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| 8-K - FORM 8-K - TMS International Corp. | d346709d8k.htm |
Exhibit 99.1
TMS International Corp. Reports First Quarter 2012 Results
PITTSBURGH, PA, May 3, 2012 – TMS International Corp. (NYSE: TMS), the parent company of Tube City IMS Corporation, a leading provider of outsourced industrial services to steel mills globally, today announced results for its first quarter ended March 31, 2012.
2012 First Quarter Highlights
| • | Total revenue for the first quarter was $747.0 million, a 13% increase compared to $664.0 million in the first quarter of 2011. |
| • | Revenue After Raw Materials Costs1 in the quarter was $155.9 million, a 15% increase compared to $135.2 million in the first quarter of 2011. |
| • | Adjusted EBITDA1 for the quarter was $36.8 million2, a 6% increase compared to $34.6 million in the first quarter of 2011. |
| • | Entered into a new seven-year $300 million senior secured term loan which the company expects will result in approximately $8.4 million of annual cash interest savings. |
| • | Won two new mill services contracts in the United States and Mexico totaling more than $179 million of cumulative total revenue over the life of the contracts at expected production levels. |
2012 First Quarter Financial Results
Total Revenue for the first quarter was $747.0 million, an increase of 13% compared to $664.0 million for the same prior year quarter. Revenue After Raw Materials Costs, the company’s measurement of sales performance, was $155.9 million, an increase of 15% compared to $135.2 million in the first quarter of 2011.
| 1 | “Revenue After Raw Materials Costs,” “Adjusted EBITDA” and “Discretionary Cash Flow” are non-GAAP financial measurements we believe are useful in measuring our operating performance. Descriptions and reconciliations of these measurements to GAAP are provided below. |
| 2 | Excludes a $12.3 million debt extinguishment loss related to the replacement of the company’s term loan and senior secured subordinated notes with a new $300 million senior secured term loan. |
1
Adjusted EBITDA for the first quarter of 2012 was $36.8 million2 compared to $34.6 million of Adjusted EBITDA in the first quarter of 2011, an increase of 6%. Net income attributable to common stock was $0.4 million for the first quarter, an increase of 28% compared to $0.3 million in the first quarter of 2011. Basic and diluted earnings per share were $0.01 for the quarter. Excluding $12.3 million of debt extinguishment costs relating to the company’s refinancing, net income attributable to common stock would have been $8.4 million and earnings per share for the quarter would have been $0.22.
The company’s Adjusted EBITDA Margin3 for the first quarter of 2012 was 23.6% compared to 25.6% in the first quarter of 2011. The decrease was largely due to start-up costs incurred at sites where TMS has recently won new contracts.
Discretionary Cash Flow1,4, which the company uses to measure operating cash flow generation, was $29.0 million for the first quarter of 2012 compared with $27.3 million in the first quarter of 2011, an increase of 6%.
Joseph Curtin, Chairman, President and Chief Executive Officer of TMS International Corp., said with respect to the company’s first quarter 2012 results, “Despite the continued challenging global economic environment, TMS International delivered solid financial results. We continue to build on our market-leading positions by aggressively pursuing new contracts, expanding our global raw materials brokerage network, cross-selling our services and providing outstanding service to our customers.”
Outlook
The company reaffirmed its previous 2012 Adjusted EBITDA guidance in a range of $142 million to $148 million, representing a year-over-year growth rate of 6% to 10%.
Conference Call Information
The company will hold a conference call to discuss first quarter 2012 results at 11:00 a.m. EDT this morning. The call will be web cast live over the Internet from the company’s Web site at www.tmsinternationalcorp.com under “Investor Relations.” Participants should follow the instructions provided on the Web site for downloading and installing the necessary audio applications. The conference call also is available by dialing 1-800-860-2442 (domestic toll free) or 1-412-858-4600 (international) and asking for the TMS International Corp. first quarter earnings conference call.
Following the live conference call, a replay will be available beginning one hour after the call. The replay will be available on the company’s web site or by dialing 1-877-344-7529 (domestic toll free) or 1-412-317-0088 (international) and entering the replay passcode 10011956. The telephonic replay will be available until Thursday, May 10, 2012.
| 3 | Adjusted EBITDA Margin is calculated as a percentage of Revenue After Raw Materials Costs. |
| 4 | Adjusted EBITDA minus maintenance capex (previously referred to in the company’s financial statements as “Free Cash Flow”). |
2
About TMS International Corp.
TMS International Corp., through its subsidiaries, including Tube City IMS Corporation, is the largest provider of outsourced industrial services to steel mills in North America as measured by revenue and has a substantial and growing international presence. The company provides mill services at 82 customer sites in 11 countries and operates 31 brokerage offices from which it buys and sells raw materials across five continents.
