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Real Industry, Inc.17 State Street, Suite 3811, New York, NY 10004www.realindustryinc.com
Real Alloy 3700 Park East Dr., Suite 300, Beachwood, OH 44122
www.realalloy.com
DEUTSCHE BANK 25TH ANNUAL LEVERAGED FINANCE CONFERENCEOCTOBER 4, 2017
Real Alloy
CAUTIONS ABOUT FORWARD-LOOKING STATEMENTS AND OTHER NOTICES
2
Cautionary Statement Regarding Forward-Looking Statements. This presentation contains forward-looking statements, which are based on our currentexpectations, estimates, and projections about Real Industry, Inc. and its subsidiaries’ (the “Company”) businesses and prospects, as well as management’sbeliefs, and certain assumptions made by management. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,”“should,” “will” and variations of these words are intended to identify forward-looking statements. Such statements speak only as of the date hereof and aresubject to change. The Company undertakes no obligation to revise or update publicly any forward-looking statements for any reason. These statementsinclude, but are not limited to, statements about: our financial results, including for the fiscal second quarter of 2017, as well as our expectations for futurefinancial trends and performance of our business and our strategy in future periods including during fiscal 2017; our ability to take advantage of opportunitiesto acquire assets with upside potential; the expected benefits to the Company of the integration of Beck Aluminum Alloys into Real Alloy; future opportunisticinvestments; our evaluation of other potential M&A opportunities; our long-term outlook; our preparation for future market conditions; and any statements orassumptions underlying any of the foregoing. Such statements are not guarantees of future performance and are subject to certain risks, uncertainties, andassumptions that are difficult to predict. Accordingly, actual results could differ materially and adversely from those expressed in any forward-lookingstatements as a result of various factors. Important factors that may cause such differences include, but are not limited to, changes in domestic andinternational demand for recycled aluminum; the cyclical nature and general health of the aluminum industry and related industries; commodity and scrapprice fluctuations and our ability to enter into effective commodity derivatives or arrangements to effectively manage our exposure to such commodity pricefluctuations; inventory risks, commodity price risks, and energy risks associated with Real Alloy’s buy/sell business model; the impact of tariffs and traderegulations on our operations; the impact of any changes in U.S. or non-U.S. tax laws on our operations or the value of our net operating losses (“NOLs”); ourability to service, and the high leverage associated with, our indebtedness, and compliance with the terms of the indebtedness, including the restrictivecovenants that constrain the operation of our business and the businesses of our subsidiaries; our ability to successfully identify, acquire and integrateadditional companies and businesses that perform and meet expectations after completion of such acquisitions; our ability to achieve future profitability; ourability to control operating costs and other expenses; that general economic conditions may be worse than expected; that competition may increasesignificantly; changes in laws or government regulations or policies affecting our current business operations and/or our legacy businesses, as well as thoserisks and uncertainties disclosed under the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results ofOperations” in the Company’s Forms 10-Q filed with the Securities and Exchange Commission (“SEC”) on May 10, 2017 and August 8, 2017 and Form 10-Kfiled with the SEC on March 13, 2017, and similar disclosures in subsequent reports filed with the SEC, which are available on our website atwww.realindustryinc.com and on the SEC website at https://www.sec.gov.
Use of Non-GAAP Financial Measures. This presentation includes references to the non-GAAP financial measures of segment earnings before interest, taxes,depreciation and amortization and, with certain additional adjustments (“Segment Adjusted EBITDA”). Management believes that Segment Adjusted EBITDAenhances the understanding of the financial performance of the operations of Real Alloy (and prior to its acquisition, the former Global Recycling andSpecification Alloys business of Aleris Corporation, “Aleris GRSA”) by investors and lenders. As a complement to financial measures recognized under GAAP,management believes that Segment Adjusted EBITDA assists investors who follow the practice of some investment analysts who adjust GAAP financialmeasures to exclude items that may obscure underlying performance and distort comparability. Because Segment Adjusted EBITDA is not a measurerecognized under GAAP, it is not intended to be presented herein as a substitute for net earnings (loss) as an indicator of operating performance. SegmentAdjusted EBITDA is the primary performance measurement used by our senior management and Board of Directors to evaluate segment operating results. Areconciliation to the GAAP equivalent of Segment Adjusted EBITDA, net earnings (loss), is provided herein at the Appendix, in our Forms 10-Q filed with theSEC on August 8, 2017, on our Form 10-K filed on March 13, 2017, and prior reports filed on Forms 10-Q, 10-K and 8-K.
