Wolverine Tube (WLVTE) 10-Q 2006 Q2 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended July 2, 2006

OR

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from                    to                    .

COMMISSION FILE NUMBER 1-12164

WOLVERINE TUBE, INC.

(Exact name of registrant as specified in its charter)

Delaware	63-0970812
(State of Incorporation)	(IRS Employer Identification No.)
200 Clinton Avenue West, Suite 1000 Huntsville, Alabama	35801
(Address of Principal Executive Offices)	(Zip Code)

(256) 353-1310
(Registrant’s Telephone Number, including Area Code)

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. YESþ NOo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filero      Accelerated filerþ      Non-accelerated filero

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YESo NOþ

Indicate the number of shares outstanding of each class of Common Stock, as of the latest practicable date:

Class	Outstanding as of August 8, 2006
Common Stock, $0.01 Par Value	15,071,391

FORM 10-Q

QUARTERLY REPORT

TABLE OF CONTENTS

		Page No.
	PART I
Item 1.	Financial Statements
	Condensed Consolidated Statements of Operations (Unaudited) - Three and six months ended July 2, 2006 and July 3, 2005		1
	Condensed Consolidated Balance Sheets - July 2, 2006 (Unaudited) and December 31, 2005		2
	Condensed Consolidated Statements of Cash Flows (Unaudited) - Six months ended July 2, 2006 and July 3, 2005		3
	Notes to Unaudited Condensed Consolidated Financial Statements		4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		42
Item 4.	Controls and Procedures		46
	PART II
Item 1A.	Risk Factors		47
Item 2.	Unregistered Sales of Securities and Use of Proceeds		48
Item 4.	Submission of Matters to a Vote of Security Holders		48
Item 5.	Other Information		49
Item 6.	Exhibits		49
Ex-10.9 Summary of Named Executive Officer Compensation
EX-31.1 Section 302 Certification of the CEO
EX-31.2 Section 302 Certification of the CFO
EX-32.1 Section 906 Certification of the CEO
EX-32.2 Section 906 Certification of the CFO

PART I. Financial Information

Item 1. Financial Statements

Wolverine Tube, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

	Three months ended					Six months ended
	July 2, 2006		July 3, 2005			July 2, 2006		July 3, 2005
(In thousands except per share amounts)
Net sales	$	417,984	$	196,321		$	716,296	$	409,803
Cost of goods sold		388,847		190,667			676,277		394,089
Gross profit		29,137		5,654			40,019		15,714
Selling, general and administrative expenses		9,764		8,644			17,393		16,952
Advisory fees and expenses		2,119		—			2,106		—
Restructuring charges		—		136			—		54
Operating income/(loss)		17,254		(3,126	)		20,520		(1,292	)
Other expenses:
Interest expense, net		6,780		5,244			12,613		10,566
Amortization and other, net		1,551		430			2,260		442
Income/(loss) before income taxes		8,923		(8,800	)		5,647		(12,300	)
Income tax provision/(benefit)		2,514		(3,118	)		1,355		(4,136	)
Net income/(loss)	$	6,409	$	(5,682	)	$	4,292	$	(8,164	)
Per share data:
Net income /(loss) per common share – basic	$	0.43	$	(0.38	)	$	0.28	$	(0.54	)
Basic weighted average number of common shares		15,073		15,051			15,066		15,014
Net income /(loss) per common share – diluted	$	0.42	$	(0.38	)	$	0.28	$	(0.54	)
Diluted weighted average number of common and common equivalent shares		15,183		15,051			15,161		15,014

The accompanying notes are an integral part of these condensed consolidated financial statements

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Wolverine Tube, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	July 2, 2006			December 31, 2005
(In thousands except share and per share amounts)	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	21,505		$	27,329
Accounts receivable, net of allowance for doubtful accounts of $0.5 million in 2006 and $0.6 million in 2005		103,464			104,186
Inventories		182,139			146,705
Prepaid expenses and other		19,560			10,209
Total current assets		326,668			288,429
Property, plant and equipment, net		176,342			181,238
Deferred charges, net		7,783			7,726
Goodwill, net		77,181			77,064
Deferred income taxes		12,340			13,469
Notes receivable		834			831
Assets held for sale		1,021			—
Investments		41			8
Total assets	$	602,210		$	568,765
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	99,282		$	71,802
Accrued liabilities		39,980			34,952
Deferred income taxes		680			—
Short-term borrowings		949			248
Total current liabilities		140,891			107,002
Long-term debt		234,642			234,920
Pension liabilities		36,270			42,889
Postretirement benefit obligation		20,157			19,722
Accrued environmental remediation		887			930
Total liabilities		432,847			405,463
Stockholders’ equity
Common stock, par value $0.01 per share; 40,000,000 shares authorized; 15,071,391 and 15,058,803 shares issued and outstanding as of July 2, 2006 and December 31, 2005, respectively		151			151
Additional paid-in capital		92,025			91,711
Retained earnings		90,026			85,734
Unearned compensation		(425	)		(324	)
Accumulated other comprehensive loss, net of tax		(12,414	)		(13,970	)
Total stockholders’ equity		169,363			163,302
Total liabilities and stockholders’ equity	$	602,210		$	568,765

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Wolverine Tube, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six months ended
	July 2, 2006			July 3, 2005
(In thousands)
Operating Activities
Net income/(loss)	$	4,292		$	(8,164	)
Adjustments to reconcile net income/(loss) to net cash used for operating activities:
Depreciation and amortization		8,614			8,546
Deferred income taxes		(29	)		(4,750	)
Other non-cash items		(3,660	)		1,717
Write down of assets held for sale		1,021			—
Changes in operating assets and liabilities:
Sale of accounts receivable		56,794			4,500
Accounts receivable, net		(56,052	)		(12,040	)
Inventories		(33,706	)		7,130
Income taxes payable		(1,497	)		(306	)
Prepaid expenses and other		(6,384	)		(5,907	)
Accounts payable		26,977			(2,585	)
Accrued liabilities including pension, postretirement benefit and environmental		(1,564	)		(2,476	)
Net cash used for operating activities		(5,194	)		(14,335	)
Investing Activities
Additions to property, plant and equipment		(2,584	)		(5,494	)
Disposal of property, plant and equipment		54			244
Net cash used for investing activities		(2,530	)		(5,250	)
Financing Activities
Financing fees and expenses paid		(993	)		(554	)
Net (payments)/borrowings on revolving credit facilities		667			(1,265	)
Issuance of common stock		63			421
Other financing activities		—			36
Net cash used for financing activities		(263	)		(1,362	)
Effect of exchange rate on cash and cash equivalents		2,163			(82	)
Net decrease in cash and cash equivalents		(5,824	)		(21,029	)
Cash and cash equivalents at beginning of period		27,329			35,017
Cash and cash equivalents at end of period	$	21,505		$	13,988

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Wolverine Tube, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(1) Basis of Reporting for Interim Financial Statements

     The accompanying unaudited condensed 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 condensed 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, 2005.

     The accompanying condensed 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 six month periods ended July 2, 2006 and July 3, 2005. The results of operations for interim periods are not necessarily indicative of results to be expected for an entire year.

     The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

     As of July 2, 2006, the Company’s significant accounting policies, which are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, have not changed from December 31, 2005, except for the adoption of Statement of Financial Accounting Standards No. 123 (revised 2004) (“SFAS 123(R)”),Share-Based Payment,and the adoption of Statement of Financial Accounting Standards No. 151 (“SFAS 151”),Inventory Costs, an amendment of ARB No. 43, Chapter 4. See Notes 3 and 5 for additional information regarding the adoption of these Statements by the Company.

     Our internal operational reporting cycle is used for quarterly financial reporting.

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(2) Cash and Cash Equivalents

     Cash and cash equivalents as of July 2, 2006 and December 31, 2005 were $21.5 million and $27.3 million, respectively.

     Approximately $5.5 million and $6.6 million of cash included in cash on hand was restricted as of July 2, 2006 and December 31, 2005, respectively, and was not available for general corporate use. Restricted cash at July 2, 2006 includes $2.7 million in margin deposits related to the Company’s metal and natural gas hedge program, $1.3 million as collateral to secure the Company’s travel and purchase credit card programs, $0.6 million to secure a letter of credit for a loan made by the Portuguese government, $0.4 million as a deposit for the Monterrey, Mexico facility lease, $0.3 million in escrow related to the sale of the Company’s former Roxboro, NC facility, and $0.2 million to secure payment of GST taxes with the Canadian Border Services Agency. Restricted cash at December 31, 2005 included $2.4 million related to deposits for margin calls on our metal and natural gas hedge programs, a $1.4 million deposit with Bank of America related to our silver consignment facility, $1.2 million as collateral to secure our travel and purchase credit card programs, $0.7 million to secure a letter of credit for a loan made by the Portuguese government, $0.4 million as a deposit for the Monterrey, Mexico facility lease, $0.3 million in escrow related to the sale of our former Roxboro, North Carolina facility, and $0.2 to secure a letter of credit for the Canadian Customs Bureau.

(3) Inventories

     Inventories are as follows:

	July 2, 2006		December 31, 2005
(In thousands)
Finished products	$	79,570	$	58,000
Work-in-process		46,531		38,983
Raw materials		29,316		23,545
Supplies		26,722		26,177
Totals	$	182,139	$	146,705

     In November 2004, the Financial Accounting Standards Board issued SFAS 151 to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs and spoilage. SFAS 151 requires that these costs be recognized as current-period charges. In addition, SFAS 151 requires that allocation of fixed production overheads be based on the normal capacity of the production facilities. SFAS 151 was effective for inventory costs incurred for fiscal years beginning after June 15, 2005. The Company adopted SFAS 151 on January 1, 2006. The adoption of this Statement did not have a material impact on our consolidated financial statements.

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(4) Earnings/(Loss) Per Share

     Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during each period. Where applicable, diluted earnings per share is 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 per share in accordance with Statement of Financial Accounting Standards No. 128 (“SFAS 128”),Earnings Per Share.

     The following table sets forth the computation of basic and diluted earnings/(loss) per share:

	Three months ended					Six months ended
	July 2, 2006		July 3, 2005			July 2, 2006		July 3, 2005
(In thousands, except per share data)
Net income/(loss)	$	6,409	$	(5,682	)	$	4,292	$	(8,164	)
Weighted average shares and share equivalents outstanding:
Basic shares		15,073		15,051			15,066		15,014
Dilutive stock options and restricted shares		110		—			95		—
Diluted weighted average shares and share equivalents		15,183		15,051			15,161		15,014
Net income/(loss) per common share — basic	$	0.43	$	(0.38	)	$	0.28	$	(0.54	)
Net income/(loss) per common share — diluted	$	0.42	$	(0.38	)	$	0.28	$	(0.54	)

     We had additional potential dilutive securities outstanding representing 1.9 million and 1.6 million common shares for the three and six month periods ended July 2, 2006 and July 3, 2005, respectively. These were not included in the computation of potentially dilutive securities, because the options’ exercise price was greater than the average market price of the common shares, or because the options and unvested restricted stock were anti-dilutive.

(5) Stock-Based Compensation Plans

     At December 31, 2005, we had stock-based employee and outside director compensation plans. Effective January 1, 2006, the Company adopted SFAS 123(R) utilizing the modified prospective method. SFAS 123(R) requires the measurement and recognition of compensation expense for all stock-based payment awards made to employees and directors, including stock options based on their fair values. The Company’s financial statements for the second quarter and six months ended July 2, 2006 reflect the impact of SFAS 123(R).

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     See Note 20 of the Notes to Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005 for a description of the Company’s stock based compensation plans.

     In 2005, the Company accelerated the vesting of all out-of-the-money, unvested, non-qualified stock options held by officers and employees in anticipation of the impact of SFAS 123(R). All options priced above $7.42, the closing market price of the Company’s common stock on October 18, 2005, were considered to be out-of-the-money. The primary purpose of the accelerated vesting was to avoid recognizing compensation expense associated with these options upon adoption by the Company of SFAS 123(R). Without the acceleration, the Company estimates that pre-tax charges under SFAS 123(R) relating to these options would have been $0.7 million and $0.2 million in fiscal 2006 and 2007, respectively.

     Upon adoption of SFAS 123(R), the Company elected to value its stock-based payment awards granted beginning in fiscal year 2006 using the Black-Scholes option-pricing model (“Black-Scholes model”), which was previously used for pro forma information. The Black-Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The Black-Scholes model requires the input of certain assumptions. The determination of fair value of stock-based payment awards on the date of grant using the Black-Scholes model is affected by our stock price as well as the input of other subjective assumptions, including: expected stock price volatility, the expected pre-vesting forfeiture rate and the expected option term (the amount of time from the grant date until the options are exercised or expire). Expected volatility is determined based upon actual historical stock price movements over the expected option term. Expected pre-vesting forfeitures are estimated based on actual historical pre-vesting forfeitures for the expected option term. The expected option term is calculated using the “simplified” method permitted by Staff Accounting Bulletin No. 107, which the Company has applied in its adoption of SFAS 123(R). Our options have characteristics significantly different from those of traded options, and changes in the assumptions can materially affect the fair value estimates.

