TPO Tarpon Industries

Second subheadline should read: Gross Profit Rises to $1.46 Million (sted $1.80 Million). Second paragraph should read: Gross profit for the second quarter ended June 30, 2006 was $1.46 million, compared to the $894,000 in the second quarter of 2005 (sted $1.80 million). Fourth paragraph, last sentence should read: Gross profit increased to $2.9 million for the six months ended June 2006 compared to $1.6 million in the six months ended June 30, 2005 (sted Gross profit increased to $3.3 million xxx). The corrected release reads: TARPON INDUSTRIES, INC. REPORTS RECORD SECOND QUARTER SALES AND REVENUE; REVENUE UP 42% TO $21.4 MILLION; GROSS PROFIT RISES TO $1.46 MILLION; Q2 EBITDA TURNS POSITIVE $86,325 Tarpon Industries, Inc. (AMEX:TPO), a manufacturer and distributor of structural and mechanical steel tubing and engineered steel storage rack systems, today announced that for the second quarter ended June 30, 2006, revenue increased 42% to $21.4 million, compared to $15.0 million for the quarter ended June 30, 2005. The company reported a net loss of $5.68 million, after a one time impairment charge of $4,326,177, or $1.22 per fully diluted share, compared to a loss of $1.46 million or $.0.32 per fully diluted share in the comparable 2005 quarter. Gross profit for the second quarter ended June 30, 2006 was $1.46 million, compared to the $894,000 in the second quarter of 2005. EBITDA for the 2006 second quarter, before impairment charges, was $86,325, the first positive EBITDA quarter since the company's February 2005 IPO, compared to ($1,308,279) reported in the first quarter ended March 31, 2006. Revenue for the six month period ended June 30, 2006 was $38.4 million an increase of 31.9 % compared to the $29.1 million reported in the six months ended June 30, 2005 (which included the operations of Steelbank only from mid-February 2005). The net loss for the 2006 six month period was $8.54 million, or $.1.84 per fully diluted share, compared to the $3.07 million, or $0.82 per fully diluted share reported in the comparable 2005 period. Gross profit increased to $2.9 million for the six months ended June 2006 compared to $1.6 million in the six months ended June 30, 2005. The loss for both the quarter and the six month period reflects impairment of Steelbank goodwill and intangibles of $3,576, 000 and impairment of the Haines Road real estate of $750,000. Interest expense for the third quarter and six month periods ending June 30, 2006 was $1,246,588 and $2,611,811 respectively. "We made solid progress in growing our revenue as we increased our customer base in the mechanical tube business while growing market share in the material handling industry markets," said James W. Bradshaw, chairman and CEO. "In addition, we reduced our SG&A expense from the first quarter, and implemented cost reductions and more cost-effective procedures that are beginning to take hold. There is more to be done, but as the company continues to grow the top line, we are already implementing many processes and programs that can build greater efficiency and lower costs." "EBITDA for the quarter improved dramatically," noted J. Stanley Baumgartner, chief financial officer of Tarpon since June, 2006. "Jim and I have forged a solid working relationship with a primary objective of substantially improving gross margins. We are encouraged by our progress, and remain focused on producing solid and measurable improvements to Tarpon's top and bottom line in the quarters ahead." "In regard to those improvements, we remain focused on and fully anticipate that the company will maintain a consistent level of sales momentum and growth," concluded Mr. Bradshaw. "In addition, we will to reduce SG&A by a half million dollars, and plan to attain 13-15% gross margins by the end of fiscal 2006. By doing so, we fully expect that the company will again reach positive EBITDA levels in the third quarter, and will attain positive net income and earnings per share in the fourth quarter of 2006." Tarpon Industries, Inc. will hold a conference call at 11:00 AM. ET on Wednesday, August 23, 2006. Interested parties are invited to listen to the call live or over the Internet at http://viavid.net/dce.aspx?sid=00003450. The call will also be available by dialing 888-694-4702, or for international callers, 973-582-2741. If you are unable to participate, an audio digital replay of the call will be available from August 23, 2006 at 1:00 PM until 11:59 PM on August 26, 2006 by dialing 1-877-519-4471 (domestic) or 1-973-341-3080 (international) using replay pin number 7749882. Tarpon Industries, Inc. Tarpon Industries, Inc., through its wholly owned subsidiaries within the United States and Canada, manufactures and sells structural and mechanical steel tubing and engineered steel storage rack systems. The company's mission is to become a larger and more significant manufacturer and distributor of structural and mechanical steel tubing, engineered steel storage rack