This Presentation includes trademarks, service marks and trade names owned by the Company and its affiliates, as well as other entities (used herein with orwithout the ® or TM symbols), which are the property of their respective owners. The Company has pending and registered trademark registrations for theirtrade names and logos in multiple jurisdictions. The use or display herein of other companies’ trade names, trademarks or service marks is not intended toimply a relationship with, or endorsement or sponsorship of the Company or its affiliates by, any other entity.
This Presentation is not an offer to sell, nor a solicitation of an offer to buy, any securities of the Company.
COMPANY OVERVIEW
REAL INDUSTRY ORGANIZATION
4
Corporate History
2008 – 2010 2013 – 2014 2015 2016
Fremont files for Chapter 11 and is
reorganized as Signature Group
Holdings with NOLs retained
Prepared for growthwith $300MM shelf registration, reverse
split and reincorporation
Sold NABCO for $78MM (2.6x MoM);acquired Real Alloy for $525MM from
Aleris
Changed name to Real Industry; uplisted to NASDAQ; $700MM shelf registration
New leadership team of Kyle Ross (CEO)
and Mike Hobey (CFO) introduced
Real Alloy acquires Beck Aluminum for
$24MM
(NASDAQ: RELY)
• Holding company structure
• U.S. Federal NOLs of $916MM (as of 12/31/16)
OPERATING SUBSIDIARY
• Global leader in third-party aluminum recycling
• LTM 6/30/17 Revenues $1.3BN and Segment Adjusted EBITDA(1)
$59MM with $17MM in Q2 2017
Drives business and growth strategy, and provides the following corporate services
– CEO/CFO services & Board governance
– SEC Reporting, Legal, Tax and Investor Relations
– Oversight of operating segments, including continuous improvement initiatives
– Management of legacy and discontinued operations
Acquired in 2015
Independently financed with 10% $305MM Senior Secured Notes, Asset-Based Lending Facility and European Factoring Facility
Led by autonomous management team
Create a sustainably profitable enterprise by allocating capital to improve the value of existing businesses and execute accretive acquisitions with a disciplined approach to value and structure
Drive stockholder value by diversifying cash flow from operations and focusing on earnings per share growth over time
Assess risk-adjusted returns for all opportunities
Key Objectives
(1) For the reconciliation of Segment Adjusted EBITDA to net income (loss), the nearest GAAP measure, please see Appendix.
REAL ALLOY OVERVIEW
Global leader in independent aluminum recycling with operations in North America and Europe
Operates 21 aluminum-processing facilities in North America and 6 facilities in Europe
Converts aluminum scrap and dross into reusable aluminum and specification alloys
Customers are automotive OEMs and suppliers, rolling mills and extruders manufacturing products for automotive, food and beverage can, steel, aerospace, and other end-uses
30+ year operating history
300+ customers worldwide
Management team with 180 years of combined industry experience
5
North America68%
Europe32%
(1) All tonnage information is presented in metric tonnes.
Coldwater
Post Falls
Goodyear
Sapulpa Loudon
Morgantown
Friendly
Chicago Heights Rock CreekMacedoniaElyria
Wabash
Mississauga
Steele
Monclova
Saginaw
Swansea
Töging
Grevenbroich
Deizisau (Stuttgart)
Eidsväg
RaudsandMount Pleasant
Houston
Lebanon
2016A Volume by End Use(1) 2016A Volume by Region(1)
Geographic Footprint
Automotive 54%Can Sheet/
Packaging 24%
Steel 7%
Transportation 3%
Extrusions 3%
Other 9%
2016A Volume: 1,157 tonnes
KEY REAL ALLOY HIGHLIGHTS
6
Full Suite of Aluminum Recycling Capabilities2
Integrated Into Customer Supply Chains3
High-Quality and Diversified Customer Base4
Business Model that Manages and Mitigates Commodity Risk1
Well Positioned to Benefit from Favorable Secular Trends5
Proven Management with Significant Industry Experience6
REAL ALLOY BUSINESS MODEL MANAGES AND MITIGATES COMMODITY RISK
7
Processes aluminum scrap and by-product owned by customers
No inventory ownership insulates from metal price risk and reduces working capital needs
Charges a tolling or processing fee on a per pound or tonne volume basis
Pass-through arrangements on energy and other costs
Purchases aluminum scrap in the open market and sells the converted metal
Rapid inventory turns (~12x/year) ensures minimal commodity price exposure
Profitability driven by the scrap spread, i.e. the spread between finished alloy prices and scrap prices
Europe buy/sell volume partially hedged
Two types of business models to serve customers
Tolling
Greater than 60% of total annual volume protected against metal price fluctuations
51%52%53%
55%51%
49%
49%48%47%
45%49%
51%
20122013201420152016LTM
Buy/Sell
Five-Year Average: 52% / 48%
(1) As of 6/30/17.
