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Abonner Teksid Aluminum S.A.R.L.S.C.A

Teksid Aluminum S.A.R.L.S.C.A

TK Aluminum Ltd. Reports Financial Results for the Second Quarter Ended June 30, 2005 and for the First Six-Month Period of 2005

Carmagnola, Italy (ots/PRNewswire)

- TK Aluminum Ltd Delivers 28.6% Improved Earnings on 11.7% Higher
Revenues
TK Aluminum Ltd., the indirect parent of Teksid Aluminum
Luxembourg S.à.r.l., SCA, today reported its consolidated financial
results for the second quarter ended June 30, 2005 and for the first
six-month period of 2005
"Teksid Aluminum has had a very good first six months of 2005 and
we are pleased with the results," reported Jake Hirsch, CEO of Teksid
Aluminum. "The benefits of our market actions, cost reductions and
restructuring initiatives that were launched in the first quarter are
gaining traction and it shows in our financials."
  • K/tons were 57.1 in the second quarter of 2005 against 53.8 in the corresponding period of 2004, up 6%. For the six-month period tons reached 112.5, against 103.8 in the same period of 2004, up 8.3%.
  • Net Revenues were EUR 271.0 million in the second quarter of 2005, up 9.7% against EUR 247.0 million in the same period of 2004. For the six-month period net revenues were EUR 522.4 million against EUR467.7 million in 2004, up 11.7%.
  • EBITDA was EUR 32.6 million in the second quarter of 2005 against EUR 15.7 million in the same period of 2004, up EUR16.9 million. For the six-month period EBITDA rose to EUR 54.0 million from EUR 26.7 million in 2004.
  • Adjusted EBITDA was EUR 24.8 million in the second quarter of 2005, against EUR 21.0 million in the same period of 2004, up EUR 3.8 million or 18%. For the six-month period Adjusted EBITDA rose to EUR 42.7 million from EUR 33.2 million in 2004, up EUR9.5 million.
  • Net Loss was EUR 1.3 million in the second quarter of 2005, compared with EUR 9.8 million in the same period of 2004. For the six-month period net loss decreased to EUR 9.3 million from EUR 21.6 million in 2004.
  • Capex were EUR 9.9 million in the second quarter of 2005, against EUR 9.5 million in the same period of 2004. For the six-month period capex were EUR 29.8 million against EUR 25.0 million in 2004.
  • Net Debt at June 30, 2005 was EUR 320.3 million against a pro-forma net debt at December 31, 2004 of EUR 277.2 million and at June 30, 2004 of EUR 308.4 million respectively. Net Debt of the previous periods has been adjusted to consider the effect of change in the accounting treatment of the synthetic lease arrangement on our Alabama facility (FIN 46R).
Net Revenues in the first six-month period of 2005 increased by
11.7% compared to same period in 2004 or 10.9% at constant exchange
rate. This growth rate exceeded the overall automotive market growth
of 2.6% due to successful market penetration on key new platform
launched in the last twelve months.
EBITDA for the first six-month period of 2005 was 10.3% of Net
Revenues, and 102.2% higher than in the corresponding period of 2004,
when EBITDA was 5.7% of Net Revenues. This significant improvement in
the EBITDA was driven by volume leverage, cost reduction and
restructuring initiatives that were launched in the first quarter of
2005. Additionally, this result was benefiting from a mostly
unrealised foreign exchange gain of EUR20 million related to our
trade and financial intercompany structure, reversing accrued but not
realised losses reported in the previous accounting periods.
Adjusted EBITDA for the first six-month period of 2005 was 8.2% of
Net Revenues, and 28.6% higher than in the corresponding period of
2004, when Adjusted EBITDA was 7.1% of Net Revenues. For the
six-month period ending June 30, 2005, Adjusted EBITDA was positively
impacted by increased volumes/mix, cost saving initiatives and
restructuring program for EUR9.3 million, EUR13.5 million and EUR1.7
million, respectively. This improvement was partially offset by
negative price reductions for EUR2.6 million, aluminium price/spread
for EUR3 million, inefficiencies, cost inflation and higher energy
cost for EUR11.5 million and negative FX effect, mainly affecting our
Polish operations, for EUR0.6 million. Change in the accounting
treatment of the synthetic lease arrangement on our Alabama facility
(FIN 46R), further improved the Adjusted EBITDA by EUR2.7 million.
For a definition and full reconciliation of Adjusted EBITDA see
below.
Net Loss for the first six-month of 2005 decreased by 56.9%
compared to same period in 2004.
