BEACHWOOD, Ohio, May 13, 2011 /PRNewswire/ -- 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, http://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 http://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.
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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
===== =====
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