BEACHWOOD, Ohio, Nov. 10, 2010/PRNewswire-Asia/ -- Aleris International, Inc. today reported results for the quarter ended September 30, 2010.
Aleris International, Inc. today reported results for the quarter ended September 30, 2010.
Summary
- Volumes increased 22% in the third quarter of 2010 compared to the
third quarter of 2009 and revenues were $1.1 billion versus $816
million in 2009.
- Net income for third quarter of 2010 was $54 million compared to a loss
of $23 million for the third quarter of 2009. Third quarter net income
totaled $46 million excluding the net of tax impacts of metal price
lag, reorganization items, unrealized gains on derivative financial
instruments, the impact of recording assets at fair value through
fresh-start accounting, and restructuring, impairment and other
charges.
- Adjusted EBITDA for the third quarter of 2010 was $72 million compared
to $45 million for the third quarter of 2009. Adjusted EBITDA for the
twelve months ended September 30, 2010 was $230 million.
- Cash from operating activities was $80 million in the third quarter of
2010 compared to a $23 million use of cash of in the third quarter of
2009.
- We had $520 million of liquidity at September 30, 2010, which consisted
of $425 million of availability under the revolving credit facility
plus $95 million of cash.
Aleris International, Inc. (1)
------------------------------
For the three months
ended
September 30,
-------------
2010 2009
---- ----
(Successor) (Predecessor)
(unaudited)
(Dollars and pounds in millions)
Pounds invoiced 1,180.3 963.6
Rolled Products North America 221.8 200.4
Recycling and Specification Alloys
Americas 532.4 401.4
Europe 426.1 361.8
Revenue $1,056.9 $815.6
Net income (loss) $53.8 $(22.9)
Adjusted EBITDA (Underlying) $71.9 $44.7
Cash provided (used) by operating
activities $80.1 $(22.8)
(1) Aleris International, Inc. is a wholly-owned subsidiary of
Aleris Holding Company, a holding company whose assets, liabilities
and operations consist solely of those of Aleris International, Inc.
The results of operations of Aleris Holding Company are identical to
Aleris International, Inc.
Aleris emerged from Chapter 11 bankruptcy protection on June 1, 2010. This resulted in the emerged Company being considered a new entity for financial reporting purposes. As a result, our financial statements for periods after June 1, 2010 (references to the Company and the related financial statements for such periods, the "Successor") are not comparable to the financial statements for periods prior to that date (references to the Company and the related financial statements for such periods, the "Predecessor"). However, we have adjusted for the most significant of these differences in our presentation of Adjusted EBITDA.
For the third quarter of 2010, Aleris reported revenues of $1.1 billion compared to $816 million in the third quarter of 2009. For the third quarter of 2010, net income totaled $54 million compared to a net loss of $23 million in the third quarter of 2009. Third quarter 2010 net income totaled $46 million after excluding the net of tax impacts of $13 million of metal price lag, $4 million of reorganization items, $21 million of unrealized gains on derivative financial instruments, $1 million of gains from the impact of recording assets at fair value through fresh-start accounting and $1 million of restructuring, impairment and other charges. For the third quarter of 2009, net income totaled $9 million excluding the net of tax impacts of metal price lag, reorganization items, gains from the impact of recording assets at fair value through fresh-start accounting, unrealized gains on derivative financial instruments, restructuring, impairment and other charges, and interest expense.
Adjusted EBITDA totaled $72 million in the third quarter of 2010 compared to $45 million in the third quarter of 2009. Adjusted EBITDA for the twelve months ended September 30, 2010 totaled $230 million.
For the third quarter of 2010, operating results reflected a 22% increase in demand as all of our industry segments benefited from improved economic conditions as compared to the third quarter of 2009. In addition to higher volumes, our operating results benefited from lower cash conversion costs per unit in Europe, primarily due to our significant restructuring of those operations and our continuing efforts to reduce operating costs.
At September 30, 2010, our long-term indebtedness consisted primarily of $45 million of exchangeable notes. We had $520 million of liquidity at September 30, 2010, which consisted of $425 million of availability under our revolving credit facility plus $95 million of cash.