(1)
FULL SUITE OF ALUMINUM RECYCLING CAPABILITIES
8
Raw Materials / Scrap Types
Requires Pre-Processing
Turnings
Old and New Cast
Furnace Ready
Twitch
By-Products
Dross
Pre-Processing
Shredding, drying and milling of aluminum scrap and by-products
Melting and Casting
Rotary and reverberatory furnaces
Molten
Sow
Ingot
Other Offerings
Deox cones for steel manufacturing
Fabricated products
Magnesium recycling
Operations Products
“Post shredder” scrap,generally automotive
Used castings such as an engine block
The excess from machine-cut aluminum, free of oil or steel
Large ingots of aluminum (1000-2000 lbs)
Small ingots of aluminum (~30 lbs)
Just-in-time deliveryof liquid metal
By-product of aluminum manufacturing and processing
INTEGRATED INTO CUSTOMER SUPPLY CHAINS
Illustrative Operations Flow – Aluminum Fabrication Chain
Competitive Advantage Value Proposition for Customers Impact to Real Alloy
Close proximity to customers
Just-in-time delivery
Multiple facilities to support customers across broad geographies
Operational expertise and scale bring higher efficiency and quality
Maximize recovery of customers’ metal units in our tolling business (which is usually their lowest cost alternative)
Blue-chip customer base of leading automotive OEMs, rolling mills, extruders and other manufacturers
Average customer relationship spans more than 20 years
Pre-ProcessingMelting
Casting
Ingot Scrap
Rolling / Extrusion
Scrap
End-Products
ScrapReal Alloy’s Integrated Recycling Value ChainCasting
9
Molten
HIGH-QUALITY AND DIVERSIFIED CUSTOMER BASE
Long-standing relationships with diverse customer base, including many blue-chip multinational companies
– No single customer accounted for >12% of total revenues in 2016
Close proximity to key customers and breadth of capabilities allow for closed-loop arrangements, maximizing utilization of customers’ metal
Ability to deliver “just-in-time” molten metal for direct use in customers’ operations further integrates Real Alloy into customer supply chain
Representative End Customers
Chrysler
10
11
REAL ALLOY WELL POSITIONED TO BENEFIT FROM FAVORABLE SECULAR TRENDS
In recent years, volume losses were driven by unfavorable market pricing dynamics, particularly for used beverage cans (“UBC”) vs. primary aluminum
Now experiencing a reversal of this trend and restarting UBC processing operations
Real Alloy expects to benefit from favorable secular trends that will drive increasing demand for secondary aluminum and increasing usage of aluminum in the automotive market
Real Alloy participates directly or indirectly in the production of all key types of auto components that will see increased aluminum content
Despite potential for declining auto builds in North America, overall aluminum use expected to increase given growth in aluminum content per vehicle
(Consumption CAGR from 2017-2030)
3.4%
5.7%
Primary Aluminum SecondaryAluminum
Strong Secondary Aluminum Demand(1) Secular Change in Aluminum Auto Usage
Aluminum Content per Vehicle(2)
(pounds)Changes in Aluminum per Car(3)
(increase in pounds)
397
466
565
2015 2020 2028
38
12
10
10
5
5
(11)
ClosureSheet
BodySheet
Body VacuumDie Castings
Body & BumperExtrusions
Chassis &Suspension
Wheels, Steering& Brakes
Engine &Transmission
Source: Company materials, industry research. (1) Per AME Group Q1 2017 Aluminum Strategic Market Study.(2) Per Ducker Worldwide as of July 2017. Represents North American light vehicles.(3) Per WardsAuto. Compares 2015 to 2020E.
