Aleris Reports Second Quarter Results

BEACHWOOD, Ohio, Sept. 14 /PRNewswire/ -- Aleris International, Inc. today reported results for the quarter ended June 30, 2010.

Aleris emerged from Chapter 11 bankruptcy protection on June 1, 2010. This resulted in the emerged Company being considered a new entity for financial reporting purposes and dramatically impacted second quarter net income as certain pre-bankruptcy debts were discharged in accordance with the Plan of Reorganization immediately prior to emergence and assets and liabilities were adjusted to their fair values upon emergence. As a result, our financial statements for periods after June 1, 2010 (references to the Company and the related financial statements for such periods, the "Successor") are not comparable to the financial statements for periods prior to that date (references to the Company and the related financial statements for such periods, the "Predecessor"). However, we have adjusted for the most significant of these differences in our presentation of Adjusted EBITDA. For purposes of discussing operating performance in this press release, the Successor and Predecessor results have been combined to derive "Combined" results for the three month period ended June 30, 2010.

Second quarter combined 2010 revenues were $1.0 billion compared to $688 million in the second quarter of 2009. Second quarter combined 2010 net income totaled $3.0 billion compared to a net loss of $109 million in the second quarter of 2009. Combined second quarter 2010 net income totaled $44 million after excluding $3.1 billion of gains from reorganization items, $26 million of losses from the impact of the write-up of inventory and other items associated with our application of fresh-start accounting, $48 million of unrealized losses on derivative financial instruments, and $29 million of interest expense incurred in the Predecessor period of April and May 2010. As a comparison, second quarter 2009 net loss totaled $22 million after excluding reorganization items, unrealized gains on derivative financial instruments, restructuring, impairment and other charges, and interest expense.

Adjusted EBITDA totaled $73 million in the second quarter of 2010 compared to $12 million in the second quarter of 2009. Adjusted EBITDA for the twelve months ended June 30, 2010 totaled $203 million.

Second quarter combined 2010 operating results reflect a 36% increase in demand as all of our segments benefited from improved economic conditions as compared to the second quarter of 2009. Our European segment's volumes increased 25%, mainly driven by higher demand from the automotive sector for both our recycled products and our rolled products. Second quarter combined 2010 volumes from our Rolled Products North America segment increased 27% over the second quarter of 2009 as demand from customers in the building and construction and transportation markets improved with the overall economy. Our Recycling and Specification Alloys Americas ("RSAA") segment also experienced a significant increase in demand from its automotive customers. RSAA volumes increased 51% quarter over quarter.

In addition to higher volumes, our operating results benefited from lower cash conversion costs per unit, primarily due to our significant restructuring of global operations and our continuing efforts to reduce operating costs, which occurred over the past 18 months.

At June 30, 2010, our long-term indebtedness consisted primarily of $31 million of borrowings under our new asset-backed lending facility ("ABL Facility") and $45 million of exchangeable notes. We had $442 million of liquidity at June 30, 2010, which consisted of $374 million of availability under the ABL Facility plus $68 million of cash.

Steven J. Demetriou, Aleris chairman and chief executive officer, said, "Our successful emergence from Chapter 11 begins an exciting new chapter for Aleris. Second quarter demand across all of our segments improved, reflecting the recovery from the extremely low demand levels of 2009. This increase in demand, as well as our relentless focus on improving performance and productivity through the Aleris Operating System, led to a strong quarterly Adjusted EBITDA performance.

"With substantial liquidity and minimal debt, we are well positioned to refocus our efforts on growing our core business and expanding globally."

