Attached files
| file | filename |
|---|---|
| EX-32.1 - EXHIBIT 32.1 - Aleris Corp | ex321-10ka12312014.htm |
| EX-31.2 - EXHIBIT 31.2 - Aleris Corp | ex312-10ka12312014.htm |
| EX-31.1 - EXHIBIT 31.1 - Aleris Corp | ex311-10ka12312014.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||
For the Fiscal Year Ended December 31, 2014 | ||||
or | ||||
¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||||
Commission File Number: 333-185443
_________________________________________
Aleris Corporation
(Exact name of registrant as specified in its charter)
__________________________________________
Delaware | 27-1539594 | |||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||
25825 Science Park Drive, Suite 400
Cleveland, Ohio 44122-7392
(Address of principal executive offices) (Zip code)
(216) 910-3400
(Registrant’s telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
______________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes x No ¨
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x
(Note: Registrant is a voluntary filer of reports required to be filed by certain companies under Sections 13 and 15(d) of the Securities Exchange Act of 1934 and has filed all reports that would have been required during the preceding 12 months, had it been subject to such filing requirements.)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ Accelerated filer¨ Non-accelerated filer x Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The registrant is a privately held corporation. As of June 30, 2014, the last business day of the registrant’s most recently completed second fiscal quarter, there was no established public trading market for the common stock of the registrant and therefore, an aggregate market value of the registrant’s common stock is not determinable.
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No¨
There were 31,357,493 shares of the registrant’s common stock, par value $0.01 per share, outstanding as of March 6, 2015.
DOCUMENTS INCORPORATED BY REFERENCE: None
EXPLANATORY NOTE
This Form 10-K/A (this “Amendment”) amends our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (the “Original Form 10-K”) filed with the Securities and Exchange Commission on March 27, 2015. In the Original Form10-K, we inadvertently omitted “/s/ Ernst & Young LLP” on the signature line in each of the documents titled “Report of Independent Registered Public Accounting Firm” (collectively, the “Audit Reports”). We had received a manually signed copy of the Audit Reports from Ernst & Young LLP prior to filing the Original Form 10-K.
• | This Amendment is being filed solely to include the inadvertently omitted conformed signature of Ernst & Young LLP in the Audit Reports included in Item 8. Financial Statements and Supplementary Data. |
No other changes were made to the Audit Reports. Also, no other changes have been made to the Original Form 10-K. The consolidated financial statements and notes to the consolidated financial statements are not being reissued and remain the same as those filed in the Original Form 10-K. This Amendment reflects information as of the original filing date of the Original Form 10-K, does not reflect events occurring after that date and does not modify or update in any way disclosures made in the Original Form 10-K, except as specifically noted above. This Amendment also includes currently dated certifications from each of our Chief Executive Officer and our Chief Financial Officer, as required by Rule 12b-15 of the Securities Exchange Act of 1934, as amended.
PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Consolidated Financial Statements
Index | Page Number |
Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2014, 2013 and 2012 | |
Consolidated Statements of Changes in Stockholders’ Equity and Redeemable Noncontrolling Interest for the years ended December 31, 2014, 2013 and 2012 | |
Management’s Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014 using the criteria set forth in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of December 31, 2014, the Company’s internal control over financial reporting was effective based on those criteria.
The effectiveness of internal control over financial reporting as of December 31, 2014, has been audited by Ernst & Young LLP, the independent registered public accounting firm who also audited the Company’s consolidated financial statements. Ernst & Young LLP’s attestation report on the effectiveness of the Company’s internal control over financial reporting is included herein.
/s/ Sean M. Stack |
Sean M. Stack |
President and Chief Executive Officer |
(Principal Executive Officer) |
/s/ Eric M. Rychel |
Eric M. Rychel |
Executive Vice President, Chief Financial Officer and Treasurer |
(Principal Financial Officer) |
4
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
Aleris Corporation
We have audited the accompanying consolidated balance sheet of Aleris Corporation as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive (loss) income, cash flows and changes in stockholders’ equity and redeemable noncontrolling interest for each of the three years in the period ended December 31, 2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Aleris Corporation at December 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Aleris Corporation’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated March 27, 2015 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Cleveland, Ohio
March 27, 2015
5
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
Aleris Corporation
We have audited Aleris Corporation’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). Aleris Corporation’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Aleris Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Aleris Corporation as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive (loss) income, cash flows and changes in stockholders’ equity and redeemable noncontrolling interest for each of the three years in the period ended December 31, 2014 and our report dated March 27, 2015 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Cleveland, Ohio
March 27, 2015
6
ALERIS CORPORATION
CONSOLIDATED BALANCE SHEET
(in millions, except share and per share data)
December 31, | |||||||
ASSETS | 2014 | 2013 | |||||
Current Assets | |||||||
Cash and cash equivalents | $ | 28.6 | $ | 51.3 | |||
Accounts receivable (net of allowances of $6.5 and $6.2 at December 31, 2014 and 2013, respectively) | 271.0 | 208.5 | |||||
Inventories | 627.9 | 494.2 | |||||
Deferred income taxes | 28.1 | 5.9 | |||||
Prepaid expenses and other current assets | 44.9 | 23.3 | |||||
Assets of discontinued operations - current | 385.6 | 375.8 | |||||
Total Current Assets | 1,386.1 | 1,159.0 | |||||
Property, plant and equipment, net | 942.9 | 904.5 | |||||
Intangible assets, net | 44.0 | 43.5 | |||||
Deferred income taxes | 146.7 | 28.3 | |||||
Other long-term assets | 72.4 | 66.4 | |||||
Assets of discontinued operations - long-term | 269.8 | 271.2 | |||||
Total Assets | $ | 2,861.9 | $ | 2,472.9 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 268.2 | $ | 165.7 | |||
Accrued liabilities | 183.3 | 143.9 | |||||
Deferred income taxes | 6.2 | 3.2 | |||||
Current portion of long-term debt | 3.3 | 2.5 | |||||
Liabilities of discontinued operations - current | 195.9 | 201.0 | |||||
Total Current Liabilities | 656.9 | 516.3 | |||||
Long-term debt | 1,474.9 | 1,226.8 | |||||
Deferred income taxes | 0.4 | 1.7 | |||||
Accrued pension benefits | 178.7 | 131.2 | |||||
Accrued postretirement benefits | 46.4 | 40.9 | |||||
Other long-term liabilities | 49.2 | 45.3 | |||||
Liabilities of discontinued operations - long-term | 156.4 | 136.3 | |||||
Total Long-Term Liabilities | 1,906.0 | 1,582.2 | |||||
Redeemable noncontrolling interest | 5.7 | 5.7 | |||||
Stockholders’ Equity | |||||||
Common stock; par value $.01; 45,000,000 shares authorized and 31,281,513 and 31,229,064 shares issued at December 31, 2014 and 2013, respectively | 0.3 | 0.3 | |||||
Preferred stock; par value $.01; 1,000,000 shares authorized; none issued | — | — | |||||
Additional paid-in capital | 414.1 | 401.9 | |||||
Retained earnings (deficit) | 39.1 | (47.6 | ) | ||||
Accumulated other comprehensive (loss) income | (160.9 | ) | 13.8 | ||||
Total Aleris Corporation Equity | 292.6 | 368.4 | |||||
Noncontrolling interest | 0.7 | 0.3 | |||||
Total Equity | 293.3 | 368.7 | |||||
Total Liabilities and Equity | $ | 2,861.9 | $ | 2,472.9 | |||
The accompanying notes are an integral part of these audited consolidated financial statements.
7
ALERIS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions)
For the years ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Revenues | $ | 2,882.4 | $ | 2,520.8 | $ | 2,552.3 | |||||
Cost of sales | 2,634.9 | 2,337.3 | 2,220.4 | ||||||||
Gross profit | 247.5 | 183.5 | 331.9 | ||||||||
Selling, general and administrative expenses | 221.9 | 184.1 | 207.5 | ||||||||
Restructuring charges | 2.8 | 5.0 | 8.5 | ||||||||
Losses (gains) on derivative financial instruments | 10.9 | (31.5 | ) | (3.6 | ) | ||||||
Other operating expense (income), net | 0.2 | (0.3 | ) | 0.6 | |||||||
Operating income | 11.7 | 26.2 | 118.9 | ||||||||
Interest expense, net | 107.4 | 97.4 | 52.1 | ||||||||
Other (income) expense, net | (20.0 | ) | 6.0 | 2.1 | |||||||
(Loss) income from continuing operations before income taxes | (75.7 | ) | (77.2 | ) | 64.7 | ||||||
(Benefit from) provision for income taxes | (129.5 | ) | (14.2 | ) | 5.8 | ||||||
Income (loss) from continuing operations | 53.8 | (63.0 | ) | 58.9 | |||||||
Income from discontinued operations, net of tax | 34.2 | 26.9 | 48.1 | ||||||||
Net income (loss) | 88.0 | (36.1 | ) | 107.0 | |||||||
Net loss from continuing operations attributable to noncontrolling interest | — | — | (1.8 | ) | |||||||
Net income from discontinued operations attributable to noncontrolling interest | 0.9 | 1.0 | 1.3 | ||||||||
Net income (loss) attributable to Aleris Corporation | $ | 87.1 | $ | (37.1 | ) | $ | 107.5 | ||||
The accompanying notes are an integral part of these audited consolidated financial statements.
8
ALERIS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in millions)
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Net income (loss) | $ | 88.0 | $ | (36.1 | ) | $ | 107.0 | |||||
Other comprehensive (loss) income, before tax: | ||||||||||||
Currency translation adjustments | (93.0 | ) | 33.2 | 10.8 | ||||||||
Pension and other postretirement liability adjustments | (99.4 | ) | 44.2 | (56.1 | ) | |||||||
Other comprehensive (loss) income, before tax | (192.4 | ) | 77.4 | (45.3 | ) | |||||||
Income tax (benefit) expense related to items of other comprehensive (loss) income | (17.7 | ) | 1.2 | (11.9 | ) | |||||||
Other comprehensive (loss) income, net of tax | (174.7 | ) | 76.2 | (33.4 | ) | |||||||
Comprehensive (loss) income | (86.7 | ) | 40.1 | 73.6 | ||||||||
Comprehensive income (loss) attributable to noncontrolling interest | 0.9 | 1.0 | (0.5 | ) | ||||||||
Comprehensive (loss) income attributable to Aleris Corporation | $ | (87.6 | ) | $ | 39.1 | $ | 74.1 | |||||
The accompanying notes are an integral part of these audited consolidated financial statements.
