2014

TMS International Corp. Reports Fourth Quarter and Fiscal Year 2012 Results

PITTSBURGH, Feb. 14, 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 fourth quarter and fiscal year ended December 31, 2012.

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2012 Fourth Quarter Highlights

  • Revenue After Raw Materials Costs1 in the quarter was $148.3 million, a 7.5% increase compared to $137.9 million in the fourth quarter of 2011.
  • Adjusted EBITDA1 for the quarter was $35.0 million compared to $31.7 million in the fourth quarter of 2011, a 10.4% increase.
  • Revenue After Raw Materials Costs for year ended December 31, 2012 was $606.7 million, compared to $549.5 million in 2011, up 10.4%.
  • Adjusted EBITDA for the year ended December 31, 2012 was $145.3 million, an increase of 8.4% over $134.0 million in 2011.

2012 Fourth Quarter Financial Results

Revenue After Raw Materials Costs, the company's measurement of sales performance, was $148.3 million, an increase of 7.5%, compared to $137.9 million in the fourth quarter of 2011.

Adjusted EBITDA for the fourth quarter of 2012 was $35.0 million compared to $31.7 million of Adjusted EBITDA in the fourth quarter of 2011. Income before income taxes was $10.1 million compared to $8.0 million in the fourth quarter of 2011, for an increase of 27%.  Net income attributable to common stock was $6.1 million for the fourth quarter and was flat compared to the fourth quarter of 2011, due to a higher effective tax rate in 2012. Basic and diluted earnings per share were $0.15 for the fourth quarter of 2012.

The company's Adjusted EBITDA Margin2 for the fourth quarter of 2012 was 23.6% compared to 23.0% in the fourth quarter of 2011. Total Revenue for the fourth quarter was $536.8 million compared to $617.5 million in the fourth quarter of 2011.

Discretionary Cash Flow1,3, which the company uses to measure operating cash flow generation, was $20.6 million for the fourth quarter of 2012 compared with $18.4 million in the fourth quarter of 2011, a 12.0% increase.

2012 Full Year Financial Results

Revenue After Raw Materials Costs for the year ended December 31, 2012, increased 10.4% to $606.7 million from $549.5 million for the comparable 2011 period. Adjusted EBITDA for 2012 increased 8.4% to $145.3 million from $134.0 million for 2011. Adjusted EBITDA margin for 2012 was 24.0% compared to 24.4% for 2011.

Total revenue for the year ended December 31, 2012, was $2.5 billion, compared to $2.7 billion for 2011. For 2012, the company produced Discretionary Cash Flow of $102.6 million compared with $92.1 million in 2011, an 11.3% increase.

Raymond Kalouche, President and Chief Executive Officer of TMS International Corp., said with respect to the company's financial results, "We are pleased that our financial results are right in the middle of our full-year public guidance, which we provided in early 2012. Our revenue and EBITDA were up year-over-year despite a very challenging environment in the industry for much of the year. We continue to focus on creating value for our customers and shareholders in all business environments and executing our global growth plan."

Outlook

The company expects to achieve full year 2013 Adjusted EBITDA in a range of $152 million to $160 million, representing a year-over-year growth rate of 5% to 10%.

Conference Call Information

The company will hold a conference call to discuss fourth quarter 2012 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. fourth 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 10022570.  The telephonic replay will be available until March 1, 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 35 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.

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.

TMS INTERNATIONAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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






Fourth quarter ended


Twelve months ended


December 31,


December 31,


2012


2011


2012


2011


(unaudited)




(unaudited)



Revenue:








Revenue from sale of materials

$         406,273


$         498,306


$      1,994,969


$      2,192,188

Service revenue

130,553


119,240


531,221


469,283

Total revenue

536,826


617,546


2,526,190


2,661,471









Costs and expenses:








Cost of scrap shipments

388,551


479,642


1,919,474


2,112,011

Site operating costs

97,791


91,023


396,412


356,183

Selling, general and administrative expenses

15,290


15,046


64,504


58,646

Provision for bad debts

219


178


470


590

Share based compensation associated with initial








    public offering

-


-


-


1,304

Provision for Transition Agreement

-


-


-


745

Depreciation

15,037


12,069


56,546


47,493

Amortization

3,306


3,199


12,510


12,401

Total costs and expenses

520,194


601,157


2,449,916


2,589,373

Income from operations

16,632


16,389


76,274


72,098

Loss on Early Extinguishment of Debt

-


(581)


(12,300)


(581)

Disposition of cumulative translation adjustment

(362)


-


(362)


-

Loss from equity investments

(19)


-


(19)


-

Interest expense, net

(6,112)


(7,825)


(26,125)


(32,201)









