* Revolving credit line increased
* Results impacted by escalating energy prices and aluminum price caps
* Recycling and common alloy business achieving strong growth
BALTIMORE, March 31 /PRNewswire-FirstCall/ -- Shipments of Wise Metals
Group's aluminum beverage can stock, other rolled aluminum products and scrap
in the fourth quarter of 2005 totaled 195.5 million pounds compared to 166.0
million for the same period in 2004, an increase of 18 percent, company
officials announced today. For 2005, shipments totaled 764.7 million pounds
compared to 736.1 million pounds for 2004, an increase of 4 percent.
Shipments of scrap at Wise Recycling increased approximately 25 percent in
the fourth quarter of 2005 versus the fourth quarter of 2004 and increased
approximately 24 percent for the full year. Common alloy shipments, which
were relatively flat for the fourth quarter of 2005 compared to the same
period in 2004, increased approximately 33 percent for the year.
Net loss for the fourth quarter of 2005 was $10.4 million, which includes
a $2.3 million expense for LIFO offset by a $10.2 million favorable impact for
SFAS 133 (Accounting for Derivative Instruments and Hedging Activities). This
compares to a net loss of $25.2 million in the fourth quarter of 2004, which
includes a $26.2 million expense for LIFO offset by a $1.6 million favorable
impact for SFAS 133.
For the year, Wise Metals Group reported a net loss of $21.6 million
including a $2.3 million expense for LIFO offset by an $11.7 million favorable
mark-to-market gain under SFAS 133. These results compared to a net loss of
$41.5 million in 2004 including expenses totaling $43.3 million of which $35.2
million is for LIFO, $7.5 million is a write-off for early extinguishment of
debt, and $0.6 million is a mark-to-market loss under SFAS 133. Adjusted
EBITDA for the full year 2005 was $7.5 million compared to $33.3 million for
2004.
After adjusting for LIFO and SFAS 133, net loss for the fourth quarter of
2005 was $18.3 million, compared to a loss of $0.6 million in the fourth
quarter of 2004, adjusting for similar items. The difference of approximately
$17.7 million, after adjusting for increased volumes, includes increased
energy costs of $9.2 million, the impact from metal ceilings totaling $4.7
million, employment costs of $1.1 million, materials, maintenance and other
production costs of $1.7 million, and increased interest expense of $1.1
million.
Earnings before interest and fees, taxes, depreciation and amortization
(EBITDA) adjusted for the effects of early extinguishment of debt, LIFO, and
SFAS 133 (Adjusted EBITDA) for the fourth quarter of 2005, was ($8.5) million
compared to ($0.9) million for the third quarter of 2005 and $8.2 million for
the fourth quarter of 2004.
Conversion margin, which is defined as conversion revenue (sales less
metal costs and the effect of LIFO) less conversion cost (cost of sales less
metal costs) decreased from $8.1 million in the fourth quarter of 2004 to a
deficit of $9.5 million for the same period in 2005. Increased energy costs
due to higher natural gas prices and the effects of aluminum price caps
reducing can sheet sales margins contributed to the decrease in conversion
margin.
Subsequent to year-end, on March 3, 2006, Wise Metals Group LLC completed
an amendment to its revolving line of credit resulting in a $30 million
increase to the facility from $150 million to $180 million. These additional
funds are immediately available to the company, subject to customary borrowing
base calculations. The facility also allows for an additional increase to
$200 million should conditions warrant.
"As we had expected and announced in prior periods, the fourth quarter
results were disappointing primarily as a result of energy and metal costs,"
said Wise Metals Group Chairman and Chief Executive Officer David F.
D'Addario. "Although the cost of aluminum was what we had anticipated, the
cost of natural gas continued to rise and was 33 percent higher than our
forecast, costing the company an additional $5 million. Obviously these
results are not acceptable, but we had anticipated these underlying issues and
are successfully dealing with them. I am pleased to announce that we have
reached agreements with major customers regarding a restructuring of our
supply contracts while we have also expanded our credit facility to allow us
to meet these opportunities going forward."
"Our bank group has amended the facility to permit borrowings to
eventually reach $200 million if market conditions dictate," said Wise Metals
Group Executive Vice President and Chief Financial Officer Danny Mendelson.
"This clearly demonstrates the confidence our bank group has shown in Wise
Metals Group and that our underlying collateral supports this new revolver
limit."
