EX-99.1 2 dex991.htm PRESS RELEASE ISSUED AUGUST 9, 2005 Press Release issued August 9, 2005

Exhibit 99.1

 

LOGO

 

For Information: Michael D. Friday       For Immediate Release
Telephone: (216) 910-3503       August 9, 2005

 

ALERIS NET INCOME RISES

IN 2005 SECOND QUARTER

 

Summary

 

  •   Net income totaled $18.9 million or $0.60 per diluted share compared with reported net income of $0.3 million or $0.02 per diluted share in the second quarter of 2004. Adjusted earnings per share were $0.96 in the second quarter of 2005 compared with $0.18 on a pro forma basis in the prior-year second quarter.

 

  •   Second quarter net income was negatively impacted by approximately $11.6 million of special items, of which $11.4 million were non-cash related.

 

  •   Second quarter net income was also negatively impacted by approximately $10 million or $0.29 per share due to a declining LME as a result of rolled products being on an average cost methodology as of December 9, 2004.

 

  •   Year to date earnings reported in 2005 were $48.0 million or $1.54 per share compared with $3.0 million or $0.20 per share year-to-date in 2004. Adjusted earnings per share were $2.29 for year-to-date 2005 compared with $0.43 in the prior period on a pro forma basis.

 

  •   Net debt was reduced by $46 million during the second quarter. Strong cash flow from operations drove down net debt by $68 million since December 31, 2004. Net debt to EBITDA excluding special items on last twelve month basis decreased to 1.7x at June 30, 2005 compared with 3.0x at year-end.

 

  •   Merger-related synergies and productivity benefits began to ramp-up in the second quarter of 2005 and reached an annualized run rate of $27 million during the quarter.

 

  •   2005 total year adjusted earnings per share are expected to be in the range of $3.80 to $3.90 per share.

 

 

Aleris International, Inc.

 

     For the Three Months Ended June 30,
     For the Six Months Ended June 30,
  
          2004
          2004
  

($ and lbs. in millions)

 

    2005
    Reported
    Pro Forma
     2005
    Reported
    Pro Forma
  

Volume:

                                             

Recycling and alloys lbs. processed

      838      840      840       1,670      1,670      1,670  

Rolled products lbs. shipped

      238      —        248       498      —        495  

Revenue

    $ 603.6    $ 292.4    $ 558.7     $ 1,248.6    $ 570.9    $ 1,082.6  

Net income (loss)

    $ 18.9    $ 0.3    $ (19.3 )   $ 48.0    $ 3.0    $ (8.4 )

Earnings (loss) per diluted share

    $ 0.60    $ 0.02    $ (0.69 )   $ 1.54    $ 0.20    $ (0.30 )

Adjusted earnings per share(1)

    $ 0.96    $ 0.22    $ 0.18     $ 2.29    $ 0.32    $ 0.43  

EBITDA(1)

    $ 43.7    $ 14.6    $ 6.4     $ 100.2    $ 32.7    $ 44.0  

EBITDA excluding special items(1)

    $ 55.3    $ 19.5    $ 31.1     $ 123.8    $ 35.7    $ 64.1  
(1) In this press release, we refer to various non-GAAP (generally accepted accounting principles) financial measures including (i) EBITDA, (ii) EBITDA excluding special items and (iii) adjusted earnings per share. 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,” as used in this press release, is defined as net income before interest income and expense, taxes, depreciation and amortization and minority interests. “EBITDA excluding special items,” as used in this press release, is defined as EBITDA excluding restructuring and impairment charges, executive severance costs, mark-to-market FAS 133 metal hedge unrealized gains and losses, and the non-cash cost of sales impact of the write-up of inventory and other items through purchase accounting. “Adjusted earnings per share” excludes the per-share impact of these special items. Management uses EBITDA as a performance metric and believes this measure provides additional information commonly used by our stockholders, noteholders and lenders with respect to the performance of our fundamental business activities, as well as our ability to meet our future debt service, capital expenditures and working capital needs. Management believes EBITDA excluding special items and adjusted earnings per share is useful to our stakeholders in understanding our operating results and the ongoing performance of our underlying businesses without the impact of these special items. Additionally, management uses EBITDA because the Company’s revolving credit agreement and indentures for its outstanding senior notes use EBITDA with additional adjustments to measure its compliance with covenants such as fixed charge coverage and debt incurrence.