systems and related products. For more information, please visit Tarpon's website at http://www.tarponind.com. Forward-Looking Statements Certain statements made by Tarpon in this presentation and other periodic oral and written statements, including filings with the Securities and Exchange Commission, are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, as well as statements which address operating performance, events or developments that we believe or expect to occur in the future, including those that discuss strategies, goals, outlook or other non-historical matters, or which relate to future sales or earnings expectations, cost savings, awarded sales, volume growth, earnings or a general belief in our expectations of future operating results, are forward-looking statements. The forward-looking statements are made on the basis of management's assumptions and estimations. As a result, there can be no guarantee or assurance that these assumptions and expectations will in fact occur. The forward-looking statements are subject to risks and uncertainties that may cause actual results to materially differ from those contained in the statements. Some, but not all of the risks, include our ability to obtain future sales, our ability to successfully integrate acquisitions, changes in worldwide economic and political conditions, including adverse effects from terrorism or related hostilities including increased costs, reduced production or other factors, costs related to legal and administrative matters, our ability to realize cost savings expected, inefficiencies related to production that are greater than anticipated, changes in technology and technological risks, foreign currency fluctuations, increased fuel costs, increased steel costs as it relates to our selling price, work stoppages and strikes at our facilities and those of our customers, the presence of downturns in customer markets where the company's goods and services are sold, financial and business downturns of our customers or vendors, and other factors, uncertainties, challenges, and risks detailed in Tarpon's public filings with the Securities and Exchange Commission. Tarpon does not intend or undertake any obligation to update any forward-looking statements. -0- *T CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Months Ended June 30, Six Months Ended June 30, --------------------------- ------------------------- 2006 2005 2006 2005 ------------- ------------- ------------ ------------ REVENUES: Sales, net of customer discounts $ 21,484,931 $ 15,086,908 $ 38,492,095 $ 29,105,264 Cost of goods sold 20,022,119 14,192,483 35,515,282 27,426,915 ------------- ------------- ------------ ------------ Gross Profit 1,462,812 894,425 2,976,813 1,678,349 OPERATING EXPENSES: Selling, general and administrative expenses 2,419,911 2,121,866 5,331,931 4,480,482 Impairment 4,326,177 - 4,326,177 - ------------- ------------- ------------ ------------ Total operating expense 6,746,088 2,121,866 9,658,108 4,480,482 OPERATING LOSS (5,283,276) (1,227,441) (6,681,295) (2,802,133) OTHER (INCOME) EXPENSE: Miscellaneous (income) expense (4,729) 27,989 (48,737) 41,352 Financing costs 21,911 14,776 43,549 29,691 Gain on derivatives (794,000) - (693,000) - Foreign exchange (gain) loss (64,837) 71,114 (51,464) (53,346) ------------- ------------- ------------ ------------ Total other (income) expense (841,655) 113,879 (749,652) 17,697 ------------- ------------- ------------ ------------ INTEREST EXPENSE, NET: Interest 1,255,697 186,818 2,646,916 458,148 Interest income (9,109) (44) (35,035) (4,849) ------------- ------------- ------------ ------------ Total interest expense, net 1,246,588 186,774 2,611,881 453,299 ------------- ------------- ------------ ------------ LOSS BEFORE INCOME TAXES (5,688,209) (1,528,094) (8,543,524) (3,273,129) INCOME TAX PROVISION (BENEFIT) - (60,295) - (195,621) ------------- ------------- ------------ ------------ NET LOSS $ (5,688,209) $ (1,467,799) $(8,543,524) $(3,077,508) ============= ============= ============ ============ NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (1.22) $ (0.32) $ (1.84) $ (0.82) ============= ============= ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 4,671,384 4,640,130 4,655,843 3,740,386 ============= ============= ============ ============ CONSOLIDATED BALANCE SHEETS June 30 December 31, 2006 2005 ------------ ------------ ASSETS: (unaudited) CURRENT ASSETS: Cash and cash equivalents $408,799 $7,317,364 ------------ ------------ Total current assets 19,599,157 22,334,712 ------------ ------------ TOTAL ASSETS $31,587,801 $39,005,921 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY: CURRENT LIABILITIES: $10,530,454 33,417,628 Long-term debt less current maturities 6,522 10,242 Other long-term liabilities 219,000 382,667 ------------ ------------ TOTAL LIABILITIES 34,349,282 33,810,537 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $31,587,801 $39,005,921 ============ ============ *T