BEACHWOOD, Ohio, Nov. 12 /PRNewswire/ -- Aleris International, Inc. today
reported results for the quarter ended September 30, 2008.
Third Quarter Highlights
-- EBITDA from continuing operations, excluding special items, was
$67.6 million, including a $21.5 million negative impact from metal
price lag. Adjusting for the impact of metal price lag, EBITDA from
continuing operations, excluding special items, was $89.1 million.
-- Net debt was reduced by $63 million in the third quarter.
-- Free cash flow from continuing operations was $160.1 million in the
third quarter of 2008 compared to $32.9 million in the third quarter of
2007 as working capital management, LME and currency changes reduced
net working capital.
-- Productivity savings and acquisition synergies totaled $30 million in
the third quarter of 2008, which more than offset continued increased
non-aluminum commodity cost and general inflation.
-- Losses from continuing operations totaled $196.6 million in the third
quarter of 2008, and included $225.9 million of non-cash unrealized
losses on derivative financial instruments and restructuring-related
charges.
-- Adjusted EBITDA from continuing operations, including synergies, was
$341 million for the twelve months ended September 30, 2008. Adjusting
for the impact of metal price lag, Adjusted EBITDA from continuing
operations, including synergies, was $382 million for the twelve months
ended September 30, 2008. As of September 30, 2008, liquidity was
$377 million, which consists of $293 million of availability under
Aleris's revolving credit facility, plus cash and cash equivalents on
hand.
Aleris International, Inc.
For the three months For the nine months
ended September 30 ended September 30
2008 2007 2008 2007
(unaudited) (unaudited)
(Dollars and pounds
in millions) (1)
Pounds shipped:
Global rolled and
extruded products 501.9 563.3 1,541.8 1,646.8
Global recycling 841.5 790.9 2,604.0 2,332.7
Revenue $1,583.1 $1,531.3 $4,857.8 $4,455.9
(Loss) income from
continuing operations (196.6) 2.3 (196.9) (19.5)
Net (loss) income (197.8) 3.5 (194.5) (14.7)
EBITDA from continuing
operations, excluding
special items (2) 67.6 119.3 251.8 322.7
Cash flow provided (used)
by operating activities
of continuing operations 41.6 58.7 (146.3) 149.2
Free cash flow from
continuing operations (2) 160.1 32.9 15.5 186.5
(1) Aleris completed the sale of its Zinc business on January 11, 2008 for
$287.2 million. The working capital adjustment was finalized during
the fourth quarter and no further adjustments to the net gain are
anticipated. The Zinc business has been reported as a discontinued
operation in this press release and in Aleris's unaudited quarterly
financial statements. All discussion and data will exclude the Zinc
business unless otherwise noted.
(2) This press release refers to various non-GAAP (generally accepted
accounting principles) financial measures including EBITDA from
continuing operations, EBITDA from continuing operations, excluding
special items, and free cash flow from continuing operations. The
methods used to compute these measures are likely to differ from the
methods used by other companies. These non-GAAP measures have
limitations as analytical tools and should be considered in addition
to, not in isolation or as a substitute for, or superior to, Aleris's
measures of financial performance prepared in accordance with GAAP.
Investors are encouraged to review the accompanying tables reconciling
the non-GAAP financial measures to comparable GAAP amounts. "EBITDA
from continuing operations," as used in this press release, is defined
as income (loss) from continuing operations before interest income and
expense, taxes, depreciation and amortization and minority interests.
"EBITDA from continuing operations, excluding special items," as used
in this press release, is defined as EBITDA from continuing
operations, excluding restructuring and other charges, inventory
impairment charges, unrealized gains and losses on derivative
financial instruments, the impact of the write-up of inventory and
other items through purchase accounting, non-cash stock-based
compensation expense, sponsor management fees and expenses, and the
gain on the early extinguishment of debt. "Free cash flow from
continuing operations," as used in this press release, is defined as
EBITDA from continuing operations, excluding special items, less or
plus changes in accounts receivable, inventory and accounts payable
(excluding working capital acquired in business combinations) and less
capital expenditures. In determining changes in inventory, the change
in the reported balance sheet amounts due to the impact of the write-
up of inventory through purchase accounting has been excluded.