Forward-Looking Statements

This press release contains forward-looking statements.  These include statements that contain words such as "believe," "expect," "anticipate," "intend," "estimate," "should" and similar expressions intended to connote future events and circumstances, and include statements regarding future actual and adjusted earnings; future improvements in margins, processing volumes and pricing; overall 2010 operating performance; anticipated effective tax rates; expected cost savings; the anticipated economic environment in 2010; and future benefits from acquisitions and new products.  Investors are cautioned that all forward-looking statements involve risks and uncertainties, and that actual results could differ materially from those described in the forward-looking statements.  These risks and uncertainties would include, without limitation, Aleris's levels of indebtedness and debt service obligations; its ability to effectively integrate the business and operations of its acquisitions; further slowdowns in automotive production in the U.S. and Europe; the financial condition of Aleris's customers and future bankruptcies and defaults by major customers; the availability at favorable cost of aluminum scrap and other metal supplies that Aleris processes; the ability of Aleris to enter into effective metals, natural gas and other commodity derivatives; increases in natural gas and other fuel costs of Aleris; a weakening in industrial demand resulting from a decline in U.S. or world economic conditions, including any decline caused by terrorist activities or other unanticipated events; future utilized capacity of Aleris's various facilities; a continuation of building and construction customers and distribution customers reducing their inventory levels and reducing the volume of Aleris's shipments; restrictions on and future levels and timing of capital expenditures; retention of Aleris's major customers; the timing and amounts of collections; currency exchange fluctuations; future write-downs or impairment charges which may be required because of the occurrence of some of the uncertainties listed above; the difficult conditions in the capital, credit, commodities, automobile and housing markets and in the current economy; and other risks listed in Aleris's filings with the  United States Bankruptcy Court, including but not limited to Aleris's First Amended Plan of Reorganization and related Disclosure Statement, particularly the section entitled "Risk Factors" contained therein.

Non-GAAP Financial Measures

In addition to the results reported in accordance with GAAP, this press release includes information regarding "Adjusted EBITDA." Adjusted EBITDA is a non-GAAP measure and the Company's computation is likely to differ from the methods used by other companies in computing similarly titled or defined terms.  Non-GAAP measures have limitations as analytical tools and should be considered in addition to, not in isolation or as a substitute for, or superior to, Aleris's measures of financial performance prepared in accordance with GAAP, including pre-tax income (loss) and net income (loss).  Investors are encouraged to review the accompanying tables reconciling Adjusted EBITDA to comparable GAAP amounts.   Adjusted EBITDA, as used in this press release, is defined as net income (loss) before interest income and expense, taxes, depreciation and amortization ("EBITDA"), reorganization items, net, unrealized gains and losses on derivative financial instruments, restructuring, impairment and other charges, the impact of the write-up of inventory and other items through fresh start and purchase accounting,  currency gains and losses on the translation of indebtedness, stock-based compensation expense, metal price lag, and certain other non-cash gains and losses.  Management uses Adjusted EBITDA as a performance metric and believes the measure provides additional information commonly used by parties to Aleris's ABL facility in understanding our operating results and the ongoing performance of our underlying businesses.  In addition, Adjusted EBITDA, excluding the adjustment for metal price lag, is a component of certain financial covenants required under the ABL facility.

About Aleris

Aleris is a privately-held, global leader in aluminum rolled products and extrusions, aluminum recycling and specification alloy production.  Headquartered in Beachwood, Ohio, the company operates more than 40 production facilities in the Americas, Europe and Asia.  For more information, visit www.aleris.com.  

--------------------------------------------------------------------------------------------------------------------------------------

Aleris has no obligation under the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, or other laws to publicly disclose financial or other information regarding its business.  Aleris may publicly disclose certain information from time to time, in its sole discretion.  Aleris may also determine not to publicly disclose any information, in its sole discretion, notwithstanding prior disclosures or any pattern of prior disclosures.

The information disclosed in this press release is believed by Aleris to be accurate as of the date hereof.  Aleris expressly disclaims any duty to update the information contained in this press release.  Persons engaging in any transactions with Aleris or in Aleris's securities are cautioned that there may exist other material information regarding Aleris that is not publicly available.

(Logo:  http://photos.prnewswire.com/prnh/20050504/CLW056LOGO )

(Logo:  http://www.newscom.com/cgi-bin/prnh/20050504/CLW056LOGO )

SOURCE Aleris International, Inc.