9
ALERIS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
For the years ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Operating activities | |||||||||||
Net income (loss) | $ | 88.0 | $ | (36.1 | ) | $ | 107.0 | ||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 157.6 | 129.5 | 84.8 | ||||||||
(Benefit from) provision for deferred income taxes | (132.0 | ) | (13.7 | ) | 10.4 | ||||||
Loss recognized on classification as held for sale | 11.2 | — | — | ||||||||
Stock-based compensation expense | 13.8 | 14.3 | 11.4 | ||||||||
Unrealized gains on derivative financial instruments | (6.5 | ) | (0.7 | ) | (14.3 | ) | |||||
Currency exchange (gains) losses on debt | (11.5 | ) | 3.9 | (3.4 | ) | ||||||
Amortization of debt issuance costs | 7.4 | 7.7 | 6.5 | ||||||||
Other | 2.0 | (2.4 | ) | 1.5 | |||||||
Changes in operating assets and liabilities: | |||||||||||
Change in accounts receivable | (34.1 | ) | 16.0 | 21.4 | |||||||
Change in inventories | (171.5 | ) | 15.7 | (88.4 | ) | ||||||
Change in other assets | (14.2 | ) | (20.5 | ) | (33.1 | ) | |||||
Change in accounts payable | 78.6 | (31.3 | ) | 42.3 | |||||||
Change in accrued liabilities | 11.2 | (50.5 | ) | 6.4 | |||||||
Net cash provided by operating activities | — | 31.9 | 152.5 | ||||||||
Investing activities | |||||||||||
Purchase of a business | (107.4 | ) | — | (21.5 | ) | ||||||
Payments for property, plant and equipment | (164.8 | ) | (238.3 | ) | (390.2 | ) | |||||
Proceeds from the sale of property, plant and equipment | 2.8 | 2.9 | 0.5 | ||||||||
Other | 4.1 | — | 0.1 | ||||||||
Net cash used by investing activities | (265.3 | ) | (235.4 | ) | (411.1 | ) | |||||
Financing activities | |||||||||||
Proceeds from ABL Facility | 434.0 | 30.3 | — | ||||||||
Payments on ABL Facility | (210.0 | ) | (30.3 | ) | — | ||||||
Proceeds from the issuance of 7 7/8% Senior Notes, net of discount of $8.7 | — | — | 491.3 | ||||||||
Proceeds from Zhenjiang Term Loans | — | 0.2 | 130.9 | ||||||||
Proceeds from Zhenjiang Revolver | 24.4 | 4.1 | — | ||||||||
Payments on Zhenjiang Revolver | — | (4.1 | ) | — | |||||||
Net payments on other long-term debt | (0.3 | ) | (5.2 | ) | (0.2 | ) | |||||
Debt issuance costs | — | — | (2.3 | ) | |||||||
Redemption of noncontrolling interest | — | (8.9 | ) | — | |||||||
Dividends paid | — | (313.0 | ) | — | |||||||
Other | (2.0 | ) | (4.7 | ) | (2.5 | ) | |||||
Net cash provided (used) by financing activities | 246.1 | (331.6 | ) | 617.2 | |||||||
Effect of exchange rate differences on cash and cash equivalents | (4.9 | ) | 2.3 | 2.9 | |||||||
Net (decrease) increase in cash and cash equivalents | (24.1 | ) | (532.8 | ) | 361.5 | ||||||
Cash and cash equivalents at beginning of period | 60.1 | 592.9 | 231.4 | ||||||||
Cash and cash equivalents at end of period | 36.0 | 60.1 | 592.9 | ||||||||
Cash and cash equivalents included within assets of discontinued operations - current | (7.4 | ) | (8.8 | ) | (10.0 | ) | |||||
Cash and cash equivalents of continuing operations | $ | 28.6 | $ | 51.3 | $ | 582.9 | |||||
The accompanying notes are an integral part of these audited consolidated financial statements.
10
ALERIS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND
REDEEMABLE NONCONTROLLING INTEREST
(in millions)
Common stock | Additional paid-in capital | Retained earnings (deficit) | Accumulated other comprehensive (loss) income | Total Aleris Corporation equity | Noncontrolling interest | Total equity | Redeemable noncontrolling interest | ||||||||||||||||||||||||
Balance at January 1, 2012 | $ | 0.3 | $ | 563.4 | $ | 19.7 | $ | (29.0 | ) | $ | 554.4 | $ | 6.3 | $ | 560.7 | $ | 5.4 | ||||||||||||||
Net income (loss) | — | — | 107.5 | — | 107.5 | — | 107.5 | (0.5 | ) | ||||||||||||||||||||||
Other comprehensive loss | — | — | — | (33.4 | ) | (33.4 | ) | — | (33.4 | ) | — | ||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | (0.9 | ) | (0.9 | ) | — | |||||||||||||||||||||
Stock-based compensation activity | — | 10.1 | — | — | 10.1 | — | 10.1 | — | |||||||||||||||||||||||
Reclassifcation of noncontrolling interest | — | — | — | — | — | (4.7 | ) | (4.7 | ) | 4.7 | |||||||||||||||||||||
Redeemable noncontrolling interest redemption value adjustments | — | — | (4.7 | ) | — | (4.7 | ) | — | (4.7 | ) | 4.7 | ||||||||||||||||||||
Adjustments to noncontrolling interest for change in ownership | — | 0.5 | — | — | 0.5 | (0.5 | ) | — | (8.9 | ) | |||||||||||||||||||||
Other | — | (0.1 | ) | (0.4 | ) | — | (0.5 | ) | — | (0.5 | ) | 0.3 | |||||||||||||||||||
Balance at December 31, 2012 | $ | 0.3 | $ | 573.9 | $ | 122.1 | $ | (62.4 | ) | $ | 633.9 | $ | 0.2 | $ | 634.1 | $ | 5.7 | ||||||||||||||
Net (loss) income | — | — | (37.1 | ) | — | (37.1 | ) | 1.0 | (36.1 | ) | — | ||||||||||||||||||||
Other comprehensive income | — | — | — | 76.2 | 76.2 | — | 76.2 | — | |||||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | (0.9 | ) | (0.9 | ) | — | |||||||||||||||||||||
Stock-based compensation activity | — | 10.9 | — | — | 10.9 | — | 10.9 | — | |||||||||||||||||||||||
Modification of stock options resulting in liability classification | — | (2.4 | ) | — | — | (2.4 | ) | — | (2.4 | ) | — | ||||||||||||||||||||
Dividends paid | — | (180.9 | ) | (132.1 | ) | — | (313.0 | ) | — | (313.0 | ) | (0.4 | ) | ||||||||||||||||||
Other | — | 0.4 | (0.5 | ) | — | (0.1 | ) | — | (0.1 | ) | 0.4 | ||||||||||||||||||||
Balance at December 31, 2013 | $ | 0.3 | $ | 401.9 | $ | (47.6 | ) | $ | 13.8 | $ | 368.4 | $ | 0.3 | $ | 368.7 | $ | 5.7 | ||||||||||||||
Net income | — | — | 87.1 | — | 87.1 | 0.9 | 88.0 | — | |||||||||||||||||||||||
Other comprehensive loss | — | — | — | (174.7 | ) | (174.7 | ) | — | (174.7 | ) | — | ||||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | (0.6 | ) | (0.6 | ) | — | |||||||||||||||||||||
Stock-based compensation activity | — | 12.3 | — | — | 12.3 | — | 12.3 | — | |||||||||||||||||||||||
Other | — | (0.1) | (0.4 | ) | — | (0.5 | ) | 0.1 | (0.4 | ) | — | ||||||||||||||||||||
Balance at December 31, 2014 | $ | 0.3 | $ | 414.1 | $ | 39.1 | $ | (160.9 | ) | $ | 292.6 | $ | 0.7 | $ | 293.3 | $ | 5.7 | ||||||||||||||
The accompanying notes are an integral part of these audited consolidated financial statements.
11
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions, except share and per share data)
1. | BASIS OF PRESENTATION |
Nature of Operations
Aleris Corporation and all of its subsidiaries (collectively, except where the context otherwise requires, referred to as “Aleris,” “we,” “our,” “us,” and the “Company” or similar terms) is a Delaware corporation with its principal executive offices located in Cleveland, Ohio. The principal business of the Company has historically involved the production of aluminum rolled and extruded products as well as the recycling of aluminum and specification alloy manufacturing. We have recently completed the sale of our recycling and specification alloys business and our extrusions business as we implement our strategy to transition to a purely aluminum rolled products business. See Note 18, “Discontinued Operations.” Our aluminum rolled products business produces aluminum sheet and fabricated products using direct-chill and continuous cast processes. Our aluminum sheet products are sold to customers and distributors serving the aerospace, automotive, transportation, building and construction, containers and packaging and metal distribution industries.
Basis of Presentation
Aleris Corporation is a holding company and currently conducts its business and operations through its direct wholly owned subsidiary, Aleris International, Inc. and its consolidated subsidiaries. Aleris International, Inc. is referred to herein as Aleris International. The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Use of Accounting Estimates
The consolidated financial statements are prepared in conformity with GAAP and require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are inherent in the valuations of derivatives, property, plant and equipment, intangible assets, the assumptions used to estimate the fair value of stock-based payments, pension and postretirement benefit obligations, workers’ compensation, medical and environmental liabilities, deferred tax asset valuation allowances, reserves for uncertain tax positions and allowances for uncollectible accounts receivable.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and our majority owned subsidiaries. All intercompany accounts and transactions have been eliminated upon consolidation.
Business Combinations
All business combinations are accounted for using the acquisition method as prescribed by Accounting Standards Codification (“ASC”) 805, “Business Combinations” (“ASC 805”). The purchase price paid is allocated to the assets acquired and liabilities assumed based on their estimated fair values. Any excess purchase price over the fair value of the net assets acquired is recorded as goodwill.
Discontinued Operations
In accordance with ASC 205-20, “Discontinued Operations” (“ASC 205-20”), as updated by Accounting Standards Update (“ASU”) 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” (“ASU 2014-08”), a component of an entity that is disposed of or classified as held for sale is reported as a discontinued operation if the transaction represents a strategic shift that will have a major effect on an entity’s operations and financial results. ASU 2014-08 was early adopted in the fourth quarter of 2014, and the discontinued operations presented in the current year financial statements reflect the requirements of this standard. The results of discontinued operations are aggregated and presented separately in the Consolidated Statements of Operations. Assets and liabilities of the discontinued operations are aggregated and reported separately as assets and liabilities of discontinued operations in the Consolidated Balance Sheet, including the comparative prior year period.
Amounts presented in discontinued operations have been derived from our consolidated financial statements and accounting records using the historical basis of assets and liabilities to be disposed and historical results of operations related to our recycling and specification alloys businesses and the extrusions business. The discontinued operations exclude general corporate allocations of certain functions historically provided by our corporate offices, such as accounting, treasury, tax,
12
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
human resources, facility maintenance and other services. Interest costs have been excluded from discontinued operations except for the interest expense on the debt and capital leases that will be assumed by the buyers. See Note 18, “Discontinued Operations” for more information.
Revenue Recognition and Shipping and Handling Costs
Revenues are recognized when title transfers and risk of loss passes to the customer in accordance with the provisions of the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition” (codified in ASC 605). For material that is consigned, revenue is not recognized until the product is used by the customer. Shipping and handling costs are included within “Cost of sales” in the Consolidated Statements of Operations.
Cash Equivalents
All highly liquid investments with a maturity of three months or less when purchased are considered cash equivalents. The carrying amount of cash equivalents approximates fair value because of the short maturity of those instruments.
Accounts Receivable Allowances and Credit Risk
We extend credit to our customers based on an evaluation of their financial condition; generally, collateral is not required. Substantially all of the accounts receivable associated with our European operations and a portion of the accounts receivable associated with our China operations are insured against loss by third party credit insurers. We maintain an allowance against our accounts receivable for the estimated probable losses on uncollectible accounts and sales returns and allowances. The valuation reserve is based upon our historical loss experience, current economic conditions within the industries we serve as well as our determination of the specific risk related to certain customers. Accounts receivable are charged off against the reserve when, in management’s estimation, further collection efforts would not result in a reasonable likelihood of receipt, or, if later, as proscribed by statutory regulations. The movement of the accounts receivable allowances is as follows:
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Balance at beginning of the period | $ | 7.7 | $ | 8.1 | $ | 8.7 | ||||||
Expenses for uncollectible accounts, sales returns and allowances, net of recoveries | 43.4 | 42.7 | 39.9 | |||||||||
Receivables written off against the valuation reserve | (43.4 | ) | (43.1 | ) | (40.5 | ) | ||||||
Balance at end of the period | 7.7 | 7.7 | 8.1 | |||||||||
Balance reclassified to assets of discontinued operations - current | (1.2 | ) | (1.5 | ) | (2.5 | ) | ||||||
Balance related to continuing operations | $ | 6.5 | $ | 6.2 | $ | 5.6 | ||||||
Concentration of credit risk with respect to trade accounts receivable is limited due to the large number of customers in various industry segments comprising our customer base.
