EXHIBIT 99.1
FOR: PW Eagle, Inc. FOR IMMEDIATE RELEASE
222 South Ninth Street, Suite 2880 ---------------------
Minneapolis, MN 55402
(Nasdaq-NMS: "PWEI")
CONTACT: William H. Spell
Chief Executive Officer, PW Eagle, Inc.
612/305-0339
PW EAGLE LOWERS SECOND QUARTER FORECAST
Company Notes Unusual May 2001 Results Contradict
Long-Standing Historical Trends
MINNEAPOLIS -- June 1, 2001 -- PW Eagle, Inc. (Nasdaq-NMS: "PWEI") today
announced that it has lowered its forecasted results for the quarter ending June
30, 2001. The Company's first quarter earnings announcement on May 2, 2001,
anticipated that the volume increases experienced and the increase in PVC resin
prices in the market would result in increased sales prices for PW Eagle pipe,
as has historically happened. Preliminary May results instead indicate that the
prices for many of the Company's PVC pipe products have dropped. In addition,
while the volumes of pipe in terms of pounds sold was approximately what the
Company had expected, the product mix shifted from electrical and irrigation
products to the lower priced waterworks products. PW Eagle therefore will
experience an unanticipated net decrease in the weighted average selling price
of its products in May instead of the anticipated increased selling prices.
As a result of these changes, PW Eagle is reducing anticipated net sales for the
second quarter from a range of $82 to $90 million, to a range of $76 to $80
million, with a corresponding decrease in net income from a range of $3.5 to $5
million to a range of $(1.0) to $1.0 million and earnings before interest,
taxes, depreciation and amortization (EBITDA) from a range of $10 to $13 million
to a range of $4 to $6 million. This would correspondingly reduce net earnings
per share from a range of $0.30 to $0.50 per share on a fully diluted basis to a
range of $(0.14) to $0.10 per share on a fully diluted basis. The revised second
quarter 2001 net earnings per share reflect the impact of the Company's recently
completed modified "Dutch" tender offer.
Even with these changes in PW Eagle's financial performance, the Company will
make all of the required principal and interest payments on its loans and will
maintain more than adequate liquidity. However, the Company does anticipate that
it will not be in compliance with the financial covenants in its loan
agreements. PW Eagle is currently in discussions with its lenders and expects to
obtain waivers of these covenant violations before they actually occur.
The Company continues to believe that the economy will improve later in 2001 and
that the PVC pipe business will improve as well. In fact, PW Eagle has seen some
improvement in the prices it receives for its products in the last week. Housing
starts and construction levels remain high, but these indicators have not
translated into significant increases in demand. It is not clear what will
happen to the price of PVC resin for the balance of the year, nor is it clear
what impact the electricity problems in California will have on the economy of
that state and the country.
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The historical relationships between the changes in the price of PVC resin and
the price of PVC pipe, where pipe prices normally increase at a greater rate
than PVC resin price increases, did not exist in May, nor did the Company
experience the normal seasonal increase in demand in April, although May demand
appears to be somewhat improved. As a result of this uncertainty, PW Eagle is
not able to predict with any reasonable accuracy results for the balance of
2001. Consequently, the Company is withdrawing its earlier forecast with respect
to 2001 financial performance, and is not planning any revised estimates at this
time. When the Company's markets and the pipe industry stabilize and the Company
believes it can make reasonable estimates of financial performance, it will do
so.
William H. Spell, PW Eagle Chief Executive Officer, stated, "The current
conditions in our industry are highly unusual. PVC resin prices increased in
February and March and further increases were announced for May and June. The
demand for our products improved in April and May. Historically, these
conditions would have led to an increase in price for our products in May. To
the contrary and very unusually, we experienced lower prices for many of our
products in May. As a result, for the month of May we expect the spread between
the cost of resin and the price that we receive for our pipe to be less than 50%
of what it was a year ago and about 80% of what it was in the first quarter. We
had expected that this spread would increase under these conditions as it has
historically. Unfortunately, not only did these anticipated price and demand
increases not materialize, we actually suffered a decrease in price.
"While these current conditions have had an adverse impact on our financial
performance and may cause us to violate our loan agreements, we remain a
financially strong company. We are not in any danger of failing to pay principal
and interest under our loan agreements, we have more than sufficient liquidity,
and our debt levels are conservative, so that a downturn in our financial
performance does not jeopardize the Company.
"We remain confident in the long term success of PW Eagle. We are the leading
PVC pipe producer in the western United States, and we continue to strengthen
that franchise. We are a very efficient and low cost producer, and we continue
to work to improve our efficiency and obtain further synergies from the
combination of the PW Pipe and Eagle Pacific businesses. We produce the highest
quality product and provide our customers with excellent customer service. We
have an excellent operating management team and a skilled and loyal group of
employees. We fully expect that when the economy starts to improve, our
financial performance will show marked improvement."
INFORMATION IN THIS PRESS RELEASE IS FORWARD-LOOKING INFORMATION-ACTUAL RESULTS
MAY DIFFER
PW Eagle, Inc.'s statements in this press release regarding its forecasted
results for the quarter ended June 30, 2001, including: (i) its revised
forecasted operating results discussed in the second paragraph; (ii) its belief
that it will be able to make its required principal and interest payments on its
outstanding loans and maintain adequate liquidity; (iii) its expectation that it
will obtain waivers from its lenders regarding any potential loan defaults prior
to the time such
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defaults may occur; and (iv) its belief that the economy will improve later in
2001 are all forward-looking statements made under the safe harbor provisions of
the Private Securities Litigation Reform Act. In addition, statements made in
this press release by William H. Spell regarding the Company's beliefs and
expectations that (i) the spread between the cost of resin and the price that
the Company receives for its pipe will be less than 50% of what it was a years
ago and about 80% of what it was in the first quarter; (ii) the Company remains
a financially strong Company; (iii) the Company is not in any not in any danger
of failing to pay principal and interest under its loan agreements, the Company
has more than sufficient liquidity, and a downturn in the Company's financial
performance does not jeopardize the Company; and (iv) when the economy starts to
improve, the Company's financial performance will show marked improvement are
also forward-looking statements made under the safe harbor provisions of the
Private Securities Litigation Reform Act.
These statements made by the Company and Mr. Spell involve known and unknown
risks and uncertainties that may cause the actual results to differ materially
from those expected and forecasted in this press release. Actual results could
differ as a result of: (i) a further slowdown of economic growth in the United
States, particularly west of the Mississippi; (ii) the failure of the Gross
Domestic Product to grow beyond its first quarter level; (iii) an increase in
interest rates or the failure of the Federal Reserve to lower interest rates
further; (iv) a decline in the construction of commercial and residential
building; (v) a decline in our raw material prices; and (vi) a greater supply of
PVC and PE pipe than market demand for such products caused by cyclical
fluctuations in the supply and demand for pipe. Furthermore, the Company may not
be able to make its principal and interest payments if its financial performance
continues as experienced in May, and there is no assurance that its lenders will
waive any potential loan defaults prior to the occurrence of such default. The
Company's financial performance will be adversely effected if the relationship
between the Company's pipe prices and resin prices continue to exist as the
Company experienced in May 2001, which is contrary to historical relationship
between these prices. Finally, although we believe that the economy will improve
later in 2001, based upon industry forecast information and other economic
information, there is no assurance that the economy will improve.
PW Eagle, Inc. is a leading extruder of PVC pipe and polyethylene tubing
products. The Company operates ten manufacturing facilities in the midwestern
and western United States. PW Eagle's common stock is traded on the Nasdaq
National Market under the symbol "PWEI".
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