Aleris Reports Third Quarter 2011 Results
By Aleris International Inc., PRNEThursday, November 3, 2011
CLEVELAND, November 4, 2011 -
Aleris International, Inc. today reported results for the third quarter ended September 30, 2011.
Performance Summary
- Revenue for the third quarter of 2011 was approximately $1.2 billion, an 18 percent increase over the third quarter of 2010. This increase was primarily due to higher London Metal Exchange (LME) prices and rolling margins as well as an improved product mix.
- Net income attributable to Aleris International, Inc. for the third quarter of 2011 was $28 million compared to $54 million for the third quarter of 2010.
- Adjusted EBITDA for the third quarter of 2011 was $96 million compared to $72 million for the third quarter of 2010, a 34 percent increase. Adjusted EBITDA for the 12 months ended September 30, 2011 totaled $333 million.
- Cash provided by operating activities was $125 million in the third quarter of 2011 compared to cash provided of $73 million in the third quarter of 2010 driven by higher EBITDA and working capital productivity.
- Liquidity at September 30, 2011 was $761 million, which consisted of $495 million of availability under the Company’s revolving credit facility plus $266 million of cash.
- Capital expenditures increased in the third quarter sequentially and versus the prior year as spending on our growth projects in Zhenjiang, China, Duffel, Belgium and the recycling business continued to progress as planned.
Aleris International, Inc.(1)
For the three months
ended For the nine months ended
September 30, September 30,
2011 2010 2011 2010
(Successor) (Successor) (Combined)
(Dollars and
pounds in millions) (unaudited) (unaudited)
Pounds invoiced 1,143 1,180 3,482 3,375
Rolled Products
North America 216 222 635 641
Recycling and
Specification
Alloys Americas 503 532 1,502 1,487
Europe 425 426 1,346 1,246
Revenue $ 1,247 $ 1,057 $ 3,767 $ 3,058
Net income
attributable to
Aleris
International,
Inc. $ 28 $ 54 $ 142 $ 2,234
Adjusted EBITDA $ 96 $ 72 $ 270 $ 201
Cash provided
(used) by
operating
activities $ 125 $ 73 $ 150 $ (75)
(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. For purposes of discussing operating performance in this press release, the Successor and Predecessor results have been combined to derive “Combined” results for the nine months ended September 30, 2010. All references to operating results for this period are to the combined results.
Aleris reported revenues of approximately $1.2 billion for the third quarter of 2011 compared to approximately $1.1 billion in the same period of 2010, driven by improved product mix and higher rolling margins and aluminum prices. For the third quarter of 2011, net income attributable to Aleris International, Inc. totaled $28 million compared to $54 million in the third quarter of 2010. While gross margins increased as a result of volume, mix and price improvements, third quarter 2011 net income was negatively impacted by a net $27 million variance between unrealized non-cash mark to market changes in derivative financial instruments, metal price lag and the impact of purchase accounting on derivative instruments, a $9 million increase in interest expense associated with the Company’s $500 million senior note offering, an $8 million reduction in currency gains, primarily due to exchange rate fluctuations between the Euro and U.S. dollar, and $4 million of start-up expenses associated with our joint venture in Zhenjiang, China. In addition, we terminated our research and development agreement with Tata Steel, successor to Corus Group Ltd., during the third quarter of 2011 and, as a result, recorded a one-time $12 million contract termination charge in third quarter 2011 selling, general and administrative expenses.
Adjusted EBITDA totaled $96 million in the third quarter of 2011 compared to $72 million in the third quarter of 2010. Operating results were positively impacted by a 3 percent increase in volume, after adjusting for the sale of the Brazilian recycling facility in December 2010, and a more profitable selling mix driven by substantially higher aircraft and automotive volumes. Adjusted EBITDA also benefited from margin improvements as higher rolling margins, better scrap and metal spreads, and productivity improvements more than offset inflationary and other cost pressures.
