TMS International Corp. Reports First Quarter 2013 Financial Results; Board of Directors Approves Initiation of Quarterly Dividend

PITTSBURGH, April 25, 2013 /PRNewswire/ -- 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, 2013.

(Logo: http://photos.prnewswire.com/prnh/20110406/MM78984LOGO )

The company also announced today that its Board of Directors has approved the initiation of a quarterly cash dividend. The first dividend of $0.10 per share will be payable on July 3, 2013 to stockholders of record as of the close of business on May 16, 2013. This is the first dividend declared by the company since its initial public offering in April 2011.

2013 First Quarter Highlights

- Revenue After Raw Materials Costs(1) in the quarter was $155.8 million, compared to $155.9 million in the first quarter of 2012.

- Adjusted EBITDA(1) for the quarter was $38.3 million compared to $36.8 million in the first quarter of 2012, a 4% increase.

- Successfully completed a repricing of its $300 million term loan facility that is expected to reduce its cash interest costs by approximately $3.0 million annually.

2013 First Quarter Financial Results
Revenue After Raw Materials Costs, the company's measurement of sales performance, was $155.8 million, compared to $155.9 million in the first quarter of 2012.

Adjusted EBITDA for the first quarter of 2013 was $38.3 million compared to $36.8 million of Adjusted EBITDA in the first quarter of 2012. Income before income taxes was $12.3 million compared to $0.2 million in the first quarter of 2012.  Net income attributable to common stock was $8.1 million for the first quarter compared with $0.4 million in 2012.

Basic and diluted earnings per share were $0.21 for the first quarter of 2013 compared with $0.01 in 2012. Adjusted Basic and fully diluted earnings per share was $0.22 in the first quarter of 2013 which was comparable to $0.22 in the first quarter of last year.  Both of these amounts were adjusted to remove the impact of costs associated with favorable debt restructuring activity.

The company's Adjusted EBITDA Margin(2) for the first quarter of 2013 was 24.6% compared to 23.6% in the first quarter of 2012. Total Revenue for the first quarter was $589.6 million compared to $747.0 million in the first quarter of 2012.

Discretionary Cash Flow(1,3), which the company uses to measure operating cash flow generation, was $28.0 million for the first quarter of 2013 compared with $29.1 million in the first quarter of 2012.

Commenting on the first quarter results, Raymond Kalouche, President and Chief Executive Officer of TMS International Corp., said, "Our first quarter was consistent with our expectations given the challenging industry environment we continue to face. We are well positioned for future growth in our market and are confident in our ability to meet our outlook for the year."

New Raw Materials Brokerage Office

During the quarter, the company continued to expand its global procurement web with the opening of another Mexico trading office, this one in Mexico City. This expansion into Mexico City complements the company's office in Monterrey, Mexico, and its mill services operations in Mexico and the Caribbean.

Outlook
The company reaffirms its full-year guidance for 2013 adjusted EBITDA in a range of $152 million to $160 million, which represents a year-over-year growth rate of 5 to 10 percent.

Conference Call Information
The company will hold a conference call to discuss first quarter 2013 results at 11 a.m. Eastern time this morning. The call will be web cast live along with a slide presentation over the Internet from the company's Web site at www.tmsinternationalcorp.com under "Investors." Participants should follow the instructions provided on the Web site for downloading and installing the necessary audio and visual 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 10022571.  The telephonic replay will be available until May 10, 2013.

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 81 customer sites in 11 countries and operates 36 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.

 

TMS INTERNATIONAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of dollars, except share and per share data)








Quarter ended



March 31,



2013


2012



(unaudited)


(unaudited)

Revenue:





Revenue from sale of materials

$         453,630


$         612,659

Service revenue

135,965


134,299






Total revenue

589,595


746,958






Costs and expenses:




Cost of scrap shipments

433,791


591,058

Site operating costs

101,668


101,846

Selling, general and administrative expenses

15,821


17,261

Depreciation

15,796


13,166

Amortization

3,083


3,053

Total costs and expenses

570,159


726,384

Income from operations

19,436


20,574

Loss on Modification and Early Extinguishment of Debt

(1,102)


