TMS International Corp. Reports Second Quarter 2013 Financial Results

PITTSBURGH, Aug. 1, 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 second quarter ended June 30, 2013.

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

2013 Second Quarter Results

Revenue After Raw Materials Costs1 in the quarter was $153.1 million, compared to $153.6 million in the second quarter of 2012. Adjusted EBITDA1 for the quarter was $36.1 million compared to $37.8 million in the second quarter of 2012.

Net income attributable to common stock was $8.1 million for the second quarter compared with $9.8 million in 2012. Basic and diluted earnings per share were $0.21 for the second quarter of 2013 compared with $0.25 in 2012.

The company's Adjusted EBITDA Margin2 for the second quarter of 2013 was 23.6% compared to 24.6% in the second quarter of 2012. Total Revenue for the second quarter was $631.4 million compared to $669.4 million in the second quarter of 2012.

Discretionary Cash Flow1,3, which the company uses to measure operating cash flow generation, was $25.7 million for the second quarter of 2013 compared with $28.6 million in the second quarter of 2012.

Fiscal 2013 Six Month Results

Revenue After Raw Materials Costs for the six months ended June 30, 2013 was $309.0 million comparable from $309.5 million for the first six months of 2012. Adjusted EBITDA for the first six months of 2013 was $74.4 million compared to $74.7 million for the first six months of 2012. Adjusted EBITDA margin for the first six months of 2013 was 24.1% comparable to 24.1% for the first six months of 2012.

Total revenue for the first six months of 2013 was $1.2 billion compared with $1.4 billion for the first six months of 2012. For the first six months of 2013, the company produced Discretionary Cash Flow of $53.7 million compared with $57.7 million for the first six months of 2012.

Commenting on the second quarter results, Raymond Kalouche, President and Chief Executive Officer of TMS International Corp., said, "While new contracts in our mill services group performed very well in the quarter, our results were unfavorably impacted by softness in steel production at our customer mills in North America, mostly due to planned and unplanned outages, as well as lower activity in our raw materials procurement business.  However, we continue to focus on creating value and delivering exceptional service for our customers globally, and are optimistic about improving production volumes in the second half of 2013."

Expansion of Services at Existing Customer Site in Mexico

The company also announced today that it has expanded its services with the largest integrated steel mill in Mexico.  These services are expected to generate more than $66 million in revenue during the term of these services, at expected production levels, with aggregate growth capital investments of approximately $9.5 million.

Outlook

The company is lowering its full-year guidance for 2013 adjusted EBITDA to a range of $150 million to $155 million, from its original guidance of $152 million to $160 million.

Conference Call Information

The company will hold a conference call to discuss second 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. second 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 10022573.  The telephonic replay will be available until August 16, 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 12 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.

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)












Quarter ended


Six months ended



June 30,


June 30,



2013


2012


2013


2012



(unaudited)


(unaudited)


(unaudited)


(unaudited)

Revenue:









Revenue from sale of materials

$         493,812


$         533,034


$         947,442


$      1,145,693

Service revenue

137,609


136,321


273,574


270,620










Total revenue

631,421


669,355


1,221,016


1,416,313










Costs and expenses:








Cost of scrap shipments

478,273


515,778


912,064


1,106,836

Site operating costs

100,480


100,016


202,148


201,862

Selling, general and administrative expenses

16,522


15,714


32,343


32,975

Depreciation

16,578


13,688


32,374


26,854

Amortization

3,079


3,051


6,162


6,104

Total costs and expenses

614,932


648,247


1,185,091


1,374,631

Income from operations

16,489


21,108


35,925


41,682

Loss on Modification and Early Extinguishment of Debt

-


-


(1,102)


(12,300)

Loss from equity investment

(61)


-


(104)


-

Interest expense, net

(5,362)


(5,923)


(11,335)


(14,024)










Income before income taxes

11,066


15,185


23,384


15,358










Income tax expense

(2,841)


(5,476)


(7,102)


(5,536)










Net Income

8,225


9,709


16,282


9,822

Net (income) loss attributable to noncontrolling interest

(87)


74


(81)


372










Net Income applicable to common stockholders

$             8,138


$             9,783


$           16,201


$           10,194










Net Income per share:









Basic

$              0.21


$              0.25


$              0.41


$              0.26


Diluted

$              0.21


$              0.25


$              0.41


$              0.26










Average common shares outstanding:









Basic

39,281,908


39,255,973


39,279,687


39,255,973


Diluted

39,400,986


39,257,265


39,364,671


39,256,619

 