At September 30, 2011, the Company’s long-term indebtedness consisted primarily of $500 million of 7 5/8% senior notes, $45 million of exchangeable notes, and $11 million of non-recourse term-loan debt held by Aleris’s China joint venture. Aleris had $761 million of liquidity at September 30, 2011, which consisted of $495 million of availability under the Company’s revolving credit facility plus $266 million of cash.
Rolled Products North America
Rolled Products North America’s segment income for the third quarter of 2011 increased by $1 million to $19 million compared to the third quarter of 2010. Segment Adjusted EBITDA increased by 11 percent, or $3 million, to $27 million. The segment reported improved operating results, which benefited from higher rolling margins, higher scrap utilization and improved scrap spreads. Despite continued improvements in demand from the transportation segment and a slight rebound in distributor segment volumes, the quarter saw a 3 percent lower volume overall, driven largely by a 15 percent reduction in volume to building and construction customers. Previously announced pricing initiatives led to continued year-over-year improvement in rolling margins and enabled the Rolled Products North America business to more than offset inflationary pressures on commodity costs.
Segment income for the third quarter of 2011 increased from the third quarter of 2010 as a result of the increase in Segment Adjusted EBITDA and changes in metal price lag, but was negatively impacted by reduced benefits from valuing inventory and other items to fair value upon the emergence from bankruptcy. Neither fresh-start accounting nor metal price lag impact Adjusted EBITDA.
Recycling and Specification Alloys Americas
Recycling and Specification Alloys Americas’ segment income increased by $9 million, from $10 million in the third quarter of 2010 to $19 million in the third quarter of 2011. Segment Adjusted EBITDA increased by 72 percent, or $9 million, from $12 million in the third quarter of 2010 to $21 million in the third quarter of 2011. Operating performance was positively impacted by improved demand from the North American automotive industry and recycling volumes. Excluding the effects of the sale of the Brazilian facility, third quarter 2011 shipment volumes improved 9 percent from the prior year period. Segment results in the quarter were favorably impacted by wider metal spreads and higher aluminum prices as well as the sale of the Brazilian facility, which incurred an EBITDA loss of $2 million in the third quarter of 2010. Productivity gains associated with the Aleris Operating System (AOS) further impacted quarterly performance, continuing to offset inflation.
Europe
Europe’s segment income for the third quarter of 2011 increased by $21 million to $48 million compared to the third quarter of 2010. Segment Adjusted EBITDA increased 32 percent, or $14 million, to $58 million, compared to the prior period. Improved operating performance was driven primarily by an improved product mix, with strong double-digit increases in the most profitable product categories within rolled products, including aerospace plate and sheet, and automotive sheet. European recycling operations continued to benefit from robust automotive demand, although year-over-year volume growth slowed compared with the first half of 2011. One-time gains and currency fluctuations further improved Segment Adjusted EBITDA by $7 million compared to the prior year.
Segment income for the third quarter of 2011 increased from the third quarter of 2010 as a result of the increase in Segment Adjusted EBITDA and an $18 million variance in the impact of metal price lag. These increases were partially offset by $12 million of contract termination costs recorded during the third quarter of 2011 associated with the ending of our research and development agreement with Tata Steel.
Year-to-Date Results
For the nine months ended September 30, 2011, Aleris reported revenues of approximately $3.8 billion compared to approximately $3.1 billion for the nine months ended September 30, 2010. Net income attributable to Aleris International, Inc. for the nine months ended September 30, 2011 totaled $142 million compared to approximately $2.2 billion for the prior year period. Excluding a gain of approximately $2.2 billion related to the Company’s reorganization and emergence from bankruptcy, the Company reported net income attributable to Aleris International, Inc. of $12 million for the nine months ended September 30, 2010.
Adjusted EBITDA for the nine months ended September 30, 2011 totaled $270 million, a 34 percent increase compared to the nine months ended September 30, 2010. Additionally, for the twelve month period ended September 30, 2011, Adjusted EBITDA totaled $333 million.