(12,300)

Loss from equity investment

(43)


-

Interest expense, net

(5,973)


(8,101)






Income before income taxes

12,318


173






Income tax expense

(4,261)


(60)






Net Income 

8,057


113

Net loss attributable to noncontrolling interest

6


298






Net Income applicable to common stockholders

$             8,063


$               411






Net Income per share:




Basic 

$              0.21


$              0.01

Diluted

$              0.21


$              0.01






Average common shares outstanding:




Basic 

39,277,441


39,255,973

Diluted

39,330,737


39,255,973











 

TMS INTERNATIONAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of dollars, except share data)

 






March 31,


December 31,


2013


2012

Assets

(unaudited)



Current assets:




Cash and cash equivalents  

$        30,276


$       26,936

 Accounts receivable, net of allowance for doubtful accounts of

 $2,951 and $3,038, respectively 

280,251


280,472

Inventories

58,956


50,520

Prepaid and other current assets

21,254


22,757

Deferred tax asset

7,108


7,485

Total current assets

397,845


388,170





Property, plant and equipment, net

217,933


214,668

Equity investment

2,192


2,235

Deferred financing costs, net of accumulated amortization of $2,327 and $1,863, respectively

9,348


10,069

Goodwill

241,554


242,669

Other intangibles, net of accumulated amortization of $74,842 and

$72,012, respectively

146,661


147,885

Other noncurrent assets 

4,087


4,098





Total assets

$   1,019,620


$  1,009,794





Liabilities and Stockholders' Equity




Current liabilities:




Accounts payable 

$      252,351


$     251,941

Salaries, wages and related benefits

23,612


29,274

Current taxes payable

408


964

Accrued expenses

17,363


18,284

Revolving bank borrowings

13,500


-

Current portion of long-term debt

7,492


8,395

Total current liabilities

314,726


308,858





Long-term debt

303,563


303,657

Loans from noncontrolling interest

3,094


4,341

Deferred tax liability

60,066


58,192

Other noncurrent liabilities

26,627


27,704

Total liabilities

708,076


702,752





Stockholders' equity:




Class A common stock; 200,000,000 shares authorized, $0.001

 par value per share; 14,578,332 and 14,564,928 shares issued

 and outstanding at March 31, 2013 and December 31, 2012,

respectively

14


14

Class B common stock; 30,000,000 shares authorized, $0.001

par value per share; 24,699,109 and 24,712,513 issued and

outstanding at March 31, 2013 and December 31, 2012,

respectively

25


25

Capital in excess of par value

436,985


436,359

   Accumulated deficit

(114,091)


(122,154)

   Accumulated other comprehensive income

(13,030)


(8,963)

Total TMS International Corp. stockholders' equity

309,903


305,281

Noncontrolling interest

1,641


1,761

Total stockholders'  equity

311,544


307,042

    Total liabilities and stockholders' equity

$   1,019,620


$  1,009,794









 

TMS INTERNATIONAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of dollars, except share and per share data)

 






Three months ended


March 31,






2013


2012


(unaudited)


(unaudited)

Cash flows from operating activities:




Net Income

$                    8,057


$                       113

Adjustments to reconcile Net Income to net cash provided by operating activities:




Depreciation and Amortization

18,879


16,219

Amortization of deferred financing costs 

617


747

Deferred income tax 

2,907


(4)

Provision for bad debts 

(87)


226

Loss (Gain) on the disposal of equipment 

43


(165)

Non-cash share-based compensation cost 

627


322

Equity loss

43


-

Loss on Modification and Early Extinguishment of Debt

1,103


12,300

Increase (decrease) from changes in:




Accounts receivable 

308


(47,247)

Inventories 

(8,436)


(14,257)

Prepaid and other current assets 

58


5,604

Other noncurrent assets 

11


(348)

Accounts payable

410


48,905

Accrued expenses 

(7,139)


(14,227)

Other non current liabilities 

(1,078)


99

Other, net 

(1,909)


1,735

Net cash provided by operating activities 

$                  14,414


$                  10,022





Cash flows from investing activities:




Capital expenditures 

(20,579)


