Aleris Reports First Quarter 2011 Results

By Aleris, PRNE
Thursday, May 12, 2011

BEACHWOOD, Ohio, May 13, 2011 - Aleris today reported results for the quarter ended March 31, 2011.

    Performance Summary

    - First quarter 2011 volume increased 8% versus the first
      quarter of 2010. This increase, coupled with higher LME prices and
      improved rolling margins, resulted in first quarter revenue growth of
      24% from $962 million in 2010 to $1.2 billion in 2011.

    - Net income for the first quarter of 2011 was $57 million
      compared to $10 million for the first quarter of 2010.

    - Adjusted EBITDA for the first quarter of 2011 was $78 million
      compared to $56 million for the first quarter of 2010, a 40 percent
      increase.

    - Cash used by operating activities was $57 million in the
      first quarter of 2011 due to a seasonal working capital build compared
      to a $103 million use of cash in the first quarter of 2010.

    - Liquidity at March 31, 2011 was $689 million, which consisted
      of $462 million of availability under the revolving credit facility
      plus $227 million of cash.

    - The Company broke ground for its joint venture rolling mill
      in China in January and initiated an upgrade and expansion of our
      European operations to increase capacity for autobody sheet products.
                         Aleris International, Inc. (1)
                         ------------------------------

                                              For the three months
                                                 ended March 31,
                                                --------------------
                                                2011               2010
                                                ----               ----
                                           (Successor)      (Predecessor)
      (Dollars and pounds in millions)            (unaudited)

    Pounds invoiced                            1,145              1,057
      Rolled Products North America              195                203
      Recycling and Specification Alloys
       Americas                                  494                458
      Europe                                     456                396

    Revenue                                   $1,191               $962

    Net income                                    57                 10

    Net income attributable to Aleris
     International, Inc.                          57                 10

    Adjusted EBITDA                               78                 56

    Cash used by operating activities            (57)              (103)

    (1) Aleris International, Inc. is a wholly-owned subsidiary of Aleris
    Corporation, a holding company formerly known as Aleris Holding
    Company, whose assets, liabilities and operations consist solely of
    those of Aleris International, Inc. The results of operations of Aleris
    Corporation 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.

Aleris reported revenues of $1.2 billion for the first quarter of 2011
compared to $962 million in the same period of 2010, driven by higher
shipment levels, rolling margins and aluminum prices. For the first quarter
of 2011, net income totaled $57 million compared to net income of $10 million
in the first quarter of 2010.

Adjusted EBITDA totaled $78 million in the first quarter of 2011 compared
to $56 million in the first quarter of 2010. Operating results were
positively impacted by an 8 percent increase in volume as economic conditions
for many of the industries we serve improved compared to the first quarter of
2010. Operating results also benefited from improved pricing and wider scrap
spreads which improved contribution margins, and continued productivity gains
from our Aleris Operating System.

At March 31, 2011, our long-term indebtedness consisted primarily of $500
million
of 7 5/8% senior notes issued on February 9, 2011 and $45 million of
exchangeable notes. We had $689 million of liquidity at March 31, 2011, which
consisted of $462 million of availability under our revolving credit facility
plus $227 million of cash.

Rolled Products North America

Rolled Products North America's segment income for the first quarter of
2011 decreased by $8 million to $14 million compared to the prior year
period, primarily driven by increased depreciation associated with the
revaluation of the segment's long-lived assets upon emergence from bankruptcy
and reduced benefits from metal price lag (metal price lag is excluded from
segment Adjusted EBITDA). Segment Adjusted EBITDA increased by $1 million to
$23 million
, as rolling margins improved after a series of successful pricing
initiatives in the preceding quarters. First quarter 2011 was negatively
impacted by lower volumes as distributors' restocking activity that
contributed positively to the first quarter of 2010 did not recur in the
first quarter of 2011. As expected, this volume decline from the distribution
industry more than offset solid volume gains in commercial transportation.