In addition to the typical reduced demand in our fourth quarter and the current downward trend in LME prices, the European sovereign debt crisis and broader economic uncertainty are expected to result in lower overall demand in the fourth quarter as compared to the prior year, notwithstanding continued strong demand in aerospace, automotive and transportation.
Conference Call and Webcast Information
Aleris will hold a conference call on November 4, 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 # 24616320 - 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, start-up expenses 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 Cleveland, Ohio, the Company operates more than 40 production facilities in the Americas, Europe and Asia. For more information, visit www.aleris.com.
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.
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Aleris International, Inc.
Consolidated Statements of Operations
(unaudited)
(in millions)
(Successor) (Predecessor)
For the For the For the For the
three three nine four
months months months months
ended ended ended ended For the five
September September September September months ended
30, 2011 30, 2010 30, 2011 30, 2010 May 31, 2010
Revenues $ 1,247.1 $ 1,056.9 $ 3,766.7 $ 1,414.8 $ 1,643.0
Cost of sales 1,126.1 951.4 3,382.5 1,303.8 1,455.8
Gross profit 121.0 105.5 384.2 111.0 187.2
Selling,
general and
administrative
expenses 76.2 56.7 206.0 73.3 84.2
Restructuring
and impairment
charges
(gains) 1.6 0.7 3.4 1.2 (0.4)
Losses (gains)
on derivative
financial
instruments 0.7 (14.2) (3.5) (5.1) 28.6
Other
operating
expense
(income), net 0.8 - (3.0) - 0.4
Operating
income 41.7 62.3 181.3 41.6 74.4
Interest
expense, net 11.8 2.9 34.2 3.9 73.6
Reorganization
items, net 0.1 3.5 (1.4) 5.5 (2,227.3)
Other expense
(income), net 2.5 (7.3) (2.8) (7.2) 32.7
Income before
income taxes 27.3 63.2 151.3 39.4 2,195.4
(Benefit from)
provision for
income taxes (0.3) 9.4 9.6 9.7 (8.7)
Net income 27.6 53.8 141.7 29.7 2,204.1
Net loss
attributable
to
noncontrolling
interest (0.3) - (0.1) - -
Net income
attributable
to Aleris
International,
Inc. $ 27.9 $ 53.8 $ 141.8 $ 29.7 $ 2,204.1
Aleris International, Inc.
Operating and Segment Information
(unaudited)
(in millions)
(Successor)
For the three For the three
months ended months ended
September 30, 2011 September 30, 2010
Pounds invoiced:
Rolled Products North America 215.9 221.8
Recycling and Specification
Alloys Americas 502.5 532.4
Europe 424.7 426.1
Total 1,143.1 1,180.3
Revenues:
Rolled Products North America $ 365.5 $ 322.4
Recycling and Specification
Alloys Americas 247.1 224.8
Europe 636.5 513.5
Intersegment revenues (2.0) (3.8)
Total $ 1,247.1 $ 1,056.9
Segment income:
Rolled Products North America $ 19.1 $ 17.8
Recycling and Specification
Alloys Americas 18.7 9.9
Europe 47.7 27.2
Total segment income 85.5 54.9
Corporate general and
administrative expenses (16.1) (10.6)
Restructuring and impairment
charges (1.6) (0.7)
Interest expense, net (11.8) (2.9)
Unallocated (losses) gains on
derivative financial
instruments (22.5) 20.0
Reorganization items, net (0.1) (3.5)
Unallocated currency exchange
(losses) gains (6.0) 7.2
Other expense, net (0.1) (1.2)
Income before income taxes $ 27.3 $ 63.2
Segment adjusted EBITDA:
Rolled Products North America $ 27.1 $ 24.4
Recycling and Specification
Alloys Americas 20.8 12.1
Europe 58.0 44.1
Unallocated (9.5) (8.7)
Total Adjusted EBITDA $ 96.4 $ 71.9
Supplemental Europe segment
product line information
Pounds Invoiced 424.7 426.1
Rolled Products 171.2 175.6
Extruded Products 42.5 41.5
Recycled Products 211.0 209.0
Revenues $ 636.5 $ 513.5
Intrasegment eliminations (35.6) (38.3)
Rolled Products 391.3 327.0
Extruded Products 106.6 95.8
Recycled Products 174.2 129.0
Segment Adjusted EBITDA $ 58.0 $ 44.1
Rolled Products 47.0 30.6
Extruded Products 3.1 4.1
Recycled Products 7.9 9.4
Aleris International, Inc.
