Metals USA Reports Second Quarter 2011 Sales Growth of 51% on 33% Volume Growth

Metals USA Holdings Corp.
Unaudited Consolidated Statements of Operations
(In millions, except per share data)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

2011

2010

2011

2011

2010

Revenues:

Net sales

$

505.6

$

335.0

$

432.3

$

937.9

$

622.9

Operating costs and expenses:

Cost of sales (exclusive of operating and delivery,
and depreciation and amortization shown below)

382.9

257.2

329.7

712.6

475.6

Operating and delivery

45.9

32.9

41.1

87.0

64.2

Selling, general and administrative

27.9

19.8

26.8

54.7

40.8

Depreciation and amortization

5.6

4.4

4.8

10.4

9.0

Loss (gain) on sale of property and equipment

-

-

0.1

0.1

(0.1)

Advisory agreement termination charge

-

3.3

-

-

3.3

Operating income

43.3

17.4

29.8

73.1

30.1

Other expense:

Interest expense

9.3

9.5

9.0

18.3

21.2

Loss on extinguishment of debt

-

3.5

-

-

3.5

Income before income taxes

34.0

4.4

20.8

54.8

5.4

Provision for income taxes

12.5

1.9

8.4

20.9

2.8

Net income

$

21.5

$

2.5

$

12.4

$

33.9

$

2.6

Income per share:

Income per share - basic

$

0.58

$

0.07

$

0.34

$

0.92

$

0.09

Income per share - diluted

$

0.57

$

0.07

$

0.33

$

0.91

$

0.09

Number of common shares used in the per share calculation:

Basic

37.0

35.4

37.0

37.0

30.5

Diluted

37.3

35.7

37.3

37.3

30.8

Metals USA Holdings Corp.
Unaudited Consolidated Balance Sheets
(In millions, except share amounts)

June 30,

December 31,

2011

2010

Assets

Current assets:

Cash

$

13.7

$

16.6

Accounts receivable, net of allowance of $6.7 and $5.9, respectively

232.4

149.3

Inventories

356.0

290.8

Deferred income tax asset

12.0

12.0

Prepayments and other

5.9

9.8

Total current assets

620.0

478.5

Property and equipment, net

240.2

198.8

Intangible assets, net

28.0

7.4

Goodwill

55.1

47.3

Other assets, net

13.0

13.5

Total assets

$

956.3

$

745.5

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

95.5

$

66.6

Accrued liabilities

33.6

30.6

Current portion of long-term debt

1.5

1.1

Total current liabilities

130.6

98.3

Long-term debt, less current portion

480.6

345.4

Deferred income tax liability

97.4

88.5

Other long-term liabilities

21.8

22.2

Total liabilities

730.4

554.4

Commitments and contingencies

Stockholders' equity:

Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued or

outstanding at June 30, 2011 and December 31, 2010

-

-

Common stock, $.01 par value, 140,000,000 shares authorized, 37,024,842

issued and outstanding at June 30, 2011 and December 31, 2010

0.4

0.4

Additional paid-in capital

230.6

229.8

Accumulated deficit

(5.6)

(39.5)

Accumulated other comprehensive income

0.5

0.4

Total stockholders' equity

225.9

191.1

Total liabilities and stockholders' equity

$

956.3

$

745.5

Metals USA Holding Corp.
Unaudited Consolidated Statements of Cash Flows
(In millions)

Six Months Ended

June 30,

2011

2010

Cash flows from operating activities:

Net income

$

33.9

$

2.6

Adjustments to reconcile net income to net cash used in operating activities:

Loss (gain) on sale of property and equipment

0.1

(0.1)

Provision for bad debts

1.6

1.1

Depreciation and amortization

11.4

10.0

Loss on extinguishment of debt

-

3.5

Amortization of debt issuance costs and discounts on long-term debt

1.4

2.1

Deferred income taxes

8.7

0.6

Stock-based compensation

0.8

0.2

Excess tax benefit from stock-based compensation

-

(0.1)

Non-cash interest on PIK option

-

6.2

Cash payment of interest on PIK option

-

(23.2)

Advisory agreement termination charge

-

3.3

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

(67.5)

(24.3)

Inventories

(47.1)

(36.7)

Prepayments and other

4.0

2.2

Accounts payable and accrued liabilities

7.8

10.1

Other

1.1

0.1

Net cash used in operating activities

(43.8)

(42.4)

Cash flows from investing activities:

Sales of assets

0.1

0.2

Purchases of assets

(3.7)

(1.4)

Acquisition costs, net of cash acquired

(88.4)

(19.0)

Net cash used in investing activities

(92.0)

(20.2)

Cash flows from financing activities:

Borrowings on credit facility

176.5

49.5

Repayments on credit facility

(42.4)