Recycling and Specification Alloys Americas

Recycling and Specification Alloys Americas' segment income and segment
Adjusted EBITDA were consistent at $15 million and $17 million, respectively,
for the first quarters of 2011 and 2010. Segment Adjusted EBITDA was
positively impacted by an 8 percent increase in pounds invoiced, driven by
improved demand across all of the industries served by this segment,
particularly automotive, partially offset by volume reductions resulting from
the sale of our Brazil recycling facilities in the fourth quarter of 2010.
2011 segment results were negatively impacted by tighter metal spreads.
Productivity gains further impacted quarterly performance, offsetting
inflation.

Europe

Europe's segment income for the first quarter of 2011 increased by $10
million to $46 million
, while segment Adjusted EBITDA more than doubled
compared to the prior period, increasing from $22 million to $47 million. The
increase in segment income and segment Adjusted EBITDA was primarily due to a
15 percent increase in shipment volumes as demand from the aerospace,
automotive, and other industries served by this segment outpaced the first
quarter of the prior year. Contribution margins were also favorably impacted
by improved pricing, favorable mix, and higher scrap spreads in recycling.
Productivity initiatives across the segment also contributed to the improved
performance. First quarter 2010 segment income benefited significantly from
favorable metal price lag.

Conference Call and Webcast Information

Aleris will hold a conference call May 13, 2011 at 11:00 a.m. Eastern
Standard Time
. Steven J. Demetriou, chairman and chief executive officer, and
Sean M. Stack, executive vice president and chief financial officer, will
host the call to discuss results.

The call can be accessed by dialing 1-877-398-9483 or 1-760-298-5072 (for
international callers) and referencing ID # 66618986 - or through the
Company's website, www.aleris.com. A replay of the call will be posted
on the Company's website in the Investor Relations section.

Forward-Looking Statements

Certain statements in this press release are "forward-looking statements"
within the meaning of the federal securities laws. Statements about our
beliefs and expectations and statements containing the words "may", "could",
"would", "should", "will", "believe", "expect", "anticipate", "plan",
"estimate", "target", "project", "look forward to", "intend" and similar
expressions intended to connote future events and circumstances constitute
forward-looking statements. Forward-looking statements include statements
about future costs and prices of commodities, production volumes, industry
trends, demand for our products and services, anticipated cost savings,
anticipated benefits from new products or facilities, and projected results
of operations. Forward-looking statements involve known and unknown risks and
uncertainties, which could cause actual results to differ materially from
those contained in or implied by any forward-looking statement. Important
factors that could cause actual results to differ materially from those
expressed or implied by forward-looking statements include, but are not
limited to, the following: (1) our ability to successfully implement our
business strategy; (2) the cyclical nature of the aluminum industry, our
end-use segments and our customers' industries; (3) our ability to fulfill
substantial capital investment requirements; (4) variability in general
economic conditions on a global or regional basis; (5) our ability to enter
into effective aluminum, natural gas and other commodity derivatives or
arrangements with customers to effectively manage our exposure to commodity
price fluctuations and changes in the pricing of metals; (6) increases in the
cost of raw materials and energy; (7) the loss of order volumes from or the
retention of our major customers; (8) our ability to generate sufficient cash
flows to fund capital expenditure requirements and debt service obligations;
(9) competitor pricing activity, competition of aluminum with alternative
materials and the general impact of competition in our industry segments;
(10) risks of investing in and conducting operations on a global basis,
including political, social, economic, currency and regulatory factors; (11)
liabilities under and costs of compliance with environmental, labor, health
and safety laws; and (12) other factors discussed in our filings with the
Securities and Exchange Commission, including the sections entitled "Risk
Factors" contained therein. Investors, potential investors and other readers
are urged to consider these factors carefully in evaluating the
forward-looking statements and are cautioned not to place undue reliance on
such forward-looking statements. We undertake no obligation to publicly
update or revise any forward-looking statements, whether in response to new
information, futures events or otherwise, except as otherwise required by
law.