Inventories
Our inventories are stated at the lower of cost or net realizable value. Cost is determined primarily on the average cost or specific identification method and includes material, labor and overhead related to the manufacturing process. We recorded charges associated with lower of cost or net realizable value adjustments of $0.1, $4.5 and $1.2 for the years ended December 31, 2014, 2013 and 2012, respectively. The cost of inventories acquired in business combinations are recorded at fair value in accordance with ASC 805. Our consigned inventory held at third party warehouses and customer locations was approximately $22.7 and $23.6 as of December 31, 2014 and December 31, 2013, respectively.
Property, Plant and Equipment
Property, plant and equipment is stated at cost, net of asset impairments. The cost of property, plant and equipment acquired in business combinations represents the fair value of the acquired assets at the time of acquisition.
The fair values of asset retirement obligations are capitalized to the related long-lived asset at the time the obligation is incurred and is depreciated over the remaining useful life of the related asset. Major renewals and improvements that extend an asset’s useful life are capitalized to property, plant and equipment. Major repair and maintenance projects are expensed over periods not exceeding 18 months while normal maintenance and repairs are expensed as incurred. Depreciation is primarily computed using the straight-line method over the estimated useful lives of the related assets, as follows:
13
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
Buildings and improvements | 5 - 33 years | |
Production equipment and machinery | 2 - 25 years | |
Office furniture, equipment and other | 3 - 10 years | |
The construction costs of landfills used to store by-products of the recycling process in our discontinued operations are depreciated as space in the landfills is used based on the unit of production method. Additionally, used space in the landfill is determined periodically either by aerial photography or engineering estimates.
Interest is capitalized in connection with major construction projects. Capitalized interest costs are as follows:
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Capitalized interest | $ | 1.1 | $ | 7.7 | $ | 14.8 | ||||||
Intangible Assets
Intangible assets are primarily related to trade names, technology and customer relationships. Acquired intangible assets are recorded at their estimated fair value in the allocation of the purchase price paid. Intangible assets with indefinite useful lives are not amortized and intangible assets with finite useful lives are amortized over their estimated useful lives, ranging from 15 to 25 years. See Note 6, “Intangible Assets,” for additional information.
Impairment of Property, Plant, Equipment and Finite-Lived Intangible Assets
We review our long-lived assets for impairment when changes in circumstances indicate that the carrying amount may not be recoverable. Once an impairment indicator has been identified, the asset impairment test is a two-step process. The first step consists of determining whether the sum of the estimated undiscounted future cash flows attributable to the specific asset group being tested is less than its carrying value. Estimated future cash flows used to test for recoverability include only the future cash flows that are directly associated with and are expected to arise as a direct result of the use and eventual disposition of the relevant asset group. If the carrying value of the asset group exceeds the future undiscounted cash flows expected from the asset group, a second step is performed to compute the extent of the impairment. Impairment charges are determined as the amount by which the carrying value of the asset group exceeds the estimated fair value of the asset group.
As outlined in ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”), the fair value measurement of our long-lived assets assumes the highest and best use of the asset by market participants, considering the use of the asset that is physically possible, legally permissible, and financially feasible at the measurement date. Highest and best use is determined based on the use of the asset by market participants, even if the intended use of the asset by the Company is different. The highest and best use of an asset establishes the valuation premise. The valuation premise is used to measure the fair value of an asset. ASC 820-10-35-10 states that the valuation premise of an asset is either of the following:
▪ | In-use: The highest and best use of the asset is in-use if the asset would provide maximum value to market participants principally through its use in combination with other assets as a group (as installed or otherwise configured for use). |
▪ | In-exchange: The highest and best use of the asset is in-exchange if the asset would provide maximum value to market participants principally on a stand-alone basis. |
Once a premise is selected, the approaches considered in the estimation of the fair values of the Company’s long-lived assets tested for impairment, which represent level 3 measurements within the fair value hierarchy, include the income approach, sales comparison approach and the cost approach.
Indefinite-Lived Intangible Assets
Indefinite-lived intangible assets are tested for impairment as of October 1st of each year and may be tested more frequently if changes in circumstances or the occurrence of events indicates that a potential impairment exists.
Under ASC 350, “Intangibles - Goodwill and Other,” intangible assets determined to have indefinite lives are not amortized, but are tested for impairment at least annually. As part of the annual impairment test, the non-amortized intangible assets are reviewed to determine if the indefinite status remains appropriate. Based on the annual test performed as of October 1, 2014, no impairments relating to our indefinite lived intangible assets were necessary.
14
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
Deferred Financing Costs
The costs related to the issuance of debt are capitalized and amortized over the terms of the related debt agreements as interest expense using the effective interest method.
Research and Development
Our Research and Development organization includes three locations in Europe and one location in China, along with support staff focused on new product and alloy offerings and process performance technology. Research and development expenses were $12.9, $12.4 and $7.3 for the years ended December 31, 2014, 2013 and 2012, respectively.
Stock-Based Compensation
We recognize compensation expense for stock options, restricted stock units and restricted shares under the provisions of ASC 718, “Compensation—Stock Compensation,” using the non-substantive vesting period approach, in which the expense (net of estimated forfeitures) is recognized ratably over the requisite service period based on the grant date fair value. The fair value of each new stock option is estimated on the date of grant using a Black-Scholes option pricing model. Determining the fair value of stock options at the grant date requires judgment, including estimates for the average risk-free interest rate, dividend yield, volatility, annual forfeiture rate, and exercise behavior. The fair value of restricted stock units and restricted shares are based on the estimated fair value of our common stock on the date of grant. The fair value of our common stock is estimated based upon a present value technique using discounted cash flows, forecasted over a five-year period with residual growth rates thereafter, and a market comparable approach. From these two approaches, the discounted cash flow analysis is weighted at 50% and the comparable public company analysis is weighted at 50%.
The discounted cash flow analysis is based on our projected financial information which includes a variety of estimates and assumptions. While we consider such estimates and assumptions reasonable, they are inherently subject to uncertainties and a wide variety of significant business, economic and competitive risks, many of which are beyond our control and may not materialize. Changes in these estimates and assumptions may have a significant effect on the determination of the fair value of our common stock.
The discounted cash flow analysis is based on production volume projections developed by internal forecasts, as well as commercial, wage and benefit and inflation assumptions. The discounted cash flow analysis includes the sum of (i) the present value of the projected unlevered cash flows for a five-year period (the “Projection Period”); and (ii) the present value of a terminal value, which represents the estimate of value attributable to periods beyond the Projection Period. For 2014, all cash flows were discounted using weighted-average cost of capital (“WACC”) percentages ranging from 12.8% to 13.3%. To calculate the terminal value, a perpetuity growth rate approach is used. For 2014, a growth rate of three percent was used and was determined based on research of long-term aluminum demand growth rates. Other significant assumptions include future capital expenditures and changes in working capital requirements.
The comparable public company analysis identifies a group of comparable companies giving consideration to, among other relevant characteristics, similar lines of business, business risks, growth prospects, business maturity, market presence, leverage, size and scale of operations. The analysis compares the public market implied fair value for each comparable public company to its historical and projected net sales, earnings before interest and taxes (“EBIT”) and earnings before interest, taxes, depreciation and amortization (“EBITDA”). The calculated range of multiples for the comparable companies is used to estimate a range of 10.5x to 18.0x, 6.5x to 9.5x and 0.50x to 0.65x, which is applied to our historical and projected EBIT, EBITDA and net sales, respectively, to determine a range of fair values.
Total stock-based compensation expense included in “Selling, general and administrative expenses” in the Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012 was $13.8, $14.3 and $11.4, respectively.
Derivatives and Hedging
We are engaged in activities that expose us to various market risks, including changes in the prices of primary aluminum, aluminum alloys, scrap aluminum, copper, zinc and natural gas, as well as changes in currency and interest rates. Certain of these financial exposures are managed as an integral part of our risk management program, which seeks to reduce the potentially adverse effects that the volatility of the markets may have on operating results. We do not hold or issue derivative financial instruments for trading purposes. We maintain a natural gas pricing strategy to minimize significant fluctuations in earnings caused by the volatility of gas prices. Our metal pricing strategy is designed to minimize significant, unanticipated fluctuations in earnings caused by the volatility of aluminum prices.
Generally, we enter into master netting arrangements with our counterparties and offset net derivative positions with the same counterparties against amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral
15
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
under those arrangements in our Consolidated Balance Sheet. For classification purposes, we record the net fair value of all positions expected to settle in less than one year with these counterparties as a net current asset or liability and all long-term positions as a net long-term asset or liability. At December 31, 2014 and 2013, we had posted no cash collateral.
The fair values of our derivative financial instruments are recognized as assets or liabilities at the balance sheet date. Fair values for our metal and natural gas derivative instruments are determined based on the differences between contractual and forward rates of identical hedge positions as of the balance sheet date. Our currency derivative instruments are valued using observable or market-corroborated inputs such as exchange rates, volatility and forward yield curves. In accordance with the requirements of ASC 820, we have included an estimate of the risk associated with non-performance by either ourselves or our counterparties in developing these fair values. See Note 12, “Derivative and Other Financial Instruments,” for additional information.
The Company does not currently account for its derivative financial instruments as hedges. The changes in fair value of derivative financial instruments that are not accounted for as hedges and the associated gains and losses realized upon settlement are recorded in “Losses (gains) on derivative financial instruments” or “Income from discontinued operations, net of tax” in the Consolidated Statements of Operations. All realized gains and losses are included within “Net cash provided by operating activities” in the Consolidated Statements of Cash Flows.
We are exposed to losses in the event of non-performance by counterparties to derivative contracts. Counterparties are evaluated for creditworthiness and a risk assessment is completed prior to our initiating contract activities. The counterparties’ creditworthiness is then monitored on an ongoing basis, and credit levels are reviewed to ensure there is not an inappropriate concentration of credit outstanding to any particular counterparty. Although non-performance by counterparties is possible, we do not currently anticipate non-performance by any of these parties. At December 31, 2014, substantially all of our derivative financial instruments were maintained with ten counterparties. We have the right to require cash collateral from our counterparties based on the fair value of the underlying derivative financial instruments.
Currency Translation
The majority of our international subsidiaries use the local currency as their functional currency. We translate substantially all of the amounts included in our Consolidated Statements of Operations from our international subsidiaries into U.S. dollars at average monthly exchange rates, which we believe are representative of the actual exchange rates on the dates of the transactions. Adjustments resulting from the translation of the assets and liabilities of our international operations into U.S. dollars at the balance sheet date exchange rates are reflected as a separate component of stockholders’ equity. Currency translation adjustments accumulate in consolidated equity until the disposition or liquidation of the international entities. Current intercompany accounts and transactional gains and losses associated with receivables, payables and debt denominated in currencies other than the functional currency are included within “Other (income) expense, net” or “Income from discontinued operations, net of tax” in the Consolidated Statements of Operations. The translation of accounts receivables, payables and debt denominated in currencies other than the functional currencies resulted in transactional (gains) losses of $(17.5), $6.2 and $1.5 for the years ended December 31, 2014, 2013 and 2012, respectively, of which losses (gains) of $0.2, $1.1 and $(0.1) have been included within “Income from discontinued operations, net of tax” in the Consolidated Statements of Operations.