(49.5)

Repayments of long-term debt

(0.3)

(146.6)

Deferred financing costs

(0.9)

-

Excess tax benefit from stock-based compensation

-

0.1

Net proceeds from initial public stock offering

-

221.2

Net cash provided by financing activities

132.9

74.7

Net (decrease) increase in cash

(2.9)

12.1

Cash, beginning of period

16.6

6.0

Cash, end of period

$

13.7

$

18.1

Metals USA Holdings Corp.
Unaudited Supplemental Segment and Non-GAAP Information
(In millions, except shipments)

Three Months Ended

Six Months Ended

June 30,

March 31,

June 30,

2011

2010

2011

2011

2010

Segment:

Flat Rolled and Non-Ferrous:

Net sales

$ 277.5

$ 177.0

$     228.5

$ 506.0

$ 329.0

Operating income

$   23.1

$   13.2

$       17.1

$   40.2

$   24.1

Depreciation and amortization

$     2.8

$     1.7

$         2.2

$     5.0

$     3.5

EBITDA       (1)

$   25.9

$   14.9

$       19.3

$   45.2

$   27.6

Adjusted EBITDA       (2)

$   25.9

$   14.9

$       19.3

$   45.2

$   27.6

Shipments    (3)

212

146

207

419

280

Plates and Shapes:

Net sales

$ 206.6

$ 136.5

$     190.2

$ 396.8

$ 258.4

Operating income

$   25.1

$   11.4

$       22.0

$   47.1

$   20.5

Depreciation and amortization

$     2.6

$     2.3

$         2.3

$     4.9

$     4.7

EBITDA       (1)

$   27.7

$   13.7

$       24.3

$   52.0

$   25.2

Adjusted EBITDA       (2)

$   27.7

$   13.7

$       24.9

$   52.6

$   25.2

Shipments    (3)

152

126

163

315

243

Building Products:

Net sales

$   25.2

$   24.3

$       16.2

$   41.4

$   40.5

Operating income (loss)

$     1.2

$     0.6

$       (1.8)

$   (0.6)

$   (1.1)

Depreciation and amortization (5)

$     0.5

$     0.6

$         0.6

$     1.1

$     1.2

EBITDA       (1)

$     1.7

$     1.2

$       (1.2)

$     0.5

$     0.1

Adjusted EBITDA       (2)

$     1.7

$     1.2

$       (1.2)

$     0.5

$     0.1

Shipments    (3)

-

-

-

-

-

Corporate and other:

Net sales (4)

$   (3.7)

$   (2.8)

$       (2.6)

$   (6.3)

$   (5.0)

Operating loss

$   (6.1)

$   (7.8)

$       (7.5)

$ (13.6)

$ (13.4)

Depreciation and amortization

$     0.2

$     0.3

$         0.2

$     0.4

$     0.6

EBITDA       (1)

$   (5.9)

$   (7.5)

$       (7.3)

$ (13.2)

$ (12.8)

Adjusted EBITDA       (2)

$   (5.3)

$   (4.1)

$       (5.7)

$ (11.0)

$   (9.0)

Shipments    (3)  (4)

(4)

(2)

(2)

(6)

(4)

Consolidated:

Net sales

$ 505.6

$ 335.0

$     432.3

$ 937.9

$ 622.9

Operating income

$   43.3

$   17.4

$       29.8

$   73.1

$   30.1

Depreciation and amortization (5)

$     6.1

$     4.9

$         5.3

$   11.4

$   10.0

EBITDA       (1)

$   49.4

$   22.3

$       35.1

$   84.5

$   40.1

Adjusted EBITDA       (2)

$   50.0

$   25.7

$       37.3

$   87.3

$   43.9

Shipments    (3)

360

270

368

728

519

Product Mix: (6)

Carbon Flat Rolled

34.4%

36.3%

35.7%

35.1%

35.9%

Mini Mill Products

10.3%

10.0%

10.7%

10.5%

9.9%

Non-Ferrous

24.7%

22.1%

21.1%

23.0%

22.6%

Plate

17.6%

17.9%

19.0%

18.2%

17.7%

Structural

13.0%

13.7%

13.5%

13.2%

13.9%

Total

100.0%

100.0%

100.0%

100.0%

100.0%

 (1)   EBITDA is the summation of operating income (loss) and depreciation and amortization.  We believe that EBITDA is commonly used as a measure of performance for companies in our industry and is frequently used by analysts, investors, lenders and other interested parties to evaluate a company's financial performance and its ability to incur and service debt.  EBITDA should not be considered as a measure of financial performance under accounting principles generally accepted in the United States of America.  The items excluded from EBITDA are significant components in understanding and assessing financial performance.  EBITDA should not be considered in isolation or as an alternative to net income, cash flows generated by operating, investing or financing activities or other financial statement data presented in the consolidated financial statements as an indicator of operating performance or a measure of liquidity.