"Of greatest importance were the commitments of our customers to
restructure our significant contracts to account for current market
conditions," added D'Addario. "I believe this will permit Wise to continue
as a strong, independent supplier of rolled products for the long-term with
added financial security."
The key changes to supply agreements announced by Wise include some
immediate relief on conversion pricing, customer acknowledgement that the
ceiling will expire, and cooperation and assistance with the cost of managing
the ceiling exposure prior to its expiration.
"As with our bank group, I believe that our customers' acceptance of these
terms shows their clear willingness to work with Wise to extend our long-term
supply relationships, said Wise Metals Group President and Chief Operating
Officer Randall Powers. "I attribute this to the fact that our employees have
demonstrated a clear commitment to quality and service to our customers."
"Now that we have increased the credit line and restructured our customer
contracts, we will need to work with our vendors to assure a continued supply
of high quality material input," said Mendelson. "In many ways, this is a
transitional period for the rolled products segment of the aluminum industry
and we are all adjusting to this progression in our industry."
Cautionary Note Regarding Forward-Looking Statements
Certain statements made in this news release constitute forward-looking
statements, within the meaning of the Private Securities Litigation Reform
Act, regarding the company's future plans, objectives, and expected
performance. Statements that are not historical facts, including statements
accompanied by words such as "believe," "expect," "estimate," "intend," or
"plan" are intended to identify forward-looking statements and convey the
uncertainty of future events or outcomes. The company cautions that any such
forward-looking statements are based on assumptions that the company believes
are reasonable, but are subject to a wide range of risks, and actual results
may differ materially. Certain risks and uncertainties are summarized in the
company's filings with the Securities and Exchange Commission. The company
takes no obligation to publicly update or revise any future looking statements
to reflect the occurrence of future events or circumstances.
Wise Metals Group LLC
Consolidated Statements of Operations
(Unaudited)
Three Months ended Twelve Months ended
December 31, December 31,
2005 2004 2005 2004
Sales $227,466 $179,559 $883,844 $766,868
Cost of sales 239,307 197,652 881,290 770,518
Gross (deficit) margin (11,841) (18,093) 2,554 (3,650)
Operating expenses:
Selling, general, and
administrative 2,301 3,351 10,728 11,967
Operating loss (14,142) (21,444) (8,174) (15,617)
Other income (expense):
Interest expense and fees,
net (6,456) (5,368) (25,110) (17,920)
Early extinguishment of
debt - - - (7,455)
Mark-to-market
adjustment
for contracts
under SFAS 133 10,188 1,574 11,666 (550)
Net loss $(10,410) $(25,238) $(21,618) $(41,542)
Wise Metals Group LLC
Consolidated Balance Sheets
December 31, December 31,
2005 2004
(unaudited)
(in thousands)
Assets
Current assets:
Cash and cash equivalents $6,456 $7,669
Restricted cash 250 250
Accounts receivable, less allowance 73,326 46,336
Inventories 142,151 175,809
Other current assets 24,562 9,601
Total current assets 246,745 239,665
Non-current assets:
Property and equipment, net 86,557 85,375
Other assets 8,492 9,147
Goodwill 283 283
Total non-current assets 95,332 94,805
Total assets $342,077 $334,470
Liabilities and members' deficit:
Current liabilities:
Accounts payable $54,493 $57,855
Borrowings under revolving credit
facility 137,730 101,675
Current portion of long-term debt 1,477 1,529
Accrued expenses, payroll and other 18,247 22,739
Total current liabilities 211,947 183,798
Non-current liabilities:
Senior secured notes 150,000 150,000
Term loans, less current portion 826 1,040
Other liabilities 14,593 12,397
Total non-current liabilities 165,419 163,437
Members' deficit (35,289) (12,765)
Total liabilities and members' deficit $342,077 $334,470
Wise Metals Group LLC
Consolidated Statements of Cash Flows
(Unaudited)
Twelve months ended
December 31,
2005 2004
Cash flows from operating activities
Net loss $(21,618) $(41,542)
Adjustments to reconcile net loss net cash used
in operating activities:
Depreciation and amortization 13,355 13,211