Income Taxes
We account for income taxes using the asset and liability method, whereby deferred income taxes reflect the tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In valuing deferred tax assets, we use judgment in determining if it is more likely than not that some portion or all of a deferred tax asset will not be realized and the amount of the required valuation allowance.
Tax benefits from uncertain tax positions are recognized in the financial statements when it is more likely than not that the position is sustainable, based solely on its technical merits and considerations of the relevant taxing authority, widely understood practices and precedents. We recognize interest and penalties related to uncertain tax positions within “(Benefit from) provision for income taxes” in the Consolidated Statements of Operations.
Environmental and Asset Retirement Obligations
Environmental obligations that are not legal or contractual asset retirement obligations and that relate to existing conditions caused by past operations with no benefit to future operations are expensed while expenditures that extend the life, increase the capacity or improve the safety of an asset or that mitigate or prevent future environmental contamination are capitalized in property, plant and equipment. Obligations are recorded when their occurrence is probable and the associated costs can be reasonably estimated in accordance with ASC 410-30, “Environmental Obligations.” While our accruals are based
16
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
on management’s current best estimate of the future costs of remedial action, these liabilities can change substantially due to factors such as the nature and extent of contamination, changes in the required remedial actions and technological advancements. Our existing environmental liabilities are not discounted to their present values as the amount and timing of the expenditures are not fixed or reliably determinable.
Asset retirement obligations represent obligations associated with the retirement of tangible long-lived assets. Our asset retirement obligations relate primarily to the requirement to cap our three landfills (liabilities which have been included in “Liabilities of discontinued operations” in the Consolidated Balance Sheet), as well as costs related to the future removal of asbestos and costs to remove underground storage tanks. The costs associated with such legal obligations are accounted for under the provisions of ASC 410-20, “Asset Retirement Obligations,” which requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred and capitalized as part of the carrying amount of the long-lived asset. These fair values are based upon the present value of the future cash flows expected to be incurred to satisfy the obligation. Determining the fair value of asset retirement obligations requires judgment, including estimates of the credit adjusted interest rate and estimates of future cash flows. Estimates of future cash flows are obtained primarily from engineering consulting firms. The present value of the obligations is accreted over time while the capitalized cost is depreciated over the useful life of the related asset.
Retirement, Early Retirement and Postemployment Benefits
Our defined benefit pension and other post-retirement benefit plans are accounted for in accordance with ASC 715, “Compensation—Retirement Benefits.”
Pension and postretirement benefit obligations are actuarially calculated using management’s best estimates of assumptions which include the expected return on plan assets (calculated using the fair value of plan assets), the rate at which plan liabilities may be effectively settled (discount rate), health care cost trend rates and rates of compensation increases. Net actuarial gains or losses are amortized to expense on a plan-by-plan basis when they exceed the accounting corridor, which is set at 10% of the greater of the plan assets or benefit obligations. Gains or losses outside of the corridor are subject to amortization over an average employee future service period that differs by plan. If most or all of the plan’s participants are no longer actively accruing benefits, the average life expectancy is used.
Benefits provided to employees after employment but prior to retirement are accounted for under ASC 712, “Compensation—Nonretirement Postemployment Benefits” (“ASC 712”). Such postemployment benefits include severance and medical continuation benefits that are offered pursuant to an ongoing benefit arrangement and do not represent a one-time benefit termination arrangement. Under ASC 712, liabilities for postemployment benefits are recorded at the time the obligations are probable of being incurred and can be reasonably estimated. This is typically at the time a triggering event occurs, such as the decision by management to close a facility. Benefits related to the relocation of employees and certain other termination benefits are accounted for under ASC 420, “Exit or Disposal Cost Obligations,” and are expensed over the required service period.
General Guarantees and Indemnifications
It is common in long-term processing agreements for us to agree to indemnify customers for tort liabilities that arise out of, or relate to, the processing of their material. Additionally, we typically indemnify such parties for certain environmental liabilities that arise out of or relate to the processing of their material.
In our equipment financing agreements, we typically indemnify the financing parties, trustees acting on their behalf and other related parties against liabilities that arise from the manufacture, design, ownership, financing, use, operation and maintenance of the equipment and for tort liability, whether or not these liabilities arise out of or relate to the negligence of these indemnified parties, except for their gross negligence or willful misconduct.
We expect that we would be covered by insurance (subject to deductibles) for most tort liabilities and related indemnities described above with respect to equipment we lease and material we process.
Although we cannot estimate the potential amount of future payments under the foregoing indemnities and agreements, we are not aware of any events or actions that will require payment.
New Accounting Pronouncements
In April 2014, the FASB issued ASU No. 2014-08. This guidance amends the requirements for reporting discontinued operations and requires additional disclosures about discontinued operations. Under the new guidance, only disposals representing a strategic shift in operations or that have a major effect on the company’s operations and financial results should be presented as discontinued operations. ASU No. 2014-08 also requires expanded disclosures about discontinued operations
17
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
that will provide financial statement users with more information about the assets, liabilities, income and expenses of discontinued operations. This new accounting guidance is effective for annual periods beginning after December 15, 2014, but early adoption is allowed. ASU No. 2014-08 was early adopted in the fourth quarter of 2014, and the discontinued operations presented in the current year financial statements reflect the requirements of this standard.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU No. 2014-09”), which was the result of a joint project by the FASB and International Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards. The issuance of a comprehensive and converged standard on revenue recognition is expected to enable financial statement users to better understand and consistently analyze an entity’s revenue across industries, transactions and geographies. The standard will require additional disclosures to help financial statement users better understand the nature, amount, timing, and potential uncertainty of the revenue that is recognized. ASU No. 2014-09 will be effective for the Company on January 1, 2017, and will require either retrospective application to each prior reporting period presented or retrospective application with the cumulative effect of initially applying the standard recognized at the date of adoption. We are currently evaluating the impact the application of ASU No. 2014-09 will have on the Company’s financial statements and disclosures.
In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”), which requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. Certain disclosures will be required if conditions give rise to substantial doubt about an entity’s ability to continue as a going concern. ASU 2014-15 applies to all entities and is effective for annual and interim reporting periods ending after December 15, 2016, with early adoption permitted. We do not expect that the adoption of this standard will have a material effect on the Company’s financial statements.
3. RESTRUCTURING CHARGES
2014 Initiatives
During the year ended December 31, 2014, we recorded restructuring charges of $8.6, including $5.8 that have been reclassified to “Income from discontinued operations, net of tax” in the Consolidated Statements of Operations. These charges included $6.1 related to severance and other termination benefits associated with selected 2014 personnel reductions. The personnel reductions included charges of $0.7 related to the North America segment, as well as $0.4 and $5.0 of charges associated with personnel reductions at our corporate locations and discontinued operations, respectively. The charges also include $1.9 of exit and environmental remediation costs of closed facilities, including $1.1 related to discontinued operations. No further charges associated with these initiatives are anticipated.
2013 Initiatives
During the year ended December 31, 2013, we recorded restructuring charges of $10.7, including $5.7 that have been reclassified to “Income from discontinued operations, net of tax” in the Consolidated Statements of Operations. These charges included $8.6 related to severance and other termination benefits associated with personnel reductions. The personnel reductions impacted certain selling, general and administrative positions across the Company in an effort to reduce our global cost structure and improve operating results. These personnel reductions included charges of $4.5 related to the Europe segment, as well as $1.5 and $2.5 of charges at our corporate locations and discontinued operations, respectively. Cash payments of approximately $2.7 and $4.0 were made during the years ended December 31, 2014 and 2013, respectively associated with these personnel reductions and no further charges are anticipated.
2012 Initiatives
During the year ended December 31, 2012, we recorded restructuring charges of $9.6, including $1.1 that have been reclassified to “Income from discontinued operations, net of tax” in the Consolidated Statements of Operations. These charges included $7.6 related to selected personnel reductions implemented during the fourth quarter of 2012. These personnel reductions included charges of $0.2 and $2.2 related to the North America and Europe segments, respectively, as well as $2.3 and $2.9 of charges associated with personnel reductions at our corporate locations and discontinued operations, respectively. Substantially all cash payments were made during the year ended December 31, 2013 related to these personnel reductions and no further charges are anticipated.
18
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
4. INVENTORIES
The components of our “Inventories” as of December 31, 2014 and 2013 are as follows:
December 31, | |||||||
2014 | 2013 | ||||||
Raw materials | $ | 217.3 | $ | 164.7 | |||
Work in process | 228.2 | 181.5 | |||||
Finished goods | 155.9 | 129.3 | |||||
Supplies | 26.5 | 18.7 | |||||
Total inventories of continuing operations | 627.9 | 494.2 | |||||
Total inventories included within assets of discontinued operations - current | 225.2 | 189.2 | |||||
Total inventories | $ | 853.1 | $ | 683.4 | |||
5. PROPERTY, PLANT AND EQUIPMENT
The components of our consolidated property, plant and equipment are as follows:
December 31, | |||||||
2014 | 2013 | ||||||
Land | $ | 85.2 | $ | 79.8 | |||
Buildings and improvements | 204.4 | 189.2 | |||||
Production equipment and machinery | 841.1 | 754.6 | |||||
Office furniture and computer equipment | 83.6 | 73.3 | |||||
Construction work-in-progress | 71.5 | 41.3 | |||||
Property, plant and equipment | 1,285.8 | 1,138.2 | |||||
Accumulated depreciation | (342.9 | ) | (233.7 | ) | |||
Property, plant and equipment, net of continuing operations | 942.9 | 904.5 | |||||
Property, plant and equipment, net included within assets of discontinued operations - long-term | 251.6 | 253.3 | |||||
Total property, plant and equipment, net | $ | 1,194.5 | $ | 1,157.8 | |||
Capital lease assets totaled $12.2 and $9.6 at December 31, 2014 and 2013, respectively. Accumulated amortization of capital lease assets totaled $4.9 and $2.6 at December 31, 2014 and 2013, respectively. Capital expenditures included in accounts payable totaled $27.6 and $24.9 at December 31, 2014 and 2013, respectively.