 

Beachwood, Ohio – August 9, 2005 – Aleris International, Inc. (NYSE:ARS) today reported financial results for the second quarter of 2005.

 

Aleris resulted from the December 9, 2004 merger of IMCO Recycling Inc. with Commonwealth Industries, Inc. IMCO was the acquirer for financial accounting purposes. The Company’s “As Reported” financial results for the second quarter of 2005 include the operations of both companies for 2005, but the comparable period in 2004 includes only the results of the former IMCO Recycling Inc. The “Pro Forma” results combine the operations of both companies and are adjusted to exclude the results of Commonwealth’s discontinued Alflex division and inter-company sales and to include the change to the average cost method of accounting for inventory for the rolled products segment (formerly Commonwealth), the incremental depreciation expense related to the write-up of the acquired fixed assets of rolled products to their estimated fair value, as well as incremental interest expense associated with the financing of the merger.

 

2

Second-Quarter Operating Results

 

In the second quarter of 2005, Aleris reported revenues of $603.6 million and net income of $18.9 million or $0.60 per diluted share. These results include $0.36 per share of special items including $9.5 million of mark-to-market FAS 133 metal hedge losses, $1.1 million related primarily to the non-cash cost of sales impact of the write-up of rolled products assets to fair value at date of purchase and $1.0 million of restructuring and asset impairment charges related to the merger. For the second quarter of 2004, the Company reported revenues of $292.4 million and net income of $0.3 million or $0.02 per share, including $4.5 million of executive severance and a $0.4 million mark-to-market FAS 133 metal hedge loss.

 

Reported revenues of $603.6 million and net income of $18.9 million or $0.60 per share in the second quarter of 2005 compared favorably to pro forma revenues of $558.7 million and a pro forma net loss of $19.3 million or $0.69 per share in the second quarter of 2004. Pro forma results in 2004 included $13.9 million of restructuring costs primarily related to executive severance costs and severance costs associated with the merger, $5.8 million of asset write-offs related primarily to the shut-down of tube enterprises at the rolled products segment and $5.0 million of mark-to-market FAS 133 metal hedge losses. Second quarter 2005 adjusted earnings per share of $0.96 compare to adjusted earnings per share of $0.18 on a pro forma basis in the second quarter of 2004. EBITDA excluding special items totaled $55.3 million in the second quarter of 2005 and was up 78% compared with $31.1 million on a pro forma basis in the comparable 2004 period. 2005 second quarter results were also negatively impacted by approximately $10 million or $0.29 per share at rolled products because, under the average cost inventory methodology, inventory acquired at a higher cost in the first quarter impacted operations unfavorably in the second quarter and combined with losses that were incurred on our hedges as a result of the declining LME. Improved results were driven principally by continued improvements in rolled products conversion margins and scrap spreads as well as synergy realization and productivity benefits.

 

Steven J. Demetriou, Chairman and Chief Executive Officer of Aleris, said “Results for the quarter came in above our guidance despite the unexpected rolled products inventory valuation impact due to the falling LME. Rolled products pricing and scrap spreads remained strong despite the temporary customer inventory destocking, providing further evidence of our previously stated industry structural change. Additionally, zinc continued to generate strong earnings and aluminum recycling exceeded our expectations for the quarter as turnaround initiatives began to take hold. We were also very pleased with the impact of merger synergies and productivity improvements during the quarter as they continue to ramp up. Finally, our balance sheet initiatives really paid off as significant cash flow generation allowed us to reduce net debt by $46 million during the quarter. We continue to be very excited about the future of Aleris and the outlook for the remainder of 2005 and beyond.”