(thousands of tonnes)
2013 – 2014• Deliberate reduction in volume to
improve profitability• Rationalized unprofitable
business, while increasing EBITDA
2015 – 2017• UBC tolling impacted by market pricing dynamics• Now experiencing reversal of historical trend and
restarting UBC processing operations (e.g. Morgantown facility)
868 857 827 805 786 782
385 364 377 398 371 371
1,253 1,221 1,204 1,203 1,157 1,153
2012 2013 2014 2015 2016 LTM 6/30/17
Real Alloy North America Real Alloy Europe
Real Alloy Volume Over Time
REAL ALLOY PROVEN MANAGEMENT WITH SIGNIFICANT INDUSTRY EXPERIENCE
12
Exceptional management team with combined 180+ years of industry experience
# = Years of aluminum industry experience # = Company tenure
28 28
Terry Hogan
President
Successfully weathered 2009 recession with positive EBITDA
Improved operational flexibility through targeted capex programs
High-graded European business by introducing new high margin products (i.e. Piston Alloys)
Right-sized footprint to lower fixed cost structure and improve utilization rates
Qualified customers at multiple facilities to better manage utilization levels
33 11 11 4
10
8
2 22 1 25
33 7 11 4
4
8
2 22 1 25 164 646 110 6
Chris Garisek
Director, Treasury and FP&ANorth America
Director, Operations & Manufacturing, North America
Director, Human Resources, Europe
Director, Finance, Europe
Director, Global Business Transformation Leader
Director, Human Resources, North America
Director, Operations & Manufacturing, North America
Corporate ControllerNorth America
Director, Operations & Technology, Europe
Director, Commercial Europe
Gaylord Seemann
Vice President, Information Technology
Randy Collins
Vice President, Commercial, North America
Russell Barr
Executive Vice President & General Manager, Europe
Cathryn Griffin
Vice President, Legal
REAL ALLOY MARKET DYNAMICS
BUY/SELL BUSINESS MARGIN DRIVERS
14
Buy/sell margins are impacted by scrap spreads –the difference between the price of metal sold and cost of the scrap to produce it
Note: Metal indices are only meant to serve as a directional indication of Real Alloy’s cost of scrap and realized prices.
Real Alloy North America Real Alloy Europe
Wrought Alloy & High Purity Cast Alloy Prices
London Metal Exchange cash official price of primary aluminum (“LME”), plus
Midwest Premium approximates the cost of freight and handling to ship aluminum from LME warehouses to the mid-western US (“MWP”)
LME, plus
Duty paid Rotterdam premium, European equivalent of MWP (“Rotterdam”)
Automotive Casters -Standard Casting Alloy Prices
Platts Metals Week 380 index, which tracks common aluminum alloy used in casting automotive parts in the US (“MW380”)
Metal Bulletin 226, which tracks common aluminum alloy used in casting automotive parts in Europe (“MB226”)
Scrap Prices Platts tracks pricing for high-volume scrap
materials No relevant market pricing published
Scrap Spread Difference between the price of the metal sold
and the cost of the raw material to make it Difference between LME + Rotterdam / MB226
and average scrap price
ALUMINUM SCRAP DYNAMICS
15
North American Scrap Spreads ($/tonne)(1)
North American scrap spreads have significantly rebounded since reaching cycle lows in 2016 and are approaching the five-year average
Given pricing structure of customer agreements, there is generally a lag between changes in scrap spreads and the financial impact; anticipate the improved scrap margin environment to continue to be felt in the second half of 2017
In Europe, the market environment has been favorable, leading to higher scrap spreads year-over-year
North American and European scrap spreads are not generally correlated and can provide for more stable performance
$450
$550
$650
$750
$850
Jun-12 Apr-13 Feb-14 Dec-14 Oct-15 Aug-16 Jun-17
Scrap Spread 5-Year Average
Source: Platts.(1) Scrap spread is the difference between the Platts MW380 price less the arithmetic average of the Platts price for three types of scrap (twitch, cast and turnings) that are a component of Real Alloy North America’s scrap input mix (“Average Scrap Price”). The Average Scrap Price is only meant to serve as a direction indication of scrap prices and does not represent Real Alloy’s actual scrap mix or margins.