Capital expenditures for the first six-month period of 2005 were
EUR29.8 million compared to EUR25.0 million or EUR4.8 higher than in
corresponding period of 2004, including EUR0.4 million of capital
expenditures related to items for which the Company believes it is
entitled to be reimbursed by Teksid S.p.A under the terms of the
acquisition agreement relating to our acquisition from Teksid S.p.A
in 2002.
Including EUR88.2 million of cash, Net Debt at June 30, 2005
amounted to EUR320.3 million, a EUR42.8 million increase from
pro-forma net debt at December 31, 2004, including the effect of the
change in the accounting treatment of the synthetic lease arrangement
which accounted for EUR53.4 million. The change in net debt was
primarily due to working capital usage for EUR55.5 million, and to
cash used for investment of EUR29.7 million, partially offset by
increased Funds from Operation of EUR25.1 million, a switch from w/o
recourse to factoring with full recourse of EUR14.5 million, a net
debt draw down of EUR9.1 million and EUR20 million of new equity
injection.
On June 15, 2005, Teksid Aluminum Luxembourg S.à.r.l., S.C.A.
launched an offer to exchange up to EUR240,000,000 aggregate
principal amount of its 11 3/8 % Senior Notes due 2011 (the "Original
Notes") for a like principal amount of its new 11 3/8% Senior Notes
due 2011 and the related solicitation of consents to amend the
original indenture governing the Original Notes and the registration
rights agreement (the "Registration Rights Agreement") relating to
the Original Notes. The exchange offer and consent solicitation
expired on July 15, 2005. The exchange offer and consent solicitation
was not completed because sufficient tenders were not received to
meet the minimum tender conditions of the offer. In light of the fact
that the exchange offer and consent solicitation was not completed,
the Company intends to file a registration statement and complete an
offer to exchange the Original Notes for notes registered under the
US Securities Act of 1933, as amended, as soon as practicable and in
accordance with the Registration Rights Agreement.
The Company identified at one of its subsidiaries, Teksid Aluminio
do Brasil, the following potential accounting matters as a result of,
in part, improved internal controls recently implemented: (i)
customer invoicing prior to the physical shipment of product; (ii)
overstatement of inventory for some 900 tons caused by the inflated
records of production volumes and understatement of the amount of
manufacturing scrap. Promptly thereafter, the Company's Audit
Committee retained outside counsel to assist it in investigating
these accounting issues and the reasons behind such issues, and the
Company took prompt action to terminate the practices under
investigation.
The Audit Committee and counsel review is continuing. The
investigation to date has confirmed that the total magnitude of the
accounting matters identified under (ii) above is EUR2.2 million,
although the allocation to specific financial periods of the amounts
relating to the overstatement of the inventory has not yet been
completed. At this time, based on the investigation conducted to
date, the Company is restating certain financial information related
to customer invoicing prior to the physical shipment of product; such
restatement only impacts the allocation of net revenues and related
margins through the period presented. The allocation of EUR2.2
million to prior financial periods with respect to the overstatement
of inventory is currently being investigated and will ultimately
require additional restatement of prior financial information. The
overstatement of inventory resulting in the additional restatement
will negatively impact the financial results for the implicated
periods, including the inventory value and the accumulated deficit
for a corresponding amount.
The table set forth in the enclosed attachment 2 summarises the
impact of certain adjustments required to the Company's balance sheet
for the year end December 31, 2004 and its statements of operations
for the three-month period and six-month period ended June 30, 2004
with respect to the issue of customer invoicing prior to the physical
shipment of product.
The Company was in full compliance with the financial covenants of
its Senior Credit Agreement in respect of the period ended June 30th,
2005.
Results included herein are unaudited and have been presented in
accordance with US GAAP.
Further comments on Q2 earnings will be delivered by Jake Hirsch,
CEO, and Demetrio Mauro, CFO, during the bondholders and analyst
conference call to be held on August 31st, 2005, at 15:00 pm, Central
European Time, 14:00 pm London Time.
Any interested person may join the conference call by dialling the
numbers set forth below.
Dial in n +39-071-286-1848
About Teksid Aluminum
Teksid Aluminum is a leading independent manufacturer of aluminium
engine castings for the automotive industry. Our principal products
include cylinder heads, cylinder blocks, transmission cases and
suspension components. We operate 15 manufacturing facilities in
Europe, North America, South America and Asia. Information about
Teksid Aluminum is available on our website at
www.teksidaluminum.com.
