Wise Metals Group LLC Announces Third Quarter Results
http://www.businesswire.com/news/home/20091116006141/en
* Company announces multi-year agreement with Anheuser-Busch InBev
* Consolidated sales improves by 9% compared to prior quarter
* Shipments increase 27% at Wise Recycling
BALTIMORE--(Business Wire)--
Wise Metals Group (Wise) has completed a multi-year agreement to supply aluminum
can sheet to Anheuser-Busch InBev (ABI) beginning in 2010. "This agreement is a
significant addition to the can sheet business at our Wise Alloys rolling mill
in Muscle Shoals, Ala. and is a testament to the quality and reliability
achievements of the entire Wise team," according to David D`Addario, Chairman
and CEO of Wise Metals Group.
"We are proud to have Wise as a part of our supply chain," stated Matt Rohm,
Director Metal Procurement for ABI, "Over the past several years it has become
obvious that Wise is a significant manufacturer of can sheet providing a high
quality product."
Wise is now capable of producing 14-out can sheet after widening their
three-stand and installing a new wide slitter. According to Mr. D`Addario, "The
completion of this significant capital project was key to our being able to
secure this additional business." Added D`Addario, "We are looking forward to a
mutually beneficial relationship with our new business partner ABI."
In a separate transaction Wise Metals Group and Anheuser-Busch Recycling
Corporation (ABRC) have completed a multi-year agreement in which, together with
Wise Recycling, will supply 100% of used beverage cans (UBC) scrap requirements
for the can sheet rolling mill which Wise Metals operates in Muscle Shoals, Ala.
In the world of recycling, Wise is one of the largest processors of UBC Scrap.
"This strategic partnership with ABRC is critical in a world where environmental
responsibility and sustainability have become hallmarks for businesses committed
to achieving excellence," according to D`Addario. D`Addario went on to say that
"this partnership provides us the vehicle to continue to grow and prosper
together in this critical area of corporate stewardship."
"For Wise, this means that we will have an assured supply of raw materials over
the long term which will help us accomplish our mission of supplying a high
quality product to all our customers, a commitment that I know all our employees
are part of," stated Phil Tays, Executive Vice President and Plant Manager.
Wise will be working closely with ABRC to reconcile existing agreements and
relationships with scrap suppliers for both companies. According to Trevor
Hansen, Vice President, Anheuser-Busch Recycling Corporation, "This partnership
with Wise provides an opportunity to capitalize on synergies and strengths of
both our organizations."
"The negotiation of these two agreements ends several months of intensive work,"
stated Danny Mendelson, Executive Vice President and Chief Strategic Officer.
Wise`s efforts were led by Don Farrington Executive Vice President-Sales and
Dick Weaver Executive Vice President-Non-Core Operations. "This successful
conclusion was made possible by the high level of professionalism of both the
ABRC and ABI teams. As David noted these agreements put Wise on firm financial
footing well into the future," said Mendelson.
Shipments at Wise Recycling increased 27% in the 2009 third quarter versus 2009
second quarter, while Company consolidated shipments, including shipments of
recycled metal, totaled 171.3 million pounds for the third quarter of 2009 which
increased 6% over second quarter of 2009 shipments of 161.7 million pounds.
Overall sales for the quarter increased 9% to $177.1 million compared to the
second quarter of 2009.
Gross deficit for the third quarter of 2009 improved significantly compared to
the third quarter of 2008 with an approximate $16.9 million improvement over the
prior year. Significant impacts from metal lag which affected the results in the
third quarter of 2008 no longer had major impacts on margins after the complete
implementation of the Company`s aluminum price risk management program. Such a
program better matches customer and supplier price commitments so as to greatly
reduce dependency on third-party derivative "hedge" positions.
Adjusted EBITDA for the third quarter of 2009 was ($7.2) million compared to
($25.6) million for the third quarter of 2008, an improvement of $18.4 million.
Third quarter results for 2008 also include a $54.6 million adjustment for the
lower-of-cost-or-market (LCM) impact due to failing aluminum prices. After such
LCM adjustment, Adjusted EBITDA with LCM impact for the third quarter of 2009
was ($7.2) million compared to ($80.2) million for the third quarter of 2008.
