Aleris Reports Third Quarter 2011 Results

By Aleris International Inc., PRNE
Thursday, 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.

(Logo: photos.prnewswire.com/prnh/20110616/CL21386LOGO )


                                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

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