 

Year-to-date Operating Results

 

For the first half of 2005, Aleris reported revenues of $1,248.6 million and net income of $48.0 million or $1.54 per diluted share. These results include $0.75 per share of special items including $13.1 million of mark-to-market FAS 133 metal hedge losses, $6.7 million related primarily to the non-cash cost of sales impact of the write-up of rolled products inventory to fair value at date of purchase and $3.8 million of restructuring and asset impairment charges related to the merger. For the comparable period of 2004, the Company reported revenues of $570.9 million and net income of $3.0 million or $0.20 per share, including $4.5 million of costs related primarily executive severance costs and $1.5 million of mark-to-market FAS 133 metal hedge gains.

 

3

Reported revenues of $1,248.6 million and net income of $48.0 million or $1.54 per share in the first half of 2005 compared favorably to pro forma revenues of $1,082.6 million and a pro forma net loss of $8.4 million or a loss of $0.30 per share in the first half of 2004. Pro forma results in 2004 included $14.2 million of restructuring costs primarily related to executive severance costs, severance costs associated with the merger and $5.8 million of asset write-offs related primarily to the shut-down of tube enterprises at the rolled products segment. First half 2005 adjusted earnings per share of $2.29 compare to adjusted earnings per share of $0.43 on a pro forma basis for the first half of 2004. EBITDA excluding special items totaled $123.8 million in the first half of 2005 compared with $64.1 million on a pro forma basis in the comparable 2004 period. Significantly improved results were driven principally by increases in rolled products material margins and the benefits of synergy realization and productivity.

 

Rolled Products

 

Rolled product shipments totaled 238 million pounds in the second quarter of 2005 compared to pro forma shipments of 248 million in the same period of 2004, down approximately 4% as some customers in the building and construction and distribution end-use applications adjusted inventory levels during the quarter. As the result of lower demand, the segment took the opportunity to reduce production and initiated maintenance work that had been planned later in the year. Income in the rolled products segment was $38.3 million in the second quarter of 2005, compared with pro forma segment income of $13.2 million in the comparable 2004 period, an improvement of 190% after adjustment for purchase accounting. Improvement was driven by significantly higher rolling margins, favorable scrap spreads and improved productivity.

 

Material margins in the second quarter of 2005 improved to $0.460 per pound from $0.316 per pound in the year earlier period on a pro forma basis. Sequentially, material margins declined $0.024 per pound during the quarter as higher rolling margins and further improved scrap spreads only partially offset an estimated $0.042 per pound higher metal costs that negatively impacted the P&L now that the segment is on an average cost method of accounting for inventory. This impact was not contemplated at the beginning of the quarter as the Company’s forecast assumed a flat LME. Cash conversion costs declined to $0.216 per pound in the second quarter of 2005 from $0.224 per pound in the prior year on a pro forma basis due to improved productivity. For comparative purposes, all prior-year pro forma amounts have been restated utilizing the average cost method of accounting for inventory compared to previous reporting on a LIFO basis in accordance with the prior practice of the acquiring company as required by acquisition accounting rules.

 

On a year-to-date basis, rolled products shipments totaled 498 million pounds compared with 495 million pounds in the year earlier period on a pro forma basis. Segment income totaled $87.8 million in 2005 compared with pro forma segment income of $31.4 million in the comparable 2004 year-to-date period. Increased earnings were principally the result of higher rolling margins, improved scrap spreads and increased productivity.

 

Aluminum Recycling

 

Second quarter processing volume of 510 million pounds for the aluminum recycling segment was down approximately 2% compared with 518 million pounds in the prior-year period. Segment income declined to $8.8 million in the second quarter of 2005 from $9.3 million in the second quarter of 2004 due primarily to higher natural gas costs and tighter specification alloy scrap spreads than in the prior year.

 

4

Aluminum recycling year-to-date 2005 processing volume of 1,018 million pounds compared with 1,036 million pounds in the comparable 2004 period primarily due to lower automotive volumes. Segment income of $13.0 million year-to-date 2005 was lower than June 2004 year-to-date income of $15.9 million, due primarily to lower than anticipated metal recovery performance, higher natural gas costs and tighter specification alloy scrap spreads.