Our depreciation expense, including amortization of capital lease assets, and repair and maintenance expense, was as follows:
For the years ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Depreciation expense included within selling, general and administrative (“SG&A”) expenses | $ | 18.2 | $ | 18.9 | $ | 7.4 | |||||
Depreciation expense included within cost of sales | 102.6 | 77.8 | 53.0 | ||||||||
Depreciation expense included within income from discontinued operations, net of tax | 34.4 | 30.7 | 22.3 | ||||||||
Repair and maintenance expense included within income from continuing operations | 85.5 | 71.5 | 61.2 | ||||||||
Repair and maintenance expense included within income from discontinued operations, net of tax | 53.9 | 48.6 | 49.1 | ||||||||
6. INTANGIBLE ASSETS
The following table details our intangible assets as of December 31, 2014 and 2013:
December 31, 2014 | December 31, 2013 | |||||||||||||||||||||||||
Gross | Gross | |||||||||||||||||||||||||
carrying | Accumulated | Net | Average | carrying | Accumulated | Net | ||||||||||||||||||||
amount | amortization | amount | life | amount | amortization | amount | ||||||||||||||||||||
Trade names | $ | 17.0 | $ | (0.2 | ) | $ | 16.8 | Indefinite | $ | 16.8 | $ | — | $ | 16.8 | ||||||||||||
Technology | 5.9 | (1.1 | ) | 4.8 | 25 years | 5.9 | (0.9 | ) | 5.0 | |||||||||||||||||
Customer relationships | 31.0 | (8.6 | ) | 22.4 | 15 years | 28.3 | (6.6 | ) | 21.7 | |||||||||||||||||
Total | $ | 53.9 | $ | (9.9 | ) | $ | 44.0 | 17 years | $ | 51.0 | $ | (7.5 | ) | $ | 43.5 | |||||||||||
19
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
The following table presents amortization expense, which has been classified within “Selling, general and administrative expenses” in the Consolidated Statements of Operations:
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Amortization expense | $ | 2.4 | $ | 2.1 | $ | 2.1 | ||||||
The following table presents estimated amortization expense for the next five years:
2015 | $ | 2.3 | |
2016 | 2.3 | ||
2017 | 2.3 | ||
2018 | 2.3 | ||
2019 | 2.3 | ||
Total | $ | 11.5 | |
7. ACCRUED LIABILITIES
Accrued liabilities at December 31, 2014 and 2013 consisted of the following:
December 31, | |||||||
2014 | 2013 | ||||||
Employee-related costs | $ | 60.0 | $ | 45.4 | |||
Accrued professional fees | 16.8 | 5.8 | |||||
Toll liability | 11.9 | 7.9 | |||||
Accrued taxes | 10.7 | 8.7 | |||||
Accrued interest | 22.1 | 21.9 | |||||
Accrued restructuring | 3.6 | 4.0 | |||||
Accrued capital expenditures | 30.8 | 27.5 | |||||
Derivative financial instruments | 3.9 | 1.7 | |||||
Other liabilities | 23.5 | 21.0 | |||||
Total accrued liabilities of continuing operations | 183.3 | 143.9 | |||||
Total accrued liabilities included within liabilities of discontinued operations - current | 43.5 | 57.0 | |||||
Total accrued liabilities | $ | 226.8 | $ | 200.9 | |||
8. ASSET RETIREMENT OBLIGATIONS
Our asset retirement obligations consist of legal obligations associated with the closure of our active landfills, as well as costs to remove asbestos and underground storage tanks and other legal or contractual obligations associated with the ultimate closure of our manufacturing facilities.
The changes in the carrying amount of asset retirement obligations for the years ended December 31, 2014, 2013 and 2012 are as follows:
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Balance at the beginning of the period | $ | 12.4 | $ | 14.6 | $ | 13.7 | ||||||
Revisions and liabilities incurred | 1.0 | 0.2 | 2.1 | |||||||||
Accretion expense | 0.3 | 0.5 | 0.5 | |||||||||
Payments | (0.6 | ) | (2.9 | ) | (1.7 | ) | ||||||
Translation and other charges | (0.1 | ) | — | — | ||||||||
Balance at the end of the period | 13.0 | 12.4 | 14.6 | |||||||||
Asset retirement obligations included within liabilities of discontinued operations | (8.4 | ) | (8.3 | ) | (11.2 | ) | ||||||
Balance related to continuing operations | $ | 4.6 | $ | 4.1 | $ | 3.4 | ||||||
20
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
9. LONG-TERM DEBT
Our debt is summarized as follows:
December 31, | |||||||
2014 | 2013 | ||||||
ABL facility | $ | 224.0 | $ | — | |||
7 5/8% Senior Notes due 2018, net of discount of $4.5 and $5.9 at December 31, 2014 and December 31, 2013, respectively | 495.5 | 494.1 | |||||
7 7/8% Senior Notes due 2020, net of discount of $6.4 and $7.5 at December 31, 2014 and December 31, 2013, respectively | 493.6 | 492.5 | |||||
Exchangeable Notes, net of discount of $0.6 and $0.7 at December 31, 2014 and December 31, 2013, respectively | 44.2 | 44.2 | |||||
Zhenjiang Term Loans, net of discount of $0.9 and $1.0 at December 31, 2014 and December 31, 2013, respectively | 191.5 | 192.2 | |||||
Zhenjiang Revolver, net of discount of $0.2 at December 31, 2014 | 24.2 | — | |||||
Other | 5.2 | 6.3 | |||||
Total debt of continuing operations | 1,478.2 | 1,229.3 | |||||
Less: Current portion of long-term debt | 3.3 | 2.5 | |||||
Total long-term debt of continuing operations | $ | 1,474.9 | $ | 1,226.8 | |||
Total debt included within liabilities of discontinued operations | $ | 13.1 | $ | 8.0 | |||
Maturities of Debt
Scheduled maturities of our debt and capital leases subsequent to December 31, 2014 are as follows:
Debt | Capital leases | ||||||
2015 | $ | 10.0 | $ | 3.4 | |||
2016 | 234.0 | 3.4 | |||||
2017 | 19.5 | 1.4 | |||||
2018 | 529.2 | 0.5 | |||||
2019 | 39.0 | 0.1 | |||||
After 2019 | 663.2 | 0.1 | |||||
Total | $ | 1,494.9 | $ | 8.9 | |||
Of the scheduled maturities in 2015, $8.5 and $1.6 for debt and capital leases, respectively, relate to discontinued operations.
ABL Facility
On June 1, 2010, our wholly owned subsidiary, Aleris International, Inc. (“Aleris International”), entered into an asset backed multi-currency revolving credit facility (the “ABL Facility”). On June 30, 2011, Aleris International amended and restated the ABL Facility. The amended and restated ABL Facility is a $600.0 revolving credit facility which permits multi-currency borrowings up to $600.0 by our U.S. subsidiaries, up to $240.0 by Aleris Switzerland GmbH (a wholly owned Swiss subsidiary), and up to $15.0 by Aleris Specification Alloy Products Canada Company (a wholly owned Canadian subsidiary). Aleris International and certain of its U.S. and international subsidiaries are borrowers under the ABL Facility. The availability of funds to the borrowers located in each jurisdiction is subject to a borrowing base for that jurisdiction, and the jurisdictions in which certain subsidiaries of such borrowers are located, calculated on the basis of a predetermined percentage of the value of selected accounts receivable and U.S., Canadian and certain European inventory, less certain ineligible accounts receivable and inventory. The level of the borrowing base and availability under the ABL Facility fluctuates with the underlying London Metal Exchange (“LME”) price of aluminum which impacts both accounts receivable and inventory values included in the borrowing base. Non-U.S. borrowers also have the ability to borrow under the ABL Facility based on excess availability under the borrowing base applicable to the U.S. borrowers, subject to certain sublimits. The ABL Facility provides for the issuance of up to $75.0 of letters of credit as well as borrowings on same-day notice, referred to as swingline loans that are available in U.S. dollars, Canadian dollars, euros and certain other currencies. As of December 31, 2014, we estimate that the borrowing base would have supported borrowings of $541.0. After giving effect to borrowings of $224.0 and outstanding letters of credit of $40.1, Aleris International had $276.9 available for borrowing under the ABL Facility as of December 31, 2014.
21
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
Borrowings under the ABL Facility bear interest at a rate equal to the following, plus an applicable margin ranging from 0.75% to 2.50%:
▪ | in the case of borrowings in U.S. dollars, a LIBOR rate or a base rate determined by reference to the higher of (1) Bank of America’s prime lending rate, (2) the overnight federal funds rate plus 0.5% or (3) a eurodollar rate determined by Bank of America plus 1.0%; |
▪ | in the case of borrowings in euros, a euro LIBOR rate determined by Bank of America; and |
▪ | in the case of borrowings in Canadian dollars, a Canadian prime rate. |
As of December 31, 2014 and 2013, Aleris International had $224.0 and zero outstanding under the ABL Facility.
In addition to paying interest on any outstanding principal under the ABL Facility, Aleris International is required to pay a commitment fee in respect of unutilized commitments of 0.50% if the average utilization is less than 33% for any applicable period, 0.375% if the average utilization is between 33% and 67% for any applicable period, and 0.25% if the average utilization is greater than 67% for any applicable period. Aleris International must also pay customary letters of credit fees and agency fees.
The ABL Facility is subject to mandatory prepayment with (i) 100% of the net cash proceeds of certain asset sales, subject to certain reinvestment rights; (ii) 100% of the net cash proceeds from issuance of debt, other than debt permitted under the ABL Facility; and (iii) 100% of net cash proceeds from certain insurance and condemnation payments, subject to certain reinvestment rights.
In addition, if at any time outstanding loans, unreimbursed letter of credit drawings and undrawn letters of credit under the ABL Facility exceed the applicable borrowing base in effect at such time, Aleris International is required to repay outstanding loans or cash collateralize letters of credit in an aggregate amount equal to such excess, with no reduction of the commitment amount. If the amount available under the ABL Facility is less than the greater of (x) $50.0 and (y) 15.0% of the lesser of the total commitments or the borrowing base under the ABL Facility or an event of default is continuing, Aleris International is required to repay outstanding loans with the cash we are required to deposit in collection accounts maintained with the agent under the ABL Facility.
Aleris International may voluntarily reduce the unutilized portion of the commitment amount and repay outstanding loans at any time upon three business days prior written notice without premium or penalty other than customary “breakage” costs with respect to eurodollar, euro LIBOR and EURIBOR loans.
There is no scheduled amortization under the ABL Facility. The principal amount outstanding will be due and payable in full at maturity, on June 29, 2016 unless extended pursuant to the credit agreement.
The ABL Facility is secured, subject to certain exceptions (including appropriate limitations in light of U.S. federal income tax considerations on guaranties and pledges of assets by foreign subsidiaries, and certain pledges of such foreign subsidiaries’ stock, in each case to support loans to us or our domestic subsidiaries), by a first-priority security interest in substantially all of Aleris International’s current assets and related intangible assets located in the U.S., substantially all of the current assets and related intangible assets of substantially all of its wholly owned domestic subsidiaries located in the U.S., substantially all of the current assets and related intangible assets of the borrower located in Canada and substantially all of the current assets (other than inventory located outside of the United Kingdom) and related intangibles of Aleris Recycling (Swansea) Ltd. and Aleris Switzerland GmbH and certain of its subsidiaries. The borrowers’ obligations under the ABL Facility are guaranteed by certain of Aleris International’s existing and future direct and indirect subsidiaries.
The ABL Facility contains a number of covenants that, among other things and subject to certain exceptions, restrict the ability of Aleris International and certain of its subsidiaries to:
▪ | incur additional indebtedness; |
▪ | pay dividends on capital stock and make other restricted payments; |
▪ | make investments and acquisitions; |
▪ | engage in transactions with our affiliates; |
▪ | sell assets; |
▪ | merge; and |
▪ | create liens. |
Although the credit agreement governing the ABL Facility generally does not require us to comply with any financial ratio maintenance covenants, if the amount available under the ABL Facility is less than the greater of (x) $45.0 or (y) 12.5% of the lesser of (i) the total commitments or (ii) the borrowing base under the ABL Facility at any time, a minimum fixed charge
22
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
coverage ratio (as defined in the credit agreement) of at least 1.0 to 1.0 will apply. The credit agreement also contains certain customary affirmative covenants and events of default. Aleris International was in compliance with all of the covenants set forth in the credit agreement as of December 31, 2014.
Effective as of February 27, 2015, Aleris International entered into a Consent, Release and First Amendment to the ABL Facility which, among other things, provides, subject to certain conditions: (i) certain necessary consents under the ABL Facility to permit the sale of the North American and European recycling and specification alloys businesses (the “Sale Transaction”); (ii) for certain modifications to the ABL Facility to reflect the Sale Transaction; and (iii) for the release of certain liens required to complete the Sale Transaction.