Operating and Segment Information
(unaudited)
(in millions)
(Successor) (Combined) (Successor) (Predecessor)
For the For the For the
nine nine four
months months months
ended ended ended For the five
September September September months ended
30, 2011 30, 2010 30, 2010 May 31, 2010
Pounds
invoiced
Rolled
Products North
America 634.6 641.2 295.6 345.6
Recycling and
Specification
Alloys
Americas 1,501.7 1,487.3 699.8 787.5
Europe 1,346.0 1,246.0 577.1 668.9
Total 3,482.3 3,374.5 1,572.5 1,802.0
Revenues:
Rolled
Products North
America $ 1,054.6 $ 935.7 $ 428.5 $ 507.2
Recycling and
Specification
Alloys
Americas 750.3 676.1 302.4 373.7
Europe 1,967.9 1,457.6 688.5 769.1
Intersegment
revenues (6.1) (11.6) (4.6) (7.0)
Total $ 3,766.7 $ 3,057.8 $ 1,414.8 $ 1,643.0
Segment
income:
Rolled
Products North
America $ 53.6 $ 53.3 $ 15.2 $ 38.1
Recycling and
Specification
Alloys
Americas 55.7 39.1 12.7 26.4
Europe 136.9 78.7 18.5 60.2
Total segment
income 246.2 171.1 46.4 124.7
Corporate
general and
administrative
expenses (43.8) (25.7) (13.5) (12.2)
Restructuring
and impairment
(charges)
gains (3.4) (0.8) (1.2) 0.4
Interest
expense, net (34.2) (77.5) (3.9) (73.6)
Unallocated
(losses) gains
on derivative
financial
instruments (13.8) (27.6) 11.2 (38.8)
Reorganization
items, net 1.4 2,221.8 (5.5) 2,227.3
Unallocated
currency
exchange
(losses) gains (0.2) (24.6) 7.4 (32.0)
Other expense,
net (0.9) (1.9) (1.5) (0.4)
Income before
income taxes $ 151.3 $ 2,234.8 $ 39.4 $ 2,195.4
Segment
adjusted
EBITDA:
Rolled
Products North
America $ 80.4 $ 74.1 $ 31.6 $ 42.5
Recycling and
Specification
Alloys
Americas 60.6 46.4 17.3 29.1
Europe 156.0 100.3 60.6 39.7
Corporate (27.1) (20.2) (10.9) (9.3)
Total Adjusted
EBITDA $ 269.9 $ 200.6 $ 98.6 $ 102.0
Supplemental
Europe segment
product line
information
Pounds
Invoiced 1,346.0 1,246.0 577.1 668.9
Rolled
Products 545.7 502.0 236.6 265.4
Extruded
Products 133.3 126.4 57.4 69.0
Recycled
Products 667.0 617.6 283.1 334.5
Revenues $ 1,967.9 $ 1,457.6 $ 688.5 $ 769.1
Intrasegment
eliminations (107.4) (83.9) (41.4) (42.5)
Rolled
Products 1,206.7 890.1 425.6 464.5
Extruded
Products 323.9 257.8 125.3 132.5
Recycled
Products 544.7 393.6 179.0 214.6
Segment
Adjusted
EBITDA $ 156.0 $ 100.3 $ 60.6 $ 39.7
Rolled
Products 117.7 69.3 41.1 28.2
Extruded
Products 7.5 7.3 6.4 0.9
Recycled
Products 30.8 23.7 13.1 10.6
Aleris International, Inc.