 

International

 

Processing volume of 272 million pounds for the international segment was 5% higher in the second quarter of 2005 than in the comparable period of 2004. The increase was due to improved capacity utilization in Brazil and Wales. 2005 second quarter segment income was $3.2 million compared with $5.4 million in the comparable 2004 quarter as lower profitability in Germany caused by lower margins offset the higher volume.

 

Year-to-date international processing volume of 539 million pounds compares favorably to 514 million pounds processed in the comparable 2004 period due primarily to higher volumes in Europe and Brazil. Segment income on a year-to-date basis was $7.7 million in 2005 compared to $10.4 million in the first half of 2004 due to lower margins as the result of tighter scrap spreads.

 

Zinc

 

Second quarter 2005 processing volume of 56 million pounds for the zinc segment was 11% below the level of the year-ago period, due primarily to slowing demand from the steel galvanizing industry related to the auto production slowdown. However, segment income increased to $4.8 million in the second quarter of 2005 from $2.9 million in the prior-year period, due principally to higher average selling prices of zinc and resulting better margins.

 

Zinc year-to-date 2005 processing volume of 113 million pounds was 5% lower than the comparable 2004 period, due primarily to reduced demand from steel galvanizers. Year-to-date segment income of $10.1 was 49% higher than year-to-date income in 2004, due principally to higher zinc prices.

 

Corporate Expense

 

Corporate expense primarily includes corporate SG&A and interest expense. In addition, corporate expense includes all merger-related restructuring charges and asset impairment charges, and non-cash adjustments associated with mark-to-market FAS 133 accounting for metal hedging activity that were previously shown within the business segments, in order to simplify understanding of ongoing segment operations. Our 2004 results of operations have been recast on a comparable basis. In the second quarter of 2005, special items totaled $10.5 million and included $9.5 million of mark-to-market FAS 133 metal hedge losses and $1.0 million of restructuring and asset impairment charges related to the merger. On a pro forma basis, special items in the second quarter of 2004 totaled $24.7 million and represented $13.9 million of restructuring and executive severance charges, $5.8 million of asset write-offs and mark-to-market FAS 133 metal hedge losses of $5.0 million. Reported corporate SG&A expense and interest expense were significantly higher in the second quarter of 2005 than in the comparable 2004 period due to the merger with Commonwealth.

 

Corporate SG&A in the second quarter of 2005 declined 6% from the comparable 2004 period on a pro forma basis, as corporate merger synergies more than offset higher incentive compensation accruals. Interest expense on a pro forma basis declined 12% to $9.9 million in 2005, due primarily to lower interest rates and borrowing levels.

 

5

On a year-to-date basis, corporate SG&A declined to $28.0 million in 2005 from $29.6 million in the comparable 2004 period on a pro forma basis with corporate merger synergies more than offsetting higher incentive compensation accruals. Interest expense on a pro forma basis for year-to-date 2005 declined to $20.3 million from $22.3 million in the prior year period on a pro forma basis.

 

Outlook

 

Mr. Demetriou continued, “Although we are experiencing an inventory correction by a portion of our customer base that has extended into the third quarter, we are quite optimistic regarding the outlook for the remainder of the year as manufacturing is reported to be picking up again and housing activity continues at a record pace. Additionally, automotive incentives have been very effective in reducing the supply of unsold autos and have paved the way for increased production later this year. However, it is difficult for us to predict exactly how these factors will play out incrementally in the second half of 2005, causing us to provide guidance for the total year instead of just the next quarter. We are confident that we will achieve 2005 total year adjusted earnings per share in the range of $3.80 to $3.90 compared with 2004 total year adjusted earnings per share of $0.61, anticipating that the underlying economy remains strong and our productivity initiatives continue to build momentum.”

 

Conference Call and Webcast Information

 

Aleris will host a conference call August 10, 2005 at 11 a.m. Eastern time. Steven J. Demetriou, Aleris International’s Chairman and Chief Executive Officer, and Michael D. Friday, the Company’s Executive Vice President and Chief Financial Officer, will host the call to discuss results.