Forward Looking Statements
Certain information in this news release contains forward-looking statements with respect to the company’s financial condition, results of operations or business or its expectations or beliefs concerning future events. Such forward-looking statements include the discussions of the potential new debt refinancing, the company’s business strategies, estimates of future global steel production and other market metrics and the company’s expectations concerning future operations, margins, profitability, liquidity and capital resources. Although the company believes that such forward-looking statements are reasonable, it cannot assure you that any forward-looking statements will prove to be correct. Forward-looking statements may be preceded by, followed by or include the words “may,” “will,” “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “could,” “might,” or “continue” or the negative or other variations thereof or comparable terminology. Such forward-looking statements are not guarantees of future performance and involve risks, uncertainties, estimates and assumptions that may cause the company’s actual results, performance or achievements to be materially different. Additional information relating to factors that may cause actual results to differ from the company’s forward-looking statements can be found in the company’s most recent Annual Report on Form 10-K and elsewhere in the company’s filings with the Securities and Exchange Commission. You should not place undue reliance on any of these forward- looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any such statement to reflect new information, or the occurrence of future events or changes in circumstances.
| Contacts | ||||
| Media Contact Jim Leonard 412-267-5226 |
Investor Contact Kelly Boyer 412-349-3007 |
3
TMS INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars, except share and per share data)
| Quarter ended | ||||||||
| March 31, | ||||||||
| 2012 | 2011 | |||||||
| (unaudited) | (unaudited) | |||||||
| Revenue: |
||||||||
| Revenue from sale of materials |
$ | 612,659 | $ | 551,953 | ||||
| Service revenue |
134,299 | 112,007 | ||||||
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| Total revenue |
746,958 | 663,960 | ||||||
| Costs and expenses: |
||||||||
| Cost of scrap shipments |
591,058 | 528,726 | ||||||
| Site operating costs |
101,846 | 84,564 | ||||||
| Selling, general and administrative expenses |
17,261 | 16,065 | ||||||
| Depreciation |
13,166 | 11,799 | ||||||
| Amortization |
3,053 | 3,062 | ||||||
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| Total costs and expenses |
726,384 | 644,216 | ||||||
| Income from operations |
20,574 | 19,744 | ||||||
| Interest expense, net |
(8,101 | ) | (8,677 | ) | ||||
| Loss on Early Extinguishment of Debt |
(12,300 | ) | — | |||||
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| Income before income taxes |
173 | 11,067 | ||||||
| Income tax expense |
(60 | ) | (4,850 | ) | ||||
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| Net Income |
113 | 6,217 | ||||||
| Net loss attributable to noncontrolling interest |
298 | — | ||||||
| Accretion of Preferred Stock Dividends |
— | (5,895 | ) | |||||
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| Net Income applicable to common stockholders |
$ | 411 | $ | 322 | ||||
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| Net Income per share: |
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| (basic and diluted) |
$ | 0.01 | $ | 0.07 | ||||
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| Average common shares outstanding: |
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| (basic and diluted) |
39,255,973 | 4,943,992 | ||||||
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TMS INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars, except share data)
| March 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| (unaudited) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 15,476 | $ | 108,830 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $2,831 and $2,613, respectively |
339,567 | 292,546 | ||||||
| Inventories |
70,554 | 56,297 | ||||||
| Prepaid and other current assets |
29,656 | 31,041 | ||||||
| Deferred tax asset |
7,170 | 7,114 | ||||||
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| Total current assets |
462,423 | 495,828 | ||||||
| Property, plant and equipment, net |
179,500 | 161,017 | ||||||
| Deferred financing costs, net of accumulated amortization of $337 and $9,897, respectively |
11,250 | 10,638 | ||||||
| Goodwill |
242,748 | 241,771 | ||||||
| Other intangibles, net of accumulated amortization of $62,665 and $59,461, respectively |
150,625 | 153,066 | ||||||
| Other noncurrent assets |
4,005 | 3,675 | ||||||
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| Total assets |
$ | 1,050,551 | $ | 1,065,995 | ||||
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| Liabilities and Stockholders’ Equity |
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| Current liabilities: |
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| Accounts payable |
$ | 272,023 | $ | 225,999 | ||||
| Accounts payable overdraft |
50,698 | 47,817 | ||||||
| Salaries, wages and related benefits |
23,842 | 28,105 | ||||||
| Accrued expenses |
14,390 | 24,340 | ||||||
| Revolving bank borrowings |
25,302 | 159 | ||||||
| Current portion of long-term debt |
4,669 | 3,585 | ||||||
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| Total current liabilities |
390,924 | 330,005 | ||||||
| Long-term debt |
294,478 | 379,250 | ||||||
| Loans from noncontrolling interests |