Amortization of deferred financing fees 1,208 4,859
LIFO provision 2,318 35,156
Loss on extinguishment of debt - 7,455
Unrealized (gains) losses on derivatives (11,666) 550
Changes in operating assets and liabilities:
Accounts receivable (26,990) (25,930)
Inventories 31,340 (47,715)
Other current assets (1,889) 541
Accounts payable (3,362) 18,192
Accrued expenses, payroll and other (4,255) 1,400
Net cash used in operating activities (21,559) (33,823)
Cash flows from investing activities
Purchase of equipment (14,537) (12,329)
Net cash used in investing activities (14,537) (12,329)
Cash flows from financing activities
Net issuance (repayments) of short-term
borrowings 36,003 (12,635)
Proceeds of senior secured notes offering,
net - of fees paid - 141,816
Repayment of term debt - (22,500)
Repayment of subordinated debt - (35,687)
Prepayment fee on subordinated debt - (3,500)
Payments on long-term obligations (214) (463)
Purchase of members' equity (906) (14,113)
Net cash provided by financing activities 34,883 52,918
Net increase (decrease) in cash and cash
equivalents (1,213) 6,766
Cash and cash equivalents at beginning of
period 7,669 903
Cash and cash equivalents at end of period $6,456 $7,669
Non-GAAP Financial Measures
The company uses certain non-GAAP financial measures in evaluating its
performance. These include Adjusted EBITDA. Adjusted EBITDA is not intended
to represent cash flows from operations as defined using GAAP and should be
considered in addition to, and not as a substitute for, cash flows as a
measure of liquidity or net earnings as a measure of operating performance. A
reconciliation of Adjusted EBITDA to net income (loss) is set forth in the
financial tables below. The company includes Adjusted EBITDA information
because this measure is used by management to measure our compliance with debt
covenants and by investors and note holders to evaluate our ability to service
debt. Our measure of Adjusted EBITDA may not be comparable to similarly titled
measures of other companies.
Wise Metals Group LLC
Conversion Margin
Three months Twelve months
ended December 31, ended December 31,
2005 2004 2005 2004
Sales $227,466 $179,559 $883,844 $766,868
Less:
Metal costs (164,467) (145,197) (620,710) (550,060)
LIFO adjustment 2,318 26,182 2,318 35,156
Conversion revenue $65,317 $60,544 $265,452 $251,964
Cost of sales $239,307 $197,652 $881,290 $770,518
Less:
Metal costs (164,467) (145,197) (620,710) (550,060)
Conversion costs $74,840 $52,455 $260,580 $220,458
Conversion revenue $65,317 $60,544 $265,452 $251,964
Conversion costs (74,840) (52,455) (260,580) (220,458)
Conversion (deficit)
margin $(9,523) $8,089 $4,872 $31,506
Conversion (deficit)
margin $(9,523) $8,089 $4,872 $31,506
Shipments 195,507 165,966 764,662 736,068
Conversion (deficit)
margin per pound $(.0487) $.0487 $.0064 $.0428
Reconciliation of Net Loss to Adjusted EBITDA
Three months Twelve months
ended December 31, ended December 31,
2005 2004 2005 2004
Net loss $(10,410) $(25,238) $(21,618) $(41,542)
Interest expense and
fees 6,456 5,507 25,110 18,505
Depreciation and
amortization 3,343 3,281 13,355 13,211
Early extinguishment of
debt - - - 7,455
Unrealized (gain) loss
on derivative
instruments (10,188) (1,574) (11,666) 550
LIFO adjustment 2,318 26,182 2,318 35,156
Adjusted EBITDA $(8,481) $8,158 $7,499 $33,335
About Wise Metals Group
Based in Baltimore, Md., Wise Metals Group LLC includes Wise Alloys, the
world's third-leading producer of aluminum can stock for the beverage and food
industries and an environmentally friendly company using recycled aluminum in
the production of its can stock; Wise Recycling, one of the largest, direct-
from-the-public collectors of aluminum beverage containers in the United
States, operating shipping and processing locations throughout the United
States that support a network of neighborhood collection centers; and
Listerhill Total Maintenance Center, specializing in providing maintenance,
repairs and fabrication to manufacturing and industrial plants worldwide
ranging from small on-site repairs to complete turn-key maintenance.
Contact:
Wayne E. Travers Jr.
203-378-1152 ext. 111
SOURCE Wise Metals Group LLC
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CONTACT:
Wayne E. Travers Jr. of Wise Metals Group
LLC, +1-203-378-1152 ext. 111
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