7 5/8% Senior Notes due 2018
On February 9, 2011, Aleris International issued $500.0 aggregate original principal amount of 7 5/8% Senior Notes due 2018 under an indenture (the “7 5/8% Indenture”) with U.S. Bank National Association, as trustee, and on October 14, 2011, Aleris International exchanged the $500.0 aggregate original principal amount of 7 5/8% Senior Notes due 2018 for $500.0 of its new 7 5/8% Senior Notes due 2018 that have been registered under the Securities Act of 1933, as amended (the “7 5/8% Senior Notes”). Interest on the 7 5/8% Senior Notes is payable in cash semi-annually in arrears on February 15th and August 15th of each year. The 7 5/8% Senior Notes mature on February 15, 2018.
The 7 5/8% Senior Notes are jointly and severally, irrevocably and unconditionally guaranteed on a senior unsecured basis, by us and each direct and indirect restricted subsidiary that is a domestic subsidiary and that guarantees Aleris International’s obligations under the ABL Facility, as primary obligor and not merely as surety. The 7 5/8% Senior Notes and the guarantees thereof are our unsecured senior obligations and rank (i) equally in right of payment to all of our existing and future debt and other obligations that are not, by their terms, expressly subordinated in right of payment to the 7 5/8% Senior Notes; (ii) effectively subordinated in right of payment to all of Aleris International’s existing and future secured debt (including any borrowings under the ABL Facility), to the extent of the value of the assets securing such debt; (iii) structurally subordinated to all existing and future debt and other obligations, including trade payables, of each of our subsidiaries that is not a guarantor of the 7 5/8% Senior Notes; and (iv) senior in right of payment to our existing and future debt and other obligations that are, by their terms, expressly subordinated in right of payment to the 7 5/8% Senior Notes, including Aleris International’s Exchangeable Notes (defined below).
Aleris International is not required to make any mandatory redemption or sinking fund payments with respect to the 7 5/8% Senior Notes other than as set forth in the 7 5/8% Indenture relating to certain tax matters, but under certain circumstances, it may be required to offer to purchase 7 5/8% Senior Notes as described below. Aleris International may from time to time acquire 7 5/8% Senior Notes by means other than redemption, whether by tender offer, in open market purchases, through negotiated transactions or otherwise, in accordance with applicable securities laws.
Aleris International may redeem the 7 5/8% Senior Notes, in whole or in part, upon not less than 30 nor more than 60 days prior notice at a redemption price equal to 103.8% of the principal amount, declining annually to 100.0% of the principal amount on February 15, 2017, plus accrued and unpaid interest, and Additional Interest (as defined in the 7 5/8% Indenture), if any, thereon to the applicable redemption date.
Upon the occurrence of a change in control (as defined in the 7 5/8% Indenture), each holder of the 7 5/8% Senior Notes has the right to require us to repurchase some or all of such holder’s Senior Notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase.
If Aleris International or its restricted subsidiaries engage in an asset sale (as defined in the 7 5/8% Indenture), it generally must either invest the net cash proceeds from such sales in our business within a specified period of time, permanently reduce senior debt, permanently reduce senior subordinated debt, permanently reduce debt of a restricted subsidiary that is not a subsidiary guarantor or make an offer to purchase a principal amount of the notes equal to the net cash proceeds, subject to certain exceptions. The purchase price of the notes will be 100% of their principal amount, plus accrued and unpaid interest.
The 7 5/8% Indenture contains covenants that limit Aleris International’s ability and certain of its subsidiaries’ ability to:
▪ | incur additional debt; |
▪ | pay dividends or distributions on capital stock or redeem, repurchase or retire capital stock or subordinated debt; |
▪ | issue preferred stock of restricted subsidiaries; |
▪ | make certain investments; |
▪ | create liens on our or our subsidiary guarantors’ assets to secure debt; |
23
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
▪ | enter into sale and leaseback transactions; |
▪ | create restrictions on the payments of dividends or other amounts to Aleris International from the restricted subsidiaries that are not guarantors of the 7 5/8% Senior Notes; |
▪ | enter into transactions with affiliates; |
▪ | merge or consolidate with another company; and |
▪ | sell assets, including capital stock of our subsidiaries. |
These covenants are subject to a number of important limitations and exceptions.
The 7 5/8% Indenture also provides for events of default, which, if any of them occurs, would permit or require the principal, premium, if any, interest and any other monetary obligations on all outstanding 7 5/8% Senior Notes to be due and payable immediately. Aleris International was in compliance with all covenants set forth in the 7 5/8% Indenture as of December 31, 2014.
7 7/8% Senior Notes due 2020
On October 23, 2012, Aleris International issued $500.0 aggregate original principal amount of 7 7/8% Senior Notes due 2020 (the “7 7/8% Senior Notes” and, together with the 7 5/8% Senior Notes, the “Senior Notes”) under an indenture (the “7 7/8% Indenture”) with U.S. Bank National Association, as trustee, and on January 31, 2013, Aleris International exchanged the $500.0 million aggregate original principal amount of 7 7/8% Senior Notes due 2020 for $500.0 million of its new 7 7/8% Senior Notes due 2020 that have been registered under the Securities Act of 1933, as amended (the “7 7/8% Senior Notes” and, together with the 7 5/8% Senior Notes, the “Senior Notes”). Interest on the 7 7/8% Senior Notes is payable in cash semi-annually in arrears on May 1st and November 1st of each year. The 7 7/8% Senior Notes mature on November 1, 2020.
The 7 7/8% Senior Notes are jointly and severally, irrevocably and unconditionally guaranteed on a senior unsecured basis, by us and each direct and indirect restricted subsidiary that is a domestic subsidiary and that guarantees Aleris International’s obligations under the ABL Facility and the 7 5/8% Senior Notes, as primary obligor and not merely as surety. The 7 7/8% Senior Notes and the guarantees thereof are our unsecured senior obligations and rank (i) equally in right of payment to all of our existing and future debt and other obligations that are not, by their terms, expressly subordinated in right of payment to the 7 7/8% Senior Notes (including the existing 7 5/8% Senior Notes); (ii) be effectively subordinated in right of payment to all of Aleris International’s existing and future secured debt (including any borrowings under the ABL Facility), to the extent of the value of the assets securing such debt; (iii) be structurally subordinated to all existing and future debt and other obligations, including trade payables, of each of our subsidiaries that is not a guarantor of the 7 7/8% Senior Notes; and (iv) rank senior in right of payment to our existing and future debt and other obligations that are, by their terms, expressly subordinated in right of payment to the 7 7/8% Senior Notes, including Aleris International’s Exchangeable Notes.
Aleris International is not required to make any mandatory redemption or sinking fund payments with respect to the 7 7/8% Senior Notes other than as set forth in the 7 7/8% Indenture relating to certain tax matters, but under certain circumstances, it may be required to offer to purchase 7 7/8% Senior Notes as described below. Aleris International may from time to time acquire 7 7/8% Senior Notes by means other than redemption, whether by tender offer, in open market purchases, through negotiated transactions or otherwise, in accordance with applicable securities laws.
From and after November 1, 2015, Aleris International may redeem the 7 7/8% Senior Notes, in whole or in part, upon not less than 30 nor more than 60 days’ prior notice at a redemption price equal to 105.9% of principal amount, declining annually to 100.0% of the principal amount on November 1, 2018, plus accrued and unpaid interest, and Additional Interest (as defined in the 7 7/8% Indenture), if any, thereon to the applicable redemption date.
Prior to November 1, 2015, Aleris International may, at its option, redeem up to 40% of the sum of the original aggregate principal amount of the 7 7/8% Senior Notes originally issued under the 7 7/8% Indenture and the aggregate principal amount of any additional notes issued under the 7 7/8% Indenture after the issue date at a redemption price equal to 107.9% of the aggregate principal amount thereof, plus accrued and unpaid interest, and Additional Interest, if any, thereon to the redemption date, with the net cash proceeds of one or more equity offerings of Aleris International or any direct or indirect parent of Aleris International to the extent such net proceeds are contributed to us provided that at least 60% of the sum of the aggregate principal amount of 7 7/8% Senior Notes originally issued under the 7 7/8% Indenture and the aggregate principal amount of any additional notes issued under the 7 7/8% Indenture after the issue date remain outstanding immediately after the occurrence of each such redemption and each such redemption occurs within 180 days of the date of closing of each equity offering. At any time prior to November 1, 2015, Aleris International may also redeem all or a part of the 7 7/8% Senior Notes, upon not less than 30 nor more than 60 days’ prior notice, at a redemption price equal to 100% of the principal amount of 7 7/8% Senior Notes
24
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
redeemed plus an applicable premium, as provided in the 7 7/8% Indenture, as of, and accrued and unpaid interest and Additional Interest, if any, to the redemption date.
Upon the occurrence of a change in control (as defined in the 7 7/8% Indenture), each holder of the 7 7/8% Senior Notes has the right to require Aleris International to repurchase some or all of such holder’s 7 7/8% Senior Notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase.
If Aleris International or the restricted subsidiaries engage in an asset sale (as defined in the 7 7/8% Indenture), it generally must either invest the net cash proceeds from such sales in the business within a specified period of time, permanently reduce senior debt, permanently reduce senior subordinated debt, permanently reduce debt of a restricted subsidiary that is not a subsidiary guarantor or make an offer to purchase a principal amount of the notes equal to the net cash proceeds, subject to certain exceptions. The purchase price of the notes will be 100% of their principal amount, plus accrued and unpaid interest.
The 7 7/8% Indenture contains covenants that limit Aleris International’s ability and certain of its subsidiaries’ ability to:
▪ | incur additional debt; |
▪ | pay dividends or distributions on capital stock or redeem, repurchase or retire capital stock or subordinated debt; |
▪ | issue preferred stock of restricted subsidiaries; |
▪ | make certain investments; |
▪ | create liens on its or its subsidiary guarantors’ assets to secure debt; |
▪ | enter into sale and leaseback transactions; |
▪ | create restrictions on the payments of dividends or other amounts to Aleris International from the restricted subsidiaries that are not guarantors of the 7 7/8% Senior Notes; |
▪ | enter into transactions with affiliates; |
▪ | merge or consolidate with another company; and |
▪ | sell assets, including capital stock of its subsidiaries. |
These covenants are subject to a number of important limitations and exceptions.
The 7 7/8% Indenture also provides for events of default, which, if any of them occurs, would permit or require the principal, premium, if any, interest and any other monetary obligations on all outstanding 7 7/8% Senior Notes to be due and payable immediately.
Aleris International was in compliance with all covenants set forth in the 7 7/8% Indenture as of December 31, 2014.
Aleris International used a portion of the net proceeds from the sale of the 7 7/8% Senior Notes to pay us cash dividends of approximately $313.0, which we then paid as dividends, pro rata, to our stockholders in 2013.
Exchangeable Notes
On June 1, 2010, Aleris International issued $45.0 aggregate principal amount of 6.0% senior subordinated exchangeable notes (the “Exchangeable Notes”). The Exchangeable Notes are scheduled to mature on June 1, 2020. The Exchangeable Notes have exchange rights at the holder’s option and are exchangeable for our common stock at a rate equivalent to 59.63 shares of our common stock per $1,000 principal amount of the Exchangeable Notes (after adjustment for the payments of dividends in 2011 and 2013), subject to further adjustment. The Exchangeable Notes may currently be redeemed at Aleris International’s option at specified redemption prices.
The Exchangeable Notes are the unsecured, senior subordinated obligations of Aleris International and rank (i) junior to all of its existing and future senior indebtedness, including the ABL Facility; (ii) equally to all of its existing and future senior subordinated indebtedness; and (iii) senior to all of its existing and future subordinated indebtedness.