Steven J. Demetriou, Aleris chairman and chief executive officer, said, "We are pleased with our third quarter results that show the benefits of our global restructuring and productivity work along with higher volumes and earnings momentum in Europe. We are on track with our growth strategy. This quarter, we announced the expansion of our extrusions capacity at our Tianjin facility as well as an agreement to form a Chinese joint venture, subject to normal approvals for the construction of a state-of-the-art aluminum plate rolling mill."
Rolled Products North America
Rolled Products North America's segment income for the third quarter of 2010 decreased by $9 million to $18 million compared to the third quarter of 2009 while segment Adjusted EBITDA increased $2 million to $24 million. Segment Adjusted EBITDA benefited from higher demand in distribution, transportation, and most other industries served by our North American operations. The benefits from improved shipment volumes as well as improved pricing and productivity initiatives were partially offset by tighter scrap spreads and higher conversion costs resulting from inflation and costs associated with the production ramp up at our Lewisport and Richmond rolling mills.
Recycling and Specification Alloys Americas
Recycling and Specification Alloys Americas' segment income for the third quarter of 2010 increased by $7 million to $10 million compared to the prior year period and segment Adjusted EBITDA increased by $1 million to $12 million. This increase is due primarily to volume increases resulting from the higher North American auto build rates benefiting our Specification Alloy business and generally higher recycling activities associated with increased industrial production. The benefits from improved shipment volumes were partially offset by tighter scrap flows which negatively impacted margins.
Europe
Europe segment income for the third quarter of 2010 increased by $18 million to $27 million compared to the third quarter of 2009 while segment Adjusted EBITDA increased by $26 million to $44 million. The increase in segment Adjusted EBITDA was due to an 18% increase in shipment levels as robust automotive volumes continued and general economic activity increased. In addition, benefits from our restructuring and productivity initiatives drove lower per unit conversion costs and better EBITDA performance.
Forward-Looking Statements
This press release contains forward-looking statements. These include statements that contain words such as "believe," "expect," "anticipate," "intend," "estimate," "should" and similar expressions intended to connote future events and circumstances, and include statements regarding future actual and adjusted earnings; future improvements in margins, processing volumes and pricing; overall 2010 operating performance; anticipated effective tax rates; expected cost savings; the anticipated economic environment in 2010; and future benefits from acquisitions and new products. Investors are cautioned that all forward-looking statements involve risks and uncertainties, and that actual results could differ materially from those described in the forward-looking statements. These risks and uncertainties would include, without limitation, Aleris's levels of indebtedness and debt service obligations; its ability to effectively integrate the business and operations of its acquisitions; further slowdowns in automotive production in the U.S. and Europe; the financial condition of Aleris's customers and future bankruptcies and defaults by major customers; the availability at favourable cost of aluminum scrap and other metal supplies that Aleris processes; the ability of Aleris to enter into effective metals, natural gas and other commodity derivatives; increases in natural gas and other fuel costs of Aleris; a weakening in industrial demand resulting from a decline in U.S. or world economic conditions, including any decline caused by terrorist activities or other unanticipated events; future utilized capacity of Aleris's various facilities; a continuation of building and construction customers and distribution customers reducing their inventory levels and reducing the volume of Aleris's shipments; restrictions on and future levels
and timing of capital expenditures; retention of Aleris's major customers; the timing and amounts of collections; currency exchange fluctuations; future write-downs or impairment charges which may be required because of the occurrence of some of the uncertainties listed above; the difficult conditions in the capital, credit, commodities, automobile and housing segments and in the current economy; and other risks listed in Aleris's filings with the United States Bankruptcy Court, including but not limited to Aleris's First Amended Plan of Reorganization and related Disclosure
Statement, particularly the section entitled "Risk Factors" contained therein.
Non-GAAP Financial Measures
In addition to the results reported in accordance with GAAP, this press release includes information regarding "Adjusted EBITDA." In this press release, Adjusted EBITDA, also referred to as Adjusted EBITDA (Underlying), removes the impacts of metal price lag, among other non-recurring or non-cash items, and has historically been described by the Company as "Underlying EBITDA." Adjusted EBITDA is defined as net income (loss) before interest income and expense, taxes, depreciation and amortization ("EBITDA"), metal price lag, reorganization items, net, unrealized gains and losses on derivative financial instruments, restructuring, impairment and other charges, the impact of the recording assets at fair value through fresh-start and purchase accounting, currency gains and losses on the translation of indebtedness, stock-based compensation expense, and certain other non-cash gains and losses.