Management uses EBITDA from continuing operations, EBITDA from
continuing operations, excluding special items, and free cash flow
from continuing operations as performance metrics and believes these
measures provide additional information commonly used by Aleris's
noteholders and lenders with respect to the performance of our
fundamental business objectives, as well as Aleris's ability to meet
future debt service, capital expenditure and working capital needs.
Management believes EBITDA from continuing operations, excluding
special items, is useful to Aleris's stakeholders in understanding its
operating results and the ongoing performance of its underlying
businesses without the impact of these special items.
Third Quarter Operating Results
Aleris reported third quarter 2008 revenues of $1.6 billion and a loss
from continuing operations of $196.6 million. The loss from continuing
operations includes $151.3 million of unrealized losses on derivative
financial instruments, $61.3 million in restructuring and other charges, $13.3
million of inventory impairment charges associated with restructuring
initiatives, $5.0 million of purchase accounting items, and $2.5 million of
sponsor management fees and expenses. EBITDA from continuing operations,
excluding special items, was $67.6 million in the third quarter of 2008.
Adjusting for the negative impact of metal price lag of $21.5 million, EBITDA
from continuing operations, excluding special items, was $89.1 million.
For the third quarter of 2007, Aleris reported revenues of $1.5 billion
and income from continuing operations of $2.3 million. Income from continuing
operations included $16.7 million of purchase accounting items, $2.0 million
in restructuring and other charges, $2.3 million of sponsor management fees
and expenses, $1.1 million of non-cash stock-based compensation and $22.9
million of unrealized losses on derivative financial instruments. EBITDA from
continuing operations, excluding special items, was $119.3 million in the
third quarter of 2007. Adjusting for the positive impact of metal price lag
of approximately $5.9 million, EBITDA from continuing operations, excluding
special items, was $113.4 million.
EBITDA from continuing operations, excluding special items, decreased 43%
to $67.6 million in the third quarter of 2008 from $119.3 million in the third
quarter of 2007. Approximately $46.0 million of the decrease is attributable
to lower year-over-year volumes resulting from the continued decline in demand
from the North American building and construction and automotive industries as
well as weaker demand across Europe. In addition to the impacts of the
slowing global economy, material margins were negatively impacted as LME
aluminum prices declined significantly during the quarter, resulting in
approximately $21.5 million of negative metal price lag. Metal price lag
represents the timing difference between the cost of aluminum in cost of sales
and the price of aluminum flowing through revenues, net of the results of
hedging activities. In addition, continued higher commodity costs negatively
impacted results in the third quarter. Productivity gains associated with
plant closures and other cost reduction initiatives and higher margins in
Europe associated with an improving product mix and higher pricing partially
offset the impact of volume, metal price lag and non-aluminum commodity cost
inflation. Adjusting for the impact of metal price lag, EBITDA from
continuing operations, excluding special items, decreased 21% to $89.1 million
in the third quarter of 2008 from $113.4 million in the third quarter of 2007.
Steven J. Demetriou, Chairman and Chief Executive Officer of Aleris, said,
"Excluding the impact of metal price lag, given the operating environment, we
were generally pleased with the results in the quarter. However, during the
quarter, we saw further erosion in all of our key industry segments in North
America and Europe, with the exception of aerospace, as global economic
conditions continue to worsen. As this economic crisis continues to unfold,
we will continue our relentless drive to reduce our cost base, eliminating all
non-critical spending from our operations and continuing to generate cash by
driving working capital out of the system."
Global Rolled and Extruded Products
Global Rolled and Extruded Products recorded segment income of $6.9
million in the third quarter of 2008 and $45.3 million in the third quarter of
2007. Excluding the impact of purchase accounting adjustments and inventory
impairment charges, segment EBITDA totaled $67.3 million in the third quarter
of 2008 versus $110.1 million in the third quarter of 2007, a 39% decrease.
The decline in performance was driven by an 11% reduction in shipments
compared to the prior year quarter as well as lower material margins resulting
from the negative impacts of metal price lag in the third quarter of 2008 and
tighter scrap spreads in North America caused by lower building and
construction production volume. These declines were partially offset by net
gains from productivity initiatives and the impact of foreign currency.