China Loan Facility
Aleris Aluminum Zhenjiang Co., Ltd. (“Aleris Zhenjiang”) entered into a loan agreement comprised of non-recourse multi-currency secured term loan facilities and a revolving facility (collectively, the “China Loan Facility”). The China Loan
25
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
Facility consists of a $30.6 U.S. dollar term loan facility, an RMB 993.5 (or equivalent to approximately $161.8) term loan facility (collectively referred to as the “Zhenjiang Term Loans”) and an RMB 410.0 (or equivalent to approximately $66.8) revolving facility that provides Aleris Zhenjiang with a working capital line of credit (referred to as the “Zhenjiang Revolver”). The Zhenjiang Revolver has certain restrictions that impact the term and the source of repayment for amounts drawn which may limit our ability to borrow funds on the Zhenjiang Revolver in the future. In March 2013, the Zhenjiang Revolver was amended to, among other things, increase the borrowing capacity from RMB 232.8 (or equivalent to $37.9) to RMB 410.0 (or equivalent to $66.8). The interest rate on the U.S. dollar term facility is six month U.S. dollar LIBOR plus 5.0% and the interest rate on the RMB term facility and the Zhenjiang Revolver is 110% of the base rate applicable to any loan denominated in RMB of the same tenor, as announced by the People’s Bank of China. As of December 31, 2014 and 2013, the full amount of the Zhenjiang Term Loans was drawn. As of December 31, 2014 and 2013, $24.2 and zero, respectively, were outstanding under the Zhenjiang Revolver. The final maturity date for all borrowings under the China Loan Facility is May 18, 2021. Aleris Zhenjiang is an unrestricted subsidiary and non-guarantor under the indentures governing the Senior Notes.
The China Loan Facility contains certain customary covenants and events of default. The China Loan Facility requires Aleris Zhenjiang to, among other things, maintain a certain ratio of outstanding term loans to invested equity capital. In addition, among other things and subject to certain exceptions, Aleris Zhenjiang is restricted in its ability to:
▪ | repay loans extended by the shareholders of Aleris Zhenjiang prior to repaying loans under the China Loan Facility or make the China Loan Facility junior to any other debts incurred of the same class for the project; |
▪ | distribute any dividend or bonus to shareholders if its pre-tax profit is insufficient to cover a loss or not used to discharge principal, interest and expenses; |
▪ | dispose of any assets in a manner that will materially impair its ability to repay debts; |
▪ | provide guarantees to third parties above a certain threshold that use assets that are financed by the China Loan Facility; |
▪ | permit any individual investor or key management personnel changes that result in a material adverse effect; |
▪ | use any proceeds from the China Loan Facility for any purpose other than as set forth therein; and |
▪ | enter into additional financing to expand or increase the production capacity of the project. |
Aleris Zhenjiang was in compliance with all of the covenants set forth in the China Loan Facility as of December 31, 2014. Aleris Zhenjiang has had delays in its ability to make timely draws of amounts committed under the China Loan Facility in the past and we cannot be certain that Aleris Zhenjiang will be able to draw all amounts committed under the Zhenjiang Revolver in the future or as to the timing or cost of any such draws.
10. EMPLOYEE BENEFIT PLANS
Defined Contribution Pension Plans
The Company’s defined contribution plans cover substantially all U.S. employees not covered under collective bargaining agreements and certain employees covered by collective bargaining agreements. The plans provide both profit sharing and employer matching contributions as well as an age and salary based contribution.
Our match of employees’ contributions under our defined contribution plans and supplemental employer contributions for the years ended December 31, 2014, 2013 and 2012 were as follows:
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Company match of employee contributions | $ | 5.3 | $ | 4.3 | $ | 4.4 | ||||||
Supplemental employer contributions | 1.4 | 1.4 | 1.5 | |||||||||
Defined Benefit Pension Plans
Our U.S. defined benefit pension plans cover certain salaried and non-salaried employees at our corporate headquarters and within our North America segment. The plan benefits are based on age, years of service and employees’ eligible compensation during employment for all employees not covered under a collective bargaining agreement and on stated amounts based on job grade and years of service prior to retirement for non-salaried employees covered under a collective bargaining agreement.
26
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
Our German subsidiaries sponsor various defined benefit pension plans for their employees. These plans are based on final pay and service, but some senior officers are entitled to receive enhanced pension benefits. Benefit payments are financed, in part, by contributions to a relief fund which establishes a life insurance contract to secure future pension payments; however, the plans are substantially unfunded plans under German law. The unfunded accrued pension costs are covered under a pension insurance association under German law if we are unable to fulfill our obligations.
The components of the net periodic benefit expense for the years ended December 31, 2014, 2013 and 2012 are as follows:
U.S. Pension Benefits | ||||||||||||
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Service cost | $ | 3.1 | $ | 3.7 | $ | 3.0 | ||||||
Interest cost | 7.3 | 6.6 | 7.2 | |||||||||
Amortization of net loss | — | 1.5 | 0.3 | |||||||||
Amortization of prior service cost | — | 0.1 | 0.1 | |||||||||
Expected return on plan assets | (10.5 | ) | (9.5 | ) | (8.4 | ) | ||||||
Settlement loss | — | 0.2 | — | |||||||||
Net periodic benefit cost included in continuing operations | $ | (0.1 | ) | $ | 2.6 | $ | 2.2 | |||||
Non-U.S. Pension Benefits | ||||||||||||
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Service cost | $ | 3.8 | $ | 5.0 | $ | 2.7 | ||||||
Interest cost | 7.5 | 7.3 | 7.1 | |||||||||
Amortization of net loss | 1.3 | 1.7 | — | |||||||||
Expected return on plan assets | (0.2 | ) | (0.2 | ) | (0.1 | ) | ||||||
Net periodic benefit cost | 12.4 | 13.8 | 9.7 | |||||||||
Net periodic benefit cost reclassified to income from discontinued operations | (5.9 | ) | (6.5 | ) | (5.0 | ) | ||||||
Net periodic benefit cost included in continuing operations | $ | 6.5 | $ | 7.3 | $ | 4.7 | ||||||
27
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
The changes in projected benefit obligations and plan assets during the years ended December 31, 2014 and 2013 are as follows:
U.S. Pension Benefits | Non-U.S. Pension Benefits | |||||||||||||||
For the years ended December 31, | For the years ended December 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Change in projected benefit obligations | ||||||||||||||||
Projected benefit obligation at beginning of period | $ | 163.7 | $ | 185.3 | $ | 205.8 | $ | 195.5 | ||||||||
Service cost | 3.1 | 3.7 | 3.8 | 5.0 | ||||||||||||
Interest cost | 7.3 | 6.6 | 7.5 | 7.3 | ||||||||||||
Actuarial loss (gain) | 28.2 | (19.7 | ) | 69.8 | (4.6 | ) | ||||||||||
Expenses paid | (1.2 | ) | (1.1 | ) | — | — | ||||||||||
Benefits paid | (10.1 | ) | (8.3 | ) | (6.8 | ) | (6.7 | ) | ||||||||
Plan settlements | — | (2.8 | ) | — | — | |||||||||||
Translation and other | 1.5 | — | (30.6 | ) | 9.3 | |||||||||||
Projected benefit obligation at end of period | $ | 192.5 | $ | 163.7 | $ | 249.5 | $ | 205.8 | ||||||||
Change in plan assets | ||||||||||||||||
Fair value of plan assets at beginning of period | $ | 130.0 | $ | 113.5 | $ | 5.2 | $ | 3.8 | ||||||||
Employer contributions | 9.9 | 10.3 | 7.6 | 7.5 | ||||||||||||
Actual return on plan assets | 6.6 | 18.4 | (0.1 | ) | — | |||||||||||
Expenses paid | (1.2 | ) | (1.1 | ) | — | — | ||||||||||
Benefits paid | (10.1 | ) | (8.3 | ) | (6.8 | ) | (6.7 | ) | ||||||||
Plan settlements | — | (2.8 | ) | — | — | |||||||||||
Translation and other | — | — | (0.7 | ) | 0.6 | |||||||||||
Fair value of plan assets at end of period | $ | 135.2 | $ | 130.0 | $ | 5.2 | $ | 5.2 | ||||||||
Net amount recognized | $ | (57.3 | ) | $ | (33.7 | ) | $ | (244.3 | ) | $ | (200.6 | ) | ||||
28
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
The following table provides the amounts recognized in the Consolidated Balance Sheet as of December 31, 2014 and 2013:
U.S. Pension Benefits | Non-U.S. Pension Benefits | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Noncurrent assets | $ | — | $ | — | $ | — | $ | 0.1 | ||||||||
Accrued liabilities | — | — | (3.5 | ) | (4.0 | ) | ||||||||||
Accrued pension benefits | (57.3 | ) | (33.7 | ) | (121.4 | ) | (97.5 | ) | ||||||||
Assets of discontinued operations - non-current | — | — | — | 0.1 | ||||||||||||
Liabilities of discontinued operations - current | — | — | (1.9 | ) | (2.0 | ) | ||||||||||
Liabilities of discontinued operations - non-current | — | — | (117.5 | ) | (97.3 | ) | ||||||||||
Net amount recognized | $ | (57.3 | ) | $ | (33.7 | ) | $ | (244.3 | ) | $ | (200.6 | ) | ||||
Amounts recognized in accumulated other comprehensive (loss) income (before tax) consist of: | ||||||||||||||||
Net actuarial loss | $ | 38.6 | $ | 6.4 | $ | 95.9 | $ | 38.0 | ||||||||
Net prior service cost | 2.2 | 0.8 | — | — | ||||||||||||
$ | 40.8 | $ | 7.2 | $ | 95.9 | $ | 38.0 | |||||||||
Amortization expected to be recognized during next fiscal year (before tax): | ||||||||||||||||
Amortization of net actuarial loss | $ | (2.0 | ) | $ | (5.7 | ) | ||||||||||
Amortization of net prior service cost | (0.2 | ) | — | |||||||||||||
$ | (2.2 | ) | $ | (5.7 | ) | |||||||||||
Additional Information | ||||||||||||||||
Accumulated benefit obligation for all defined benefit pension plans | $ | 192.5 | $ | 163.7 | $ | 239.4 | $ | 197.9 | ||||||||
For defined benefit pension plans with projected benefit obligations in excess of plan assets: | ||||||||||||||||
Aggregate projected benefit obligation | 192.5 | 163.7 | 249.5 | 205.6 | ||||||||||||
Aggregate fair value of plan assets | 135.2 | 130.0 | 5.2 | 4.7 | ||||||||||||
For defined benefit pension plans with accumulated benefit obligations in excess of plan assets: | ||||||||||||||||
Aggregate accumulated benefit obligation | 192.5 | 163.7 | 239.3 | 197.7 | ||||||||||||
Aggregate fair value of plan assets | 135.2 | 130.0 | 5.2 | 4.7 | ||||||||||||
Projected employer contributions for 2015 | 9.3 | 7.0 | ||||||||||||||
Plan Assumptions. We are required to make assumptions regarding such variables as the expected long-term rate of return on plan assets and the discount rate applied to determine service cost and interest cost. Our objective in selecting a discount rate is to select the best estimate of the rate at which the benefit obligations could be effectively settled. In making this estimate, projected cash flows are developed and matched with a yield curve based on an appropriate universe of high-quality corporate bonds.