Consolidated Balance Sheet
(unaudited)
(in millions, except share and per share data)
(Successor)
September 30, 2011 December 31, 2010
ASSETS
Current Assets
Cash and cash equivalents $ 265.9 $ 113.5
Accounts receivable (net of
allowances of $9.4 and $8.7 at
September 30, 2011 and
December 31, 2010,
respectively) 530.4 393.4
Inventories 672.2 613.6
Deferred income taxes 1.6 1.6
Current derivative financial
instruments 14.0 17.4
Prepaid expenses and other
current assets 26.0 23.8
Total Current Assets 1,510.1 1,163.3
Property, plant and equipment,
net 573.1 510.0
Intangible assets, net 48.2 49.7
Long-term derivative financial
instruments 0.9 9.3
Deferred income taxes 13.8 13.9
Other long-term assets 35.9 33.5
Total Assets $ 2,182.0 $ 1,779.7
LIABILITIES AND
STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $ 376.4 $ 283.6
Accrued liabilities 219.6 165.2
Deferred income taxes 13.8 13.8
Current portion of long-term
debt 4.7 5.3
Total Current Liabilities 614.5 467.9
Long-term debt 549.0 45.1
Deferred income taxes 9.9 8.7
Accrued pension benefits 179.1 184.5
Accrued postretirement
benefits 47.0 48.5
Other long-term liabilities 80.7 83.2
Total Long-Term Liabilities 865.7 370.0
Redeemable preferred stock;
par value $.01; 5,000 shares
authorized and issued 5.3 5.2
Stockholder's Equity
Common stock; par value $.01;
5,000 shares authorized and
100 shares issued - -
Additional paid-in capital 630.9 838.7
Retained earnings 27.8 71.2
Accumulated other
comprehensive income 30.5 26.7
Total Aleris International,
Inc. Equity 689.2 936.6
Noncontrolling interest 7.3 -
Total Equity 696.5 936.6
Total Liabilities and Equity $ 2,182.0 $ 1,779.7
Aleris International, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(in millions)
(Successor)
For the three For the three
months ended months ended
September 30, 2011 September 30, 2010
Operating activities
Net income $ 27.6 $ 53.8
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 17.0 15.4
Provision for deferred income
taxes 0.7 -
Reorganization items:
Charges 0.1 3.5
Payments, net of cash received (1.6) (12.7)
Restructuring and impairment
charges:
Charges 1.6 0.7
Payments (1.2) (1.1)
Stock-based compensation
expense 2.8 2.1
Unrealized losses (gains) on
derivative financial
instruments 22.3 (20.9)
Currency exchange losses
(gains) on debt 5.3 (0.1)
Amortization of debt issuance
costs 1.5 1.0
Other non-cash charges
(gains), net 2.0 (14.8)
Changes in operating assets
and liabilities: - -
Change in accounts receivable 30.0 12.3
Change in inventories 7.4 (8.3)
Change in other assets 4.1 19.4
Change in accounts payable 16.4 20.8
Change in accrued liabilities (10.7) 2.1
Net cash provided by operating
activities 125.3 73.2
Investing activities
Payments for property, plant
and equipment (48.3) (18.8)
Proceeds from the sale of
property, plant and equipment 0.3 0.3
Other (0.2) (0.1)
Net cash used by investing
activities (48.2) (18.6)
Financing activities
Proceeds from ABL Facility - 3.9
Payments on ABL Facility - (36.2)
Proceeds from China Loan
Facility 5.8 -
Net payments on other
long-term debt (2.5) (0.2)
Debt and equity issuance costs (0.4) (0.7)
Contributions from
noncontrolling interests 3.5 -
Dividends paid - -
Net cash provided (used) by
financing activities 6.2 (33.2)
Effect of exchange rate
differences on cash and cash
equivalents (5.0) 6.2
Net increase in cash and cash
equivalents 78.3 27.6
Cash and cash equivalents at
beginning of period 187.6 67.5
Cash and cash equivalents at
end of period $ 265.9 $ 95.1
Aleris International, Inc.