Adjusted EBITDA is a non-GAAP measure and the Company's computation is likely to differ from the methods used by other companies in computing similarly titled or defined terms. Non-GAAP measures have limitations as analytical tools and should be considered in addition to, not in isolation or as a substitute for, or superior to, Aleris's measures of financial performance prepared in accordance with GAAP, including pre-tax income (loss) and net income (loss). Investors are encouraged to review the accompanying tables reconciling Adjusted EBITDA to comparable GAAP amounts. Management uses Adjusted EBITDA as a performance metric and believes the measure provides additional information commonly used by parties to Aleris's revolving credit facility in understanding its operating results and the ongoing performance of our underlying businesses. In addition, Adjusted
EBITDA, including the impacts of metal price lag, is a component of certain financial covenants required under the revolving credit facility.
About Aleris
Aleris is a privately-held, global leader in aluminum rolled products and extrusions, aluminum recycling and specification alloy production. Headquartered in Beachwood, Ohio, the company operates more than 40 production facilities in the Americas, Europe and Asia. For more information,
visit http://www.aleris.com.
--------------------------------
Aleris has no obligation under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended or other laws to publicly disclose financial or other information regarding its business. Aleris may publicly disclose certain information from time to time, in it sole discretion. Aleris may also determine not to publicly disclose any information, in its sole discretion, notwithstanding prior disclosures or any pattern of prior disclosures.
The information disclosed in this press release is believed by Aleris to be accurate as of the date hereof. Aleris expressly disclaims any duty to update the information contained in this press release. Persons engaging in any transactions with Aleris or in Aleris's securities are cautioned that there may exist other material information regarding Aleris that is not publicly available.
Aleris International, Inc.
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Consolidated Statement of Operations
(unaudited)
(in millions)
For the three months ended
September 30,
-------------
2010 2009
---- ----
(Successor) (Predecessor)
Revenues $1,056.9 $815.6
Cost of sales 951.4 727.8
----- -----
Gross profit 105.5 87.8
Selling, general and administrative
expenses 56.7 55.5
Restructuring, impairment and other
charges 0.7 17.5
Gains on derivative financial
instruments (14.2) (17.5)
----- -----
Operating income 62.3 32.3
Interest expense, net 2.9 58.2
Reorganization items, net 3.5 8.0
Other income, net (7.3) (7.4)
---- ----
Income (loss) before income taxes 63.2 (26.5)
Provision for (benefit from) income
taxes 9.4 (3.6)
=== ====
Net income (loss) $53.8 $(22.9)
===== ======
Aleris International, Inc.
--------------------------
Consolidated Balance Sheet
(in millions, except share and per share data)
September 30, December 31,
2010 2009
-------------- -------------
(unaudited)
ASSETS (Successor) (Predecessor)
Current Assets
Cash and cash equivalents $95.1 $108.9
Accounts receivable (net of
allowances of $9.7 and $16.7
at September 30, 2010 and
December 31, 2009) 479.3 319.3
Inventories 553.9 425.8
Deferred income taxes - 9.8
Current derivative financial
instruments 12.1 30.4
Prepaid expenses and other
current assets 35.2 64.3
---- ----
Total Current Assets 1,175.6 958.5
Property, plant and equipment,
net 503.3 500.3
Goodwill - 37.8
Intangible assets, net 50.3 26.3
Long-term derivative financial
instruments 6.5 8.6
Deferred income taxes 10.3 28.9
Other long-term assets 35.0 19.9
Total Assets $1,781.0 $1,580.3
======== ========
LIABILITIES AND STOCKHOLDER'S
EQUITY (DEFICIT)
Current Liabilities
Accounts payable $287.1 $203.2
Accrued liabilities 195.0 165.1
Deferred income taxes 10.6 29.2
Current portion of long-term
debt 5.5 391.7
Debt in default - 5.0
---
Debtor-in-possession financing - 444.0
--- -----
Total Current Liabilities 498.2 1,238.2
Long-term debt 45.3 2.0
Deferred income taxes 5.7 27.5
Accrued pension benefits 197.5 123.4
Accrued postretirement benefits 46.9 -
Other long-term liabilities 89.3 90.3
---- ----
Total Long-Term Liabilities 384.7 243.2
Liabilities subject to
compromise - 2,279.3
Redeemable preferred stock; par
value $.01; 5,000 shares
authorized and issued at
September 30, 2010 5.0 -
Stockholder's Equity (Deficit)
Successor:
Common stock; par value $.01;
5,000 shares authorized and
100 shares issued - -
Additional paid-in capital 836.4 -
Predecessor:
Preferred stock; par value
$.01; 100 shares authorized;
none issued - -
Common stock; par value $.01;
900 shares authorized and
issued - -
Additional paid-in capital - 857.9
Retained earnings (deficit) 29.5 (3,063.3)
Accumulated other comprehensive
income 27.2 25.0
Total Stockholder's Equity
(Deficit) 893.1 (2,180.4)
----- --------
Total Liabilities and
Stockholder's Equity (Deficit) $1,781.0 $1,580.3
======== ========
Aleris International, Inc.