$637
$622
RECENT ALUMINUM MARKET PERFORMANCE
North America Market Prices ($/tonne) Europe Market Prices (€/tonne)
$1,000
$1,425
$1,850
$2,275
$2,700
LME LME + MWP
MW380 Average Scrap Price
€ 1,000
€ 1,300
€ 1,600
€ 1,900
€ 2,200
LME LME + Rotterdam MB226
As of June 30, 2017 YTD Avg. LTM Avg. 5-Year Avg.LME $1,880 $1,773 $1,781LME + MWP 2,087 1,953 2,055MW380 1,975 1,900 2,135Avg. Scrap Price 1,392 1,344 1,498
As of June 30, 2017 YTD Avg. LTM Avg. 5-Year Avg.LME €1,736 €1,628 €1,490LME + Rotterdam 1,877 1,757 1,701MB226 1,775 1,692 1,762
Source: Platts (North America), MetalPrices (Europe).16
REAL ALLOY FINANCIAL UPDATE
REAL ALLOY Q2 2017 OVERVIEW
18
Real Alloy overall performance reflected the improved North America scrap spread that had commenced in 1Q17
Volume decreased 1% from the prior quarter and from YOY
Segment Adjusted EBITDA increased 40% from the prior quarter and decreased 18% YOY
Solid liquidity position of $67 million
Volume Invoiced(metric tonnes in thousands)
Segment Adjusted EBITDA (1)
($ millions)
(1) For the reconciliation of Segment Adjusted EBITDA to net income (loss), the nearest GAAP measure, please see Appendix.
196 199 196 194 197 195
96 95 96 85 95 95
292 294 291 279 292 290
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
RANA RAEU
$18.3 $20.9
$16.9
$11.8 $12.3
$17.2
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Segment Adjusted EBITDA per tonne ($/tonne)
$63 $71 $58 $42 $42 $59
REAL ALLOY NORTH AMERICA
19
Increased sales in buy/sell business, driven by the Beck Acquisition and commercial efforts, offset reduced tolling volume, similar to 1Q17
Segment Adjusted EBITDA higher sequentially primarily due to scrap spreads and reduced SG&A; lower YOY due to volume, mix between tolling and buy/sell, and scrap spreads
Capex spending continuing to be geared toward improving efficiency of facilities to benefit both employees and customers
Volume Invoiced(metric tonnes in thousands)
Segment Adjusted EBITDA (1)
($ millions)
Capital Expenditures($ millions)
49% 44% 44%
51% 56% 56%
2Q16 1Q17 2Q17
Tolling Buy/Sell
199 197 195
(0.9%)(2.3%)
$14.3
$6.3$8.7
2Q16 1Q17 2Q17
Segment Adjusted EBITDA (1)
($ millions)
Capital Expenditures($ millions)
$72 $45
Segment Adjusted EBITDA per tonne ($/tonne)
$3.5
$2.4$2.9
2Q16 1Q17 2Q17
$32
(39.2%)
38.1%
(1) For the reconciliation of Segment Adjusted EBITDA to net income (loss), the nearest GAAP measure, please see Appendix.
REAL ALLOY EUROPE
20
Volume and mix between tolling and buy/sell business remained similar YOY
Delivered highest Segment Adjusted EBITDA in gross USD since fiscal year 2011
Performance driven by strong scrap spread environment in Europe and favorable product mix
Volume Invoiced(metric tonnes in thousands)
Segment Adjusted EBITDA (1)
($ millions)
Capital Expenditures($ millions)
56% 53% 56%
44% 47% 44%
2Q16 1Q17 2Q17
Tolling Buy/Sell
95 95 95
(0.1%)0.5%
$6.6$6.0
$8.5
2Q16 1Q17 2Q17
Segment Adjusted EBITDA (1)
($ millions)
Capital Expenditures($ millions)
$70 $89
Segment Adjusted EBITDA per tonne ($/tonne)
$2.3
$3.2
$2.0
2Q16 1Q17 2Q17
$63
28.8%41.7%
(1) For the reconciliation of Segment Adjusted EBITDA to net income (loss), the nearest GAAP measure, please see Appendix.