Non-GAAP Financial Measures

In addition to the results reported in accordance with GAAP, this press
release includes information regarding "Adjusted EBITDA" and "segment
Adjusted EBITDA." These non-GAAP financial measures exclude interest income
and expense, income taxes, depreciation and amortization, metal price lag,
reorganization items, net, unrealized gains and losses on derivative
financial instruments, restructuring and impairment 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 gains and losses. Metal
price lag represents the financial impact of the timing difference between
when aluminum prices included within our revenues are established and when
aluminum purchase prices included in our cost of sales are established. This
lag will, generally, increase our earnings and EBITDA in times of rising
primary aluminum prices and decrease our earnings and EBITDA in times of
declining primary aluminum prices. We now seek to reduce this impact through
the use of derivative financial instruments. Metal price lag is net of the
realized gains and losses from our derivative financial instruments. We
exclude metal price lag from our determination of Adjusted EBITDA because it
is not an indicator of the performance of our underlying operations.

Our computation of these non-GAAP measures 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, our measures of financial performance prepared in accordance
with GAAP, including pre-tax income (loss) and net income (loss) attributable
to Aleris International, Inc. Investors are encouraged to review the
accompanying tables reconciling Adjusted EBITDA and segment Adjusted EBITDA
to comparable GAAP amounts. Management uses Adjusted EBITDA and segment
Adjusted EBITDA as a performance metric and believes the measure provides
additional information commonly used by parties to our revolving credit
facility and holders of our 7 5/8% senior notes in understanding the
Company's 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 covenants under the revolving credit
facility and EBITDA, with certain adjustments, is a component of certain
covenants under the indenture governing our 7 5/8% senior notes.

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 www.aleris.com.

While Aleris will in the future be required to file periodic and current
reports with the SEC under the indenture governing the 7 5/8% senior notes,
Aleris currently 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 its
sole discretion.

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.

(Logo: photos.prnewswire.com/prnh/20050504/CLW056LOGO )

                              Aleris International, Inc.
                              --------------------------

                            Consolidated Income Statements
                                     (unaudited)
                                    (in millions)

                                                 (Successor)  (Predecessor)
                                                 -----------  -------------
                                                    For the       For the
                                                     three         three
                                                    months        months
                                                     ended         ended
                                                  March 31,     March 31,
                                                     2011          2010
                                                 ----------    ----------
    Revenues                                        $1,191.2      $961.9
    Cost of sales                                    1,062.7       848.8
                                                     -------       -----
    Gross profit                                       128.5       113.1
    Selling, general and administrative expenses        61.7        49.6
    Restructuring and impairment charges (gains)         0.1        (1.3)
    Gains on derivative financial instruments              -        (7.8)
    Other operating income, net                         (3.8)       (0.1)
                                                        ----        ----
    Operating income                                    70.5        72.7
    Interest expense, net                                8.4        44.4
    Reorganization items, net                            0.6         4.7
    Other (income) expense, net                         (1.5)       12.6
                                                        ----        ----
    Income before income taxes                          63.0        11.0
    Provision for income taxes                           5.7         1.3
                                                         ---         ---
    Net income                                          57.3         9.7
                                                        ----         ---
    Net loss attributable to noncontrolling
     interest                                           (0.1)          -
    Net income attributable to Aleris
     International, Inc.                               $57.4        $9.7
                                                       =====        ====
                              Aleris International, Inc.
                              --------------------------

                          Operating and Segment Information
                                     (unaudited)
                                    (in millions)

                                                    (Successor) (Predecessor)
                                                    ----------- -------------
                                                       For the      For the
                                                        three        three
                                                       months       months
                                                        ended        ended
                                                     March 31,    March 31,
                                                        2011         2010
                                                    ----------   ----------
    Pounds invoiced
      Rolled Products North America                     194.6         202.7
      Recycling and Specification Alloys Americas       493.9         458.3
      Europe                                            456.1         395.6
                                                        -----         -----
    Total                                             1,144.6       1,056.6
                                                      =======       =======