 

The call can be accessed by dialing 800-638-4930 or 617-614-3944 and referencing passcode #79340797 at least 10 minutes prior to the presentation, which will begin promptly at 11 a.m. Eastern time. In addition, the conference call will be broadcast live over the Internet at www.aleris.com.

 

A replay of the conference call will be posted to the Company’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 #10117910 beginning at 2 p.m. Eastern time, August 10 until 11:59 p.m. Eastern time, August 17, 2005.

 

About Aleris

 

Aleris International, Inc. is a global leader in aluminum recycling and production of specification alloys and is a major North American manufacturer of common aluminum alloy sheet. The Company is also a leading manufacturer of value-added zinc products that include zinc oxide, zinc dust and zinc metal. Headquartered in Beachwood, Ohio, a suburb of Cleveland, the Company operates 28 production facilities in the United States, Brazil, Germany, Mexico and Wales, and has approximately 3,200 employees. For more information about Aleris, please visit the Company’s Web site at http://www.aleris.com.

 

6

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 earnings and earnings per share; future improvements in margins, processing volumes and pricing; overall 2005 operating performance; anticipated strengthened automotive volumes; expected cost savings; and anticipated synergies resulting from the merger. 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’ ability to effectively integrate the business and operations of Commonwealth; downturns in automotive production in the U.S. and Europe, the financial condition of Aleris’ customers and future bankruptcies and defaults by major customers; the availability at favorable cost of aluminum scrap and other metal supplies that the Company processes; the ability of the Company to enter into effective metals, natural gas and other commodity derivatives; future natural gas and other fuel costs of the Company; a weakening in industrial demand resulting from a decline in U.S. or world economic conditions caused by terrorist activities or other unanticipated events; future utilized capacity of the Company’s various facilities; future decreases in recycling outsourcing by primary producers; restrictions on and future levels and timing of capital expenditures; retention of the Company’s major customers; the timing and amounts of collections; the future mix of product sales vs. tolling business; currency exchange fluctuations; future write-downs or impairment charges which may be required because of the occurrence of some of the uncertainties listed above; and other risks listed in the Company’s filings with the Securities and Exchange Commission, including but not limited to the Company’s quarterly reports on Form 10-Q for the periods ended March 31, 2005 and June 30, 2005 and its annual report on Form 10-K for the fiscal year ended December 31, 2004, particularly the sections entitled “Risk Factors” contained therein.

 

7

Aleris International, Inc.

 

Consolidated Statement of Income

(in thousands, except per share data)

(unaudited)

 

     For the Three Months Ended
June 30,
    For the Six Months Ended
June 30,
  
     2005
     2004
    2005
     2004
  

REVENUES

    $ 603,607     $ 292,439    $ 1,248,588     $ 570,947  

Cost of sales

      542,086       269,578      1,114,931       526,877  
    
 
  
 

GROSS PROFIT

      61,521       22,861      133,657       44,070  

Selling, general and administrative expense

      20,227       14,717      42,769       26,648  

Interest and other expense (income)

      (535 )     103      (694 )     229  

Restructuring charge

      1,006       —        3,797       —    

Unrealized losses (gains) on derivatives

      9,482       445      13,136       (1,493 )

Interest expense

      9,944       6,861      20,276       13,305  
    
 
  
 
       40,124       22,126      79,284       38,689  

Income before provision for income taxes, and minority interests

      21,397       735      54,373       5,381  

Provision for income taxes

      2,352       387      6,180       2,295  
    
 
  
 

Income before minority interests

      19,045       348      48,193       3,086  

Minority interests, net of provision for income taxes

      131       60      191       87  
    
 
  
 

Net income

    $ 18,914     $ 288    $ 48,002     $ 2,999  
    
 
  
 

Net earnings per common share:

                                

Basic

    $ 0.62     $ 0.02    $ 1.58     $ 0.20  

Diluted

    $ 0.60     $ 0.02    $ 1.54     $ 0.20  

Weighted Average Shares Outstanding:

                                

Basic

      30,732       14,814      30,303       14,658  

Diluted

      31,496       15,313      31,088       15,097  

 

8

Aleris International, Inc.

