TMS International Corp. Reports Third Quarter 2012 Results

PITTSBURGH, Nov. 1, 2012 /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 third quarter ended September 30, 2012.

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2012 Third Quarter Highlights
- Revenue After Raw Materials Costs(1) in the quarter was $149.0 million, a 7.0% increase compared to $139.3 million in the third quarter of 2011.

- Adjusted EBITDA(1) for the quarter was $35.7 million compared to $34.3 million in the third quarter of 2011, a 4.1% increase.

- Basic and diluted earnings per share were $0.25 for the 2012 third quarter, a 47.1% increase compared with $0.17 earnings per share for the third quarter of 2011.

2012 Third Quarter Financial Results
Revenue After Raw Materials Costs, the company's measurement of sales performance, was $149.0 million, an increase of 7.0%, compared to $139.3 million in the third quarter of 2011.

Adjusted EBITDA for the third quarter of 2012 was $35.7 million compared to $34.3 million of Adjusted EBITDA in the third quarter of 2011. Net income attributable to common stock was $9.8 million for the third quarter compared to $6.5 million in the third quarter of 2011, an increase of 50.7%. Basic and diluted earnings per share were $0.25 for the third quarter of 2012.

The company's Adjusted EBITDA Margin(2) for the third quarter of 2012 was 24.0% compared to 24.6% in the third quarter of 2011. Total Revenue for the third quarter was $573.1 million compared to $709.2 million in the third quarter of 2011.

Discretionary Cash Flow(3),  which the company uses to measure operating cash flow generation, was $24.8 million for the third quarter of 2012 compared with $23.6 million in the third quarter of 2011, a 5.1% increase.

Fiscal 2012 Nine Month Results
Revenue After Raw Materials Costs for the nine months ended September 30, 2012 increased 11.4% to $458.4 million from $411.6 million for the first nine months of 2011. Excluding the $12.3 million of debt extinguishment costs relating to the company's refinancing, Adjusted EBITDA for the first nine months of 2012 increased 7.8% to $110.4 million from $102.4 million for the first nine months of 2011. Adjusted EBITDA margin for the first nine months of 2012 was 24.1% compared to 24.9 % for the first nine months of 2011.

Total revenue for the first nine months of 2012 was $2.0 billion, comparable to the first nine months of 2011. For the first nine months of 2012, the company produced Discretionary Cash Flow of $82.0 million compared with $73.7 million for the first nine months of 2011, an 11.3% increase.

Joseph Curtin, Chairman, President and Chief Executive Officer of TMS International Corp., said with respect to the company's third quarter 2012 results, "I am pleased with our strong financial results for the quarter, particularly given the current global economic backdrop. We're staying focused on creating value for our customers and shareholders."

Contract Wins/Renewals
The company is announcing four new contract wins from the third quarter of approximately $37 million of cumulative revenue over the terms of the contracts at expected production levels. For the first nine months of 2012, TMS International has secured 17 new contracts of approximately $307 million of cumulative revenue over the terms of the contracts at expected production levels, with aggregate growth capital investments of approximately $37 million. This follows nine new contract wins in 2011 of approximately $433 million of cumulative revenue over the terms of the contracts at expected production levels, with aggregate growth capital investments of approximately $64 million.

New Raw Materials Brokerage Offices
During the quarter, the company continued to expand its global footprint with the opening of its first offices in Seoul, South Korea, and Kuala Lumpur, Malaysia, both important raw material and steel producing markets in the Asia-Pacific region. The opening of these offices complements the company's six existing offices in Asia, and provides the company with an excellent platform to grow its presence and serve its customers in the region.

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 third quarter 2012 results at 11:30 a.m. Eastern time 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. third 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, November 15, 2012.

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 80 customer sites in 10 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)

 













Third quarter ended


Nine months ended




September 30,


September 30,




2012


2011


2012


2011




(unaudited)


(unaudited)


(unaudited)


(unaudited)


Revenue:










Revenue from sale of materials

$    443,003


$    589,146


$ 1,588,696


$ 1,693,882


Service revenue

130,048


120,068


400,668


350,043












Total revenue

573,051


709,214


1,989,364


2,043,925












Costs and expenses:









Cost of scrap shipments

424,087


569,911


1,530,923


1,632,369


Site operating costs

96,759


90,963


298,621


265,160


Selling, general and administrative expenses

16,490


14,011


49,465


44,012


Share based compensation associated with initial









    public offering

-


-


-


1,304


Provision for Transition Agreement

-


745


-


745


Depreciation

14,655


11,856


41,509


35,424


Amortization

3,100


3,068


9,204


9,202


Total costs and expenses

555,091


690,554


1,929,722


1,988,216


Income from operations

17,960


18,660


59,642


55,709


Interest expense, net

(5,989)