    Revenues:
      Rolled Products North America                    $310.7        $295.0
      Recycling and Specification Alloys Americas       247.6         217.4
      Europe                                            634.8         454.0
      Intersegment revenues                              (1.9)         (4.5)
                                                         ----          ----
    Total                                            $1,191.2        $961.9
                                                     ========        ======

    Segment income:
      Rolled Products North America                     $14.4         $22.0
      Recycling and Specification Alloys Americas        14.9          15.4
      Europe                                             46.4          36.5
                                                         ----          ----
    Total segment income                                 75.7          73.9
      Corporate general and administrative expenses     (12.6)         (7.1)
      Restructuring and impairment (charges) gains       (0.1)          1.3
      Interest expense, net                              (8.4)        (44.4)
      Unallocated gains on derivative financial
       instruments                                        5.0           0.9
      Reorganization items, net                          (0.6)        (4.7)
      Unallocated currency exchange gains (losses)        4.5         (8.7)
      Other expense, net                                 (0.5)        (0.2)
    Income before income taxes                          $63.0         $11.0
                                                        =====         =====

    Segment adjusted EBITDA:
      Rolled Products North America                     $23.0         $22.4
      Recycling and Specification Alloys Americas        16.6          17.1
      Europe                                             46.9          21.6
      Corporate                                          (8.0)         (5.2)
    Total Adjusted EBITDA                               $78.5         $55.9
                                                        =====         =====
                                Aleris International, Inc.
                                --------------------------

                                Consolidated Balance Sheet
                      (in millions, except share and per share data)

                                                   (Successor)    (Successor)
                                                     March 31,  December 31,
                                                       2011           2010
                                                   ----------   -------------
                           ASSETS                  (unaudited)
    Current Assets
    Cash and cash equivalents                           $227.4        $113.5
    Accounts receivable (net of allowances of
     $9.0 and $8.7 at March 31, 2011                     551.9         393.4
    and December 31, 2010, respectively)
    Inventories                                          712.6         613.6
    Deferred income taxes                                  1.6           1.6
    Current derivative financial instruments              18.2          17.4
    Prepaid expenses and other current assets             25.4          23.8
                                                          ----          ----
       Total Current Assets                            1,537.1       1,163.3
    Property, plant and equipment, net                   518.6         510.0
    Intangible assets, net                                49.2          49.7
    Long-term derivative financial instruments            13.6           9.3
    Deferred income taxes                                 13.8          13.9
    Other long-term assets                                34.8          33.5
           Total Assets                               $2,167.1      $1,779.7
                                                      ========      ========

            LIABILITIES AND STOCKHOLDER'S EQUITY
    Current Liabilities
    Accounts payable                                    $376.5        $283.6
    Accrued liabilities                                  179.7         165.2
    Deferred income taxes                                 13.8          13.8
    Current portion of long-term debt                      6.3           5.3
       Total Current Liabilities                         576.3         467.9
    Long-term debt                                       535.9          45.1
    Deferred income taxes                                  8.9           8.7
    Accrued pension benefits                             190.6         184.5
    Accrued postretirement benefits                       48.0          48.5
    Other long-term liabilities                           85.1          83.2
                                                          ----          ----
           Total Long-Term Liabilities                   868.5         370.0
    Redeemable preferred stock; par value
     $.01; 5,000 shares authorized and issued              5.3           5.2
    at March 31, 2011
    Stockholder's Equity
      Common stock; par value $.01; 5,000 shares
       authorized and 100 shares issued                      -             -
      Additional paid-in capital                         647.3         838.7
    Retained earnings                                     22.2          71.2
    Accumulated other comprehensive income                47.6          26.7
           Total Aleris International, Inc. Equity       717.1         936.6
    Noncontrolling interest                               (0.1)            -
           Total Equity                                  717.0         936.6
                                                         -----         -----
           Total Liabilities and Equity               $2,167.1      $1,779.7
                                                      ========      ========
                               Aleris International, Inc.
                               --------------------------