     The adoption of SFAS 123(R) resulted in stock-based compensation expense for the three and six month periods ended July 2, 2006 of approximately $0.1 million and $0.3 million, respectively, all of which was recorded in selling, general and administrative expenses. This expense decreased the earnings per share by $0.01 per basic share for the three and six month periods ended July 2, 2006. The Company recognized a deferred tax benefit from the stock-based compensation expense of $46 thousand and $91 thousand for the three and six month periods ended July 2, 2006, respectively.

     The Company recorded stock-based compensation expense for the three and six months ended July 2, 2006 as follows:

	Three Months		Six Months
	Ended		Ended
(in thousands)	July 2, 2006		July 2, 2006
Stock-based compensation expense:
Non-qualified stock options	$	58	$	115
Restricted stock		76		153
Total stock-based compensation expense	$	134	$	268

     For the three month and six month periods ended July 3, 2005, the Company applied the intrinsic value method of accounting for stock options as prescribed by Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees(“APB 25”). Since all options granted during the three and six month periods ended July 3, 2005 had an exercise price equal to

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or greater than the closing market price of the underlying common stock on the grant date, no compensation expense was recognized. If compensation cost for the Company’s stock-based compensation plans had been recognized in the second quarter and first six months ended July 3, 2005 under the provisions of SFAS 123(R), the Company’s net loss and loss per share would have increased to the following pro forma amounts:

	Three Months			Six Months
	Ended			Ended
	July 3, 2005			July 3, 2005
(In thousands, except per share amounts)
Net loss, as reported	$	(5,682	)	$	(8,164	)
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(163	)		(299	)
Pro forma net income/(loss)	$	(5,845	)	$	(8,463	)
Loss per share:
Basic – as reported	$	(0.38	)	$	(0.54	)
Basic – pro forma	$	(0.39	)	$	(0.56	)
Diluted – as reported	$	(0.38	)	$	(0.54	)
Diluted – pro forma	$	(0.39	)	$	(0.56	)

     Prior to the adoption of SFAS 123(R), the Company presented any tax benefits of deductions resulting from the exercise of stock options within operating cash flows in the Condensed Consolidated Statement of Cash Flows. SFAS 123(R) requires tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options to be classified and reported as both an operating cash outflow and a financing cash inflow upon adoption of SFAS 123(R).

     As of July 2, 2006, the Company had not yet recognized compensation expense on the following non-vested awards:

			Average Remaining
	Non-vested		Recognition Period
(in thousands)	Compensation		(Months)
Non-qualified stock options	$	363		33
Restricted stock awards	$	390		33
Total	$	753		33

     The Company granted on April 5, 2006 65,425 and 102,550 restricted shares and non-qualified stock options, respectively. The determination of the fair value of the stock option awards, using the Black-Scholes model, incorporated the assumptions for stock options granted

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during the three month period ended July 2, 2006 set forth in the following table. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is based on historical volatility. Expected life is based on historical experience and consideration of changes in option terms.

	For the
	Quarterly
	Period Ended
	July 2, 2006
Expected stock price volatility		45.00	%
Expected life (in years)		5
Risk-free interest rate		4.79	%
Expected dividend yield		0	%
Weighted average fair value	$	1.78

     The following table summarizes stock options outstanding and changes during the six month period ended July 2, 2006:

								Intrinsic
								Value of
				Weighted		Weighted		Unexercised
				Average		Average		in the
				Exercise		Remaining Life		Money
	Shares			Price		(Years)		Options
								thousands
Options outstanding — January 1, 2006		1,911,116			$9.47		5.7	$	216
Granted		102,550			$3.88		5.0		—
Exercised		—			—		—		—
Cancelled or expired		(95,361	)		$9.09		—		—
Options outstanding — July 2, 2006		1,918,305			$9.18		5.7	$	—
Options exercisable — July 2, 2006		1,743,755			$9.65		5.3	$	—

     The range of exercise prices of the exercisable options and outstanding options at July 2, 2006 are as follows:

					Weighted
	Number of		Number of		Average
	Exercisable		Outstanding		Remaining
Weighted Average Exercise Price	Options		Options		Life (Years)
$3.88 - $4.11		206,057		308,607		7.69
$4.12 - $8.23		118,100		190,100		6.28
$8.24 - $12.34		1,135,032		1,135,032		5.56
$12.35 - $16.45		259,066		259,066		3.42
$16.46 - $20.57		18,500		18,500		3.35
$20.58 - $24.68		7,000		7,000		2.56
Totals		1,743,755		1,918,305		5.65

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     Restricted stock award activity for the six months ended July 2, 2006 is summarized below:

				Weighted
				Average
				Grant Date
				Fair Value
	Shares			per Award
Unvested restricted stock awards — January 1, 2006		80,467			$7.51
Granted		65,425			$3.88
Vested		(33,574	)		$8.87
Cancelled or expired		(2,500	)		$7.10
Unvested restricted stock awards — July 2, 2006		109,818			$4.90

(6) Interest Expense

     The following table summarizes interest expense, net:

	Three months ended						Six months ended
	July 2, 2006			July 3, 2005			July 2, 2006			July 3, 2005
(in thousands)
Interest expense	$	6,713		$	5,405		$	12,493		$	10,818
Interest income		(205	)		(112	)		(326	)		(179	)
Effect of interest rate swap		298			26			497			71
Capitalized interest		(26	)		(75	)		(51	)		(144	)
Interest expense, net	$	6,780		$	5,244		$	12,613		$	10,566

(7) Debt

The following table summarizes long-term debt:

	July 2, 2006			December 31, 2005
(In thousands)
Senior Notes, 7.375%, due August 2008	$	134,744		$	135,180
Discount on 7.375% Senior Notes, original issue discount amortized over 10 years		(60	)		(75	)
Senior Notes, 10.5%, due April 2009		99,400			99,400
Discount on 10.5% Senior Notes, original issue discount amortized over 7 years		(471	)		(557	)
Capitalized leases		129			112
Netherlands facility, 5.1%, due on demand		792			4
Other foreign facilities		1,057			1,104
		235,591			235,168
Less short-term borrowings		(949	)		(248	)
Total	$	234,642		$	234,920

     Our liquidity facilities consist of a receivables sale facility of up to $90 million (see Note 8); a secured revolving credit facility of up to $35 million; and a silver consignment and forward

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contracts facility providing for up to the lesser of $17 million or the value of 2.0 million fine troy ounces of silver. The terms of each of these liquidity facilities, as amended through the first quarter of 2006, are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Liquidity Facilities” of our Form 10-Q for the quarter ended April 2, 2006.

     On April 4, 2006, we amended our secured revolving credit facility to permit the April amendments to our receivables sale facility described in Note 8, to provide for an appraisal of our equipment, and to update certain representations and schedules.

     On June 9, 2006, we again amended the secured revolving credit facility to permit the June amendment to the receivables sale facility described in Note 8.

     All of our liquidity facilities have cross default provisions. As of July 2, 2006, we were in compliance with the covenants contained in all of our liquidity facilities.

     We had no borrowings outstanding under our secured revolving credit facility at July 2, 2006, and approximately $12.8 million of standby letters of credit outstanding thereunder. After taking into account an additional $5.7 million of reserves, other holdbacks and the reduction in availability as a result of the value of our interest rate swap, we had $16.5 million in additional borrowing availability under our secured revolving credit facility as of that date. As of December 31, 2005, we had no borrowings outstanding under our secured revolving credit facility, and approximately $12.5 million of standby letters of credit outstanding. After taking into account $8.1 million of reserves, other holdbacks and the reduction in availability as a result of the value of our interest rate swap, we had $11.9 million in additional borrowing availability under the secured revolving credit facility as of that date.

     Under our silver consignment and forward contracts facility at July 2, 2006, we had $13.3 million of silver in our inventory under the silver consignment facility, with a corresponding amount included in accounts payable, and $0.9 million committed to under the forward contracts facility. At December 31, 2005, we had $13.5 million of silver in our inventory under the silver consignment facility, with a corresponding amount included in accounts payable, and $1.1 million committed to under the forward contracts facility.

(8) Receivables Sale Facility

     In April 2005, we established a three-year, $45 million receivables sale facility arranged by Wachovia Bank, National Association (“Wachovia”). The terms of the receivables sale facility, as amended through the first quarter of 2006, are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Liquidity Facilities” of our Form 10-Q for the quarter ended April 2, 2006. We further amended the receivables sale facility in the second quarter of 2006, as described below.

     On April 4, 2006, we amended the receivables sale facility to include certain Canadian accounts receivable originated by Wolverine Tube (Canada), Inc. (“WTCI”) as being eligible for sale, to add The CIT Group/Business Credit, Inc. (“CIT/BC”) as a purchaser of receivables

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interests, and to increase the maximum amount available under the facility to $70 million. Under the amended facility, WTCI will participate in the receivables sale facility as an additional Originator (along with the Company and its other wholly owned subsidiaries Small Tube Manufacturing, LLC and Tube Forming, L.P.). The Company has guaranteed the performance by WTCI of its obligations under the facility.

     The April 2006 amendments provided that CIT/BC would fund $25 million of the receivable interests purchases towards the $70 million purchase limit, with the remainder to be funded by Wachovia (or its commercial paper conduit). On June 9, 2006, we amended the receivables sale facility to further increase the purchase limit to $90 million, with CIT/BC and Wachovia each funding a maximum of $45 million of the purchase limit. This $90 million purchase limit remains subject to the amount of eligible receivables and certain reserves required by the facility. Accordingly, availability under the amended receivables sale facility may continue to fluctuate over time, perhaps materially, given changes in eligible receivables balances and the amount of required reserves, but cannot exceed the facility’s $90 million purchase limit.

     On May 30, 2006, we agreed with Wachovia to adjust the monthly costs we pay when purchases are funded by Wachovia, as liquidity provider, rather than by Wachovia’s commercial paper conduit. These costs will now accrue on outstanding balances at the LIBO rate plus 2.00% per annum or at the Company’s option at base rate plus 50 basis points if the Company’s Fixed Charge Coverage ratio is less than 1:1. Our monthly costs on purchases funded by CIT/BC continue to be based on LIBO rate plus 2.00%.

     As of July 2, 2006, the value of receivables eligible to be purchased under the facility totaled approximately $82.6 million. We had utilized $75.8 million as of July 2, 2006, leaving an availability of $6.8 million under the facility as of this date.

     In accordance with the provisions of Statement of Financial Accounting Standards No. 140 (“SFAS 140”),Accounting for Transfers and Servicing of Financial Assets, the Company includes in accounts receivable in its consolidated balance sheets the portion of receivables sold to DEJ 98 Finance, LLC (DEJ) which have not been resold by DEJ to Variable Funding Capital Company, LLC (VFCC) or certain other purchasers (the Liquidity Banks). At July 2, 2006, the outstanding advance under the agreements was $75.8 million. Accordingly, accounts receivable in the consolidated balance sheets have been reduced by $75.8 million at July 2, 2006, representing the face amount of the outstanding receivables sold at that date.

(9) Contingencies

     We are subject to extensive environmental regulations imposed by local, state, federal and provincial authorities in the U.S., Canada, China, Portugal and Mexico 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 $0.9 million as of July 2, 2006, consisting primarily of $0.8 million for the Ardmore, Tennessee facility and $0.1 million for the Decatur, Alabama facility. Based upon information currently available, we believe that the ultimate

12

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 July 2, 2006, and could result in additional exposure if these environmental matters are not resolved as anticipated.

(10) Comprehensive Income/(Loss)

     The following table summarizes comprehensive income/(loss):

	Three months ended						Six months ended
	July 2, 2006			July 3, 2005			July 2, 2006			July 3, 2005
(In thousands)
Net income/(loss)	$	6,409		$	(5,682	)	$	4,292		$	(8,164	)
Translation adjustment for financial statements denominated in a foreign currency		6,151			(2,131	)		6,721			(3,936	)
Unrealized gain/(loss) on cash flow hedges, net of tax		(2,201	)		(429	)		(5,089	)		1,492
Minimum pension liability adjustment, net of tax		(78	)		6			(76	)		12
Comprehensive income/(loss)	$	10,281		$	(8,236	)	$	5,848		$	(10,596	)

(11) Advisory Fees and Expenses

     We have secured the services of certain financial, legal and business advisors to consult on issues including strategic planning and the restructuring of our balance sheet. For the three and six month periods ended July 2, 2006 we incurred $2.1 million in fees and expenses related to these activities.

(12) 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 U.S., Canada, China, Portugal and Mexico. The wholesale products segment includes manufacturing facilities in the U.S. 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, of which the level of sales is directly impacted by the price of metal, primarily copper. We do not allocate to each reportable segment asset amounts and items of income and expense below gross profit.