Adjusting for the impact of metal price lag, segment EBITDA, excluding special
items, totaled $88.8 million in the third quarter of 2008 versus $104.2
million in the third quarter of 2007, a 15% decrease.
Global Recycling
Segment income was $16.3 million in the third quarter of 2008 compared to
$8.8 million in the third quarter of 2007. Segment EBITDA, excluding special
items, was $31.9 million in the third quarter of 2008 compared to $26.6
million in the third quarter of 2007, a 20% increase. The improvement is
attributable to acquisition synergies resulting from the Wabash Alloys
acquisition and improved pricing which more than offset reduced demand from
the automotive related Specification Alloy business and the Recycling customer
base.
Corporate Expense
Corporate expense primarily includes corporate general and administrative
expense and certain functions that are performed for the business units, other
income and expense, certain realized and unrealized gains and losses on
derivative financial instruments resulting from the centralization of Aleris's
risk management functions and interest expense.
General and administrative expenses increased $5.6 million in the third
quarter of 2008 to $31.7 million from $26.1 million in the third quarter of
2007 primarily due to higher professional fees related to a global procurement
savings initiative, employee costs associated with strengthening Aleris's
global finance organization, and the translation effect of the stronger euro
when compared to the prior year quarter.
During the third quarter of 2008, Aleris recorded $53.7 million of
restructuring and other charges associated with the permanent closure of its
Cap-de-la-Madeleine, Quebec aluminum rolling mill facility. The expense
consists primarily of $29.1 million of asset impairment charges for inventory
and long-lived assets as well as $24.6 million of severance costs and other
cash exit and contract termination costs. In addition to these changes, Aleris
recorded $7.6 million of asset impairments and other exit costs associated
with previously closed facilities.
Aleris recorded non-cash unrealized losses of $151.3 million on derivative
financial instruments as a result of the weakening of the euro against the
U.S. dollar as well as the decreasing prices of aluminum and natural gas.
These unrealized losses are not allocated to the business units until the
derivative financial instruments are settled in cash. As market positions
change daily, these unrealized losses may not represent the actual realized
cash losses that will be received upon settlement. However, as the fair value
of the derivative instruments changes so will the price paid for the
underlying hedged item.
Free cash flow in the third quarter of 2008 was $160.1 million compared to
$32.9 million in the prior year quarter. Free cash flow was positively
impacted by the decrease in working capital due to working capital management
initiatives which have reduced overall inventory quantities as well as a
declining LME and strengthening U.S. dollar. In addition, capital expenditures
totaled $24.7 million in the third quarter of 2008 compared to $39.2 million
in the third quarter of 2007.
Aleris ended the third quarter of 2008 with $2.6 billion of net debt and
$377 million in liquidity, which consisted of $293 million of availability
under Aleris's revolving credit facility, plus cash and cash equivalents on
hand. In the quarter, net debt was reduced by $63 million driven by cash from
working capital reductions, partially offset by margin requirements related to
Aleris's hedge book given the drop in the LME over the quarter. Adjusted
EBITDA from continuing operations, including synergies, was $340.8 million for
the twelve months ended September 30, 2008. Adjusting for the negative impact
of metal price lag, Adjusted EBITDA from continuing operations, including
synergies, was $381.8 million for the twelve months ended September 30, 2008.
In the quarter, in order to protect liquidity in the current environment
of increased volatility of the LME, Aleris increased the size of its revolving
credit facility by $244 million from up to $850 million to up to approximately
$1.1 billion, subject to applicable borrowing bases.
In addition, Aleris adjusted its metal hedging strategy to preserve its
liquidity position by unwinding certain hedges that are related to base
inventory levels, which exposed Aleris to more metal price lag, or one-time
timing differences between the cost of metal and the price of metal sold.
Transaction margin protection hedging remains in place. In the quarter, as
discussed earlier, results were negatively impacted by metal price lag due to
the impact of the lower LME. However, the lower LME contributed to higher
free cash flow.