Until September 2002, Teksid Aluminum was a division of Teksid
S.p.A., which was owned by Fiat. Through a series of transactions
completed between September 30, 2002 and November 22, 2002, Teksid
S.p.A. sold its aluminium foundry business to a consortium of
investment funds led by equity investors that include affiliates of
each Questor Management Company, LLC, JPMorgan Partners, Private
Equity Partners SGR SpA and AIG Global Investment Corp. As a result
of the sale, Teksid Aluminum is owned by its equity investors through
TK Aluminum Ltd., a Bermuda holding company.
On July 17, 2003, Teksid Aluminum Luxembourg S.a.r.l., SCA issued
EUR 240 million aggregate principal amount of senior notes due in
2011. The notes were sold to qualified institutional buyers in the
United States pursuant to Rule 144A of the US securities laws and to
persons outside United States pursuant to Regulation S of the US
securities laws. The proceeds of the sale were used to repay amounts
borrowed to finance the acquisition of Teksid Aluminum and pay
certain fees and expenses.
Reconciliation of Net Loss to EBITDA and Adjusted EBITDA
Adjusted EBITDA is a supplemental measure of our performance that
is not required by, or presented in accordance with US GAAP.
Furthermore, Adjusted EBITDA should not be considered as an
alternative to net income (loss) or any other performance measures
derived in accordance with US GAAP, or to cash flows from operating
activities as a measure of liquidity.
The following is a reconciliation of income (loss) from operations
to EBITDA and to Adjusted EBITDA:
Six-month period
                                             ended June 30,
    (in millions of euro)                     2005       2004
    Net loss                                  (9,3)     (21,6)
    Depreciation and amortisation             31,6       28,5
    Interest expenses, including debt         24,3       20,8
    issuance costs, net
    Income tax expense                         7,4       (1,0)
    EBITDA                                    54,0       26,7
    Foreign exchange (gains)/losses          (19,8)      (0,9)
    Net (earnings)/losses of affiliated        0,3          -
    companies
    Other (incomes)/expenses                   0,4        1,6
    Adjustments to EBITDA:
    Restructuring and Early retirement         3,2        1,0
    expenses (a)
    Other expenses and non recurring           0,7        2,5
    items (b)
    Severance emplyees costs (c)                 -        2,3
    Filing SEC and Exchange Offer fees         2,6
    (d)
    Fees payables to affiliates of the         1,3          -
    investors (e)
    Adjusted EBITDA (f)                       42,7       33,2
(a) Adjustment to eliminate expenses associated with the
operational restructuring, early retirement programs activated in
Italy, North America and France during 2005 and with early retirement
program partially subsidised by the French government activated
during 2004. The voluntary programs have been offered to eligible
workers between the ages of 55 and 60. Between 2002 and 2005, we
intend to replace workers who elect to participate in the program
with lower-wage workers. Teksid S.p.A has agreed to reimburse us for
the first EUR8.5 million of payments made by us under the programs.
We expect that this will be sufficient to cover our costs under that
plan.
(b) Adjustment to eliminate the impact of expenses that are
reimbursed by Teksid S.p.A. under the purchase agreement and other
non recurring items.
(c) Adjustment to eliminate the impact of expenses associated with
severance expenses related to terminated employees in France and
Italy
(d) Adjustment to eliminate the impact of non recurring expenses
incurred by the Company in connection with its SEC registration
process and expired private exchange offer and consent solicitation.
(e) Adjustment to eliminate the impact of fees payables to
affiliates of the investors according to the financial and advisory
services arrangement with affiliates of certain of the equity
investors of the Company. Such item is a new adjustment as provided
by the amendment of the Senior Credit Facility as executed on April
26, 2005.
(f) "EBITDA" represents earnings before interest, taxes and
depreciation and amortisation. "Adjusted EBITDA" represents net
income as adjusted for those items that are permitted or required to
be excluded for purposes of calculating "Consolidated EBITDA" for
purposes of the covenants under our senior credit facility. EBITDA
and Adjusted EBITDA are supplemental measures of our performance that
are not required by, or presented in accordance with US GAAP.
Furthermore, EBITDA and Adjusted EBITDA should not be considered as
an alternative to net income (loss) or any other performance measures
derived in accordance with US GAAP, or to cash flows from operating
activities as a measure of liquidity. EBITDA and Adjusted EBITDA are
measurement tools for evaluating the actual operating performance of
the Company. Management uses Adjusted EBITDA, as its primary
measurement tool for evaluating the actual operating performance of
the Company as compared to budget and, consequently, in determining
management and employee compensation, bonuses and other incentives.