13

     Summarized financial information concerning our reportable segments is shown in the following table:

						Rod, Bar
	Commercial		Wholesale			& Other			Consolidated
(In thousands)
Three months ended July 2, 2006
Pounds shipped		68,453		28,480			4,981			101,914
Net sales	$	272,810	$	123,454		$	21,720		$	417,984
Gross profit/(loss)	$	7,790	$	22,286		$	(940	)	$	29,137
Three months ended July 3, 2005
Pounds shipped		52,267		19,371			2,344			73,982
Net sales	$	146,881	$	38,446		$	10,994		$	196,321
Gross profit/(loss)	$	5,472	$	(178	)	$	360		$	5,654
Six months ended July 2, 2006
Pounds shipped		133,233		51,263			9,622			194,118
Net sales	$	487,409	$	189,320		$	39,567		$	716,296
Gross profit/(loss)	$	16,098	$	24,454		$	(533	)	$	40,019
Six months ended July 3, 2005
Pounds shipped		107,722		42,782			7,237			157,741
Net sales	$	299,951	$	84,027		$	25,825		$	409,803
Gross profit/(loss)	$	15,091	$	(302	)	$	925		$	15,714

Information concerning enterprise-wide revenues by product line is shown in the following table:

	Three months ended				Six months ended
	July 2, 2006		July 3, 2005		July 2, 2006		July 3, 2005
(In thousands)
Commercial Products:
Tube Products	$	192,959	$	93,235	$	338,878	$	190,610
Fabricated Products		52,782		36,514		97,714		72,584
Other Products		27,069		17,132		50,817		36,757
Sub-total		272,810		146,881		487,409		299,951
Wholesale Products		123,454		38,446		189,320		84,027
Rod, bar and other		21,720		10,994		39,567		25,825
Total	$	417,984	$	196,321	$	716,296	$	409,803

     Included in “Other Products” in commercial products above are the Company’s Metal Joining and Copper Alloy products lines, as individually each of those product lines represent less than 10% of the Company’s total sales for each year.

14

(13) Pension Expense

Defined Contribution Plans

     We have 401(k) plans covering substantially all of our U.S. employees. We recorded expense with respect to these plans of $1.6 million and $0.2 million for the three months ended July 2, 2006 and July 3, 2005, respectively. We have recorded expense with respect to these plans of $1.8 million and $0.3 million for the six months ended July 2, 2006 and July 3, 2005, respectively. Beginning with the freezing of our U.S qualified and non-qualified retirement plans on February 28, 2006, contributions made under our defined contribution plans may include the following components: (i) a match, at the Company’s discretion, of employee salaries contributed to the plans; (ii) a contribution amount equal to 3% of an employee’s annual salary; (iii) a “gain share” component upon the Company attaining certain financial performance targets; and (iv) a transition provision, providing for contributions for five years, based upon an employee’s age and years of service.

U.S. Qualified Retirement Plan

��    The Company froze benefits accruing under its U.S. qualified retirement plan, effective February 28, 2006. The following table summarizes the components of net periodic pension cost for the U.S. Qualified Retirement Plan:

	Three months ended						Six months ended
	July 2, 2006			July 3, 2005			July 2, 2006			July 3, 2005
(In thousands)
Service cost	$	(91	)	$	1,224		$	1,005		$	2,461
Interest cost		(1,018	)		2,495			11,284			5,017
Expected return on plan assets		1,162			(2,899	)		(12,876	)		(5,830	)
Amortization of prior service cost		—			30			—			61
Amortization of net actuarial loss		(116	)		444			1,285			893
Net periodic pension cost	$	(63	)	$	1,294		$	698		$	2,602

U.S. Nonqualified Retirement Plan

     The Company previously had two non-qualified retirement plans in the U.S: the 2002 Supplemental Executive Retirement Plan (“Executive Plan”) and Supplemental Benefit Restoration Plan (“Restoration Plan”). The Executive Plan was terminated by the Company on December 9, 2005, effective December 16, 2005. No participants were vested under the Executive Plan on the date of termination other than a former CEO who retired on December 9, 2005. Including the former CEO (whose final Executive Plan benefits were paid in January and June of 2006), no benefits are payable to any participant under the Executive Plan. Benefits due to the former CEO paid in January 2006 were paid from funds previously held in a rabbi trust and from the general operating funds of the Company. Funds paid to the former CEO in June 2006 were paid from the general operating funds of the Company.

15

     Effective February 28, 2006, the Company also froze the accrual of benefits under its Restoration Plan. The following table summarizes the components of net periodic pension cost for the Restoration Plan for 2006 and the Restoration Plan and Executive Plan for 2005:

	Three months ended				Six months ended
	July 2, 2006		July 3, 2005		July 2, 2006		July 3, 2005
(In thousands)
Service cost	$	3	$	64	$	6	$	128
Interest cost		15		122		33		244
Amortization of prior service cost		—		92		—		184
Amortization of loss		1		19		1		38
FAS 88 settlement		23		94		51		188
Net periodic pension cost	$	42	$	391	$	91	$	782

Canadian Plans

     The following table summarizes the components of net periodic pension cost for the Canadian pension plans:

	Three months ended						Six months ended
	July 2, 2006			July 3, 2005			July 2, 2006			July 3, 2005
(In thousands)
Service cost	$	230		$	149		$	453		$	353
Interest cost		418			361			822			859
Expected return on plan assets		(474	)		(373	)		(932	)		(887	)
Amortization of prior service cost		37			23			73			56
Amortization of net actuarial loss		34			20			66			47
Net periodic pension cost	$	245		$	180		$	482		$	428

Postretirement Benefit Obligation

     In the first quarter of 2006, we also announced changes to our postretirement benefit program. Effective February 28, 2006, we eliminated subsidies for retiree medical insurance for employees who were not at least age 55 (age 57 for employees located in Altoona, PA) as of February 28, 2006.

     The following table summarizes the components of the net periodic costs for postretirement benefits:

	Three months ended					Six months ended
	July 2, 2006			July 3, 2005		July 2, 2006			July 3, 2005
(In thousands)
Service cost	$	130		$	184	$	258		$	368
Interest cost		287			283		569			566
Amortization of prior service cost		(12	)		38		(25	)		76
Amortization of deferred gain		(3	)		11		(7	)		22
Net periodic cost	$	402		$	516	$	795		$	1,032

16

(14) Assets Held for Sale

     During the second quarter of 2006 we recorded a write down of $1.0 million before taxes ($0.7 million after taxes) associated with certain pieces of equipment located at our Jackson, TN facility. This equipment was written down to its net realizable value due to the successful modernization of the existing lines at that facility. We began seeking a buyer for this equipment and accordingly have reclassified the equipment to Assets Held for Sale on the July 2, 2006 balance sheet, net of the valuation allowance.

(15) Income Taxes

     The income tax expense of $2.5 million and $1.4 million for the second quarter and first six months of 2006, respectively, are net of the reversal of $2.5 million in valuation allowances for deferred tax assets (primarily associated with net operating losses) which will be utilized against current taxable income in the U.S., and the establishment of a deferred tax valuation allowance in Canada of $2.4 million for the likely expiration of net operating losses based on the current forecast for our Canadian operations.

     On July 13, 2006, the Financial Accounting Standards Board issued Interpretation No 48,Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, clarifying the way companies account for uncertainty in income taxes. This pronouncement is effective for years beginning after December 15, 2006. Management is evaluating the impact of this pronouncement but does not anticipate that it will have a material impact.

(16) Litigation

     Our facilities and operations are subject to extensive environmental laws and regulations, and we are currently involved in various proceedings relating to environmental matters (See Note 9). We are not involved in any legal proceedings that we believe could have a material adverse effect upon our business, operating results or financial condition.

(17) Condensed Consolidating Financial Information

     The following tables present condensed consolidating financial information for: (a) Wolverine Tube, Inc. (the “Parent”) on a stand-alone basis; (b) on a combined basis, the guarantors of the 10.5% Senior Notes and 7.375% Senior Notes (“Subsidiary Guarantors”), which include TF Investor, Inc.; Tube Forming, L.P.; Wolverine Finance, LLC; Wolverine China Investments, LLC; Small Tube Manufacturing, LLC; Wolverine Joining Technologies, LLC; WT Holding Company, Inc. and Tube Forming Holdings, Inc.; and (c) on a combined basis, the Non-Guarantor Subsidiaries, which include Wolverine Tube (Canada) Inc.; 3072452 Nova Scotia Company; 3072453 Nova Scotia Company; 3072996 Nova Scotia Company; Wolverine Tube Canada Limited Partnership; Wolverine Tube (Shanghai) Limited; Wolverine European Holdings BV; Wolverine Tube Europe BV; Wolverine Tube, BV; Wolverine Tubagem (Portugal), Lda; Wolverine Joining Technologies Canada, Inc.; Wolverine Europe (EURL); WLVN de Latinoamerica, S. de R.L. de C.V.; WLV Mexico, S. de R.L. de C.V.; and DEJ 98 Finance, LLC. Each Subsidiary Guarantor is wholly-owned by Wolverine Tube, Inc. The guarantees of each of the Subsidiary Guarantors are full, unconditional, joint and several.

17

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.

18

Wolverine Tube, Inc. and Subsidiaries
Condensed Consolidating Statements of Operations
For the Three Months Ended July 2, 2006
(Unaudited)

							Non-
				Subsidiary			Guarantor
	Parent			Guarantors			Subsidiaries			Eliminations			Consolidated
(In thousands)
Net sales	$	257,248		$	60,527		$	131,826		$	(31,617	)	$	417,984
Cost of goods sold		240,281			52,025			128,158			(31,617	)		388,847
Gross profit		16,967			8,502			3,668			—			29,137
Selling, general and administrative expenses		7,678			689			1,397			—			9,764
Advisory fees and expenses		2,119			—			—			—			2,119
Operating income		7,170			7,813			2,271			—			17,254
Other expense/(income):
Interest expense/(income), net		5,415			(1	)		1,366			—			6,780
Amortization and other, net		4,142			(3,132	)		541			—			1,551
Equity in earnings of subsidiaries		5,530			—			—			(5,530	)		—
Income/(loss) before income taxes		3,143			10,946			364			(5,530	)		8,923
Income tax provision/(benefit)		(3,266	)		3,720			2,060			—			2,514
Net income/(loss)	$	6,409		$	7,226		$	(1,696	)	$	(5,530	)	$	6,409

Wolverine Tube, Inc. and Subsidiaries
Condensed Consolidating Statements of Operations
For the Three Months Ended July 3, 2005
(Unaudited)

							Non-
				Subsidiary			Guarantor
	Parent			Guarantors			Subsidiaries			Eliminations			Consolidated
(In thousands)
Net sales	$	115,047		$	43,092		$	55,636		$	(17,454	)	$	196,321
Cost of goods sold		114,872			38,616			54,633			(17,454	)		190,667
Gross profit		175			4,476			1,003			—			5,654
Selling, general and administrative expenses		6,556			853			1,235			—			8,644
Restructuring charges		79			—			57			—			136
Operating income/(loss)		(6,460	)		3,623			(289	)		—			(3,126	)
Other expense/(income):
Interest expense/(income), net		5,305			(8	)		(53	)		—			5,244
Amortization and other, net		(1,141	)		949			622			—			430
Equity in earnings of subsidiaries		1,435			—			—			(1,435	)		—
Income/(loss) before income taxes		(9,189	)		2,682			(858	)		(1,435	)		(8,800	)
Income tax provision/(benefit)		(3,507	)		911			(522	)		—			(3,118	)
Net income/(loss)	$	(5,682	)	$	1,771		$	(336	)	$	(1,435	)	$	(5,682	)

19

Wolverine Tube, Inc. and Subsidiaries
Condensed Consolidating Statements of Operations
For the Six Months Ended July 2, 2006
(Unaudited)

							Non-
				Subsidiary			Guarantor
	Parent			Guarantors			Subsidiaries			Eliminations			Consolidated
(In thousands)
Net sales	$	435,177		$	111,586		$	228,074		$	(58,541	)	$	716,296
Cost of goods sold		412,199			97,250			225,369			(58,541	)		676,277
Gross profit		22,978			14,336			2,705			—			40,019
Selling, general and administrative expenses		13,364			1,480			2,549			—			17,393
Advisory fees and expenses		2,072			(7)			41			—			2,106
Operating income/(loss)		7,542			12,863			115			—			20,520
Other expense/(income):
Interest expense/(income), net		10,795			(4	)		1,822			—			12,613
Amortization and other, net		5,884			(4,807	)		1,183			—			2,260
Equity in earnings of subsidiaries		7,948			—			—			(7,948	)		—
Income/(loss) before income taxes		(1,189	)		17,674			(2,890	)		(7,948	)		5,647
Income tax provision/(benefit)		(5,481	)		6,009			827			—			1,355
Net income/(loss)	$	4,292		$	11,665		$	(3,717	)	$	(7,948	)	$	4,292