REAL ALLOY(1) HISTORICAL FINANCIAL SUMMARY
21
Note: Numbers may not add due to rounding. (1) Financial data prior to 2015 is of Aleris GRSA. (2) Differences between segment totals and consolidated totals are included in Corporate and Other.(3) LME pricing presented on a per metric tonne basis.(4) Financial data prior to 2015 is before any estimated standalone impact. For the reconciliation of Segment Adjusted EBITDA to net income (loss), the nearest GAAP measure, please see Appendix.
868 857 827 805 786 782
385 364 377 398 371 371
1,253 1,221 1,204 1,203 1,157 1,153
2012 2013 2014 2015 2016 LTM6/30/17
Real Alloy North America Real Alloy Europe
947 938 971 856 821 868
602 561 550527 429 439
$1,549 $1,499 $1,521$1,383
$1,250 $1,307
2012 2013 2014 2015 2016 LTM6/30/17
Real Alloy North America Real Alloy Europe
$56
$37$32
$35$31 $30
2012 2013 2014 2015 2016 LTM6/30/17
Maintenance Capex Range of $22-27MM
$69 $70
$88$82
$68$58
60 59
73 68 59
50
2012 2013 2014 2015 2016 LTM6/30/17
Segment Adj. EBITDA Segment Adj. EBITDA per Tonne
Volume Invoiced(metric tonnes in thousands)
Segment Revenue (2)
($ millions)
Segment Capital Expenditures (2)
($ millions)
Segment Adjusted EBITDA (4)
($ millions)
2,019 1,846 1,866 1,651 1,604 1,773
Average LME Al Price(3)
CURRENT CAPITALIZATION AND LIQUIDITY
22
New $110 million Asset-Based Facility closed March 14, 2017; improved pricing, terms and flexibility
(1) For the reconciliation of Segment Adjusted EBITDA to net income (loss), the nearest GAAP measure, please see Appendix.(2) Represents the arithmetic average of Segment Adjusted EBITDA from fiscal years 2013 to 2016.
($ millions)
As of
June 30, 2017
Real Alloy
Cash 14.0$
Availability under Revolving Credit Facility 31.1
Availability under Factoring Facility 21.8
Liquidity 66.9$
Revolving Credit Facility 76.0$
Senior Secured Notes due 2019 305.0
Capital Leases 7.4
Total Debt 388.4$
Segment Adjusted LTM EBITDA (1) 58.2$
Segment Adjusted Average EBITDA from 2013 to 2016 (1,2)
76.7$
Total Debt / Segment Adjusted LTM EBITDA 6.7x
Total Debt / Segment Adjusted Average EBITDA from 2013 to 2016 5.1x
CONCLUSION
SUMMARY
Ongoing focus on executable investment opportunities at Real Industry and Real Alloy that maximize stockholder value
Scrap spreads in North America expected to remain stable
Third quarter typically impacted by seasonal customer shutdowns
Continuing to explore options to refinance the Senior Secured Notes due 2019
24
APPENDIX
2Q 2017 FINANCIAL STATEMENTS
26
Unaudited Condensed Consolidated Balance Sheets
June 30, December 31,
(In millions, except share and per share amounts) 2017 2016
ASSETS
Current assets:
Cash and cash equivalents $ 18.4 $ 27.2
Trade accounts receivable, net 112.9 88.4
Financing receivable 32.5 28.4
Inventories 120.1 118.2
Prepaid expenses, supplies and other current assets 29.0 24.6
Total current assets 312.9 286.8
Property, plant and equipment, net 289.8 289.2
Equity method investment 5.6 5.0
Identifiable intangible assets, net 11.3 12.5
Goodwill 42.9 42.2
Other noncurrent assets 8.5 9.8
TOTAL ASSETS $ 671.0 $ 645.5
LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade payables $ 124.3 $ 115.8
Accrued liabilities 51.4 46.4
Long-term debt due within one year 3.1 2.3
Total current liabilities 178.8 164.5
Accrued pension benefits 45.9 42.0
Environmental liabilities 11.6 11.6
Long-term debt, net 376.4 354.2
Common stock warrant liability 2.1 4.4