Cautionary Note Regarding Forward-Looking Statements
Certain statements made in this news release constitute forward-looking
statements, within the meaning of the Private Securities Litigation Reform Act,
regarding the company`s future plans, objectives, and expected performance.
Statements that are not historical facts, including statements accompanied by
words such as "believe," "expect," "estimate," "intend," or "plan" are intended
to identify forward-looking statements and convey the uncertainty of future
events or outcomes. The company cautions that any such forward-looking
statements are based on assumptions that the company believes are reasonable,
but are subject to a wide range of risks, and actual results may differ
materially. Certain risks and uncertainties are summarized in the company`s
filings with the Securities and Exchange Commission. The company takes no
obligation to publicly update or revise any future looking statements to reflect
the occurrence of future events or circumstances.
Wise Metals Group LLC
Condensed Consolidated Statements of Operations
(In thousands)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2009 2008 2009 2008
Net sales $ 177,076 $ 296,945 $ 496,482 $ 962,611
Cost of sales 183,619 321,087 535,922 965,704
Gross deficit (6,543 ) (24,142 ) (39,440 ) (3,093 )
Operating expenses:
Selling, general, and administrative 3,848 6,579 9,740 12,290
Operating loss (10,391 ) (30,721 ) (49,180 ) (15,383 )
Other expense:
Interest expense (8,729 ) (8,840 ) (26,013 ) (27,173 )
Gain (loss) on derivative instruments (774 ) 11,987 (944 ) (1,706 )
Net loss $ (19,894 ) $ (27,574 ) $ (76,137 ) $ (44,262 )
Accretion of redeemable preferred membership interest (2,101 ) (1,929 ) (6,303 ) (5,787 )
Net loss attributable to common members $ (21,995 ) $ (29,503 ) $ (82,440 ) $ (50,049 )
Wise Metals Group LLC
Condensed Consolidated Balance Sheets
(In thousands)
September 30, December 31,
2009 2008
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 414 $ 234
Broker deposits 264 1,233
Accounts receivable, less allowance for doubtful accounts ($2,152 in 2009 and $2,793 in 2008) 90,249 72,430
Inventories 250,976 199,895
Fair value of derivative instruments 326 1,141
Other current assets 10,059 6,193
Total current assets 352,288 281,126
Non-current assets:
Property and equipment, net 103,545 103,519
Other assets 7,282 8,410
Goodwill 283 283
Total non-current assets 111,110 112,212
Total assets $ 463,398 $ 393,338
Liabilities and members` deficit
Current liabilities:
Accounts payable $ 289,247 $ 196,278
Current portion of long-term debt and capital lease obligations 26,346 4,286
Borrowings under revolving credit facility, net of discount ($282 in 2009 and $654 in 2008) 217,887 167,765
Fair value of derivative instruments - 341
Accrued expenses, payroll and other 22,542 16,633
Total current liabilities 556,022 385,303
Non-current liabilities:
Term loans and capital lease obligations, less current portion 1,933 26,617
Senior notes 150,000 150,000
Accrued pension and other post retirement obligations 13,521 13,521
Other liabilities 1,335 1,173
Total non-current liabilities 166,789 191,311
Redeemable preferred membership interest (liquidation preference of $90,750 as of September 30, 2009) 89,976 83,673
Members` deficit
Members` deficit (338,192 ) (255,752 )
Accumulated other comprehensive loss (11,197 ) (11,197 )
Total members` deficit (349,389 ) (266,949 )
Total liabilities, redeemable preferred membership interest, and members` deficit $ 463,398 $ 393,338
Wise Metals Group LLC
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Nine months ended
September 30,
2009 2008
Cash flows from operating activities
Net loss $ (76,137 ) $ (44,262 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 11,534 10,515
Amortization of deferred financing fees 2,097 1,401
Recognition of unrealized actuarial gain from other post retirement benefits - (3,178 )
LIFO provision - 12,382
Lower of cost or market reserve - 1,900
Net periodic benefit cost 2,181 (2,322 )
Bad debt (recovery) expense (125 ) 1,321
Unrealized loss (gain) on derivative instruments 1,326 (1,018 )
Changes in operating assets and liabilities:
Broker deposits 969 (3,564 )