Management believes Adjusted EBITDA, facilitates comparisons of
operating performance from period to period and company to company by
eliminating potential differences caused by variations in capital
structures (affecting interest expense), tax positions (such as the
impact on periods or companies of changes in effective tax rates or
net operating losses) and the age and book depreciation of tangible
assets (affecting depreciation expense). The Company presents
Adjusted EBITDA as it is the basis against which certain financial
tests are measured under our senior credit facility. The Company also
presents EBITDA because management believes it is frequently used by
securities analysts, investors and other interested parties in
evaluating similar companies, the vast majority of which present
EBITDA when reporting their results. Nevertheless, both EBITDA and
Adjusted EBITDA have limitations as an analytical tool, and you
should not consider it in isolation from, or as a substitute for
analysis of, our results of operations as reported under US GAAP.
Some of these limitations are: such measurements do not reflect our
cash expenditures or future requirements for capital expenditures or
contractual commitments; such measurements do not reflect changes in,
or cash requirements for, our working capital needs; such
measurements do not reflect the significant interest expense, or the
cash requirements necessary to service interest or principal
payments, on our debt; although depreciation and amortisation are
non-cash charges, the assets being depreciated and amortised will
often have to be replaced in the future, such measurements do not
reflect any cash requirements for such replacements; such
measurements are not adjusted for all non-cash income or expense
items that are reflected in our statements of cash flows; and other
companies in our industry may calculate such measurements do
differently than we do, limiting such measurements' usefulness as a
comparative measure.
Because of these limitations, EBITDA and Adjusted EBITDA should
not be considered as a measure of discretionary cash available to us
to invest in the growth of our business.
In association with the change in accounting treatment of the
synthetic lease arrangement, for covenants compliance purposes
according to section 22.5 (c) of our senior credit agreement, the
Company should apply, to the relevant financial measures, the same
accounting treatment existing at the closing date (September 30,
2002).
Therefore, as a result of the change in the accounting treatment
of the synthetic lease arrangement, the measure utilised for
covenants compliance calculation in the six-month period ended June
30, 2005 are impacted as follows:
  • "Adjusted EBITDA" is higher by an aggregate of EUR2.7 million;
  • "Consolidated Total Net Debt" is higher by EUR53.4 million;
  • "Consolidated Net Interest Payables" is higher by EUR1.0 million.
Impact of restatement of the Company's balance sheet for the year
ended December 31, 2004 and its statement of operations for the
three-month and six-month period ended June 30, 2004 with respect to
the issue of customer invoicing prior to the physical shipment of
product
The table set forth below summarises the impact of certain
adjustments required to the Company's balance sheet for the year end
December 31, 2004 and its statements of operations for the
three-month period and six-month period ended June 30, 2004 with
respect to the issue of customer invoicing prior to the physical
shipment of product:
Dec. 31,               Dec. 31,
                                 2004,                 2004,
                               previously
    (Euro in thousands)         reported   Adjustments  as restated
    Trade accounts             81.585       (2.022)     79.563
    receivables
    Inventory                  99.662        1.605     101.267
    Prepaid expenses           50.868        142        51.010
    Net Equity                106.120       (275)      105.845
                              Three-month                   Three-month
                              period ended                  period ended
    (Euro in thousands)      June 30, 2004,                 June 30,
                                                            2004,
    (unaudited)               previously    Adjustments     as restated
                              reported
    Net Revenues              248.275         (1.300)       246.975
    Cost of good sold        (212.349)         1.063       (211.286)
    Income from operations      2.013           (237)         1.776
    Income (loss) before       (9.403)          (237)        (9.640)
    income taxes
    Net loss                   (9.636)          (156)        (9.792)
                                Six-month                     Six-month
                              period ended                   period ended
    (Euro in thousands)      June 30, 2004,                   June 30,
                                                              2004,
    (unaudited)                previously     Adjustments    as restated
                               reported
    Net Revenues               469.645           (1.979)      467.666
    Cost of good sold         (403.922)           1.730      (402.192)
    Income (loss) from        (783)                (249)       (1.032)
    operations
    Income (loss) before       (22.450)            (249)      (22.699)
    income taxes
    Net loss                   (21.484)            (164)      (21.648)
In relation to the condensed consolidated statements of cash flow
for the six-month period ended June 30, 2004, the restatement had no
significant effect on the amounts of net cash provided by operating
activities.
For further information please call
    Demetrio Mauro,
    Chief Financial Officer,
    +39-011-979-4784 or
    Domenico Orlandi,
    Senior Vice President and General Counsel,
    +39-011-979-4875
    Massimiliano Chiara,
    Finance Manager,
    +39-011-979-4889

Contact:

Demetrio Mauro, Chief Financial Officer, +39-011-979-4784; Domenico
Orlandi, Senior Vice President and General Counsel, +39-011-979-4875;
Massimiliano Chiara, Finance Manager, +39-011-979-4889