Deferred income taxes, net 2.5 2.5
Other noncurrent liabilities 6.7 6.9
TOTAL LIABILITIES 624.0 586.1
Redeemable Preferred Stock 25.4 24.9
Stockholders' equity:
Preferred stock — —
Additional paid-in capital 545.9 546.7
Accumulated deficit (524.0) (506.2)
Treasury stock — —
Accumulated other comprehensive loss (1.4) (7.1)
Total stockholders' equity—Real Industry, Inc. 20.5 33.4
Noncontrolling interest 1.1 1.1
TOTAL STOCKHOLDERS' EQUITY 21.6 34.5
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY $ 671.0 $ 645.5
2Q 2017 FINANCIAL STATEMENTS CONT’D
27
Unaudited Condensed Consolidated Statements of Operations
Three Months Ended June 30, Six Months Ended June 30,
(In millions, except per share amounts) 2017 2016 2017 2016
Revenues $ 350.2 $ 320.9 $ 687.3 $ 630.3
Cost of sales 332.1 298.6 655.8 591.4
Gross profit 18.1 22.3 31.5 38.9
Selling, general and administrative expenses 12.4 14.6 26.8 30.0
Losses (gains) on derivative financial
instruments, net 0.6 (1.5) 1.7 (0.3)
Amortization of identifiable intangible assets 0.6 0.6 1.2 1.2
Other operating expense, net 0.7 0.5 1.6 2.0
Operating profit 3.8 8.1 0.2 6.0
Nonoperating expense (income):
Interest expense, net 9.6 9.1 20.6 18.3
Change in fair value of common stock warrant
liability 0.2 (1.3) (2.3) (0.7)
Loss (income) from equity method investment 0.5 — (0.6) —
Foreign exchange losses (gains) on
intercompany loans (1.4) 1.6 (2.2) (1.0)
Other, net — (0.2) 0.3 (0.2)
Total nonoperating expense, net 8.9 9.2 15.8 16.4
Loss from continuing operations before
income taxes (5.1) (1.1) (15.6) (10.4)
Income tax expense 1.1 0.2 1.9 0.9
Loss from continuing operations (6.2) (1.3) (17.5) (11.3)
Earnings from discontinued operations, net of
income taxes — 0.1 — 0.1
Net loss (6.2) (1.2) (17.5) (11.2)
Earnings from continuing operations attributable to
noncontrolling interest 0.3 0.3 0.4 0.4
Net loss attributable to Real Industry, Inc. $ (6.5) $ (1.5) $ (17.9) $ (11.6)
LOSS PER SHARE
Net loss attributable to Real Industry, Inc. $ (6.5) $ (1.5) $ (17.9) $ (11.6)
Dividends on Redeemable Preferred Stock, in-kind — (0.5) — (0.9)
Dividends on Redeemable Preferred Stock,
in cash or accrued (0.5) — (1.1) —
Accretion of fair value adjustment to Redeemable
Preferred Stock (0.3) (0.2) (0.5) (0.5)
Net loss available to common stockholders $ (7.3) $ (2.2) $ (19.5) $ (13.0)
Basic and diluted loss per share:
Continuing operations $ (0.25) $ (0.08) $ (0.67) $ (0.43)
Discontinued operations — 0.01 — —
Basic and diluted loss per share $ (0.25) $ (0.07) $ (0.67) $ (0.43)
SEGMENT ADJUSTED EBITDA RECONCILIATION TO REAL INDUSTRY NET LOSS
28
Three Months Ended
(In millions) Jun-17 Mar-17 Dec-16 Sep-16 Jun-16
Segment Adjusted EBITDA $ 17.2 $ 12.3 $ 11.8 $ 16.9 $ 20.9
Unrealized gains (losses) on derivative financial instruments (0.1) (0.2) 0.1 (0.6) 1.9
Segment depreciation and amortization (10.1) (11.5) (11.9) (11.3) (10.6)
Amortization of inventories and supplies purchase accounting adjustments — — (0.2) — (0.3)
Corporate and Other selling, general and administrative expenses (2.5) (3.2) (3.1) (7.5) (3.6)
Goodwill impairment — — (61.8) — —
Other, net (0.7) (1.0) (2.1) (1.0) (0.2)
Operating profit (loss) 3.8 (3.6) (67.2) (3.5) 8.1
Interest expense, net (9.6) (11.0) (9.8) (9.2) (9.1)
Change in fair value of common stock warrant liability (0.2) 2.5 (0.2) 1.9 1.3
Acquisition-related costs and expenses — — (1.0) — —
