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.
(Logo: http://photos.prnewswire.com/prnh/20110406/MM78984LOGO )
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 |
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 |
Twelve months ended |
||||
| (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 |
Twelve months ended |
|||
| 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, |
December 31, |
|
| 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, |
December 31, |
|
| 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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