Wolverine Tube, Inc. and Subsidiaries
Condensed Consolidating Statements of Operations
For the Six Months Ended July 3, 2005
(Unaudited)

							Non-
				Subsidiary			Guarantor
	Parent			Guarantors			Subsidiaries			Eliminations			Consolidated
(In thousands)
Net sales	$	235,219		$	85,407		$	125,979		$	(36,802	)	$	409,803
Cost of goods sold		232,055			77,028			121,808			(36,802	)		394,089
Gross profit		3,164			8,379			4,171			—			15,714
Selling, general and administrative expenses		12,816			1,656			2,480			—			16,952
Restructuring charges		(88	)		—			142			—			54
Operating income/(loss)		(9,564	)		6,723			1,549			—			(1,292	)
Other expense/(income):
Interest expense/(income), net		10,784			(19	)		(199	)		—			10,566
Amortization and other, net		2,129			(2,674	)		987			—			442
Equity in earnings of subsidiaries		7,200			—			—			(7,200	)		—
Income/(loss) before income taxes		(15,277	)		9,416			761			(7,200	)		(12,300	)
Income tax provision/(benefit)		(7,113	)		3,201			(224	)		—			(4,136	)
Net income/(loss)	$	(8,164	)	$	6,215		$	985		$	(7,200	)	$	(8,164	)

20

Wolverine Tube, Inc. and Subsidiaries
Condensed Consolidating Balance Sheets
July 2, 2006
(Unaudited)

							Non-
				Subsidiary			Guarantor
	Parent			Guarantors			Subsidiaries		Eliminations			Consolidated
(In thousands)
Assets
Current assets
Cash and cash equivalents	$	3,771		$	—		$	17,734	$	—		$	21,505
Accounts receivable, net		931			11,926			90,607		—			103,464
Inventories		98,419			44,368			39,352		—			182,139
Prepaid expenses and other		15,457			1,382			2,721		—			19,560
Total current assets		118,578			57,676			150,414		—			326,668
Property, plant and equipment, net		103,019			25,700			47,623		—			176,342
Deferred charges, net		4,673			95			3,015		—			7,783
Deferred taxes, non-current		7,385			(7,385	)		12,340		—			12,340
Goodwill, net		—			75,504			1,677		—			77,181
Assets held for resale		1,021			—			—		—			1,021
Notes receivable		—			—			834		—			834
Prepaid pension and other		—			—			41		—			41
Investments in subsidiaries		498,466			325			—		(498,791	)		—
Total assets	$	733,142		$	151,915		$	215,944	$	(498,791	)	$	602,210
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	60,799		$	19,020		$	19,463	$	—		$	99,282
Accrued liabilities		9,791			21,120			9,069		—			39,980
Short-term borrowings		(130	)		156			923		—			949
Deferred income taxes		(1,696	)		1,696			680		—			680
Intercompany balances		214,629			(222,187	)		7,558		—			—
Total current liabilities		283,393			(180,195	)		37,693		—			140,891
Long-term debt		233,612			45			985		—			234,642
Pension liabilities		34,787			—			1,483		—			36,270
Postretirement benefit obligation		11,100			—			9,057		—			20,157
Accrued environmental remediation		887			—			—		—			887
Total liabilities		563,779			(180,150	)		49,218		—			432,847
Stockholders’ equity		169,363			332,065			166,726		(498,791	)		169,363
Total liabilities and stockholders’ equity	$	733,142		$	151,915		$	215,944	$	(498,791	)	$	602,210

21

Wolverine Tube, Inc. and Subsidiaries
Condensed Consolidating Balance Sheets
December 31, 2005

						Non-
			Subsidiary			Guarantor
	Parent		Guarantors			Subsidiaries			Eliminations			Consolidated
(In thousands)
Assets
Current assets
Cash and cash equivalents	$	4,571	$	—		$	22,758		$	—		$	27,329
Accounts receivable, net		7,965		6,930			89,291			—			104,186
Inventories		64,418		44,631			37,656			—			146,705
Prepaid expenses and other		7,425		1,528			1,256			—			10,209
Total current assets		84,379		53,089			150,961			—			288,429
Property, plant and equipment, net		108,275		27,001			45,962			—			181,238
Deferred charges, net		—		75,505			1,559			—			77,064
Deferred taxes, non-current		5,368		125			2,223			—			7,726
Goodwill, net		7,174		(7,174	)		13,469			—			13,469
Assets held for sale		—		—			831			—			831
Prepaid pension and other		14		—			(6	)		—			8
Investments in subsidiaries		484,383		325			—			(484,708	)		—
Total assets	$	689,593	$	148,871		$	215,009		$	(484,708	)	$	568,765
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	35,364	$	18,635		$	17,803		$	—		$	71,802
Accrued liabilities		9,350		17,969			7,633			—			34,952
Short-term borrowings		—		24			224			—			248
Intercompany balances		195,247		(209,227	)		13,980			—			—
Total current liabilities		239,961		(172,599	)		39,640			—			107,002
Long-term debt		233,948		58			914			—			234,920
Pension liabilities		40,285		—			2,604			—			42,889
Postretirement benefit obligation		11,167		—			8,555			—			19,722
Accrued environmental remediation		930		—			—			—			930
Total liabilities		526,291		(172,541	)		51,713			—			405,463
Stockholders’ equity		163,302		321,412			163,296			(484,708	)		163,302
Total liabilities and stockholders’ equity	$	689,593	$	148,871		$	215,009		$	(484,708	)	$	568,765

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Wolverine Tube, Inc. and Subsidiaries
Condensed Consolidating Statements of Cash Flows
For the Six Months Ended July 2, 2006
(Unaudited)

							Non-
				Subsidiary			Guarantor
	Parent			Guarantors			Subsidiaries			Eliminations			Consolidated
(In thousands)
Operating Activities
Net income /(loss)	$	4,292		$	11,665		$	(3,717	)	$	(7,948	)	$	4,292
Depreciation and amortization		4,937			1,564			2,113			—			8,614
Deferred income taxes		(1,906	)		1,906			(29	)		—			(29	)
Other non-cash items		(3,737	)		12			65			—			(3,660	)
Write down of assets		1,021			—			—			—			1,021
Equity in earnings of subsidiaries		(7,948	)		—			—			7,948			—
Changes in receivables sale facility		—			—			56,794			—			56,794
Changes in operating assets and liabilities		28,107			(40,606	)		(59,727	)		—			(72,226	)
Net cash provided by/(used for) operating activities		24,766			(25,459	)		(4501	)		—			(5,194	)
Investing Activities
Additions to property, plant and equipment		(974	)		(252	)		(1,388	)		—			(2,584	)
Disposals of property, plant and equipment		31			—			23			—			54
Net cash used for investing activities		(943	)		(222	)		(1,365	)		—			(2,530	)
Financing Activities
Issuance of common stock		63			—			—			—			63
Financing fees and expenses paid		(122	)		—			(871	)		—			(993	)
Net borrowings/(payments) on revolving credit facilities		(132	)		119			680			—			667
Intercompany borrowings/(payments)		(26,009	)		25,562			447			—			—
Net cash provided by/(used for) financing activities		(26,200	)		25,681			256			—			(263	)
Effect of exchange rate on cash and cash equivalents		1,577			—			586			—			2,163
Net increase/(decrease) in cash and cash equivalents		(800	)		—			(5,024	)		—			(5,824	)
Cash and cash equivalents at beginning of period		4,571			—			22,758			—			27,329
Cash and cash equivalents at end of period	$	3,771		$	—		$	17,734		$	—		$	21,505

23

Wolverine Tube, Inc. and Subsidiaries
Condensed Consolidating Statements of Cash Flows
For the Six Months Ended July 3, 2005
(Unaudited)

							Non-
				Subsidiary			Guarantor
	Parent			Guarantors			Subsidiaries			Eliminations			Consolidated
(In thousands)
Operating Activities
Net income /(loss)	$	(8,164	)	$	6,215		$	985		$	(7,200	)	$	(8,164	)
Depreciation and amortization		5,373			1,528			1,645			—			8,546
Deferred income taxes		(4,520	)		—			(230	)		—			(4,750	)
Loss on disposal of fixed assets		—			—			141			—			141
Other non-cash items		1,671			30			16			—			1,717
Equity in earnings of subsidiaries		(7,200	)		—			—			7,200			—
Changes in receivables sale facility		4,500			—			—			—			4,500
Changes in operating assets and liabilities		(19,299	)		12,289			(9,315	)		—			(16,325	)
Net cash provided by/(used for) operating activities		(27,639	)		20,062			(6,758	)		—			(14,335	)
Investing Activities
Additions to property, plant and equipment		(2,581	)		(788	)		(2,125	)		—			(5,494	)
Other		177			226			(159	)		—			244
Net cash used for investing activities		(2,404	)		(562	)		(2,284	)		—			(5,250	)
Financing Activities
Issuance of common stock		421			—			—			—			421
Deferred financing fees		(554	)		—			—			—			(554	)
Net payments on revolving credit facilities		(1,000	)		(12	)		(253	)		—			(1,265	)
Intercompany borrowings (payments)		15,415			(19,483	)		4,068			—			—
Other financing activities		10,225			(6	)		(10,183	)		—			36
Net cash provided by/(used for) financing activities		24,507			(19,501	)		(6,368	)		—			(1,362	)
Effect of exchange rate on cash and cash equivalents		(45	)		1			(38	)		—			(82	)
Net decrease in cash and cash equivalents		(5,581	)		—			(15,448	)		—			(21,029	)
Cash and cash equivalents at beginning of period		11,191			—			23,826			—			35,017
Cash and cash equivalents at end of period	$	5,610		$	—		$	8,378		$	—		$	13,988

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     This report contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that do not relate solely to current or historical fact, but address events or developments that we anticipate will occur in the future. Forward-looking statements include statements regarding our goals, beliefs, plans or current expectations, taking into account the information currently available to our management. When we use words such as “anticipate,” “intend,” “expect,” “believe,” “plan,” “may,” “should” or “would” or other words that convey uncertainty of future events or outcome, we are making forward-looking statements. Statements relating to future sales, earnings, operating performance, restructuring strategies, capital expenditures and sources and uses of cash, for example, are forward-looking statements.

     These forward-looking statements are subject to various risks and uncertainties which 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 and circumstances occurring after the date hereof, or to reflect the occurrence of unanticipated events. Information concerning risk factors is contained under Item 1A “Risk Factors” in our Annual Report onForm 10-K for the year ended December 31, 2005, as well as in the section entitled “Risk Factors” in Part II, Item 1A of this report. You should carefully consider all of the risks and all other information contained in or incorporated by reference in this report and in our filings with the SEC. These risks are not the only ones we face. Additional risks and uncertainties not presently known to us, or which we currently consider immaterial, also may adversely affect us. If any of these risks actually occur, our business, financial condition and results of operations could be materially and adversely affected.

Company Overview

     Wolverine is a world-class quality manufacturer of copper and copper alloy tube, fabricated and metal joining products, and copper and copper alloy rod and bar products. Our focus is on custom-engineered, higher value-added tubular products, fabricated and metal joining products which enhance performance and energy efficiency in many applications, including commercial and residential heating, ventilation and air conditioning, refrigeration, home appliances, automotive, industrial equipment, power generation, petro-chemicals and chemical processing. We believe that we have the broadest product offering of any North American manufacturer of copper and copper alloy tube, which allows the offering of packaged solutions and cross selling opportunities. Our principal product segments are commercial products, wholesale products and rod, bar and other products.

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Results of Operations

     The following discussion summarizes the significant factors affecting the consolidated operating results of the Company for the three and six month periods ended July 2, 2006 and July 3, 2005. 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 related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.

Executive Summary

     We earned a profit in the second quarter of 2006 of approximately $6.4 million, or $0.42 per diluted share as compared to a net loss of $5.7 million, or $0.38 per share in the second quarter of 2005. For the six months ended July 2, 2006, our net income was $4.3 million or $0.28 per diluted share as compared to a net loss of $8.2 million or $0.54 per share for the same period in 2005. Net income for the second quarter and the six months ended July 2, 2006 was driven by increased pounds shipped in all segments and record high prices in our wholesale business. Increased demand for industrial tube and fabricated products was created by the changeover to 13 SEER units manufactured by residential HVAC companies (which require double-digit percentage increases in copper tubing and fabricated products as compared to 10 SEER units). Wholesale volume increases in the second quarter were driven by commercial construction increases and an imbalance in supply and demand.