Income before income taxes

10,139


7,983


37,468


39,316

Income tax expense

(3,891)


(2,366)


(11,347)


(15,410)

Net Income 

6,248


5,617


26,121


23,906









Net (income) loss attributable to noncontrolling interest

(184)


532


(43)


726

Accretion of Preferred Stock Dividends

-


-


-


(7,156)









Net Income applicable to common stockholders

$             6,064


$             6,149


$           26,078


$           17,476









Net Income per share:









Basic 

$              0.15


$              0.16


$              0.66


$              0.59


Diluted

$              0.15


$              0.16


$              0.66


$              0.59










Average common shares outstanding:









Basic 

39,277,441


39,255,973


39,266,148


29,593,776


Diluted

39,277,441


39,255,973


39,266,469


29,596,359

 

TMS INTERNATIONAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of dollars, except share data)








December 31,


December 31,



2012


2011

Assets


(unaudited)



Current assets:






 Cash and cash equivalents  


$         26,936


$       108,830


 Accounts receivable, net of allowance for doubtful accounts of $3,038 and

$2,613, respectively 


280,472


292,546


Inventories


50,520


56,297


Prepaid and other current assets


22,757


31,041


Deferred tax asset


7,485


7,114



Total current assets


388,170


495,828








Property, plant and equipment, net


214,668


158,314

Equity investment


2,235


-

Deferred financing costs, net of accumulated amortization of $1,863 and $9,517, respectively


10,069


10,638

Goodwill


242,669


241,771

Other intangibles, net of accumulated amortization of $72,012 and $59,461, respectively


147,885


155,769

Other noncurrent assets 


4,098


3,675










Total assets


$     1,009,794


$    1,065,995








Liabilities and Stockholders' Equity





Current liabilities:






Accounts payable 


$        251,941


$       273,816


Salaries, wages and related benefits


29,274


28,105


Current taxes payable


964


347


Accrued expenses


18,284


23,993


Revolving bank borrowings


-


159


Current portion of long-term debt


8,395


3,585



Total current liabilities


308,858


330,005








Long-term debt


303,657


379,250

Loans from noncontrolling interest


4,341


5,275

Deferred tax liability


58,192


53,791

Other noncurrent liabilities


27,704


20,833



Total liabilities


702,752


789,154








Stockholders' equity:






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

share; 14,564,928 and 12,894,333 shares issued and outstanding at December

31, 2012 and December 31, 2011, respectively


14


13


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

share; 24,712,513 and 26,361,640 issued and outstanding at December 31, 2012

and December 31, 2011, respectively


25


26


Capital in excess of par value


436,359


434,841

   Accumulated deficit


(122,154)


(148,232)

   Accumulated other comprehensive income


(8,963)


(11,075)



Total TMS International Corp. stockholders' equity


305,281


275,573



Noncontrolling interest


1,761


1,268



Total stockholders'  equity


307,042


276,841



    Total liabilities and stockholders' equity


$     1,009,794


$    1,065,995

 

TMS INTERNATIONAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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




Twelve months ended



December 31,








2012


2011



(unaudited)



Cash flows from operating activities:





Net Income


$                 26,121


$                 23,906

Adjustments to reconcile Net Income to net cash provided by operating

activities:





Depreciation and Amortization


69,056


59,894

Amortization of deferred financing costs 


2,593


2,491

Deferred income tax 


4,969


12,300

Provision for bad debts 


470


590

Loss on the disposal of equipment 


49


291

Non-cash share-based compensation cost 


1,944


2,231

Equity loss


19


-

Loss on Early Extinguishment of Debt


12,300


581

Increase (decrease) from changes in:





Accounts receivable 


16,061


(85,989)

Inventories 


5,777


(17,633)

Prepaid and other current assets 


4,058


(2,789)

Other noncurrent assets 


(630)


(79)

Accounts payable


(21,875)


70,346

Accrued expenses 


(4,267)


(4,639)

Other non current liabilities 


2,380


(236)

Other, net 


287


(2,320)

Net cash provided by operating activities 


$              119,312


$                 58,945






Cash flows from investing activities:





Capital expenditures 


(110,539)


(80,783)

Software and systems expenditures


(3,927)


(2,293)

Proceeds from sale of equipment 


1,848


673

Acquisition


-


(50)

Equity investment


(2,254)


-

Contingent payment for acquired business 


(131)


(337)

Cash flows related to IU International, net 


(28)


(402)

Net cash used in investing activities 


(115,031)


(83,192)






Cash flows from financing activities:





Revolving credit facility borrowing (repayments), net


(159)


(115)

Net proceeds from initial public offering


-


128,657

Borrowing from noncontrolling interests


2,357


-

Repayment of debt 


(386,577)


(46,223)