                         Consolidated Statements of Cash Flows
                                      (unaudited)
                                     (in millions)

                                              (Successor)   (Predecessor)
                                              -----------   -------------
                                                 For the
                                                  three     For the three
                                              months ended  months ended
                                                March 31,      March 31,
                                                   2011          2010
                                               ----------     ----------
    Operating activities
      Net income                                  $57.3           $9.7
      Adjustments to reconcile net income
       to net cash provided (used) by
       operating activities:
         Depreciation and amortization             16.6           12.3
         Loss (benefit) from deferred income
          taxes                                     0.2           (0.7)
         Reorganization items:
             Charges                                0.6            4.7
             Payments, net of cash received        (2.2)          (4.9)
         Restructuring and impairment charges
          (gains):
             Charges (gains)                        0.1           (1.3)
           Payments                                (1.5)          (3.9)
         Stock-based compensation expense           2.4            0.8
         Unrealized gains on derivative
          financial instruments                    (5.0)          (0.5)
         Currency exchange (gains) losses on
          debt                                     (4.6)           8.7
         Amortization of debt costs                 1.3           17.4
         Other non-cash (gains) charges, net       (4.5)           6.2
      Changes in operating assets and
       liabilities:
         Change in accounts receivable           (138.9)        (142.7)
         Change in inventories                    (78.0)         (85.2)
         Change in other assets                    (0.7)           4.5
         Change in accounts payable                81.9           42.5
         Change in accrued liabilities             18.2           29.7
    Net cash used by operating activities         (56.8)        (102.7)
    Investing activities
      Payments for property, plant and
       equipment                                  (22.9)          (9.3)
      Proceeds from the sale of property,
       plant and equipment                          0.4            0.2
      Other                                           -            0.2
                                                    ---            ---
    Net cash used by investing activities         (22.5)          (8.9)
    Financing activities
      Proceeds from Senior Notes, net of
       discount of $10.0                          490.0              -
      Proceeds from DIP ABL Facility                  -          485.0
      Payments on DIP ABL Facility                    -         (429.9)
      Proceeds from DIP Term Facility                 -           34.6
      Net proceeds from (payments on) long-
       term debt                                    1.5           (0.8)
      Debt issuance costs                          (2.4)         (11.9)
      Dividends paid to Aleris Corporation       (300.0)             -
    Net cash provided by financing
     activities                                   189.1           77.0
      Effect of exchange rate differences
       on cash and cash equivalents                 4.1           (3.3)
    Net increase (decrease) in cash and
     cash equivalents                             113.9          (37.9)
      Cash and cash equivalents at
       beginning of period                        113.5          108.9
                                                  -----          -----
    Cash and cash equivalents at end of
     period                                      $227.4          $71.0
                                                 ======          =====
                            Aleris International, Inc.
                            --------------------------

        Reconciliation of Net Income Attributable to Aleris International,
                             Inc. to Adjusted EBITDA
                                   (unaudited)
                                  (in millions)

                                                For the three months
                                                       ended
                                                     March 31,
                                                     ---------
                                                   2011          2010
                                                   ----          ----
                                            (Successor)      (Predecessor)

    Net income attributable to Aleris
     International, Inc.                          $57.4          $9.7
    Interest expense, net                           8.4          44.4
    Provision for income taxes                      5.7           1.3
    Depreciation and amortization                  16.6          12.3
                                                   ----          ----
      EBITDA                                       88.1          67.7
    Reorganization items, net                       0.6           4.7
    Unrealized gains on derivative
     financial instruments                         (5.0)         (0.5)
    Restructuring and impairment charges
     (gains)                                        0.1          (1.3)
    Impact of recording assets at fair
     value through
        fresh-start and purchase accounting           -           1.0
    Currency (gains) losses on
     translation of indebtedness                   (4.6)          8.7
    Stock-based compensation expense                2.4           0.8
    Other                                          (2.2)          0.4
    Favorable metal price lag                      (0.9)        (25.6)
      Adjusted EBITDA                             $78.5         $55.9
                                                  =====          =====
                             Aleris International, Inc.
                             --------------------------