 (2) Adjusted EBITDA, as contemplated by our credit documents, is used by our lenders for debt covenant compliance purposes. Adjusted EBITDA is EBITDA adjusted to eliminate management fees to related parties, one-time, non-recurring charges related to the use of purchase accounting, and other non-cash income or expenses, which are more particularly defined in our credit documents and the indentures governing our notes.

 (3)   Expressed in thousands of tons.  Not a meaningful measure for Building Products.

 (4)   Negative net sales and shipment information represent the elimination of intercompany transactions.

 (5)   Includes depreciation expense recorded in cost of sales.

 (6)   Based on net sales by product line excluding Building Products.

EBITDA and Adjusted EBITDA Non-GAAP Measures, Reconciliations and Explanations

EBITDA is the summation of operating income (loss) and depreciation and amortization.  EBITDA also represents net income before interest, income taxes, depreciation and amortization.  Adjusted EBITDA (as defined by the loan and security agreement governing the ABL facility and the indentures governing our notes) is defined as EBITDA further adjusted to exclude certain non-cash, non-recurring and realized (or in the case of the indentures, expected) future cost savings directly related to prior acquisitions.  EBITDA and Adjusted EBITDA are not defined terms under accounting principles generally accepted in the United Sates of America ("GAAP").  Neither EBITDA nor Adjusted EBITDA should be considered an alternative to operating income or net income as a measure of operating results or an alternative to cash flow as a measure of liquidity.  

There are material limitations associated with making the adjustments to our earnings to calculate EBITDA and Adjusted EBITDA and using these non-GAAP financial measures as compared to the most directly comparable GAAP financial measures. For instance, EBITDA and Adjusted EBITDA do not include:

*

interest expense, and because we have borrowed money in order to finance our operations, interest expense is a necessary element of our costs and ability to generate revenue;

*

depreciation and amortization expense, and because we use capital assets, depreciation and amortization expense is a necessary element of our costs and ability to generate revenue; and

*

income tax expense, and because the payment of taxes is part of our operations, tax expense is a necessary element of our costs and ability to operate.

We present EBITDA because we consider it an important supplemental measure of our performance and believe it is frequently used by our investors and other interested parties, as well as by our management, in the evaluation of companies in our industry, many of which present EBITDA when reporting their results.  In addition, EBITDA provides additional information used by our management and board of directors to facilitate internal comparisons to historical operating performance of prior periods.  Further, management believes EBITDA facilitates our operating performance comparisons from period to period because it excludes potential differences caused by variations in capital structure (affecting interest expense), tax positions (such as the impact of changes in effective tax rates or net operating losses) and the age and book depreciation of facilities and equipment (affecting depreciation expense).

We believe that the inclusion of supplemental adjustments to EBITDA applied in presenting Adjusted EBITDA are appropriate to provide additional information to investors about the performance of the business, and we are required to present Adjusted EBITDA to demonstrate compliance with our debt covenants.  Management uses Adjusted EBITDA as a key indicator to evaluate performance of certain employees.

Pro Forma Adjusted EBITDA is defined as Adjusted EBITDA (as discussed above) with additions for the Adjusted EBITDA of our recent acquisitions, as though we owned those businesses for the twelve-month period ended June 30, 2011.  Adjusted EBITDA on a Pro Forma Basis, as defined by our credit agreements, is a non-GAAP measure used in the calculation of our Consolidated Total Debt Ratio, as defined by the indenture governing our notes.    

Three Months Ended

Six Months Ended

Twelve Months Ended

June 30,

March 31,

June 30,

June 30,

2011

2010

2011

2011

2010

2011

(In millions)

Operating income

$ 43.3

$ 17.4

$       29.8

$ 73.1

$ 30.1

$                103.2

Depreciation and amortization (1)

6.1

4.9

5.3

11.4

10.0

21.2

EBITDA

49.4

22.3

35.1

84.5

40.1

124.4

Indenture defined adjustments to EBITDA:

Facility closure and severance costs

-

-

0.6

0.6

-

0.6

Stock options and grant expense

0.4

0.1

0.4

0.8

0.2

1.8

Management fees and other costs

-

3.3

-

-

3.6

0.2

Acquisition expenses

0.2

-

1.2

1.4

-

1.4

Adjusted EBITDA

$ 50.0

$ 25.7

$       37.3

$ 87.3

$ 43.9

$                128.4

Pro forma acquisition adjustments

7.6

Pro forma Adjusted EBITDA

$                136.0

 (1)   Includes depreciation expense recorded in cost of sales for the Building Products Group.