TMS INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars, except share data)








June 30,


December 31,



2013


2012

Assets


(unaudited)



Current assets:





       Cash and cash equivalents 


$         33,135


$        26,936

       Accounts receivable, net of allowance for doubtful accounts of $3,075 and $3,038, respectively


269,271


280,472

      Inventories


50,732


50,520

      Prepaid and other current assets


35,734


22,757

      Deferred tax asset


7,727


7,485

      Total current assets


396,599


388,170






Property, plant and equipment, net


213,487


214,668

Equity investment


2,130


2,235

Deferred financing costs, net of accumulated amortization of $2,860 and $1,863, respectively


8,809


10,069

Goodwill


241,363


242,669

Other intangibles, net of accumulated amortization of $77,870 and $72,012, respectively


146,589


147,885

Other noncurrent assets


3,910


4,098






      Total assets


$     1,012,887


$    1,009,794






Liabilities and Stockholders' Equity





Current liabilities:





Accounts payable


$        248,817


$       251,941

Salaries, wages and related benefits


25,502


29,274

Current taxes payable


2,380


964

Accrued expenses


23,601


18,284

Revolving bank borrowings


418


-

Current portion of long-term debt


7,458


8,395

      Total current liabilities


308,176


308,858






Long-term debt


301,465


303,657

Loans from noncontrolling interest


2,638


4,341

Deferred tax liability


59,644


58,192

Other noncurrent liabilities


27,154


27,704

Total liabilities


699,077


702,752






Stockholders' equity:

      Class A common stock; 200,000,000 shares authorized, $0.001 par value per share; 14,765,493

      and 14,564,928 shares issued and outstanding at June 30, 2013 and December 31, 2012,

      respectively






14


14






      Class B common stock; 30,000,000 shares authorized, $0.001 par value per share; 24,528,208

      and 24,712,513 issued and outstanding at June 30, 2013 and December 31, 2012, respectively


25


25

      Capital in excess of par value


433,897


436,359

   Accumulated deficit


(105,953)


(122,154)

   Accumulated other comprehensive income


(15,793)


(8,963)

      Total TMS International Corp. stockholders' equity


312,190


305,281

      Noncontrolling interest


1,620


1,761

      Total stockholders'  equity


313,810


307,042

          Total liabilities and stockholders' equity


$     1,012,887


$    1,009,794

 

TMS INTERNATIONAL CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars, except share and per share data)








Six months ended




June 30,










2013


2012




(unaudited)


(unaudited)

Cash flows from operating activities:






      Net Income



$                 16,282


$                   9,823

        Adjustments to reconcile Net Income to net cash provided by operating

        activities:






          Depreciation and Amortization



38,536


32,958

          Amortization of deferred financing costs



1,259


1,350

          Deferred income tax



3,021


2,501

          Provision for bad debts



-


206

          Loss (Gain) on the disposal of equipment



25


(168)

          Non-cash share-based compensation cost



1,466


817

          Equity loss



105


-

          Loss on Modification and Early Extinguishment of Debt



1,102


12,300

          Increase (decrease) from changes in:






              Accounts receivable



11,201


4,673

              Inventories



(212)


(5,162)

              Prepaid and other current assets



(12,948)


4,834

              Other noncurrent assets



188


(210)

              Accounts payable



(3,124)


10,323

              Accrued expenses



(967)


(8,330)

              Other non current liabilities



(550)


1,193

              Other, net



(3,313)


(2,132)

Net cash provided by operating activities



$                 52,071


$                 64,976







Cash flows from investing activities:






      Capital expenditures



(36,038)


(55,018)

      Software and systems expenditures



(5,431)


(493)

      Proceeds from sale of equipment



140


347

      Contingent payment for acquired business



-


(131)

      Cash flows related to IU International, net



-


(67)

Net cash used in investing activities



(41,329)


(55,362)







Cash flows from financing activities:






      Revolving credit facility borrowing (repayments), net



418


(3)

      Borrowing from noncontrolling interests



-


2,347

      Repayment of debt



(5,858)


(381,254)

      Proceeds from debt issuance, net of original issue discount



2,250


300,703

      Debt issuance and termination fees



(772)


(13,711)

      Payments to acquire noncontrolling interests



-


(231)

      Contributions from noncontrolling interests



-


269

Net cash used in financing activities



(3,962)


(91,880)

Effect of exchange rate on cash and cash equivalents



(581)


(62)

Cash and cash equivalents:






Net increase (decrease)  in cash



6,199


(82,266)