7,193 | 5,275 | ||||||
| Deferred tax liability |
55,036 | 53,791 | ||||||
| Other noncurrent liabilities |
20,906 | 20,833 | ||||||
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| Total liabilities |
768,537 | 789,154 | ||||||
| Stockholders’ equity (deficit): |
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| Class A common stock; 200,000,000 shares authorized, $0.001 par value per share; 12,948,013 and 12,894,333 shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively |
13 | 13 | ||||||
| Class B common stock; 30,000,000 shares authorized, $0.001 par value per share; 26,307,960 and 26,361,640 issued and outstanding at March 31, 2012 and December 31, 2011, respectively |
26 | 26 | ||||||
| Capital in excess of par value |
434,736 | 434,841 | ||||||
| Accumulated deficit |
(147,821 | ) | (148,232 | ) | ||||
| Accumulated other comprehensive income |
(6,476 | ) | (11,075 | ) | ||||
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| Total TMS International Corp. stockholders’ equity |
280,478 | 275,573 | ||||||
| Noncontrolling interest |
1,536 | 1,268 | ||||||
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| Total stockholders’ equity |
282,014 | 276,841 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 1,050,551 | $ | 1,065,995 | ||||
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5
TMS INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars, except share and per share data)
| Quarter ended | ||||||||
| March 31, | ||||||||
| 2012 | 2011 | |||||||
| (unaudited) | (unaudited) | |||||||
| Cash flows from operating activities: |
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| Net Income |
$ | 113 | $ | 6,217 | ||||
| Adjustments to reconcile Net Income to net cash provided by operating activities: |
||||||||
| Depreciation and Amortization |
16,219 | 14,861 | ||||||
| Amortization of deferred financing costs |
747 | 617 | ||||||
| Deferred income tax |
(4 | ) | 2,176 | |||||
| Provision for bad debts |
226 | 12 | ||||||
| Gain on the disposal of equipment |
(165 | ) | (36 | ) | ||||
| Non-cash share-based compensation cost |
322 | 9 | ||||||
| Loss on Early Extinguishment of Debt |
12,300 | — | ||||||
| Increase (decrease) from changes in: |
||||||||
| Accounts receivable |
(47,247 | ) | (77,094 | ) | ||||
| Inventories |
(14,257 | ) | (20,118 | ) | ||||
| Prepaid and other current assets |
5,604 | 3,158 | ||||||
| Other noncurrent assets |
(348 | ) | 423 | |||||
| Accounts payable and accounts payable overdraft |
48,905 | 100,108 | ||||||
| Accrued expenses |
(14,227 | ) | (14,357 | ) | ||||
| Other non current liabilities |
99 | 159 | ||||||
| Other, net |
1,735 | 948 | ||||||
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| Net cash provided by operating activities |
$ | 10,022 | $ | 17,083 | ||||
| Cash flows from investing activities: |
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| Capital expenditures |
(33,224 | ) | (11,728 | ) | ||||
| Proceeds from sale of equipment |
271 | 191 | ||||||
| Contingent payment for acquired business |
(131 | ) | (337 | ) | ||||
| Cash flows related to IU International, net |
(27 | ) | (229 | ) | ||||
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| Net cash used in investing activities |
(33,111 | ) | (12,103 | ) | ||||
| Cash flows from financing activities: |
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| Revolving credit facility borrowing (repayments), net |
25,142 | 189 | ||||||
| Repayment of debt |
(380,732 | ) | (1,081 | ) | ||||
| Proceeds from debt issuance, et of original issue discount |
297,000 | — | ||||||
| Debt issuance and termination fees |
(13,630 | ) | — | |||||
| Other, net |
1,955 | — | ||||||
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| Net cash used for financing activities |
(70,265 | ) | (892 | ) | ||||
| Cash and cash equivalents: |
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| Net increase (decrease) in cash |
(93,354 | ) | 4,088 | |||||
| Cash at beginning of period |
108,830 | 49,492 | ||||||
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| Cash at end of period |
$ | 15,476 | $ | 53,580 | ||||
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6
DESCRIPTION AND GAAP RECONCILIATIONS OF
CERTAIN FINANCIAL MEASUREMENTS
Revenue After Raw Materials Costs
We measure our sales volume on the basis of Revenue After Raw Materials Costs, which we define as Total Revenue minus Cost of Raw Materials Shipments. Revenue After Raw Materials Costs is not a recognized financial measure under GAAP, but we believe it is useful in measuring our operating performance because it excludes the fluctuations in the market prices of the raw materials we procure for and sell to our customers. We subtract the Cost of Raw Materials Shipments from Total Revenue because market prices of the raw materials we procure for and generally concurrently sell to our customers are offset on our statement of operations. Further, in our raw materials procurement business, we generally engage in two alternative types of transactions that require different accounting treatments for Total Revenue. In the first type, we take no title to the materials being procured and we record only our commission as revenue; in the second type, we take title to the materials and sell it to a buyer, typically in a transaction where a buyer and seller are matched. By subtracting the Cost of Raw Materials Shipments, we isolate the margin that we make on our raw materials procurement and logistics services, and we are better able to evaluate our operating performance in terms of the volume of raw materials we procure for our customers and the margin we generate.