Foreign exchange gains (losses) on intercompany loans 1.4 0.8 (3.4) — (1.6)
Income (loss) from equity method investment (0.5) 1.1 (1.1) — —
Other nonoperating expense, net — (0.3) 0.6 (0.5) 0.2
Income tax benefit (expense) (1.1) (0.8) 1.0 0.5 (0.2)
Earnings (loss) from discontinued operations, net of income taxes — — 0.5 — 0.1
Net loss $ (6.2) $ (11.3) $ (80.6) $ (10.8) $ (1.2)
RECONCILIATION OF SEGMENT ADJUSTED EBITDA TO NET EARNINGS (LOSS)
29
Note: Financial data from 2012 through 2014 is of the former Global Recycling and Specification Alloys business of Aleris Corporation ("GRSA"), is before any estimated standalone impact, and reconciles GRSA Adjusted EBITDA to Net income attributable to Aleris. Financial data from 2015 is of GRSA through the approximate two months period ended February 26, 2015 and the data of Real Alloy through the approximate 10 months period ended December 31, 2015, and Segment Adjusted EBITDA reconciles to each entities' respective Net income (loss). Financial data from 2016 onward is of Real Alloy and Segment Adjusted EBITDA reconciles to Real Industry Net income (loss). For relevant footnotes, see our Form 10-Q filed with the Securities and Exchange Commission ("SEC") on August 8, 2017 and Form 10-K filed with the SEC on March 13, 2017 for the fiscal year ended December 31, 2016 and six months ended June 30, 2017 and June 30, 2016, our standalone audited financial statements for the fiscal year ended December 31, 2015 filed with the SEC on form 8-K dated August 9, 2016, for fiscal years ended December 31, 2014, 2013 and 2012 our Form 8-K filed with the SEC on dated June 29, 2015.
($ millions) 2012 2013 2014 2015 20166-Mo.2016
6-Mo.2017
LTM 6/30/17
Net earnings (loss) $26.4 $19.0 $29.3 ($27.2) ($102.6) ($11.2) ($17.5) ($108.9)
Interest expense, net - - - 35.0 37.3 18.3 20.6 39.6
Provision for income taxes 11.9 4.3 1.1 5.5 (0.6) 0.9 1.9 0.4
Depreciation and amortization 15.8 21.6 25.6 40.1 48.5 25.3 21.5 44.7
EBITDA $ 54.1 $44.9 $56.0 $53.4 ($17.4) $33.3 $26.5 ($24.2)
Goodwill impairment - - - - 61.8 - - 61.8
Real Industry Corporate and Other selling, general and administrative expenses - - - - 15.5 6.9 5.7 14.3
Change in fair value of common stock warrant liability - - - - (2.4) (0.7) (2.3) (4.0)
Loss from equity method investment - - - - 1.1 - (0.6) 0.5
Earnings (loss) from discontinued operations, net of income taxes - - - - (0.6) (0.1) - (0.5)
Other nonoperating income, net - - - - (0.3) (0.2) 0.3 0.2
Acquisition-related costs and expenses - - - 8.9 1.0 - - 1.0
Amortization of purchase accounting adjustments - - - 9.2 1.1 0.9 - 0.2
Foreign exchange (gains) losses on intercompany loans - - 0.6 1.6 2.4 (1.0) (2.2) 1.2
Unrealized losses (gains) on derivatives (1.5) (0.8) 2.6 (0.6) (1.0) (1.5) 0.4 0.9
Earnings attributable to non-controlling interest 1.3 1.0 0.9 0.3 - - - -
Loss on disposal of assets 0.8 1.3 2.2 2.2 - - - -
Share-based compensation expense 4.2 4.8 3.9 0.5 - - - -
SG&A allocated from Aleris not directly associated with GRSA 12.0 12.6 12.8 1.3 - - - -
Management Fees from Real Industry - - - 2.5 - - - -
Restructuring charges 2.4 3.3 - - - - - -
Excluded entities/facilities (3.6) (3.3) - - - - - -
Medical expense adjustment - 4.3 3.1 - - - - -
Extreme winter weather - - 2.1 - - - - -
Other (0.8) 1.4 3.4 2.5 6.7 1.6 1.7 6.8
Segment Adjusted EBITDA $68.9 $69.5 $87.6 $81.8 $67.9 $39.2 $29.5 $58.2