     Copper prices continued to climb, reaching record levels during the second quarter and the first six months of 2006. During the second quarter, the increase in spot copper prices was $0.97 per pound or a 39 percent increase, from $2.49 per pound at the beginning of the quarter to $3.46 on July 2, 2006. Spot copper prices during the first six months of 2006 rose from $2.16 per pound at December 31, 2005 to $3.46 per pound at July 2, 2006, a 60 percent increase. These higher prices increased our net sales and metal purchases which placed continuing demands on working capital and resultant interest costs to support it. During the second quarter we increased our availability under our receivables sale facility providing the liquidity needed to deal with the effect of higher copper prices on working capital. As a result of carrying additional working capital compared to the same periods a year ago, our interest expense was $1.5 million more than interest expense in the second quarter of 2005 and $2.0 million higher than in the first six months of 2005. During the second quarter we successfully reduced inventory by 3 million pounds or approximately 10%, we increased our inventory turns by nearly 30% to 13.5, and working with our commercial customers we shortened payment terms and improved collections, lowering our days sales outstanding by approximately 5 days.

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     Finally, we continue to work with our financial advisors on issues including strategic planning and the various options for the restructuring of our balance sheet. For the first six months of 2006, expenses of $2.1 million before tax were recorded related to these activities. Further, we also recorded a charge of $1.0 million for the write down of an asset held for sale to its fair value less cost to sell.

Stock-based Compensation Expense

     Effective January 1, 2006, we adopted SFAS 123(R) using the modified prospective transition method, which requires measurement and recognition of compensation expense for all stock-based payment awards made to employees and directors, including stock options, based on fair values. Our financial statements for the three and six months ended July 2, 2006 reflect the impact of SFAS 123(R). In accordance with the modified prospective transition method, our financial statements for prior periods have not been restated to reflect, and do not include, the impact of SFAS 123(R). Stock-based compensation expense recognized is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. Stock-based compensation expense recognized in our Condensed Consolidated Statements of Operations for the three and six months ended July 2, 2006 included compensation expense for unvested stock-based payment awards granted prior to December 31, 2005, based on the grant date fair value estimated in accordance with the pro forma provisions of SFAS 123, and compensation expense for the stock-based payment awards granted subsequent to December 31, 2005 based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R). In conjunction with the adoption of SFAS 123(R), we elected to attribute the value of stock-based compensation to expense over the periods of requisite service during which each tranche of stock options is earned, which was previously used for our pro forma information required under SFAS 123(R). We did not make any new stock option grants in the first quarter of 2006. However, we did make stock option grants covering an aggregate of 102,550 shares in the second quarter of 2006.

     In 2005, the Company accelerated the vesting of all out-of-the-money, unvested, non-qualified stock options held by officers and employees in anticipation of the impact of SFAS 123(R). All options priced above $7.42, the closing market price of the Company’s common stock on October 18, 2005, were considered to be out-of-the-money. The primary purpose of the accelerated vesting was to avoid recognizing compensation expense associated with these options upon adoption by the Company of SFAS 123(R). Without the acceleration, the Company estimates that pre-tax charges under SFAS 123(R) relating to these options would have been $0.7 million and $0.2 million in fiscal 2006 and 2007, respectively.

     Upon adoption of SFAS 123(R), we elected to value our stock-based payment awards granted beginning in fiscal year 2006 using the Black-Scholes model, which we previously used for the pro forma information required under SFAS 123. The determination of fair value of stock-based payment awards on the date of grant using the Black-Scholes model is affected by our stock price as well as the input of other subjective assumptions. The Black-Scholes model requires a number of assumptions, of which the most significant are: expected stock price volatility, the expected pre-vesting forfeiture rate and the expected option term (the amount of time from the grant date until the options are exercised or expire). Expected volatility is

27

determined based upon actual historical stock price movements over the expected option term. Expected pre-vesting forfeitures are estimated based on actual historical pre-vesting forfeitures for the expected option term. The expected option term is calculated using the “simplified” method permitted by Staff Accounting Bulletin 107 (SAB 107). Our options have characteristics significantly different from those of traded options, and changes in the assumptions can materially affect the fair value estimates.

     The adoption of SFAS 123(R) decreased the earnings per share by $0.01 per basic and diluted share for the three and six months ended July 2, 2006. See Note 5 to the Notes to Unaudited Condensed Consolidated Financial Statements for further detail on the impact of SFAS 123(R) on the Company’s Condensed Consolidated Financial Statements.

For the Three Months Ended July 2, 2006 Compared to the Three Months Ended July 3, 2005

     Pounds shipped in the second quarter of 2006 increased in all business segments as follows:

Pounds Shipped
For the Three Months Ended

In thousands, except for percentages	July 2, 2006		July 3, 2005		Increase		% Increase
Commercial products		68,453		52,267		16,186		31.0	%
Wholesale products		28,480		19,371		9,109		47.0
Rod, bar and other products		4,981		2,344		2,637		112.5
Total		101,914		73,982		27,932		37.8	%

     Overall, total pounds of product shipped in the second quarter of 2006 were 101.9 million pounds, an increase of 37.8 percent from last year’s second quarter.

     Shipments of commercial products were 68.5 million pounds, a 31.0 percent increase from the second quarter of 2005. The increase in commercial shipments is attributable to a 37.7 percent increase in demand for industrial tube and fabricated products. This growth reflects increased demand from the production of 13 SEER residential air conditioning units. Shipments of technical tube used in commercial chiller units improved 12.4 percent in the second quarter of 2006 versus 2005 with growth in shipments in all geographic areas. Shipments of wholesale products totaled 28.5 million pounds, as compared to last year’s second quarter of 19.4 million pounds, a 47 percent improvement. These record shipments were driven by commercial construction and an imbalance in supply and demand in the early part of the quarter. This volume increase was achieved even with erratic and increasing copper prices. Shipments of rod, bar and other products totaled 5.0 million pounds, as compared to 2.3 million pounds in the second quarter of 2005. This quarter over quarter increase in rod and bar shipments is principally due to reduced production in 2005 while the Montreal facility was on strike.

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     The increase in net sales in total and by business segment was as follows:

Net Sales
For the Three Months Ended

In thousands, except for percentages	July 2, 2006		July 3, 2005		$ Increase		% Increase
Commercial products	$	272,810	$	146,881	$	125,929		85.7	%
Wholesale products		123,454		38,446		85,008		221.1
Rod, bar and other products		21,720		10,994		10,726		97.6
Total	$	417,984	$	196,321	$	221,663		112.9	%

     Overall, net sales in the second quarter increased 112.9 percent to $418.0 million or $4.10 per pound as compared to $196.3 million, or $2.65 per pound last year. The higher net sales reflects the average COMEX metal price of $3.37 per pound in the second quarter of 2006 compared to $1.53 per pound in the prior year, a 120.3 percent increase. Per unit fabrication revenues, which is the selling price, excluding metal, was $1.14 per pound in 2006 as compared to $1.05 per pound in 2005. This change primarily reflects the significant increase in fabrication revenue in our wholesale products segment, as well as improved pricing or mix in all other product groups except for fabricated products, where mix changes have resulted in lower fabrication revenues.

     Net sales in commercial products increased 85.7 percent to $272.8 million, principally reflecting the aforementioned increase in copper prices, which is a direct pass through to our commercial products customers. On a per unit basis, commercial products net sales were $3.99 per pound, compared to $2.81 per pound in the prior year. This increase in overall selling price is net of a reduction in per unit fabrication revenues from $1.26 per pound in 2005 to $1.20 per pound in 2006 due to the previously mentioned change in fabricated products mix. Net sales in wholesale products increased to $123.5 million from the prior year’s second quarter of $38.4 million. On a per unit basis, net sales for wholesale products were $4.34 per pound, a $2.35 per pound increase from the second quarter of 2005, reflecting increased copper prices and a 130.9 percent improvement in unit fabrication revenues. Rod, bar and other net sales increased to $21.7 million, a 97.6 percent increase from the $11.0 million in the second quarter of the prior year, reflecting rising metal prices and increased shipments. This was offset by lower fabrication revenues per pound from $1.15 in the second quarter of 2005 to $0.94 per pound in the current quarter. On a per unit basis, net sales for rod, bar and other increased by $1.08 to $3.23 per pound again reflecting increased metal prices. Net sales in our distribution business in the Netherlands decreased by 5.4 percent to $5.6 million in the second quarter of 2006.

29

     The overall increase in gross profit/(loss) and the variance by business segment was as follows:

Gross Profit/(Loss)
For the Three Months Ended

							$ Increase
In thousands, except for percentages	July 2, 2006			July 3, 2005			(Decrease)			% Increase
Commercial products	$	7,790		$	5,472		$	2,318			42.4	%
Wholesale products		22,286			(178	)		22,464		*NM
Rod, bar and other products		(940	)		360			(1,300	)	*NM
Total	$	29,137		$	5,654		$	23,483			415.3	%

* NM — Not Meaningful

     Gross profit in the second quarter of 2006 increased to $29.1 million as compared to $5.7 million in the second quarter of 2005. The increase in gross profit was led by the wholesale product segment, with gross profit in the commercial products segment improving by 42.4 percent. The improvement in gross profit was partially offset by continued strengthening of the Canadian dollar. The negative impact on the second quarter results from the strengthening Canadian dollar was approximately $1.0 million.

     Our unit manufacturing costs for the quarter were $0.87 per pound as compared to $0.95 per pound in the second quarter of 2005. Unit manufacturing costs in the second quarter of 2005 were negatively impacted by the Montreal strike and the under absorption of fixed costs due to lower volumes produced in 2005. Unit manufacturing costs in the second quarter of 2006 excluding the Canadian currency translation impact of $0.02 per pound, would have been $0.85 per pound.

     Gross profit for commercial products was $7.8 million, compared to $5.5 million in the second quarter of 2005. These results reflect improved demand and lower manufacturing costs for commercial products which were partially offset by lower fabrication revenues due to a shift in product mix. Wholesale products gross profit was $22.3 million in the second quarter of 2006 versus a loss of $178 thousand in the same period in 2005. The improvement is due principally to significantly enhanced pricing coupled with greater volume. The loss in the rod, bar and other segment was $940 thousand in the quarter compared to a gross profit of $360 thousand in the second quarter of 2005. The gross profit in our European distribution business was more than offset by losses in the rod and bar business in 2006. The rod and bar loss is attributed to lower fabrication revenues on higher volume. Additionally, the strengthening Canadian dollar adversely impacts this segment’s gross profit.

     Selling, general and administrative (“SG&A”) expenses were $9.8 million in the second quarter of 2006, as compared to $8.6 million in the same quarter last year. The $1.2 million increase includes a $2.2 million increase in the accrual for incentive compensation and employee 401(k) success sharing. Excluding these expenses, SG&A savings from our 2005 corporate restructuring are being realized.

     We have secured the services of certain financial, legal and business advisors to consult on issues including strategic planning and the restructuring of our balance sheet. For the second quarter we recorded $2.1 million before tax related to these activities.

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     Net interest expense was $6.8 million in the second quarter of 2006 as compared to $5.2 million in 2005. The increase reflects higher costs from a greater utilization of our liquidity facilities, along with higher interest expense as a result of increases in benchmark interest rates applicable to our liquidity facilities and interest rate swap.

     A tax provision of $2.5 million was recorded in the second quarter of 2006 reflecting an effective rate of approximately 28 percent as compared to a tax benefit of $3.1 million, or approximately 35 percent of the taxable loss, for the same quarter a year ago. The 2006 tax provision is net of the reversal of $2.5 million valuation allowance for deferred tax assets (primarily associated with net operating losses) which will be utilized against current taxable income in the U.S., and the establishment of a deferred tax valuation allowance in Canada of $2.4 million for the likely expiration of net operating losses. The effective tax rate is being impacted by a continued tax holiday in Portugal and income in tax jurisdictions where statutory rates are lower than North America.

     On July 13, 2006 the Financial Accounting Standards Board issued Interpretation No 48,Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, clarifying the way companies account for uncertainty in income taxes. This pronouncement is effective for years beginning after December 15, 2006. Management is evaluating the impact of this pronouncement but does not anticipate that it will have a material impact.

For the Six Months Ended July 2, 2006 Compared to the Six Months Ended July 3, 2005

     Pounds shipped increased in the first half of 2006 as compared to 2005 in all business segments as follows:

Pounds Shipped
For the Six Months Ended

In thousands, except for percentages	July 2, 2006		July 3, 2005		Increase		% Increase
Commercial products		133,233		107,722		25,511		23.7	%
Wholesale products		51,263		42,782		8,481		19.8
Rod, bar and other products		9,622		7,237		2,385		33.0
Total		194,118		157,741		36,377		23.1	%

     Overall, total pounds of product shipped in the first six months of 2006 were 194.1 million pounds, an increase of 23.1 percent from last year’s first half.

     Shipments of commercial products were 133.2 million pounds, a 23.7 percent increase from the first half of 2005. The increase in commercial shipments is attributable to increased demand for industrial tube and fabricated products. This growth reflects increased requirements for tubing and fabricated products used in the production of 13 SEER residential air conditioning units. Shipments of wholesale products totaled 51.3 million pounds, as compared to last year’s first half of 42.8 million pounds, a 19.8 percent improvement. These shipments were driven by commercial construction and an imbalance in supply and demand especially in the early part of the second quarter. This volume increase was achieved even with erratic and increasing copper prices. Shipments of rod, bar and other products totaled 9.6 million pounds, as compared to 7.2

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million pounds in the first half of 2005. This year over year increase particularly in rod and bar shipments is principally due to reduced production in 2005 while the Montreal facility was on strike.