| Quarter ended | ||||||||
| March 31, | ||||||||
| 2012 | 2011 | |||||||
| Revenue After Raw Materials Costs: |
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| Consolidated: |
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| Total Revenue |
$ | 746,958 | $ | 663,960 | ||||
| Cost of Raw Materials Shipments |
(591,058 | ) | (528,726 | ) | ||||
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| Revenue After Raw Materials Costs |
$ | 155,900 | $ | 135,234 | ||||
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Adjusted EBITDA
Adjusted EBITDA is not a recognized financial measure under GAAP, but we believe it is useful in measuring our operating performance. Adjusted EBITDA is used internally to determine our incentive compensation levels, including under our management bonus plan, and it is required, with some additional adjustments, in certain covenant compliance calculations under our senior secured credit facilities. We also use Adjusted EBITDA to benchmark the performance of our business against expected results, to analyze year-over-year trends and to compare our operating performance to that of our competitors. We also use Adjusted EBITDA as a performance measure because it excludes the impact of tax provisions and Depreciation and Amortization, which are difficult to compare across periods due to the impact of accounting for business combinations and the impact of tax net operating losses on cash taxes paid. In addition, we use Adjusted EBITDA as a performance measure of our operating segments in accordance with ASC Topic 280, Disclosures About Segments of an Enterprise and Related Information. We believe that the presentation of Adjusted EBITDA enhances our investors’ overall understanding of the financial performance of and prospects for our business.
7
| Quarter ended | ||||||||
| March 31, | ||||||||
| 2012 | 2011 | |||||||
| Income before income taxes |
$ | 173 | $ | 11,067 | ||||
| Plus: Depreciation and Amortization |
16,219 | 14,861 | ||||||
| Interest Expense, Net |
8,101 | 8,677 | ||||||
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| Earnings before interest, taxes, depreciation and amortization |
$ | 24,493 | $ | 34,605 | ||||
| Loss on Early Extinguishment of Debt |
12,300 | — | ||||||
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| Adjusted EBITDA |
$ | 36,793 | $ | 34,605 | ||||
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Discretionary Cash Flow
Discretionary Cash Flow is calculated as our Adjusted EBITDA minus our Maintenance Capital Expenditures. We believe Discretionary Cash Flow is useful in measuring our liquidity. Discretionary Cash Flow is not a recognized financial measure under GAAP, and may not be comparable to similarly titled measures used by other companies in our industry. Discretionary Cash Flow should not be considered in isolation from or as an alternative to any other performance measures determined in accordance with GAAP (in thousands):
| Quarter ended | ||||||||
| March 31, | ||||||||
| 2012 | 2011 | |||||||
| Adjusted EBITDA |
$ | 36,793 | $ | 34,605 | ||||
| Maintenance Capital Expenditures |
(7,767 | ) | (7,336 | ) | ||||
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| Discretionary Cash Flow |
$ | 29,026 | $ | 27,269 | ||||
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The following table reconciles Discretionary Cash Flow to net cash provided by (used in) operating (in thousands):
| Quarter ended | ||||||||
| March 31, | ||||||||
| 2012 | 2011 | |||||||
| Discretionary Cash Flow |
$ | 29,026 | $ | 27,269 | ||||
| Maintenance Capital Expenditures |
7,767 | 7,336 | ||||||
| Cash interest expense |
(15,456 | ) | (12,499 | ) | ||||
| Cash income taxes |
(1,005 | ) | (205 | ) | ||||
| Change in accounts receivable |
(47,247 | ) | (77,094 | ) | ||||
| Change in inventory |
(14,257 | ) | (20,118 | ) | ||||
| Change in accounts payable |
48,905 | 100,108 | ||||||
| Change in other current assets and liabilities |
(595 | ) | (6,760 | ) | ||||
| Other operating cash flows |
2,884 | (954 | ) | |||||
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| Net cash provided by operating activities |
$ | 10,022 | $ | 17,083 | ||||
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8