Consolidated Statements of Cash Flows
(unaudited)
(in millions)
(Successor) Combined (Successor) (Predecessor)
For the For the For the
nine nine four
months months months
ended ended ended For the five
September September September months ended
30, 2011 30, 2010 30, 2010 May 31, 2010
Operating
activities
Net income $ 141.7 $ 2,233.8 $ 29.7 $ 2,204.1
Adjustments to
reconcile net
income to net
cash
provided
(used) by
operating
activities:
Depreciation
and
amortization 50.9 40.9 20.7 20.2
Provision for
(benefit from)
deferred
income taxes 1.5 (11.4) - (11.4)
Reorganization
items:
(Gains)
charges (1.4) (2,221.8) 5.5 (2,227.3)
Payments, net
of cash
received (1.7) (50.0) (18.8) (31.2)
Restructuring
and impairment
charges
(gains):
Charges
(gains) 3.4 0.8 1.2 (0.4)
Payments (3.0) (7.1) (1.6) (5.5)
Stock-based
compensation
expense 7.3 4.0 2.7 1.3
Unrealized
losses (gains)
on derivative
financial
instruments 13.4 27.0 (12.2) 39.2
Currency
exchange
(gains) losses
on debt (1.0) 25.5 - 25.5
Amortization
of debt
issuance costs 4.5 29.2 1.4 27.8
Other non-cash
(gains)
charges, net (5.9) 4.8 (13.5) 18.3
Changes in
operating
assets and
liabilities:
Change in
accounts
receivable (130.7) (165.8) 15.7 (181.5)
Change in
inventories (53.5) (115.6) 23.1 (138.7)
Change in
other assets (3.7) 2.3 17.5 (15.2)
Change in
accounts
payable 88.4 89.5 22.1 67.4
Change in
accrued
liabilities 39.5 38.5 5.1 33.4
Net cash
provided
(used) by
operating
activities 149.7 75.4 98.6 (174.0)
Investing
activities
Payments for
property,
plant and
equipment (108.4) (41.4) (25.4) (16.0)
Proceeds from
the sale of
property,
plant and
equipment 7.8 0.6 0.3 0.3
Other (0.4) 0.1 0.1 -
Net cash used
by investing
activities (101.0) (40.7) (25.0) (15.7)
Financing
activities
Proceeds from
ABL Facility - 140.8 60.8 80.0
Payments on
ABL Facility - (142.6) (142.6) -
Proceeds from
issuance of
Senior Notes,
net of
discount of
$10.0 490.0 - - -
Proceeds from
China Loan
Facility 11.5 - - -
Net payments
on other
long-term debt (1.0) (1.8) (0.5) (1.3)
Proceeds from
issuance of
common stock,
net of
issuance costs
of $22.5 - 541.1 - 541.1
Proceeds from
issuance of
Preferred
Stock - 5.0 - 5.0
Proceeds from
Exchangeable
Notes, net of
issuance costs
of $1.2 - 43.8 - 43.8
Proceeds from
DIP ABL
Facility - 895.3 - 895.3
Payments on
DIP ABL
Facility - (1,112.5) - (1,112.5)
Proceeds from
DIP Term
Facility - 34.8 - 34.8
Payments on
DIP Term
Facility - (244.7) - (244.7)
Debt and
equity
issuance costs (7.2) (55.2) (1.0) (54.2)
Contributions
from
noncontrolling
interests 7.6 - - -
Dividends paid
to Aleris
Corporation (400.0) - - -
Other 2.0 (0.1) (0.3) 0.2
Net cash
provided
(used) by
financing
activities 102.9 103.9 (83.6) 187.5
Effect of
exchange rate
differences on
cash and cash
equivalents 0.8 (1.6) 6.2 (7.8)
Net increase
(decrease) in
cash and cash
equivalents 152.4 (13.8) (3.8) (10.0)
Cash and cash
equivalents at
beginning of
period 113.5 108.9 98.9 108.9
Cash and cash
equivalents at
end of period $ 265.9 $ 95.1 $ 95.1 $ 98.9
Aleris International, Inc.