Year-to-date 2008 Operating Results
Aleris reported revenues of $4.9 billion and a loss from continuing
operations of $196.9 million for the nine month period ended September 30,
2008. The loss from continuing operations includes $74.1 million of
unrealized losses on derivative financial instruments, $75.1 million in
restructuring and other charges, $17.1 million of purchase accounting items,
$13.3 million of inventory impairment charges associated with restructuring
initiatives, $7.1 million of sponsor management fees and expenses, and $1.8
million of charges for non-cash stock-based compensation. EBITDA from
continuing operations, excluding special items, was $251.8 million for the
nine month period ended September 30, 2008. Adjusting for the negative impact
of metal price lag, Adjusted EBITDA from continuing operations, excluding
special items, was $284.4 million for the nine month period ended September
30, 2008.
For the nine month period ended September 30, 2007, Aleris reported
revenues of $4.5 billion and a loss from continuing operations of $19.5
million. The loss from continuing operations includes $91.8 million from
purchase accounting, $10.9 million in restructuring and other charges, $6.8
million of sponsor management fees and expenses, $2.9 million of non-cash
stock-based compensation and $17.4 million of unrealized gains on derivative
financial instruments. EBITDA from continuing operations, excluding special
items, was $322.7 million for the nine month period ended September 30, 2007.
Adjusting for the negative impact of metal price lag, Adjusted EBITDA from
continuing operations, excluding special items, was $330.4 million for the
nine month period ended September 30, 2007.
EBITDA from continuing operations, excluding special items, in the nine
months ended September 30, 2008 was $251.8 million versus $322.7 million for
the nine months ended September 30, 2007. The decline is primarily due to
lower year-over-year volumes resulting from declining demand in the North
American building and construction and automotive industries and certain
European end use industries. In addition, declining LME aluminum prices have
resulted in unfavorable metal price lag effects as compared to the prior year
which have only partially been offset by derivative financial instruments.
The unfavorable impacts of metal price lag were $32.6 million and $7.7 million
in the first nine months of 2008 and 2007, respectively. Also contributing to
the decline are the continued impact of higher non-aluminum commodity costs as
well as general inflation. These negative effects have been partially offset
by acquisition synergies and productivity initiatives as well as wider spreads
and higher pricing in the Global Recycling operations. Adjusting for the
impact of metal price lag, EBITDA from continuing operations, excluding
special items, in the nine months ended September 30, 2008 was $284.4 million
versus $330.4 million for the nine months ended September 30, 2007.
Conference Call and Webcast Information
Aleris will hold a conference call November 12, 2008 at 10:00 a.m. Eastern
time. Steven J. Demetriou, Chairman and Chief Executive Officer, Sean M.
Stack, Executive Vice President, Corporate Development and Strategy and Kevin
L. Brown, Executive Vice President and Chief Financial Officer, will host the
call to discuss results.
The call can be accessed by dialing 866-713-8563 or 617-597-5311 and
referencing passcode 10179086 at least 10 minutes prior to the presentation,
which will begin promptly at 10 a.m. Eastern time. In addition, the conference
call will be broadcast live on Aleris's web site at www.aleris.com.
A replay of the conference call will be posted on Aleris's web site at
www.aleris.com. A taped replay of the call will also be available by dialing
888-286-8010 or 617-801-6888 and referencing passcode 72006033 beginning at
12:00 p.m. Eastern time, November 12, 2008 until 11:59 p.m. Eastern time,
November 19, 2008.
About Aleris
Aleris International, Inc. is a global leader in aluminum rolled products
and extrusions, aluminum recycling and specification alloy production.