--------------------------
Reconciliation of Net Income (Loss) to Adjusted EBITDA (Underlying)
(unaudited)
(in millions)
For the three months ended
September 30,
-------------
2010 2009
---- ----
(Successor) (Predecessor)
Net income (loss) $53.8 $(22.9)
Interest expense, net 2.9 58.2
Provision for (benefit from) income
taxes 9.4 (3.6)
Depreciation and amortization 15.4 46.8
---- ----
EBITDA 81.5 78.5
Reorganization items, net 3.5 8.0
Unrealized gains on derivative
financial instruments (20.9) (20.1)
Restructuring, impairment and other
charges 0.7 17.5
Impact of recording assets at fair
value through fresh-start and
purchase accounting (1.2) 0.5
Currency gains on translation of
indebtedness (7.2) (6.1)
Stock-based compensation expense 2.1 0.8
Other 0.2 (2.3)
Metal price lag 13.2 (32.1)
Adjusted EBITDA (Underlying) $71.9 $44.7
===== =====
Aleris International, Inc.
--------------------------
Reconciliation of Segment Income to
Segment Adjusted EBITDA (Underlying)
(unaudited)
(in millions)
For the three months
ended
September 30,
-------------
2010 2009
---- ----
(Successor) (Predecessor)
Rolled Products North America
Segment income $17.8 $26.9
Impact of recording assets at fair
value through fresh-start and
purchase accounting (4.4) -
Depreciation and amortization 9.2 7.1
Metal price lag 1.8 (11.7)
Segment Adjusted EBITDA (Underlying) $24.4 $22.3
===== =====
Recycling and Specification Alloys
Americas
Segment income $9.9 $3.2
Impact of recording assets at fair
value through fresh-start and
purchase accounting 0.2 -
Depreciation and amortization 2.0 6.3
Metal price lag - 1.4
Segment Adjusted EBITDA (Underlying) $12.1 $10.9
===== =====
Europe
Segment income $27.2 $9.3
Impact of recording assets at fair
value through fresh-start and
purchase accounting 3.0 0.5
Depreciation and amortization 3.2 32.4
Other (0.7) (2.4)
Metal price lag 11.4 (21.8)
Segment Adjusted EBITDA (Underlying) $44.1 $18.0
===== =====
Aleris International, Inc.
--------------------------
Reconciliation of Last Twelve Months Net Income
to Adjusted EBITDA (Underlying)
(unaudited)
(in millions)
For the twelve
months ended
September 30, 2010
------------------
(Combined)
Net income $2,334.2
Interest expense, net 137.5
Benefit from income taxes (37.0)
Depreciation and amortization 69.2
----
EBITDA 2,503.9
Reorganization items, net (3,072.2)
Unrealized losses on derivative financial
instruments 9.4
Restructuring, impairment and other charges 771.5
Impact of recording assets at fair value through
fresh-start and purchase accounting 25.7
Currency losses on translation of indebtedness 26.5
Stock-based compensation expense 4.3
Other 1.9
Metal price lag (40.6)
Adjusted EBITDA (Underlying) $230.4
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