Reconciliation of Net Income Attributable to Aleris International,
Inc. to
Adjusted EBITDA
(unaudited)
(in millions)
For the three
months ended For the nine months ended
September 30, September 30,
2011 2010 2011 2010
(Successor) (Successor) (Combined)
Net income
attributable to
Aleris
International, Inc. $ 27.9 $ 53.8 $ 141.8 $ 2,233.8
Interest expense,
net 11.8 2.9 34.2 77.5
(Benefit from)
provision for income
taxes (0.3) 9.4 9.6 1.0
Depreciation and
amortization 17.0 15.4 50.9 40.9
EBITDA 56.4 81.5 236.5 2,353.2
Reorganization
items, net 0.1 3.5 (1.4) (2,221.8)
Unrealized losses
(gains) on
derivative financial
instruments 22.3 (20.9) 13.4 27.0
(Favorable)
unfavorable metal
price lag (8.7) 13.1 (6.3) (14.3)
Restructuring and
impairment charges 1.6 0.7 3.4 0.8
Impact of recording
assets at fair value
through
fresh-start and
purchase accounting 0.9 (1.2) 2.2 25.8
Currency losses
(gains) on
translation of
indebtedness 5.0 (7.2) (1.0) 24.6
Stock-based
compensation expense 2.8 2.1 7.3 4.0
Start-up costs 4.0 0.6 8.2 0.6
Other 12.0 (0.3) 7.6 0.7
Adjusted EBITDA $ 96.4 $ 71.9 $ 269.9 $ 200.6
Aleris International, Inc.
Reconciliation of Adjusted EBITDA to
Cash Flows Provided (Used) by Operating Activities
(unaudited)
(in millions)
For the three months For the nine months
ended ended
September 30, September 30,
2011 2010 2011 2010
(Successor) (Successor) (Combined)
Adjusted EBITDA $ 96.4 $ 71.9 $ 269.9 $ 200.6
Reorganization
items, net (0.1) (3.5) 1.4 2,221.8
Unrealized
(losses) gains on
derivative
financial
instruments (22.3) 20.9 (13.4) (27.0)
Favorable
(unfavorable)
metal price lag 8.7 (13.1) 6.3 14.3
Restructuring and
impairment
charges (1.6) (0.7) (3.4) (0.8)
Impact of
recording assets
at fair value
through
fresh-start and
purchase
accounting (0.9) 1.2 (2.2) (25.8)
Currency (losses)
gains on
translation of
indebtedness (5.0) 7.2 1.0 (24.6)
Stock-based
compensation
expense (2.8) (2.1) (7.3) (4.0)
Start-up costs (4.0) (0.6) (8.2) (0.6)
Other (12.0) 0.3 (7.6) (0.7)
EBITDA 56.4 81.5 236.5 2,353.2
Interest expense,
net (11.8) (2.9) (34.2) (77.5)
Benefit from
(provision for)
income taxes 0.3 (9.4) (9.6) (1.0)
Depreciation and
amortization (17.0) (15.4) (50.9) (40.9)
Net income
attributable to
Aleris
International,
Inc. 27.9 53.8 141.8 2,233.8
Net loss
attributable to
noncontrolling
interest (0.3) - (0.1) -
Net income 27.6 53.8 141.7 2,233.8
Depreciation and
amortization 17.0 15.4 50.9 40.9
Provision for
(benefit from)
deferred income
taxes 0.7 - 1.5 (11.4)
Reorganization
items, net of
payments (1.5) (9.2) (3.1) (2,271.8)
Restructuring and
impairment
charges (gains),
net of payments 0.4 (0.4) 0.4 (6.3)
Stock-based
compensation
expense 2.8 2.1 7.3 4.0
Unrealized losses
(gains) on
derivative
financial
instruments 22.3 (20.9) 13.4 27.0
Currency exchange
losses (gains) on
debt 5.3 (0.1) (1.0) 25.5
Amortization of
debt issuance
costs 1.5 1.0 4.5 29.2
Other non-cash
charges (gains),
net 2.0 (14.8) (5.9) 4.8
Change in
operating assets
and liabilities:
Change in
accounts
receivable 30.0 12.3 (130.7) (165.8)
Change in
inventories 7.4 (8.3) (53.5) (115.6)
Change in other
assets 4.1 19.4 (3.7) 2.3
Change in
accounts payable 16.4 20.8 88.4 89.5
Change in accrued
liabilities (10.7) 2.1 39.5 38.5
Net cash provided
(used) by
operating
activities $ 125.3 $ 73.2 $ 149.7 $ (75.4)
Aleris International, Inc.