Headquartered in Beachwood, Ohio, a suburb of Cleveland, Aleris operates over
40 production facilities in North America, Europe, South America and Asia, and
employs approximately 8,400 employees. For more information about Aleris,
please visit its web site at www.aleris.com.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SAFE HARBOR REGARDING FORWARD-LOOKING STATEMENTS
Forward-looking statements made in this news release are made pursuant to
the safe harbor provision of the Private Securities Litigation Reform Act of
1995. These include statements that contain words such as "believe,"
"expect," "anticipate," "intend," "estimate," "should" and similar expressions
intended to connote future events and circumstances, and include statements
regarding future actual and adjusted earnings; future improvements in margins,
processing volumes and pricing; overall 2008 operating performance;
anticipated effective tax rates; expected cost savings; success in integrating
and anticipated synergies resulting from Aleris's recent acquisitions,
including the acquisition of the downstream aluminum businesses of Corus Group
plc; its future growth; the anticipated economic environment in 2008; and
future benefits from acquisitions and new products. Investors are cautioned
that all forward-looking statements involve risks and uncertainties, and that
actual results could differ materially from those described in the forward-
looking statements. These risks and uncertainties would include, without
limitation, Aleris's levels of indebtedness and debt service obligations; its
ability to effectively integrate the business and operations of its
acquisitions; further slowdowns in automotive production in the U.S. and
Europe; the financial condition of Aleris's customers and future bankruptcies
and defaults by major customers; the availability at favorable cost of
aluminum scrap and other metal supplies that Aleris processes; the ability of
Aleris to enter into effective metals, natural gas and other commodity
derivatives; continued increases in natural gas and other fuel costs of
Aleris; a weakening in industrial demand resulting from a decline in U.S. or
world economic conditions, including any decline caused by terrorist
activities or other unanticipated events; future utilized capacity of Aleris's
various facilities; a continuation of building and construction customers and
distribution customers reducing their inventory levels and reducing the volume
of Aleris's shipments; restrictions on and future levels and timing of capital
expenditures; retention of Aleris's major customers; the timing and amounts of
collections; currency exchange fluctuations; future write-downs or impairment
charges which may be required because of the occurrence of some of the
uncertainties listed above; the difficult conditions in the capital, credit,
commodities, automobile and housing markets and in the current economy; and
other risks listed in Aleris's filings with the Securities and Exchange
Commission (the "SEC"), including but not limited to Aleris's annual report on
Form 10-K for the fiscal year ended December 31, 2007, and quarterly report
on Form 10-Q for the quarter ended September 30, 2008 to be filed,
particularly the section entitled "Risk Factors" contained therein.
Aleris International, Inc.
Consolidated Statement of Operations
(unaudited)
(in millions)
For the three months For the nine months
ended September 30 ended September 30
2008 2007 2008 2007
Revenues $1,583.1 $1,531.3 $4,857.8 $4,455.9
Cost of sales 1,525.5 1,435.8 4,579.7 4,180.0
Gross profit 57.6 95.5 278.1 275.9
Selling, general and
administrative expense 82.3 84.4 238.0 212.7
Restructuring and other
charges 61.3 2.0 75.1 10.9
Losses (gains) on
derivative financial
instruments 143.0 (1.7) 82.6 (30.9)
Operating (loss) income (229.0) 10.8 (117.6) 83.2
Interest expense 58.2 51.0 171.9 151.4
Interest income (0.2) (0.7) (1.6) (1.9)
Other (income) expense, net (4.1) 3.6 (8.3) 3.8
Loss from continuing
operations before provision
for income taxes and
minority interests (282.9) (43.1) (279.6) (70.1)
Benefit from income taxes (86.3) (45.6) (83.2) (51.2)
(Loss) income from continuing
operations before minority
interests (196.6) 2.5 (196.4) (18.9)
Minority interests, net of
provision for income taxes - 0.2 0.5 0.6
(Loss) income from continuing
operations (196.6) 2.3 (196.9) (19.5)
(Loss) income from
discontinued operations,
net of tax (1.2) 1.2 2.4 4.8
Net (loss) income $(197.8) $3.5 $(194.5) $(14.7)
Aleris International, Inc.
Operating and Segment Information
(unaudited)
(in millions)
For the three months For the nine months
ended September 30 ended September 30
2008 2007 2008 2007
Supplemental information:
Depreciation and amortization $59.1 $67.1 $173.2 $148.3
Capital expenditures 24.7 39.2 107.6 126.5
Segment reporting:
Shipments (pounds)
Global rolled and extruded
products 501.9 563.3 1,541.8 1,646.8
Global recycling 841.5 790.9 2,604.0 2,332.7
1,343.4 1,354.2 4,145.8 3,979.5
Revenues:
Global rolled and extruded
products $1,027.8 $1,146.3 $3,128.9 $3,299.8
Global recycling 579.1 425.1 1,809.6 1,267.1
Intersegment eliminations (23.8) (40.1) (80.7) (111.0)
$1,583.1 $1,531.3 $4,857.8 $4,455.9
Segment income:
Global rolled and extruded
products $6.9 $45.3 $61.8 $95.2
Global recycling 16.3 8.8 67.1 49.9
23.2 54.1 128.9 145.1
Unallocated amounts:
Corporate general and
administrative expense (31.7) (26.1) (91.1) (75.0)
Restructuring and other charges (61.3) (2.0) (75.1) (10.9)
(Losses) gains from derivative
financial instruments (150.0) (21.0) (72.5) 18.3
Interest expense (58.2) (51.0) (171.9) (151.4)
Interest and other (expense)
income, net (4.9) 2.9 2.1 3.8
Loss from continuing operations
before provision for income taxes
and minority interests $(282.9) $(43.1) $(279.6) $(70.1)
Aleris International, Inc.