Accounts receivable (17,694 ) (20,941 )
Inventories (51,081 ) 15,023
Other assets (5,346 ) (1,837 )
Accounts payable 92,969 26,087
Accrued expenses and other liabilities 3,120 4,539
Net cash used in operating activities (36,187 ) (3,954 )
Cash flows from investing activities
Purchase of equipment (11,131 ) (16,647 )
Acquisition of Alabama Electric Motors LLC, net of cash received - (244 )
Net cash used in investing activities (11,131 ) (16,891 )
Cash flows from financing activities
Net issuance of short-term borrowings 50,122 18,468
Proceeds from long-term debt - 300
Proceeds from sale-financing transaction - 4,000
Payments on long-term obligations (2,624 ) (2,513 )
Net cash provided by financing activities 47,498 20,255
Net increase (decrease) in cash and cash equivalents 180 (590 )
Cash and cash equivalents at beginning of period 234 1,447
Cash and cash equivalents at end of period $ 414 $ 857
Non-cash investing activities
Capital expenditures included in liabilities $ 429 $ 1,177
Non-GAAP Financial Measures
The company uses certain non-GAAP financial measures in evaluating its
performance. These include Adjusted EBITDA (defined in the revolving credit
agreement as earnings before income taxes, interest expense and fees, net, and
depreciation and amortization, adjusted to exclude early extinguishment of debt,
income from affiliate, nonrecurring charges, severance charges and credits, LIFO
adjustments, cumulative effect of change in accounting principle and
mark-to-market adjustment for contracts under SFAS No. 133). Additionally, the
Company reports inventory values assuming a lower of FIFO cost or market basis
to determine liquidity under the Company`s revolving loan agreement. Adjusted
EBITDA is not intended to represent cash flows from operations as defined using
GAAP and should be considered in addition to, and not as a substitute for, cash
flows as a measure of liquidity or net earnings as a measure of operating
performance. A reconciliation of Adjusted EBITDA to net loss as well as a
reconciliation to net cash used in operating activities are set forth in the
financial tables below. The company includes Adjusted EBITDA information because
this measure is used by management to measure our compliance with debt covenants
and by investors and note holders to evaluate our ability to service debt. Our
measure of Adjusted EBITDA may not be comparable to similarly titled measures of
other companies.
Reconciliation of Net Loss to Adjusted EBITDA
Three months Nine months
ended September 30, ended September 30,
2009 2008 2009 2008
Net loss $ (19,894 ) $ (27,574 ) $ (76,137 ) $ (44,262 )
Interest expense and fees 8,729 8,840 26,013 27,173
Depreciation and amortization 3,909 3,463 11,534 10,515
LIFO Adjustment - (5,118 ) - 12,382
Unrealized loss (gain) on derivative instruments 86 (5,241 ) 1,326 (1,018 )
Adjusted EBITDA (7,170 ) (25,630 ) (37,264 ) 4,790
LCM impact - (54,589 ) 23,048 (54,589 )
Adjusted EBITDA with LCM impact $ (7,170 ) $ (80,219 ) $ (14,216 ) $ (49,799 )
Reconciliation of Net Cash Used in Operating Activities to Adjusted EBITDA
Nine months ended September 30,
2009 2008
Net cash used in operating activities $ (36,187 ) $ (3,954 )
Changes in working capital items and other (4,042 ) (73,018 )
Interest expense 26,013 27,173
Adjusted EBITDA with LCM impact $ (14,216 ) $ (49,799 )
About Wise Metals Group
Based in Baltimore, Md., Wise Metals Group LLC includes Wise Alloys, the world`s
third-leading producer of aluminum can stock for the beverage and food
industries and an environmentally friendly company using recycled aluminum in
the production of its can stock; Wise Recycling, one of the largest,
direct-from-the-public collectors of aluminum beverage containers in the United
States, operating shipping and processing locations throughout the United States
that support a network of neighborhood collection centers; and Listerhill Total
Maintenance Center, specializing in providing maintenance, repairs and
fabrication to manufacturing and industrial plants worldwide ranging from small
on-site repairs to complete turn-key maintenance.
Wise Metals Group
Mr. James Reidy, 410-636-6500
metals.info@wisemetals.com
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