         Reconciliation of Adjusted EBITDA to Cash Flows Used by Operating
                                     Activities
                                    (unaudited)
                                   (in millions)

                                              For the three months
                                                      ended
                                                   March 31,
                                                   ---------
                                              2011            2010
                                              ----            ----
                                        (Successor)         (Predecessor)

    Adjusted EBITDA                          $78.5            $55.9
    Reorganization items, net                 (0.6)            (4.7)
    Unrealized gains on derivative
     financial instruments                     5.0              0.5
    Restructuring and impairment
     (charges) gains                          (0.1)             1.3
    Impact of recording assets at fair
     value through
        fresh-start and purchase
         accounting                              -             (1.0)
    Currency gains (losses) on
     translation of indebtedness               4.6             (8.7)
    Stock-based compensation expense          (2.4)            (0.8)
    Other                                      2.2             (0.4)
    Favorable metal price lag                  0.9             25.6
                                               ---             ----
    EBITDA                                    88.1             67.7
    Interest expense, net                     (8.4)           (44.4)
    Provision for income taxes                (5.7)            (1.3)
    Depreciation and amortization            (16.6)           (12.3)
                                             -----            -----
    Net income attributable to Aleris
     International, Inc.                      57.4              9.7
    Net loss attributable to
     noncontrolling interest                  (0.1)               -
                                              ----              ---
    Net income                                57.3              9.7
    Depreciation and amortization             16.6             12.3
    Loss (benefit) from deferred
     income taxes                              0.2             (0.7)
    Reorganization items, net of
     payments                                 (1.6)            (0.2)
    Restructuring and impairment
     charges (gains), net of payments         (1.4)            (5.2)
    Stock-based compensation expense           2.4              0.8
    Unrealized gains on derivative
     financial instruments                    (5.0)            (0.5)
    Currency exchange (gains) losses
     on debt                                  (4.6)             8.7
    Amortization of debt issuance
     costs                                     1.3             17.4
    Other non-cash (gains) charges,
     net                                      (4.5)             6.2
    Change in operating assets and
     liabilities:
        Change in accounts receivable       (138.9)          (142.7)
        Change in inventories                (78.0)           (85.2)
        Change in other assets                (0.7)             4.5
        Change in accounts payable            81.9             42.5
        Change in accrued liabilities         18.2             29.7
    Net cash used by operating
     activities                             $(56.8)         $(102.7)
                                            ======            =======
                             Aleris International, Inc.
                             --------------------------

                        Reconciliation of Segment Income to
                              Segment Adjusted EBITDA
                                    (unaudited)
                                   (in millions)

                                       For the three months ended
                                               March 31,
                                         --------------------------
                                           2011              2010
                                           ----              ----
                                    (Successor)         (Predecessor)
    Rolled Products North America
      Segment income                      $14.4             $22.0
      Depreciation and amortization         9.8               5.7
      Other                                 0.2               0.2
      Favorable metal price lag            (1.4)             (5.5)
        Segment Adjusted EBITDA           $23.0             $22.4
                                          =====             =====

    Recycling and Specification
     Alloys Americas
      Segment income                      $14.9             $15.4
      Depreciation and amortization         1.6               1.8
      Other                                 0.1              (0.1)
        Segment Adjusted EBITDA           $16.6             $17.1
                                          =====              =====

    Europe
      Segment income                      $46.4             $36.5
      Impact of recording assets at
       fair value through
         fresh-start and purchase
          accounting                          -               1.0
      Depreciation and amortization         4.2               4.1
      Other                                (4.2)                -
      Unfavorable (favorable) metal
       price lag                            0.5             (20.0)
        Segment Adjusted EBITDA           $46.9             $21.6
                                          =====              =====

Investor Contact: Sean M. Stack, +1-216-910-3504, or Media Contact: Kristen Bihary, +1-216-910-3664

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