Condensed Consolidated Balance Sheet
(in millions)
September 30, December 31,
2008 2007
ASSETS (unaudited)
Current Assets
Cash and cash equivalents $83.7 $109.9
Accounts receivable, net 766.4 668.0
Inventories 801.7 839.7
Deferred income taxes 135.7 41.6
Derivative financial instruments 20.9 30.6
Prepaid expenses and other current assets 102.3 40.6
Assets of discontinued operations - current - 254.1
Total Current Assets 1,910.7 1,984.5
Property, plant and equipment, net 1,324.3 1,423.5
Goodwill 1,216.5 1,219.1
Intangible assets, net 297.5 329.9
Derivative financial instruments 40.6 56.4
Deferred income taxes 10.8 10.8
Other assets 51.2 49.1
TOTAL ASSETS $4,851.6 $5,073.3
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $618.2 $687.4
Accrued liabilities 297.2 192.9
Derivative financial instruments 75.0 33.1
Deferred income taxes 25.2 25.2
Current maturities of long-term debt 21.0 20.6
Liabilities of discontinued
operations - current - 67.5
Total Current Liabilities 1,036.6 1,026.7
Long-term debt 2,684.3 2,696.5
Deferred income taxes 186.4 177.3
Accrued pension benefits 151.9 155.8
Accrued postretirement benefits 50.0 52.5
Other long-term liabilities 124.4 113.8
Stockholder's Equity 618.0 850.7
TOTAL LIABILITIES AND EQUITY $4,851.6 $5,073.3
Aleris International, Inc.
Reconciliation of (Loss) Income from Continuing Operations to
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
and EBITDA, Excluding Special Items (1)
(unaudited)
(in millions)
For the three For the nine
months ended months ended
September 30 September 30
2008 2007 2008 2007
(Loss) income from continuing
operations $(196.6) $2.3 $(196.9) $(19.5)
Interest expense, net 58.0 50.3 170.3 149.5
Benefit from income taxes (86.3) (45.6) (83.2) (51.2)
Minority interests - 0.2 0.5 0.6
Depreciation and amortization 59.1 67.1 173.2 148.3
EBITDA from continuing operations (165.8) 74.3 63.9 227.7
Unrealized losses (gains) on
derivative financial instruments 151.3 22.9 74.1 (17.4)
Restructuring and other charges 61.3 2.0 75.1 10.9
Inventory impairment charges 13.3 - 13.3 -
Impact of recording acquired assets
at fair value 5.0 16.7 17.1 91.8
Sponsor management fee and expenses 2.5 2.3 7.1 6.8
Stock-based compensation expense - 1.1 1.8 2.9
Gain on early extinguishment of debt - - (0.6) -
EBITDA from continuing operations,
excluding special items $67.6 $119.3 $251.8 $322.7
(1) See note 1 on page 2.
Aleris International, Inc.