     The increase in net sales in total and by business segment was as follows:

Net Sales
For the Six Months Ended

In thousands, except for percentages	July 2, 2006		July 3, 2005		$ Increase		% Increase
Commercial products	$	487,409	$	299,951	$	187,458		62.5	%
Wholesale products		189,319		84,027		105,292		125.3
Rod, bar and other products		39,567		25,825		13,742		53.2
Total	$	716,296	$	409,803	$	306,493		74.8	%

     Overall, net sales in the first half of 2006 increased 74.8 percent to $716.3 million or $3.69 per pound as compared to $409.8 million, or $2.60 per pound last year. The higher net sales reflects the average COMEX metal price of $2.81 per pound in the first half of 2006 compared to $1.50 per pound in the prior year. Per unit fabrication revenues, which is the selling price, excluding metal, was $1.10 per pound in 2006 as compared to $1.04 per pound in 2005. This change primarily reflects the significant increase in fabrication revenue in our wholesale products segment, as well as improved pricing or mix in all other product groups except for fabricated products, where mix changes have resulted in lower fabrication revenues.

     Net sales in commercial products increased 62.5 percent to $487.4 million, principally reflecting the aforementioned increase in copper prices, which is a direct pass through to our commercial products customers. On a per unit basis, commercial products net sales were $3.66 per pound, compared to $2.78 per pound in the prior year. This increase in overall selling price is net of a reduction in per unit fabrication revenues from $1.27 per pound in 2005 to $1.20 per pound in 2006, due to the previously mentioned change in fabricated products mix. Net sales in wholesale products increased to $189.3 million from the prior year’s first half of $84.0 million. On a per unit basis, net sales for wholesale products were $3.69 per pound, a $1.73 per pound increase from the first half of 2005, reflecting increased copper prices and an 88 percent improvement in unit fabrication revenues. Rod, bar and other net sales increased to $39.6 million, a 53.2 percent increase from the $25.8 million in the first half of the prior year, reflecting rising metal prices and increased shipments. This was slightly enhanced by higher fabrication revenues per pound from $0.72 in the first half of 2005 to $0.73 per pound in the current year. On a per unit basis, net sales for rod, bar and other increased by $0.91 to $3.00 per pound again reflecting increased metal prices. Net sales in our distribution business in the Netherlands remained relatively unchanged for the first six months of 2006 versus 2005 at $10.7 million.

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     The increase in gross profit in total and the variance by business segment was as follows:

Gross Profit/(Loss)
For the Six Months Ended

							$ Increase
In thousands, except for percentages	July 2, 2006			July 3, 2005			(Decrease)			% Increase
Commercial products	$	16,098		$	15,091		$	1,007			6.7	%
Wholesale products		24,454			(302	)		24,756		*NM
Rod, bar and other products		(533	)		925			(1,458	)	*NM
Total	$	40,019		$	15,714		$	24,305			154.7	%

* NM – Not Meaningful

     Gross profit in the first half of 2006 increased to $40.0 million as compared to $15.7 million in the first half of 2005. The increase in gross profit of over 154.7 percent was led by the wholesale product segment, with gross profit in the commercial products segment improving by 6.7 percent. The improvement in gross profit was partially offset by continued strengthening of the Canadian dollar. The negative impact on the results during the first six months of 2006 from the strengthening Canadian dollar was approximately $1.6 million.

     Our unit manufacturing costs for the first half of 2006 were $0.89 per pound as compared to $0.93 per pound in the first half of 2005. Unit manufacturing costs in the first half of 2005 were negatively impacted by the Montreal strike and the under absorption of fixed costs due to lower volumes produced in 2005. Unit manufacturing costs excluding the Canadian currency translation impact of $0.02 per pound would have been $0.87 per pound.

     Gross profit for commercial products was $16.1 million, compared to $15.1 million in the first half of 2005. These results reflect improved demand related to SEER 13 requirements and lower manufacturing costs for commercial products which were partially offset by lower fabrication revenues due to a shift in product mix. Wholesale products gross profit was $24.5 million in the first half of 2006 versus a loss of $302 thousand in the same period in 2005. The improvement is due principally to record high pricing coupled with greater volume. The loss in the rod, bar and other segment was $533 thousand in the first half compared to a gross profit of $925 thousand in the first half of 2005. The gross profit in our European distribution business was more than offset by losses in the rod and bar business in 2006. The rod and bar loss was attributed primarily to metal variances absorbed by this product line. Additionally, the strengthening Canadian dollar adversely impacts this segment’s gross profit.

     SG&A expenses were $17.4 million for the first half of 2006, as compared to $17.0 million in the same period last year. The $0.4 million increase includes a $2.4 million increase in the accrual for incentive compensation and employee 401(k) success sharing. Excluding these expenses, SG&A savings from our 2005 corporate restructuring are being realized.

     We have secured the services of certain financial, legal and business advisors to consult on issues including strategic planning and the restructuring of our balance sheet. For the first six months we recorded $2.1 million before tax related to these activities.

     Net interest expense was $12.6 million in the first six months of 2006 as compared to $10.6 million for the same period in 2005. The increase reflects higher costs from a greater

33

utilization of our liquidity facilities, along with higher interest expense as a result of increases in benchmark interest rates applicable to our liquidity facilities and interest rate swap.

     A tax provision of $1.4 million was recorded in the first half of 2006 reflecting an effective rate of approximately 24 percent as compared to a tax benefit of $4.1 million, or approximately 34 percent of the taxable loss, for the same period a year ago. The 2006 tax provision is net of the reversal of $2.5 million valuation allowance for deferred tax assets (primarily associated with net operating losses) which will be utilized against current taxable income in the U.S., and the establishment of a deferred tax valuation allowance in Canada of $2.4 million for the likely expiration of net operating losses. The effective tax rate is being impacted by a continued tax holiday in Portugal and income in tax jurisdictions where statutory rates are lower than North America.

Liquidity and Capital Resources

     The following table sets forth selected information concerning our financial condition:

	July 2, 2006
	(Unaudited)		December 31, 2005
(In thousands)
Cash and cash equivalents	$	21,505	$	27,329
Working capital		185,777		181,427
Total debt		235,591		235,168
Current ratio		2.32		2.70

Overview and Outlook

     In the second quarter of 2006, we reported operating profit of $6.4 million, reversing the trend of losses for the previous seven consecutive quarters. In spite of this improvement, our business has not yet generated sufficient unrestricted cash flow from operations to satisfy our working capital needs, interest payment obligations, capital expenditures and other cash requirements. Increasing working capital requirements caused by the significant rise in copper and other metal prices have required us to utilize amounts available under our receivables sale facility and our secured revolving credit facility to fund these requirements. Our normal working capital requirements also typically increase during the first and second quarters of our fiscal year, thereby exacerbating the above liquidity issues.

     On April 27, 2006, Moody’s Investor Service (“Moody’s”) downgraded our senior unsecured notes to Caa2 from Caa1 and our corporate family rating to Caa1 from B3, with an outlook of negative. Key factors stated by Moody’s in their downgrade decision include 1) a weak liquidity profile, 2) vulnerability to raw material cost inflation, 3) significant customer concentration risks, 4) substantial financial leverage and modest interest coverage, and 5) expectations for negative free cash flow in 2006. The ratings positively reflect our leading market position in several of our product lines, the diversity of our copper tube offerings, and the new 13 SEER federal mandate that augurs well for long-term demand.

     Working with our commercial banks, on April 4, 2006 and again on June 9, 2006, we completed amendments to our receivables sale facility to, among other things, allow the sale of

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certain Canadian accounts receivable under the receivables sale facility, and increase the maximum amount available under the facility first to $75 million, and then to $90 million. On the same dates, we amended our secured revolving credit facility to permit the amendments to the receivables sale facility noted above. These amendments increased the combined maximum availability under the secured revolving credit facility and the receivables sale facility up to $125.0 million, subject to eligibility, borrowing base, reserves and other limitations. As of July 31, 2006, our utilization of the receivables sale facility was $68.9 million, leaving $7.4 million in additional availability thereunder. Under our secured revolving credit facility, $12.8 million in letters of credit and no revolving loans were outstanding as of August 7, 2006. Taking into consideration $5.7 million in reserves and other holdbacks and the reduction in availability as a result of the value of our interest rate swap, we had approximately $16.5 million in additional borrowing availability as of that date. Our ability to access cash under these facilities depends on the amount of eligible receivables and available borrowing base and our compliance with the covenants contained in these agreements. We believe that the availability under our liquidity facilities, combined with the unrestricted cash on hand in North America, should provide the necessary liquidity required for the foreseeable future in 2006.

     We and our financial advisors are evaluating refinancing or restructuring alternatives in anticipation of the upcoming maturities of our secured revolving credit facility and receivables sale facility in 2008, and senior note issues in 2008 and 2009, as well as our future projected short-term liquidity needs. Because of restrictions on incurring additional debt and other limitations contained in our senior note indentures and financing agreements (primarily the indenture covenants that generally restrict our ability to incur secured indebtedness for borrowed money in an aggregate amount greater than 10% of our consolidated net tangible assets [which was $36.5 million at July 2, 2006], unless we equally and ratably secure the senior notes), along with our already significant leverage and our current financial condition and credit ratings, we may not be able to obtain additional incremental liquidity through our existing secured revolving credit facility or through a new secured or unsecured lending arrangement.

     With our current cash balances, amounts available under our amended liquidity facilities and anticipated cash flow from continuing operations, we believe that we will be able to satisfy existing working capital needs, debt service obligations and capital expenditure and other cash requirements in the near to mid-term. If, however, we are not able to satisfy these obligations because we are unable to generate sufficient cash from operations, access sufficient available funds under our liquidity facilities or refinance or obtain additional liquidity sources, if copper prices continue to increase beyond our capacity to cover these increased costs, if our commercial customers stop supporting the temporary change in payment terms, or because of other adverse changes in our business, we may face a default and acceleration of our debt, possibly leading to bankruptcy or insolvency. See the discussion of related risks under “Part I Item 1A – Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2005 and in “Part II Item 1A – Risk Factors” of this report below.

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Sources of Liquidity

     Our principal sources of liquidity are cash and cash equivalents, cash provided by operations, and cash available under our liquidity facilities.

     Cash and cash equivalents.In the first six months of 2006, cash and cash equivalents decreased by $5.8 million. Cash and cash equivalents as of July 2, 2006 and December 31, 2005 were $21.5 million and $27.3 million, respectively, of which $12.7 million and $15.9 million, respectively, were held by subsidiaries located outside the U.S.

     Approximately $5.5 million and $6.6 million of cash included in cash on hand was restricted as of July 2, 2006 and December 31, 2005, respectively, and was not available for general corporate use. Restricted cash at July 2, 2006 includes $2.7 million in margin deposits related to the Company’s metal and natural gas hedge program, $1.3 million as collateral to secure the Company’s travel and purchase credit card programs, $0.6 million to secure a letter of credit for a loan made by the Portuguese government, $0.4 million as a deposit for the Monterrey, Mexico facility lease, $0.3 million in escrow related to the sale of the Company’s former Roxboro, NC facility, and $0.2 million to secure payment of GST taxes with the Canadian Border Services Agency. Restricted cash at December 31, 2005 included $2.4 million related to deposits for margin calls on our metal and natural gas hedge programs, a $1.4 million deposit with Bank of America related to our silver consignment facility, $1.2 million as collateral to secure our travel and purchase credit card programs, $0.7 million to secure a letter of credit for a loan made by the Portuguese government, $0.4 million as a deposit for the Monterrey, Mexico facility lease, $0.3 million in escrow related to the sale of our former Roxboro, North Carolina facility, and $0.2 to secure a letter of credit for the Canadian Customs Bureau.

     Cash used for operations.Cash used for operating activities in the first six months of 2006 was $5.2 million. Cash used for operating activities in the first six months of 2005 was $14.3 million. The decrease in cash used by operations in 2006 versus 2005 is the result of the sale of accounts receivable under the Company’s receivables sale facility of $56.8 million, which offset increases in accounts receivable. Without the sale of accounts receivable, cash used for operating activities would have been $62.0 million.

     Cash from our receivables sale facility. The amount of cash available to us under our receivables sale facility is based upon the amount of eligible receivables and certain reserves required by the facility. Accordingly, availability may fluctuate over time, but in no case can it exceed the facility’s purchase limit (which was $90.0 million at July 2, 2006). Based upon a servicing report as of July 2, 2006, the value of receivables eligible to be purchased totaled approximately $82.6 million. We had utilized $75.8 million under the facility at July 2, 2006, leaving $6.8 million additional availability as of this date. See “Liquidity Facilities - Receivables Sale Facility” below.