(33,153)

Software and systems expenditures

(2,366)


(71)

Proceeds from sale of equipment 

78


271

Contingent payment for acquired business 

-


(131)

Cash flows related to IU International, net 

-


(27)

Net cash used in investing activities 

(22,867)


(33,111)





Cash flows from financing activities:




Revolving credit facility borrowing (repayments), net

13,500


25,142

Borrowing from noncontrolling interests

-


1,917

Repayment of debt 

(3,185)


(380,732)

Proceeds from debt issuance, net of original issue discount

2,250


297,000

Debt issuance and termination fees

(772)


(13,630)

Payments to acquire noncontrolling interests

-


(231)

Contributions from noncontrolling interests

-


269

Net cash provided by (used in)  financing activities 

11,793


(70,265)





Cash and cash equivalents:




Net increase (decrease)  in cash 

3,340


(93,354)

Cash at beginning of period 

26,936


108,830

Cash at end of period 

$                  30,276


$                  15,476









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,


(dollars in thousands)

2013


2012


(unaudited)

Revenue After Raw Materials Costs:




Consolidated:




Total Revenue

$ 589,595


$ 746,958

Cost of Raw Materials Shipments

(433,791)


(591,058)





Revenue After Raw Materials Costs

$ 155,804


$ 155,900





Mill Services Group:




Total Revenue

$ 172,351


$ 180,070

Cost of Raw Materials Shipments

(35,389)


(43,712)





Revenue After Raw Materials Costs

$ 136,962


$ 136,358





Raw Material and Optimization Group:




Total Revenue

$ 417,190


$ 566,872

Cost of Raw Materials Shipments

(398,394)


(547,339)





Revenue After Raw Materials Costs

$    18,796


$    19,533





Administrative:




Total Revenue

$            54


$            16

Cost of Raw Materials Shipments

(8)


(7)





Revenue After Raw Materials Costs

$            46


$              9





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.

 


Quarter ended
March 31,


(dollars in thousands)

2013


2012


(unaudited)

Adjusted EBITDA:




Net Income

$      8,057


$         113

Income Tax Expense

4,261


60

Interest Expense, Net

5,973


8,101

Depreciation and Amortization

18,879


16,219

Loss on Modification and Early Extinguishment of debt

1,102


12,300





Adjusted EBITDA

$    38,272


$    36,793





Adjusted EBITDA by Operating Segment:




Mill Services Group

$    32,750


$    32,417

Raw Material and Optimization Group

13,769


14,615

Administrative

(8,247)


(10,239)






$    38,272


$    36,793





 

 


Quarter ended
March 31,


2013


2012


(unaudited)


(unaudited)

Income before income taxes

$       12,318


$            173

Plus: Depreciation and amortization

18,879


16,219

Interest Expense, Net

5,973


8,101





Earnings before interest, taxes, depreciation and amortization

37,170


24,493

Loss on Modification and Early Extinguishment of Debt

1,102


12,300





Adjusted EBITDA

$       38,272


$       36,793





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,
2013


March 31,
2012

Adjusted EBITDA

$       38,272


$      36,793

Maintenance Capital Expenditures

(10,238)


(7,696)





Discretionary Cash Flow

$       28,034


$       29,097





The following table reconciles Discretionary Cash Flow to net cash provided by (used in) operating activities (in thousands): 

 






Quarter ended


March 31,
2013


March 31,
2012

Discretionary Cash Flow

$        28,034


$        29,097

Maintenance Capital Expenditures

10,238


7,696

Cash interest expense

(5,090)


(15,382)

Cash income taxes

(619)


(1,005)

Change in accounts receivable

308


(47,247)

Change in inventory

(8,436)


(14,257)

Change in account payable

410


48,905

Change in other current assets and liabilities

(7,347)


(595)

Other operating cash flows

(3,084)


2,810





Net cash provided by operating activities

$        14,414


$        10,022





 

(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) Adjusted EBITDA Margin is calculated as a percentage of Revenue After Raw Materials Costs.

(3) Adjusted EBITDA minus maintenance capex.

SOURCE TMS International Corp.



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