 

Supplementary Information

(in thousands, unaudited)

 

     For the Three Months Ended
June 30,
     For the Six Months Ended
June 30,
  
     2005
     2004
     2005
     2004
  

Depreciation and amortization

    $ 12,801     $ 7,082     $ 26,171     $ 14,197  

Capital spending

    $ 13,074     $ 4,937     $ 21,946     $ 12,563  

Segment Reporting:

                                 

Volume (pounds):

                                 

Aluminum recycling

      509,783       517,844       1,017,931       1,036,421  

International

      272,338       259,333       539,156       514,427  

Zinc

      55,761       62,882       112,861       119,075  
    
 
 
 
       837,882       840,059       1,669,948       1,669,923  

Percent tolled:

      49 %     48 % (1)     50 %     48 % (1)

Shipped pounds – Rolled products

      238,481       247,874       497,652       494,903  

Revenues:

                                 

Rolled products

    $ 322,063     $ —       $ 672,309     $ —    

Aluminum recycling

      129,865       143,931       274,440       281,610  

International

      101,001       92,594       203,619       183,267  

Zinc

      59,938       55,914       114,919       106,070  

Intersegment eliminations

      (9,260 )     —         (16,699 )     —    
    
 
 
 
     $ 603,607     $ 292,439     $ 1,248,588     $ 570,947  

Segment Income:

                                 

Rolled products

    $ 38,265     $ —       $ 87,804     $ —    

Aluminum recycling

      8,765       9,267       12,966       15,887  

International

      3,201       5,431       7,681       10,444  

Zinc

      4,804       2,884       10,092       6,777  
    
 
 
 
     $ 55,035     $ 17,582     $ 118,543     $ 33,108  
(1) recast to include former Commonwealth Industries sales as buy/sell due to the acquisition.

 

9

Aleris International, Inc.

 

Condensed Consolidated Balance Sheet

(in thousands)

 

     June 30, 2005
    December 31, 2004(1)
     (unaudited)     

ASSETS

              

Current Assets:

              

Cash

    $ 45,498    $ 17,828

Accounts Receivable, Net

      256,877      229,018

Inventories

      243,662      262,210

Other Current Assets

      30,948      37,178
    
  

Total Current Assets

      576,985      546,234

PP&E, Net

      415,364      432,779

Goodwill

      63,708      63,940

Restricted Cash

      6,173      16,007

Other Assets

      20,181      22,189
    
  

TOTAL ASSETS

    $ 1,082,411    $ 1,081,149
    
  

LIABILITIES AND STOCKHOLDERS’ EQUITY

              

Current Liabilities:

              

Accounts Payable

    $ 157,984    $ 178,943

Accrued Liabilities

      82,228      88,405

Current Maturities of long-term debt

      7,495      61
    
  

Total Current Liabilities

      247,707      267,409

Deferred Income Taxes Payable

      12,786      11,280

Long-Term Debt

      364,386      412,338

Other Long-Term Liabilities

      106,431      107,452

Stockholders’ Equity

      351,101      282,670
    
  

TOTAL LIABILITIES AND EQUITY

    $ 1,082,411    $ 1,081,149
    
  
(1) Certain items have been reclassified to conform to the current period presentation.

 

 

10

Aleris International, Inc.

 

Reconciliation of Net Income to

Earnings Before Interest, Taxes, Depreciation and

Amortization (EBITDA) and EBITDA Excluding Special Items

(in thousands)

(unaudited)

 

     For the Three Months Ended
June 30,
    For the Six Months Ended
June 30,
  
     2005
    2004
    2005
    2004
  

Net Income

    $ 18,914    $ 288    $ 48,002    $ 2,999  

Interest expense(net)

      9,510      6,752      19,640      13,072  

Income taxes

      2,352      387      6,180      2,295  

Minority interests

      131      60      191      87  

Depreciation and amortization

      12,801      7,082      26,171      14,197  
    
  
  
  