(7,792)


(20,013)


(24,376)


Loss on Early Extinguishment of Debt

-


-


(12,300)


-












Income before income taxes

11,971


10,868


27,329


31,333












Income tax expense

(1,920)


(4,497)


(7,456)


(13,044)












Net Income 

10,051


6,371


19,873


18,289












Net (income) loss attributable to noncontrolling interest

(231)


134


141


194


Accretion of Preferred Stock Dividends

-


-


-


(7,156)












Net Income applicable to common stockholders

$       9,820


$       6,505


$     20,014


$     11,327












Net Income per share:










Basic 

$         0.25


$         0.17


$         0.51


$         0.43



Diluted

$         0.25


$         0.17


$         0.51


$         0.43












Average common shares outstanding:










Basic 

39,274,874


39,255,973


39,262,343


26,290,157



Diluted

39,274,874


39,255,973


39,262,772


26,295,801












 

 

TMS INTERNATIONAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of dollars, except share data)

 












September 30,


December 31,





2012


2011

Assets


(unaudited)



Current assets:






 Cash and cash equivalents  


$         26,478


$      108,830


 Accounts receivable, net of allowance for doubtful accounts of $2,868 and $2,613, respectively 


291,957


292,546


Inventories


54,300


56,297


Prepaid and other current assets


20,458


31,041


Deferred tax asset


7,609


7,114



Total current assets


400,802


495,828








Property, plant and equipment, net


206,080


158,314

Deferred financing costs, net of accumulated amortization of $1,326 and $9,517, respectively

10,357


10,638

Goodwill


242,407


241,771

Other intangibles, net of accumulated amortization of $68,767 and $59,461, respectively

149,293


155,769

Other noncurrent assets 


5,212


3,675










Total assets


$    1,014,151


$   1,065,995








Liabilities, Redeemable Preferred Stock and Stockholders' Equity





Current liabilities:






Accounts payable 


$       279,769


$      273,816


Salaries, wages and related benefits


29,396


28,105


Accrued expenses


18,845


24,340


Revolving bank borrowings


-


159


Current portion of long-term debt


4,400


3,585



Total current liabilities


332,410


330,005








Long-term debt


296,451


379,250

Loans from noncontrolling interests


7,440


5,275

Deferred tax liability


54,966


53,791

Other noncurrent liabilities


21,685


20,833



Total liabilities


712,952


789,154








Stockholders' (deficit) equity:






Class A common stock; 200,000,000 shares authorized, $0.001 par value per share; 14,494,805 and 12,894,333 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively


13


13


Class B common stock; 30,000,000 shares authorized, $0.001 par value per share; 24,782,636 and 26,361,640 issued and outstanding at September 30, 2012 and December 31, 2011, respectively


26


26


Capital in excess of par value


435,804


434,841

   Accumulated deficit


(128,218)


(148,232)

   Accumulated other comprehensive income


(8,029)


(11,075)



Total TMS International Corp. stockholders' equity


299,596


275,573



Noncontrolling interest


1,603


1,268



Total stockholders'  equity


301,199


276,841



    Total liabilities and stockholders' equity


$    1,014,151


$   1,065,995















 

TMS INTERNATIONAL CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

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










Nine months ended




September 30,










2012


2011




(unaudited)


(unaudited)

Cash flows from operating activities:






Net Income



$    19,873


$    18,289

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






Depreciation and Amortization



50,713


44,626

Amortization of deferred financing costs 



1,950


1,850

Deferred income tax 



3,589


11,789

Provision for bad debts 



251


412

(Gain) loss on the disposal of equipment 



(82)


44

Non-cash share-based compensation cost 



1,390


1,909

Loss on Early Extinguishment of Debt



12,300


-

Increase (decrease) from changes in:






Accounts receivable 



338


(119,091)

Inventories 



1,997


(23,674)

Prepaid and other current assets 



5,730


2,182

Other noncurrent assets 



(734)


295

Accounts payable 



5,953


89,579

Accrued expenses 



(4,218)


(11,030)

Other non current liabilities 



(218)


(589)

Other, net 



66


(2,529)

Net cash provided by operating activities 



$    98,898


$    14,062







Cash flows from investing activities:






Capital expenditures 



(84,865)


(50,598)

ERP & software expenditures



(2,249)


(1,105)

Proceeds from sale of equipment 



464


520

Acquisition



-


(50)

Long term investment



(900)


-

Contingent payment for acquired business 



(131)


(337)

Cash flows related to IU International, net 



(27)


(284)

Net cash used in investing activities 



(87,708)


(51,854)







Cash flows from financing activities:






Revolving credit facility borrowing (repayments), net



(159)


3,259

Net proceeds from initial public offering



-


128,657

Borrowing from noncontrolling interests



2,347


-

Repayment of debt 



(382,857)


(45,277)

Proceeds from debt issuance, net of original issue discount



300,703


-

Debt issuance and termination fees



(13,727)


-

Payments to acquire noncontrolling interests



(231)


-

Contributions from noncontrolling interests



269


979

Net cash (used in) provided by financing activities 



(93,655)


87,618







Effect of exchange rate on cash and cash equivalents



113


(490)







Cash and cash equivalents:






Net (decrease) increase in cash 



(82,352)


49,336

Cash at beginning of period 



108,830


49,492

Cash at end of period 



$    26,478


$    98,828















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
September 30,


Nine months ended
September 30,

(dollars in thousands)

2012


2011

2012


2011


(unaudited)

(unaudited)

Revenue After Raw Materials Costs:






Consolidated:






Total Revenue

$    573,051


$    709,214

$   1,989,364


$   2,043,925

Cost of Raw Materials Shipments

(424,087)


(569,911 )

(1,530,923)


(1,632,369)








Revenue After Raw Materials Costs

$    148,964


$    139,303

$      458,441


$      411,556








Mill Services Group:







Total Revenue

$    164,554


$    168,360

$      527,222


$      495,605

Cost of Raw Materials Shipments

(33,593)


(46,317)

(122,772)


(135,072)








Revenue After Raw Materials Costs

$    130,961


$    122,043

$      404,450


$      360,533








Raw Material and Optimization Group:







Total Revenue

$    408,469


$    540,853

$   1,462,084


$   1,548,286

Cost of Raw Materials Shipments

(390,497)


(523,601)

(1,408,144)


(1,497,321)








Revenue After Raw Materials Costs

$      17,972


$      17,252

$        53,940


$        50,965








Administrative:







Total Revenue

$             28


$               1

$               58


$               34

Cost of Raw Materials Shipments

3


7

(7 )


24








Revenue After Raw Materials Costs

$             31


$               8

$               51


$               58








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
September 30,


Nine months ended
September 30,

(dollars in thousands)

2012

2011

2012

2011


(unaudited)

(unaudited)

Adjusted EBITDA:





Net Income

$      10,051

$        6,371

$        19,873

$        18,289

Income Tax Expense

1,920

4,497

7,456

13,044

Interest Expense, Net

5,989

7,792

20,013

24,376

Depreciation and Amortization

17,755

14,924

50,713

44,626

Provision for Transition Agreement

-

745

-

745

Loss on Early Extinguishment of debt

-

-

12,300

-

Share based compensation associated with initial public offering

-

-

-

1,304






Adjusted EBITDA

$      35,715

$      34,329

$      110,355

$      102,384






Adjusted EBITDA by Operating Segment:





Mill Services Group

$      32,000

$      29,537

$        99,858

$        89,507

Raw Material and Optimization Group

13,372

13,254

39,631

39,223

Administrative

(9,657)

(8,462)

(29,134)

(26,346)







$      35,715

$      34,329

$      110,355

$      102,384









 


Third quarter ended
September 30,


Nine months ended
September 30,


2012

2011


2012

2011


(unaudited)

(unaudited)


(unaudited)

(unaudited)

Income before income taxes

$         11,971

$         10,868


$         27,329

$         31,333

Plus: Depreciation and amortization

17,755

14,924


50,713

44,626

Interest Expense, Net

5,989

7,792


20,013

24,376







Earnings before interest, taxes, depreciation and amortization

35,715

33,584


98,055

100,335

Share based compensation associated with initial public offering


1,304

Provision for Transition Agreement

745


745

Loss on Early Extinguishment of debt


12,300







Adjusted EBITDA

$         35,715

$         34,329


$       110,355

$       102,384







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):

 


Nine months  ended


September 30,
2012


September 30,
2011

Adjusted EBITDA

$       110,355


$      102,384

Maintenance Capital Expenditures

(28,373)


(28,640)





Discretionary Cash Flow

$         81,982


$         73,744





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






Nine months ended


September 30,
2012


September 30,
2011

Discretionary Cash Flow

$          81,982


$          73,744

Maintenance Capital Expenditures

28,373


28,640

Cash interest expense

(25,980)


(28,661)

Cash income taxes

(3,491)


(1,214)

Change in accounts receivable

338


(119,091)

Change in inventory

1,997


(23,674)

Change in account payable

5,953


89,579

Change in other current assets and liabilities

9,831


(2,755)

Other operating cash flows

(105)


(2,506)





Net cash provided by (used in) operating activities

$          98,898


$         14,062





(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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