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Uses of Liquidity

     Our principal uses of liquidity are funding operations, working capital needs, capital expenditures and interest, the funding of payments related to our outstanding debt and other financing facilities, and the funding of pension obligations.

     Working capital needs.As noted above, net cash used for operating activities in the first six months of 2006 was $5.2 million, as compared to cash used for operating activities of $14.3 million for the first six months of 2005. The $5.2 million of cash used in 2006 is net of $56.8 million of receivables sold. The $14.3 million for the first six months of 2005 is net of $12.0 million of receivables sold. The continued rapid and unprecedented increase in copper and other non-ferrous metal prices has significantly increased our working capital requirements, causing our levels of accounts receivable and inventory to be higher in 2006 than in 2005. This increase in working capital is in spite of a year over year 12.5 million pound reduction of product carried in inventory, the improvement in our inventory turns from 6.3 to 13.5 and improvements made in the number of days sales outstanding for receivables from 46.1 to 35.4. Copper prices during the first six months of 2006 rose from $2.16 per pound at December 31, 2005 to $3.46 per pound at July 2, 2006. This increase in working capital requirements has been exacerbated as suppliers have generally shortened credit terms related to the purchase of metal. Due to the normal seasonality of our business, we have historically drawn-down on our liquidity facilities during the first half of the year. However, escalating copper prices, increased purchases due to increased volumes, and shortened payment terms have required us to utilize our liquidity facilities more in the first half of 2006 than in previous periods.

     Capital expenditures.In the first six months of 2006, capital expenditures totaled $2.6 million versus $5.5 million in the first six months of 2005. Capital expenditures include asset replacement, environmental and safety compliance, cost reduction and productivity improvement items. The reduction in capital expenditures in 2006 versus 2005 reflects a lower level of capital projects at our Monterrey, Mexico facility. Our capital spending plan for 2006 is forecasted to be $6.5 to $8.0 million.

     Payments related to our outstanding debt and other financing facilities.In the first six months of 2006, we made interest and other fee payments on our senior notes, liquidity facilities and other debt totaling $11.9 million, versus payments of $10.3 million in the first six months of 2005. The increase in interest and fee expense from 2005 to 2006 results primarily from increased utilization of our receivables sale facility in the first half of 2006 as compared to the amount borrowed under our secured revolving credit facility and utilized under the receivables sale facility in the first half of 2005. In addition, year over year increases in variable interest rates along with reduced benefits from our interest rate swap as a result of the increasing rates also had an impact on interest and fee expense.

     Funding of pension obligations. In each of the six month periods ended July 2, 2006 and July 3, 2005, we made a contribution of $0.5 million to our U.S. qualified defined benefit pension plan. For the six month periods ended July 2, 2006 and July 3, 2005, we made contributions of $1.7 million and $0.6 million, respectively, to our Canadian defined benefit pension plans.

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     The Company froze benefits accruing to its U.S. defined benefit pension plan and Supplemental Benefit Restoration Plan, effective February 28, 2006. In conjunction with the freezing of these plans, the Company, effective March 1, 2006, made enhancements to its 401(k) plan for the employees impacted by this action. These enhancements include an automatic three percent contribution of employees’ applicable compensation to each affected employee’s 401(k) account, a match of employees’ contributions, the addition of a success sharing component to the 401(k) plan, and the provision of transition contributions for five years for certain employees based upon an employee’s age and years of service as of February 28, 2006. We made payments to our employees’ 401(k) accounts of $1.0 million and $0.3 million for the six months ended July 2, 2006 and July 3, 2005, respectively.

     In January 2006, we made a lump sum distribution of $5.7 million and in June 2006 we made a second and final payment of $0.6 million to a former CEO, who retired on December 9, 2005, which represented his vested benefits under the 2002 Supplemental Executive Retirement Plan and Supplemental Benefit Restoration Plan. The payout was made from a combination of the funds previously held in a rabbi trust and from general corporate funds.

Off-Balance Sheet Arrangements

     Except as described herein, for the quarter ended July 2, 2006, there were no material changes to the information regarding the off-balance sheet arrangements disclosed in our Annual Report on Form 10-K for the year ended December 31, 2005 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Off-Balance Sheet Arrangements,” as updated by the information disclosed under the same caption of our Form 10-Q for the quarter ended April 2, 2006.

     On April 4, 2006, we amended our receivables sale facility to include certain Canadian accounts receivable originated by Wolverine Tube (Canada), Inc. as being eligible for sale, to add The CIT Group/Business Credit, Inc. as a purchaser of receivables interests, and to increase the maximum amount available under the facility to $70 million.

     On June 9, 2006, we amended the receivables sale facility to further increase the maximum amount available under the facility to $90 million.

     The April and June 2006 amendments, as well as amounts outstanding at July 2, 2006, are more fully described below in “Liquidity Facilities” and in Note 8 of the Notes to Unaudited Condensed Consolidated Financial Statements.

     Other than the receivables sale facility, we had no other off-balance sheet arrangements as of July 2, 2006 that either have, or are reasonably likely to have, a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Liquidity Facilities

     As described in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financing Agreements” of our Form 10-K for the fiscal

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year ended December 31, 2005, our financing arrangements consist of (i) our 7.375% Senior Notes due 2008 and our 10.5% Senior Notes due 2009, of which $134.7 million and $99.4 million, respectively, were outstanding as of July 2, 2006; (ii) our liquidity facilities described below; and (iii) certain other credit arrangements with respect to our non-U.S. operations. The agreements governing our liquidity facilities, and the indentures governing our senior notes, contain cross default provisions. As of July 2, 2006, we were in compliance with the covenants contained in the agreements governing our liquidity facilities and in the indentures governing our senior notes.

     Our liquidity facilities currently consist of a $90 million receivables sale facility arranged by Wachovia Bank, National Association (“Wachovia”); a $35 million secured revolving credit facility with Wachovia; and a silver consignment and forward contracts facility with Bank of America, N.A. We view our receivables sale facility and our secured revolving credit facility as sources of available liquidity. We view our silver consignment facility as a source of indirect liquidity because it allows us to reduce the amount of working capital necessary to fund our silver raw material requirements. The terms of each of these liquidity facilities, as amended through the first quarter of 2006, are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Liquidity Facilities” of our Form 10-Q for the quarter ended April 2, 2006. We further amended the receivables sale facility and the secured revolving credit facility in the second quarter of 2006, as described below.

     On April 4, 2006, we amended our receivables sale facility to include certain Canadian accounts receivable originated by Wolverine Tube (Canada), Inc. (“WTCI”) as being eligible for sale, to add The CIT Group/Business Credit, Inc. (“CIT/BC”) as a purchaser of receivables interests, and to increase the maximum amount available under the facility to $70 million. Under the amended facility, WTCI will participate in the receivables sale facility as an additional Originator (along with the Company and its other wholly owned subsidiaries Small Tube Manufacturing, LLC and Tube Forming, L.P.). The Company has guaranteed the performance by WTCI of its obligations under the facility.

     The April 2006 amendments provided that CIT/BC would fund $25 million of the receivable interests purchases towards the $70 million purchase limit, with the remainder to be funded by Wachovia (or its commercial paper conduit). On June 9, 2006, we amended the receivables sale facility to further increase the purchase limit to $90 million, with CIT/BC and Wachovia each funding a maximum of $45 million of the purchase limit. This $90 million purchase limit remains subject to the amount of eligible receivables and certain reserves required by the facility. Accordingly, availability under the amended receivables sale facility may continue to fluctuate over time, perhaps materially, given changes in eligible receivables balances and the amount of required reserves, but cannot exceed the facility’s $90 million purchase limit.

     On May 30, 2006, we agreed with Wachovia to adjust the monthly costs we pay when purchases are funded by Wachovia, as liquidity provider, rather than by Wachovia’s commercial paper conduit. These costs will now accrue on outstanding balances at the LIBO rate plus 2.00% per annum or at the Company’s option at base rate plus 50 basis points if the Company’s Fixed

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Charge Coverage ratio is less than 1:1. Our monthly costs on purchases funded by CIT/BC continue to be based on LIBO rate plus 2.00%.

     As of July 2, 2006, the value of receivables eligible to be purchased under the facility totaled approximately $82.6 million. We had utilized $75.8 million as of July 2, 2006, leaving an availability of $6.8 million under the facility as of this date.

     On April 4, 2006, we amended our secured revolving credit facility to permit the April amendments to our receivables sale facility described above and to provide for an appraisal of the our equipment, and to update certain representations and schedules. On June 9, 2006, we again amended the secured revolving credit facility to permit the June amendment to the receivables sale facility described above.

     We had no borrowings outstanding under our secured revolving credit facility at July 2, 2006, and approximately $12.8 million of standby letters of credit outstanding thereunder. After taking into account an additional $5.7 million of reserves, other holdbacks and the reduction in availability as a result of the value of our interest rate swap, we had $16.5 million in additional borrowing availability under our secured revolving credit facility as of that date. As of December 31, 2005, we had no borrowings outstanding under our secured revolving credit facility, and approximately $12.5 million of standby letters of credit outstanding. After taking into account $8.1 million of reserves, other holdbacks and the reduction in availability as a result of the value of our interest rate swap, we had $11.9 million in additional borrowing availability under the secured revolving credit facility as of that date.

     Under our silver consignment and forward contracts facility at July 2, 2006, we had $13.3 million of silver in our inventory under the silver consignment facility, with a corresponding amount included in accounts payable, and $0.9 million committed to under the forward contracts facility. At December 31, 2005, we had $13.5 million of silver in our inventory under the silver consignment facility, with a corresponding amount included in accounts payable, and $1.1 million committed to under the forward contracts facility.

Environmental Matters

     We are subject to extensive environmental regulations imposed by local, state, federal and provincial authorities in the U.S., Canada, China, Portugal and Mexico 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 $0.9 million as of July 2, 2006, consisting primarily of $0.8 million for the Ardmore, Tennessee facility and $0.1 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 environmental matters could differ materially from the amounts we estimated and have accrued at July 2, 2006, and could result in additional exposure if these environmental matters are not resolved as anticipated.

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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 $0.1 million as of July 3, 2005.

Ardmore, Tennessee

     On December 28, 1995, we entered into a Consent Order and Agreement with the Tennessee Division of Superfund (“Tennessee Division”), relating to the Ardmore, Tennessee facility, under which we agreed to conduct an assessment on whether volatile organic compounds detected in and near the municipal drinking water supply are related to the Ardmore facility and, if necessary, to undertake an appropriate response. That site assessment revealed contamination, including elevated concentrations of volatile organic compounds, in the soil in areas of the Ardmore facility, and also revealed elevated levels of certain volatile organic compounds in the shallow residuum ground water zone at the Ardmore facility.

     The water currently delivered to residents by the municipality is treated prior to human consumption, and thus does not contain volatile organic compounds above acceptable drinking water standards. We do not know whether the municipality may have delivered untreated water to its water consumers prior to the installation of the water treatment process. However, due to dilution with non-contaminated water, which we believe occurs in the operation of the municipal well system, it is unlikely that any consumer was exposed in the past to volatile organic compounds above acceptable drinking water standards. No notice or threat of any claim has been made from the municipality or its residents with respect to the drinking water.