Proceeds from debt issuance, net of original issue discount


312,078


5,275

Debt issuance and termination fees


(13,996)


(5,326)

Payments to acquire noncontrolling interests


(231)


-

Contributions from noncontrolling interests


269


1,849

Net cash (used in) provided by financing activities 


(86,259)


84,117






Effect of exchange rate on cash and cash equivalents


84


(532)






Cash and cash equivalents:





Net (decrease) increase in cash 


(81,894)


59,338

Cash at beginning of period 


108,830


49,492

Cash at end of period 


$                 26,936


$              108,830

 

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
December 31,


Twelve months ended

December 31,

(dollars in thousands)

2012

2011

2012

2011


(unaudited)

(unaudited)

Revenue After Raw Materials Costs:





Consolidated:





Total Revenue

$ 536,826

$ 617,546

$ 2,526,190

$ 2,661,471

Cost of Raw Materials Shipments

(388,551)

(479,642)

(1,919,474)

(2,112,011)

Revenue After Raw Materials Costs

$ 148,275

$ 137,904

$    606,716

$    549,460






Mill Services Group:





Total Revenue

$ 161,140

$ 167,505

$    688,362

$    663,110

Cost of Raw Materials Shipments

(30,721)

(45,833)

(153,493)

(180,905)

Revenue After Raw Materials Costs

$ 130,419

$ 121,672

$    534,869

$    482,205






Raw Material and Optimization Group:





Total Revenue

$ 375,687

$ 450,027

$ 1,837,771

$ 1,998,313

Cost of Raw Materials Shipments

(357,838)

(433,804)

(1,765,982)

(1,931,125)

Revenue After Raw Materials Costs

$    17,849

$    16,223

$      71,789

$      67,188






Administrative:





Total Revenue

$           (1)

$            14

$              57

$              48

Cost of Raw Materials Shipments

8

(5)

1

19

Revenue After Raw Materials Costs

$              7

$              9

$              58

$              67






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
December 31,


Twelve months ended
December 31,

(dollars in thousands)

2012

2011

2012

2011


(unaudited)

(unaudited)

Adjusted EBITDA:





Net Income

$      6,248

$      5,617

$      26,121

$      23,906

Income Tax Expense

3,891

2,366

11,347

15,410

Interest Expense, Net

6,112

7,825

26,125

32,201

Depreciation and Amortization

18,343

15,268

69,056

59,894

Provision for Transition Agreement

-

--

-

745

Loss on Early Extinguishment of debt

-

581

12,300

581

Recognition of cumulative translation adjustment

362

-

362

-

Share based compensation associated with initial public

offering

-

-

-

1,304

Adjusted EBITDA

$    34,956

$    31,657

$    145,311

$    134,041






Adjusted EBITDA by Operating Segment:





Mill Services Group

$    30,448

$    28,004

$    130,306

$    117,511

Raw Material and Optimization Group

12,756

11,819

52,387

51,042

Administrative

(8,248)

(8,166)

(37,382)

(34,512)


$    34,956

$    31,657

$    145,311

$    134,041






 


Fourth quarter ended
December 31,

Twelve months ended
December 31,


2012

2011

2012

2011


(unaudited)

(unaudited)

(unaudited)

(unaudited)

Income before income taxes

$       10,139

$         7,983

$       37,468

$       39,316

Plus: Depreciation and amortization

18,343

15,268

69,056

59,894

Interest Expense, Net

6,112

7,825

26,125

32,201






Earnings before interest, taxes, depreciation and amortization

34,594

31,076

132,649

131,411

Share based compensation associated with initial public

offering

1,304

Provision for Transition Agreement

745

Recognition of cumulative translation adjustment

362

362

Loss on Early Extinguishment of debt

581

12,300

581

Adjusted EBITDA

$       34,956

$       31,657

$    145,311

$    134,041






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):


Twelve months  ended


December 31,
2012

December 31,
2011

Adjusted EBITDA

$     145,311

$    134,041

Maintenance Capital Expenditures

(42,719)

(41,893)

Discretionary Cash Flow

$     102,592

$       92,148




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





Twelve months ended


December 31,
2012

December 31,
2011

Discretionary Cash Flow

$      102,592

$        92,148

Maintenance Capital Expenditures

42,719

41,893

Cash interest expense

(31,064)

(30,284)

Cash income taxes

(7,542)

(1,854)

Change in accounts receivable

16,061

(85,989)

Change in inventory

5,777

(17,633)

Change in account payable

(21,875)

70,346

Change in other current assets and liabilities

7,325

(6,854)

Other operating cash flows

5,319

(2,828)

Net cash provided by operating activities

$      119,312

$        58,945




 

SOURCE TMS International Corp.



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