EBITDA

    $ 43,708    $ 14,569    $ 100,184    $ 32,650  

Mark-to-market FAS 133 metal hedge loss / (gain)

      9,482      445      13,136      (1,493 )

Restructuring, merger related and executive separation charges

      1,006      4,512      3,797      4,512  

Non-cash cost of sales impact of recording acquired assets at fair value

      1,137      —        6,695      —    
    
  
  
  

EBITDA, excluding special items

    $ 55,333    $ 19,526    $ 123,812    $ 35,669  
    
  
  
  

 

Reconciliation of Actual and Pro Forma Net Income to Actual and

Pro Forma Earnings Before Interest, Taxes, Depreciation and

Amortization and Actual and Pro Forma EBITDA Excluding Special Items

(in thousands)

(unaudited)

 

     For the Three Months Ended
June 30,
     For the Six Months Ended
June 30,
  
     2005
Actual
    2004
Pro Forma
     2005
Actual
    2004
Pro Forma
  

Net Income (loss)

    $ 18,914    $ (19,313 )   $ 48,002    $ (8,350 )

Interest expense(net)

      9,510      11,254       19,640      22,029  

Income taxes

      2,352      369       6,180      2,338  

Minority interests

      131      60       191      87  

Depreciation and amortization

      12,801      14,023       26,171      27,906  
    
  
 
  

EBITDA

      43,708      6,393       100,184      44,010  

Mark-to-market FAS 133 metal hedge loss / (gain)

      9,482      5,009       13,136      47  

Restructuring, merger related and executive separation charges

      1,006      19,663       3,797      20,057  

Non-cash cost of sales impact of recording acquired assets at fair value

      1,137      —         6,695      —    
    
  
 
  

EBITDA, excluding special items

    $ 55,333    $ 31,065     $ 123,812    $ 64,114  
    
  
 
  

 

 

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Aleris International, Inc.

Reconciliation of Earnings per Diluted Share to

Adjusted Earnings per Diluted Share(1)

(unaudited)

 

     For the Three Months Ended
June 30,
    

For the Six Months Ended

June 30,

  
     2005
    2004
     2005
    2004
  
        Reported
    Pro Forma
        Reported
     Pro Forma
  

Earnings per Share as reported

    $ 0.60    $ 0.02    $ (0.69 )   $ 1.54    $ 0.20     $ (0.30 )

Purchase accounting adjustments

      0.03      —        —         0.20      —         —    

Ineffective metal hedging

      0.27      0.02      0.15       0.39      (0.06 )     —    

Restructuring costs

      0.03      0.17      0.61       0.11      0.17       0.61  

Tax impact

      0.03      0.01      0.11       0.05      0.01       0.12  
    
  
  
 
  
 

Earnings per Share as adjusted

    $ 0.96    $ 0.22    $ 0.18     $ 2.29    $ 0.32     $ 0.43  
    
  
  
 
  
 
(1) This statement reconciles (i)earnings per share as reported,(ii) to earnings per share as adjusted to exclude the impact of purchase accounting adjustments, the impact of mark-to-market FAS 133 metal hedge gains and losses, and the impact of executive severance costs, restructuring costs associated with management actions related to pre merger restructuring initiatives of Commonwealth Industries and the merger of the Company with Commonwealth. The tax impact of the adjustments was determined by computing an adjusted annual tax rate and associated expense excluding the adjustments from pre-tax income. The adjusted expense was compared to the reported or pro forma expense with the difference, on a per share basis, reflected in the statement. The methods used to compute these measures may differ from the methods used by other companies. Earnings per share as adjusted is a non GAAP measure. This non-GAAP measure has limitations as an analytical tool and should be considered in addition to, not in isolation or as a substitute for, or superior to, Aleris’ measures of financial performance prepared in accordance with GAAP. Investors are encouraged to review the contained herein tables reconciling the non-GAAP financial measures to comparable GAAP amounts. Management believes earnings per share as adjusted to exclude special items is useful to our stakeholders in better understanding our operating results from period to period and the ongoing performance of our underlying businesses without the impact of these special items.

 

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