     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

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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 $2,000. No active remediation is anticipated at this site. However, we are still awaiting a response from the Pennsylvania Department of Environmental Protection to our RIFS.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     We are exposed to various market risks, including changes in 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

     The price our customers pay for a product includes a metal charge that represents, in some cases, the market value of the copper used in that product as of the date we ship the product to the customer. Effective September 1, 2005, we began charging certain customers the previous monthly average COMEX price for metal. This pricing model is expected to serve as a natural hedge against changes in the commodity price of copper, and allows us to better match the cost of copper with the selling price to our customers. However, as an accommodation to our customers, we often enter into fixed price commitments to purchase copper on their behalf in order to fix the price of copper in advance of shipment. We account for these transactions as cash flow hedges under Statement of Financial Accounting Standards No. 133,Accounting for Derivative Instruments and Hedging Activities,as amended by Statement of Financial Accounting Standards No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities,and by Statement of Financial Accounting Standards No. 149,Amendment of Statement 133 on Derivative Instruments and Hedging Activities(hereinafter collectively referred to as “SFAS 133”). The fair value of these derivative assets is recognized in prepaid expenses and other assets in the Consolidated Balance Sheet. Hedge ineffectiveness is recognized in the Consolidated Statement of Operations under cost of goods sold. Information regarding this type of derivative transaction is as follows:

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	Three months		Six months
	ended		ended
(In millions)	July 2, 2006		July 2, 2006
Gains arising from ineffectiveness included in earnings	$	0.5	$	1.4
Gains reclassed from other comprehensive income (“OCI”) to earnings	$	2.7	$	3.9

(In millions)	July 2, 2006		July 3, 2005
Aggregate notional value of derivatives outstanding	$	15.4	$	12.7
Period through which derivative positions currently exist	December 2007		December 2006
Fair value of derivatives – asset/(liability)	$	0.6	$	0.9
Increase/(decrease) in fair value due to the effect of a 10% adverse change in commodity prices to current fair value	$	1.5	$	(1.4	)
Deferred gains included in OCI	$	4.2	$	0.6
Gains included in OCI to be recognized in the next 12 months	$	4.1	$	0.6
Number of months over which gain in OCI is to be recognized		18		12

     We have firm-price purchase commitments with some of our copper suppliers under which we agree to buy copper at a price set in advance of the actual delivery of that copper to us. Under these arrangements, we assume the risk of a price decrease in the market price of copper between the time this price is fixed and the time the copper is delivered. In order to reduce our market exposure to price decreases, at the time we enter into a firm-price purchase commitment, we also often enter into commodity forward contracts to sell a like amount of copper at the then-current price for delivery to the counter party at a later date. We account for these transactions as cash flow hedges under SFAS 133. The fair value of these derivative liabilities is recognized in accrued liabilities in the Consolidated Balance Sheet. Hedge ineffectiveness is recognized in the Consolidated Statement of Operations under cost of goods sold. Information on this type of derivative transaction is as follows:

	Three months			Six months
	ended			ended
(In millions)	July 2, 2006			July 2, 2006
Gain arising from ineffectiveness included in earnings	$	1.7		$	1.5
(Losses) reclassed from other comprehensive income (“OCI”) to earnings	$	(1.9	)	$	(2.2	)

(In millions)	July 2, 2006			July 3, 2005
Aggregate notional value of derivatives outstanding	$	5.7		$	8.3
Period through which derivative positions currently exist	September 2006			September 2005
Fair value of derivatives – asset/(liability)	$	4.0		$	(8.6	)
Increase/(decrease) in fair value due to the effect of a 10% adverse change in commodity prices to current fair value	$	1.0		$	(0.9	)
Deferred gains/(losses) included in OCI	$	(2.7	)	$	0.4
Gains/(losses) included in OCI to be recognized in the next 12 months	$	(2.7	)	$	0.4
Number of months over which gain/(loss) in OCI is to be recognized		3			3

     We have entered into commodity forward contracts to sell copper in order to hedge or protect the value of the copper carried in our inventory from price decreases. We account for these forward contracts as fair value hedges under SFAS 133. The fair value of these derivative liabilities is recognized in accrued liabilities in the Consolidated Balance Sheet. Hedge

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ineffectiveness is recognized in the Consolidated Statement of Operations under cost of goods sold. Information on this type of derivative transaction is as follows:

	Three months		Six months
	ended		ended
(In millions)	July 2, 2006		July 2, 2006
Gain/(loss) arising from ineffectiveness included in earnings	$	0.2	$	(2.1	)

(In millions)	July 2, 2006			July 3, 2005
Aggregate notional value of derivatives outstanding	$	13.1		$	53.3
Period through which derivative positions currently exist	September 2006			September 2005
Fair value of derivatives – asset/(liability)	$	(6.7	)	$	(2.3	)
(Decrease) in fair value due to the effect of a 10% adverse change in commodity prices to current fair value	$	(2.0	)	$	(5.6	)

     We have also entered into commodity futures contracts to purchase natural gas to reduce our risk of future price increases. We account for these transactions as cash flow hedges under SFAS 133. The fair value of these derivative assets is recognized in prepaid expenses and other assets in the Consolidated Balance Sheet. Hedge ineffectiveness is recognized in the Consolidated Statement of Operations under cost of goods sold. Information on this type of derivative transaction is as follows:

	Three months			Six months
	ended			ended
(In millions)	July 2, 2006			July 2, 2006
Gains arising from ineffectiveness included in earnings	$	0.4		$	1.2
(Losses) reclassed from other comprehensive income (“OCI”) to earnings	$	(0.6	)	$	(0.6	)

(In millions)	July 2, 2006			July 3, 2005
Aggregate notional value of derivatives outstanding	$	8.1		$	5.6
Period through which derivative positions currently exist	December 2008			December 2006
Fair value of derivatives – asset/(liability)	$	(0.8	)	$	7.1
(Decrease) in fair value due to the effect of a 10% adverse change in commodity prices to current fair value	$	(0.7	)	$	(0.7	)
Deferred gains/(losses) included in OCI	$	(4.0	)	$	1.7
Gains/(losses) included in OCI to be recognized in the next 12 months	$	(2.0	)	$	1.2
Number of months over which gain/(loss) in OCI is to be recognized		30			12

Foreign Currency Exchange Risk

     We are subject to market risk 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 three months. As of July 2, 2006, we had forward exchange contracts outstanding to sell foreign currency with a notional amount of $1.7 million. The estimated fair

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value of these forward exchange contracts to sell foreign currency is a $9 thousand loss. The effect of a 10% adverse change in exchange rates would reduce the fair value by approximately $0.2 million.

     We also use foreign currency forward exchange contracts to hedge our inventory currency risk in Canada. These contracts are denominated in U.S. and Canadian dollars. As of July 2, 2006, we had foreign currency forward exchange contracts outstanding through December 2006 to purchase foreign currency with a notional amount of $8.6 million. As of July 2, 2006, we had an unrealized gain of $0.4 million associated with these foreign currency forward exchange contracts. The effect of a 10% adverse change in exchange rates would be a loss of approximately $0.8 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 an increase in interest expense for the three and six month periods ended July 2, 2006 of $0.3 million and $0.5 million, respectively, and an increase of interest expense for the three and six month periods ended July 3, 2005 of $26 thousand and $71 thousand, respectively.

     As of July 2, 2006, the fair market value of the interest rate swap was a liability of $2.0 million, which is 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 six month periods ended July 2, 2006, the interest rate swap effectively converted $50 million of fixed rate 7.375% Senior Notes to variable rates of 9.8% and 9.4%, respectively. As of July 3, 2005, the fair market value of the interest rate swap was a liability of $0.9 million, which was included in other liabilities with a corresponding decrease to the hedged debt. Equal and offsetting unrealized gains and losses were included in other income expense. For the three and six month periods ended July 3, 2005, the interest rate swap effectively converted $50 million of fixed rate 7.375% Senior Notes to variable rates of 7.6% and 7.7%, 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.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

     Under the supervision and with the participation of management, including our Chief Executive Officer, Johann R. Manning, Jr., and our Chief Financial Officer, James E. Deason, we carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based upon that evaluation, Messrs. Manning and Deason have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

     Based upon the evaluation performed by our management, which was conducted with the participation of Messrs. Manning and Deason, there has been no change in our internal control over financial reporting during the second quarter of 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1A. Risk Factors

     The Company has included in its Annual Report on Form 10-K for the year ended December 31, 2005 a description of certain risks and uncertainties that could affect the Company’s business, future performance or financial condition (“Risk Factors”). The Risk Factors are hereby incorporated in Part II, Item 1A of this Form 10-Q. The information presented below updates, and should be read in conjunction with, the Risk Factors.

Recent changes in payment terms applicable to our commercial customers may cause these customers to move their business to competitors who, because of their greater financial resources, may offer more generous payment terms.

     Beginning with shipments on April 24, 2006, we modified the payment terms applicable to commercial customers to net 15 days. This change was made to proactively address the fact that copper prices have continued to increase. This measure was taken to help manage liquidity in this unprecedented period of changing metal prices. However, this change may cause certain of these customers to move their business to competitors who may offer more generous payment terms. If any our largest commercial customers, or a significant number of smaller commercial customers, move business to a competitor, demand for our products may fall, and our revenues, results of operations and financial condition might suffer.

During the second quarter of 2006, wholesale demand was strong and wholesale pricing rose to record high levels, neither of which may be sustained in future quarters.

     Wholesale prices rose to record high levels in the second quarter of 2006. In addition, demand for wholesale products was high in a market where commercial construction increases created a supply and demand imbalance. Gross profit in this segment benefited from these conditions in the second quarter. We cannot predict whether these high levels of wholesale pricing and demand will be sustained in future quarters. A significant reduction in per unit prices or in the demand for these products from our customers could negatively impact our results of operations and financial position.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     The following table presents information with respect to repurchases of Common Stock made by the Company during the quarter ended July 2, 2006. All of the repurchased shares were surrendered to the Company by employees for tax withholding purposes in conjunction with the vesting of restricted shares held by employees under the Company’s 2003 Equity Incentive Plan.

					Total Number of Shares		Approximate Dollar
	Total Number				Purchased as Part of		Value (in Millions) that
	of Shares		Average Price		Publicly Announced		May Yet Be Purchased
	Purchased		Paid Per Share		Plans		Under the Plans or
Period	(1)		(2)		or Programs		Programs
4/03/06 – 4/30/06		3,534		5.64		—		—
5/01/06 – 5/28/06		218		2.98		—		—
5/29/06 – 7/02/06		—		—		—		—
Total		3,752		5.49		—		—

(1)	Shares surrendered to the Company by employees to satisfy individual tax withholding obligations upon vesting of previously issued shares of restricted Common Stock. Shares are not part of any Company repurchase plan.
(2)	Average price paid per share reflects the closing price of the Common Stock on the business day the shares were surrendered by employee stockholders.

Item 4. Submission of Matters to a Vote of Security Holders

     On May 23, 2006, the Company held its Annual Meeting of Stockholders. The matters voted on at the meeting and the results of those votes were as follows:

(1) Election of three Class I Directors:

	Votes For		Votes Withheld
Stephen E. Hare		13,226,428		309,608
William C. Griffiths		13,226,428		309,608
David M. Gilchrist, Jr.		13,226,420		309,616

Other directors whose term of office continued after the meeting were John L. Duncan, Jan K. Ver Hagen, Julie A. Beck, Dennis J. Horowitz, Gail O. Neuman and Johann R. Manning, Jr.

(2) Ratification of the appointment of KPMG, LLP as the Company’s independent auditors for the fiscal year ending December 31, 2006:

Votes For	Votes Against		Votes Withheld
13,363,809		121,663		50,564

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Item 5. Other Information.

     As previously reported by the Company on a Form 8-K filed on April 11, 2006, on April 5, 2006 the Compensation Committee (the “Committee”) of the Board of Directors of the Company adopted the Wolverine Tube, Inc. Annual Performance Incentive Plan (the “Plan”) and established 2006 performance measures and bonus level opportunities under the Plan for the Chief Executive Officer and the other executive officers named in the Company’s proxy statement for the 2006 Annual Meeting of Stockholders (collectively, the “named executive officers”). The Form 8-K as filed contained an inadvertent error in the third paragraph of Item 1.01 regarding named executive officer bonus levels. The original Form 8-K correctly disclosed that the Committee established 2006 bonus levels for the Chief Executive Officer ranging up to 117% of his base salary, and for the other named executive officers up to 70% of base salary, in all cases based on the extent to which performance goals are achieved. However, the Plan also provides that, in the event that the performance goal associated with the maximum bonus level is exceeded, the bonus payouts will increase on a pro-rata basis beyond the maximum percentages noted above.

Item 6. Exhibits

10.1	Receivables Sale Agreement, dated as of April 4, 2006, between Wolverine Tube (Canada) Inc. and DEJ 98 Finance, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 11, 2006).
10.2	Amendment No. 1 to Receivables Sale Agreement (U.S.), dated as of April 4, 2006, among the Company, Tube Forming, L.P., Small Tube Manufacturing LLC and DEJ 98 Finance, LLC (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on April 11, 2006).
10.3	Amended and Restated Receivables Purchase Agreement, dated as of April 4, 2006, among DEJ 98 Finance, LLC, Wolverine Finance, LLC, the Company, Variable Funding Capital Company LLC, The CIT Group/Business Credit, Inc., individually and as co-agent, and Wachovia Bank, National Association, individually and as agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on April 11, 2006).
10.4	Amendment No. 4 to Amended and Restated Credit Agreement, dated as of April 4, 2006, among the Company and its U.S. subsidiaries, the lenders named therein and Wachovia Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on April 11, 2006).
10.5	Amendment No. 1 to Amended and Restated Receivables Purchase Agreement, effective as of June 9, 2006, among DEJ 98 Finance, LLC, Wolverine Finance, LLC, the Company, Variable Funding Capital Company LLC, The CIT Group/Business Credit, Inc., individually and as co-agent, and Wachovia Bank, National Association, individually and as agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 13, 2006).

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10.6	Amendment No. 5 to Amended and Restated Credit Agreement, dated as of June 9, 2006, among the Company and its U.S. subsidiaries, the lenders named therein and Wachovia Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on June 13, 2006).
10.7*	Wolverine Tube, Inc. Annual Performance Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 11, 2006).
10.8*	Change in Control Severance Agreement, dated May 26, 2006, between the Company and Allan J. Williamson, (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 30, 2006).
10.9*	Summary of Named Executive Officer Compensation.
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.

* Management contract or compensatory plan or arrangement.

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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: August 10, 2006	By:	/s/ James E. Deason
	Name:		James E. Deason
	Title:		Senior Vice President, Chief
			Financial Officer and Secretary

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