Cash at beginning of period



26,936


108,830

Cash at end of period



$                 33,135


$                 26,564

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
June 30,


Six months ended
June 30,


(dollars in thousands)

2013

2012


2013

2012



(unaudited)


(unaudited)


Revenue After Raw Materials Costs:







Consolidated:







Total Revenue

$ 631,421

$ 669,355


$ 1,221,016

$ 1,416,313









Cost of Raw Materials Shipments

(478,273)

(515,778)


(912,064)

(1,106,836)


Revenue After Raw Materials Costs

$ 153,148

$ 153,577


$ 308,952

$ 309,477








Mill Services Group:







Total Revenue

$ 171,377

$ 182,598


$ 343,728

$ 362,668


Cost of Raw Materials Shipments

(34,572)

(45,467)


(69,961)

(89,179)


Revenue After Raw Materials Costs

$ 136,805

$ 137,131

$ 273,767

$ 273,489








Raw Material and Optimization Group:







Total Revenue

$ 460,121

$ 486,743


$ 877,311

$ 1,053,615


Cost of Raw Materials Shipments

(443,704)

(470,308)


(842,098)

(1,017,647)


Revenue After Raw Materials Costs

$    16,417

$    16,435


$    35,213

$    35,968








Administrative:







Total Revenue

$         (77)

$            14


$         (23)

$            30


Cost of Raw Materials Shipments

3

(3)


(5)

(10)


Revenue After Raw Materials Costs

$         (74)

$            11


$         (28)

$            20
















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
June 30,


Six months ended
June 30,

(dollars in thousands)

2013

2012


2013

2012


(unaudited)


(unaudited)

Adjusted EBITDA:






Net Income

$      8,225

$      9,709


$   16,282

$      9,822

Income Tax Expense

2,841

5,476


7,102

5,536

Interest Expense, Net

5,362

5,923


11,335

14,024

Depreciation and Amortization

19,657

16,739


38,536

32,958

Loss on Modification and Early Extinguishment of debt

-

-


1,102

12,300

Adjusted EBITDA

$    36,085

$    37,847


$   74,357

$   74,640






Adjusted EBITDA by Operating Segment:





Mill Services Group

$    34,477

$    35,441


$   67,227

$   67,858

Raw Material and Optimization Group

11,049

11,644


24,818

26,258

Administrative Group

(9,441)

(9,238)


(17,688)

(19,476)







$    36,085

$    37,847


$   74,357

$    74,640







Quarter ended
June 30,


Six months ended
June 30,

(dollars in thousands)

2013

2012


2013

2012


(unaudited)

(unaudited)

(unaudited)

(unaudited)

Income before income taxes

$    11,066

$    15,185

$   23,384

$    15,358

Plus: Depreciation and amortization

19,657

16,739

38,536

32,958

Interest Expense, Net

5,362

5,923

11,335

14,024






Earnings before interest, taxes, depreciation and amortization

36,085

37,847

73,255

62,340

Loss on Modification and Early Extinguishment of Debt

-

-

1,102

12,300

Adjusted EBITDA

$    36,085

$    37,847

$   74,357

$    74,640






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
June 30,


Six months ended
June 30,

(dollars in thousands)

2013

2012


2013

2012


(unaudited)

(unaudited)

(unaudited)

(unaudited)

Adjusted EBITDA

$       36,085

$      37,847

$      74,357

$        74,640

Maintenance Capital Expenditures

 

(10,427)

(9,242)

(20,665)

(16,937)

Discretionary Cash Flow

$       25,658

$       28,605

$        53,692

$        57,703







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








Quarter ended


Six months ended


June 30,
2013

June 30,
2012


June 30,
2013

June 30,
2012

Discretionary Cash Flow

$        25,658

$        28,605


$        53,692

$        57,703

Maintenance Capital Expenditures

10,427

9,242


20,665

16,937

Cash interest expense

(4,953)

(5,391)


(10,043)

(20,773)

Cash income taxes

(6,120)

(948)


(6,739)

(1,953)

Change in accounts receivable

10,893

51,920


11,201

4,673

Change in inventory

8,224

9,095


(212)

(5,162)

Change in account payable

(3,534)

(38,582)


(3,124)

10,323

Change in other current assets and liabilities

(6,632)

5,198


(13,979)

4,603

Other operating cash flows

3,694

(4,247)

610

(1,437)






Net cash provided by operating activities

$        37,657

$        54,892

$        52,071

$        64,914













 

SOURCE TMS International Corp.



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