Reconciliation of Free Cash Flow to Cash Flow from Operating Activities of
Continuing Operations
(unaudited)
(in millions)
For the three For the nine
months ended months ended
September 30 September 30
2008 2007 2008 2007
Free cash flow $160.1 $32.9 $15.5 $186.5
Net working capital (decrease)
increase (117.2) 47.2 128.7 9.7
Capital expenditures 24.7 39.2 107.6 126.5
EBITDA from continuing operations,
excluding special items 67.6 119.3 251.8 322.7
Unrealized (losses) gains on
derivative financial instruments (151.3) (22.9) (74.1) 17.4
Gain on early extinguishment of debt - - 0.6 -
Restructuring and other charges (61.3) (2.0) (75.1) (10.9)
Inventory impairment charges (13.3) - (13.3) -
Impact of recording acquired assets
at fair value (5.0) (16.7) (17.1) (91.8)
Sponsor management fee and expenses (2.5) (2.3) (7.1) (6.8)
Stock-based compensation expense - (1.1) (1.8) (2.9)
EBITDA from continuing operations (165.8) 74.3 63.9 227.7
Interest expense, net (58.0) (50.3) (170.3) (149.5)
Benefit from income taxes 86.3 45.6 83.2 51.2
Depreciation and amortization (59.1) (67.1) (173.2) (148.3)
Minority interest, net of provision
for income taxes - (0.2) (0.5) (0.6)
(Loss) income from continuing
operations (196.6) 2.3 (196.9) (19.5)
Depreciation and amortization 59.1 67.1 173.2 148.3
Benefit from deferred income taxes (97.3) (44.5) (91.8) (50.3)
Restructuring and other charges:
Charges 61.3 2.0 75.1 10.9
Payments (9.3) (2.6) (25.6) (11.7)
Inventory impairment charges 13.3 - 13.3 -
Stock-based compensation expense - 1.1 1.8 2.9
Unrealized losses (gains) on
derivative financial instruments 151.3 22.9 74.1 (17.4)
Non-cash charges related to step-up
in carrying value of inventory - 1.6 0.3 46.2
Other non-cash charges 4.4 4.6 11.6 10.4
Net change in operating assets and
liabilities 55.4 4.2 (181.4) 29.4
Cash flow provided (used) by
operating activities of continuing
operations $41.6 $58.7 $(146.3) $149.2
Aleris International, Inc.
Reconciliation of Segment Income to Segment Income, Excluding Special
Items and Segment EBITDA, Excluding Special Items
(unaudited)
(in millions)
For the three For the nine
months ended months ended
September 30 September 30
2008 2007 2008 2007
Global Rolled and Extruded Products
Segment income $6.9 $45.3 $61.8 $95.2
Purchase accounting adjustments 5.8 15.8 19.3 87.8
Inventory impairment charges 13.3 - 13.3 -
Segment income, excluding special
items 26.0 61.1 94.4 183.0
Depreciation and amortization 41.3 49.0 126.7 115.5
Segment EBITDA, excluding special
items $67.3 $110.1 $221.1 $298.5
Global Recycling
Segment income $16.3 $8.8 $67.1 $49.9
Purchase accounting adjustments (0.8) 0.9 (2.2) 4.0
Segment income, excluding special
items 15.5 9.7 64.9 53.9
Depreciation and amortization 16.4 16.9 42.3 30.3
Segment EBITDA, excluding special
items $31.9 $26.6 $107.2 $84.2
Aleris International, Inc.
Reconciliation of Loss from Continuing Operations to
EBITDA from Continuing Operations and
Adjusted EBITDA from Continuing Operations (1)(2)
(in millions)
For the twelve months ended
September 30, 2008
Loss from continuing operations $(270.3)
Interest expense, net 224.7
Income taxes (120.4)
Depreciation and amortization 228.2
EBITDA from continuing operations 62.2
Unrealized losses on derivative financial instruments 84.5
Restructuring and other charges 96.9
Impact of recording acquired assets at fair value 31.8
Sponsor management fee and expenses 9.4
Stock-based compensation expense 3.3
Gain on early extinguishment of debt (0.6)
Inventory impairment charges 13.3
Estimated synergies - Corus Aluminum 2.0
Estimated synergies - Wabash Alloys 12.0
Estimated synergies - EKCO Products 1.0
Estimated synergies - AE/HT 2.0
Cost savings - plant closures 23.0
Adjusted EBITDA from continuing operations $340.8
(1) See note 1 on page 2.
(2) Represents historical financial information for the twelve months
ended September 30, 2008 including the expected synergy savings from
the Corus Aluminum, Wabash Alloys, EKCO Products, AE Products and HT
Aluminum acquisitions as well as the expected cost savings from plant
closures as permitted by Aleris's Term Loan Agreement.
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