Reconciliation of Segment Income to
Segment Adjusted EBITDA
(unaudited)
(in millions)
For the three months ended For the nine months ended
September 30, September 30,
2011 2010 2011 2010
(Successor) (Successor) (Combined)
Rolled
Products
North America
Segment
income $ 19.1 $ 17.8 $ 53.6 $ 53.3
Impact of
recording
assets at
fair value
through
fresh-start
and purchase
accounting - (4.4) - (2.5)
Depreciation
and
amortization 9.5 9.2 29.2 21.7
Other 0.3 - 0.6 0.6
(Favorable)
unfavorable
metal price
lag (1.8) 1.8 (3.0) 1.0
Segment
Adjusted
EBITDA $ 27.1 $ 24.4 $ 80.4 $ 74.1
Recycling and
Specification
Alloys
Americas
Segment
income $ 18.7 $ 9.9 $ 55.7 $ 39.1
Impact of
recording
assets at
fair value
through
fresh-start
and purchase
accounting - 0.2 - 1.9
Depreciation
and
amortization 1.7 2.0 5.1 5.6
Other 0.4 - (0.2) (0.2)
Segment
Adjusted
EBITDA $ 20.8 $ 12.1 $ 60.6 $ 46.4
Europe
Segment
income $ 47.7 $ 27.2 $ 136.9 $ 78.7
Impact of
recording
assets at
fair value
through
fresh-start
and purchase
accounting 0.9 3.0 2.2 26.5
Depreciation
and
amortization 5.0 3.2 14.0 11.3
Other 11.3 (0.6) 6.2 (0.9)
(Favorable)
unfavorable
metal price
lag (6.9) 11.3 (3.3) (15.3)
Segment
Adjusted
EBITDA $ 58.0 $ 44.1 $ 156.0 $ 100.3
Aleris International, Inc.
Reconciliation of Last Twelve Months
Net Income Attributable to Aleris International, Inc. to
Adjusted EBITDA
(unaudited)
(in millions)
For the twelve months ended
September 30, 2011
(Successor)
Net income attributable to Aleris
International, Inc. $ 183.6
Net loss attributable to noncontrolling
interest (0.1)
Depreciation and amortization 68.5
Provision for income taxes 0.1
Interest expense, net 37.3
EBITDA 289.4
Reorganization items, net 0.5
Unrealized losses on derivative financial
instruments 5.8
Restructuring, impairment and other charges 14.3
Impact of recording assets at fair value
through fresh-start and purchase accounting 2.4
Currency gains on translation of indebtedness 0.6
Stock-based compensation expense 9.5
Metal price lag (5.7)
Start-up costs 9.6
Other 6.8
Adjusted EBITDA $ 333.2
Investor Contact: Sean M. Stack, +1-216-910-3504 or Media Contact: Kristen Bihary, +1-216-910-3664
Tags: Aleris International Inc, Cleveland, November 4, Ohio
