accumulated and
communicated to our management, including Messrs. Horowitz and Deason, as
appropriate to allow timely decisions regarding the required disclosure. The
design of any system of controls is based in part upon certain assumptions
about the likelihood of future events. There can be no assurance that any
design will succeed in achieving its stated goal under all potential future
conditions, regardless of how remote. Based upon evaluation 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 period covered by this
report that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting. 
 PART II. OTHER INFORMATION 
 Item 6. Exhibits  (a)
    
    Exhibits  10.1
    
    Form of Non-Qualified Option Agreement under the Wolverine
Tube, Inc. 1993 Stock Option Plan for Outside Directors and 2001
Stock Option Plan for Outside Directors.10.2
    
    Form of Non-Qualified Option Agreement under the Wolverine
Tube, Inc. 2003 Equity Incentive Plan.10.3
    
    Form of Restricted Stock Agreement under the Wolverine Tube,
Inc. 2003 Equity Incentive Plan.10.4
    
    Form of SAR Agreement under the Wolverine Tube, Inc. 2003
Equity Incentive Plan.10.5
    
    Amendment No. 5 to Credit Agreement, dated as of September
27, 2004 by and between Wolverine Tube, Inc., its US and Canadian
subsidiaries and the lenders named therein.10.6
    
    Eighth Amendment and Agreement to Consignment and Forward
Contracts Agreement, dated September 29, 2004, by and among
Wolverine Tube, Inc., Wolverine Tube (Canada), Inc., Wolverine
Joining Technologies, LLC and Fleet Precious Metals, Inc. 35




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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. 
 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized. WOLVERINE TUBE, INC.Dated: November 12, 2004
    By:
    /s/ James E. DeasonName:
    
    James E. DeasonTitle:
    
    Executive Vice President,
Chief Financial Officer,
Secretary and Director 36