Assumptions for long-term rates of return on plan assets are based upon historical returns, future expectations for returns for each asset class and the effect of periodic target asset allocation rebalancing. The results are adjusted for the payment of reasonable expenses of the plan from plan assets. We believe these assumptions are appropriate based upon the mix of the investments and the long-term nature of the plans’ investments.
The weighted average assumptions used to determine benefit obligations are as follows:
U.S. Pension Benefits | |||||||||
As of December 31, | |||||||||
2014 | 2013 | 2012 | |||||||
Discount rate | 3.8 | % | 4.6 | % | 3.6 | % | |||
29
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
Non-U.S. Pension Benefits | |||||||||
As of December 31, | |||||||||
2014 | 2013 | 2012 | |||||||
Discount rate | 2.2 | % | 3.9 | % | 3.7 | % | |||
Rate of compensation increases, if applicable | 3.0 | 3.0 | 3.0 | ||||||
The weighted average assumptions used to determine the net periodic benefit cost for the years ended December 31, 2014, 2013 and 2012 are as follows:
U.S. Pension Benefits | |||||||||
For the years ended December 31, | |||||||||
2014 | 2013 | 2012 | |||||||
Discount rate | 4.6 | % | 3.6 | % | 4.5 | % | |||
Expected return on plan assets | 8.0 | 8.3 | 8.3 | ||||||
Non-U.S. Pension Benefits | |||||||||
For the years ended December 31, | |||||||||
2014 | 2013 | 2012 | |||||||
Discount rate | 3.9 | % | 3.7 | % | 4.9 | % | |||
Expected return on plan assets | 3.1 | 3.5 | 4.1 | ||||||
Rate of compensation increase | 3.0 | 3.0 | 3.0 | ||||||
Plan Assets. The weighted average plan asset allocations at December 31, 2014 and 2013 and the target allocations are as follows:
Percentage of Plan Assets | |||||||||
2014 | 2013 | Target Allocation | |||||||
Cash | 1 | % | 1 | % | — | % | |||
Equity | 62 | 63 | 60 | ||||||
Fixed income | 22 | 22 | 25 | ||||||
Real estate | 11 | 10 | 12 | ||||||
Other | 4 | 4 | 3 | ||||||
Total | 100 | % | 100 | % | 100 | % | |||
The principal objectives underlying the investment of the pension plans’ assets are to ensure that the Company can properly fund benefit obligations as they become due under a broad range of potential economic and financial scenarios, maximize the long-term investment return with an acceptable level of risk based on such obligations, and broadly diversify investments across and within the capital markets to protect asset values against adverse movements in any one market. The Company’s strategy balances the requirement to maximize returns using potentially higher return generating assets, such as equity securities, with the need to control the risk versus the benefit obligations with less volatile assets, such as fixed-income securities.
Investment practices must comply with the requirements of ERISA and any other applicable laws and regulations. The use of derivative instruments is permitted where appropriate and necessary for achieving overall investment policy objectives. Currently, we do not use derivative instruments.
30
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
The fair values of the Company’s pension plan assets at December 31, 2014 by asset class are as follows:
Fair Value Measurements at December 31, 2014 Using: | ||||||||||||||||
Quoted Prices in | Significant | Significant | ||||||||||||||
Active Markets for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
Asset Class: | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Cash | $ | 2.4 | $ | 2.4 | $ | — | $ | — | ||||||||
Registered Investment Companies: | ||||||||||||||||
Large U.S. Equity | 18.7 | 18.7 | — | — | ||||||||||||
Small / Mid U.S. Equity | 13.4 | 13.4 | — | — | ||||||||||||
International Equity | 12.9 | 12.9 | — | — | ||||||||||||
Commingled and Limited Partnership Funds: | ||||||||||||||||
Hedged Equity | 19.9 | — | 19.9 | — | ||||||||||||
Core Real Estate | 15.3 | — | 15.3 | — | ||||||||||||
International Large Cap Equity | 14.4 | — | 14.4 | — | ||||||||||||
Core Fixed Income | 30.4 | — | 30.4 | — | ||||||||||||
Small Cap Value Equity | 7.8 | — | 7.8 | — | ||||||||||||
Other | 5.2 | — | 5.2 | — | ||||||||||||
Total | $ | 140.4 | $ | 47.4 | $ | 93.0 | $ | — | ||||||||
The fair values of the Company’s pension plan assets at December 31, 2013 by asset class are as follows:
Fair Value Measurements at December 31, 2013 Using: | ||||||||||||||||
Quoted Prices in | Significant | Significant | ||||||||||||||
Active Markets for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
Asset Class: | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Cash | $ | 1.3 | $ | 1.3 | $ | — | $ | — | ||||||||
Registered Investment Companies: | ||||||||||||||||
Large U.S. Equity | 16.9 | 16.9 | — | — | ||||||||||||
Small / Mid U.S. Equity | 13.2 | 13.2 | — | — | ||||||||||||
International Equity | 13.8 | 13.8 | — | — | ||||||||||||
Fixed Income | 14.6 | 14.6 | — | — | ||||||||||||
Commingled and Limited Partnership Funds: | ||||||||||||||||
Hedged Equity | 18.9 | — | 18.9 | — | ||||||||||||
Core Real Estate | 13.9 | — | 13.9 | — | ||||||||||||
International Large Cap Equity | 14.8 | — | 14.8 | — | ||||||||||||
Core Fixed Income | 14.5 | — | 14.5 | — | ||||||||||||
Small Cap Value Equity | 7.4 | — | 7.4 | — | ||||||||||||
Other | 5.9 | — | 5.2 | 0.7 | ||||||||||||
Total | $ | 135.2 | $ | 59.8 | $ | 74.7 | $ | 0.7 | ||||||||
Level 3 assets were sold during the year ended December 31, 2014.
The following section describes the valuation methodologies used to measure the fair values of pension plan assets. There have been no changes in the methodologies used at December 31, 2014 and 2013.
▪ | Registered investment companies—These investments are valued at net asset value (“NAV”) of shares at year-end based on quoted market prices and are categorized within Level 1 of the fair value hierarchy. |
▪ | Commingled and limited partnership funds—These investments are valued at the NAV of units held or ownership interest in partners’ capital at year-end. NAV is determined by dividing the fair value of the fund’s net assets by its units outstanding at the valuation date. Partnership interests are also based on the net asset fair value at the valuation date. All commingled fund and limited partnership investments are categorized within Level 2 of the fair value hierarchy. Each of the commingled funds and limited partnership investments are further described below: |
• | Hedged Equity—Hedged equity funds are primarily comprised of shares or units in other investment companies or trusts. Trading positions are valued in the investment funds at fair value. |
31
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
▪ | Core Real Estate—Core real estate funds are composed primarily of real estate investments owned directly or through partnership interests and mortgage loans on income-producing real estate. |
▪ | International Large Cap Equity—International large cap equity funds invest in equity securities of companies ordinarily located outside the U.S. and Canada. |
▪ | Core Fixed Income—Core fixed income funds primarily invest in fixed income securities. |
▪ | Small Cap Value Equity—Limited partnership invested primarily in equity securities of small capitalization companies. |
Plan Contributions. Our funding policy for funded pensions is to make annual contributions based on advice from our actuaries and the evaluation of our cash position, but not less than minimum statutory requirements. Contributions for unfunded plans were equal to benefit payments.
Expected Future Benefit Payments. The following benefit payments for our pension plans, which reflect expected future service, as appropriate, are expected to be paid for the periods indicated:
Non-U.S. | Non-U.S. | |||||||||||
U.S. | Pension Benefits | Pension Benefits | ||||||||||
Pension Benefits | (Continuing Operations) | (Discontinued Operations) | ||||||||||
2015 | $ | 9.9 | $ | 3.5 | $ | 2.9 | ||||||
2016 | 10.3 | 3.6 | 3.0 | |||||||||
2017 | 10.8 | 3.7 | 3.2 | |||||||||
2018 | 10.8 | 4.6 | 3.4 | |||||||||
2019 | 11.2 | 4.3 | 3.6 | |||||||||
2020 - 2024 | 57.1 | 21.2 | 20.9 | |||||||||
Other Postretirement Benefit Plans
We maintain health care and life insurance benefit plans covering certain corporate and North America segment employees. We accrue the cost of postretirement benefits within the covered employees’ active service periods.
The financial status of the plans at December 31, 2014 and 2013 is as follows:
For the years ended December 31, | ||||||||
2014 | 2013 | |||||||
Change in benefit obligations | ||||||||
Benefit obligation at beginning of period | $ | 45.0 | $ | 56.4 | ||||
Service cost | 0.1 | 0.2 | ||||||
Interest cost | 1.8 | 1.8 | ||||||
Benefits paid | (4.8 | ) | (5.3 | ) | ||||
Employee contributions | 0.8 | 0.7 | ||||||
Medicare subsidies received | 0.3 | 0.2 | ||||||
Actuarial loss (gain) | 7.0 | (9.0 | ) | |||||
Other | 0.2 | — | ||||||
Benefit obligation at end of period | $ | 50.4 | $ | 45.0 | ||||
Change in plan assets | ||||||||
Fair value of plan assets at beginning of period | $ | — | $ | — | ||||
Employer contributions | 3.7 | 4.4 | ||||||
Employee contributions | 0.8 | 0.7 | ||||||
Medicare subsidies received | 0.3 | 0.2 | ||||||
Benefits paid | (4.8 | ) | (5.3 | ) | ||||
Fair value of plan assets at end of period | $ | — | $ | — | ||||
Net amount recognized | $ | (50.4 | ) | $ | (45.0 | ) | ||
32
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
The following table provides the amounts recognized in the Consolidated Balance Sheet as of December 31, 2014 and 2013:
December 31, | ||||||||
2014 | 2013 | |||||||
Accrued liabilities | $ | (4.0 | ) | $ | (4.1 | ) | ||
Accrued postretirement benefits | (46.4 | ) | (40.9 | ) | ||||
Net amount recognized | $ | (50.4 | ) | $ | (45.0 | ) | ||
Amounts recognized in accumulated other comprehensive (loss) income (before tax) consist of: | ||||||||
Net actuarial loss (gain) | $ | 6.0 | $ | (1.4 | ) | |||
Net prior service cost | 0.2 | — | ||||||
$ | 6.2 | $ | (1.4 | ) | ||||
Amortization expected to be recognized during next fiscal year (before tax): | ||||||||
Amortization of net actuarial loss | $ | 0.4 | ||||||
$ | 0.4 | |||||||
Additional information: | ||||||||
For plans with benefit obligations in excess of plan assets: | ||||||||
Aggregate benefit obligation | $ | 50.4 | $ | 45.0 | ||||
Aggregate fair value of plan assets | — | — | ||||||
The components of net postretirement benefit expense for the years ended December 31, 2014, 2013 and 2012 are as follows:
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Service cost | $ | 0.1 | $ | 0.2 | $ | 0.2 | ||||||
Interest cost | 1.8 | 1.8 | 2.4 | |||||||||
Amortization of net (gain) loss | (0.4 | ) | 0.4 | 0.3 | ||||||||
Net postretirement benefit expense included in continuing operations | $ | 1.5 | $ | 2.4 | $ | 2.9 | ||||||
Plan Assumptions. We are required to make an assumption regarding the discount rate applied to determine service cost and interest cost. Our objective in selecting a discount rate is to select the best estimate of the rate at which the benefit obligations could be effectively settled. In making this estimate, projected cash flows are developed and are then matched with a yield curve based on an appropriate universe of high-quality corporate bonds.
The weighted average assumptions used to determine net postretirement benefit expense and benefit obligations are as follows:
For the years ended December 31, | |||||||||
2014 | 2013 | 2012 | |||||||
Discount rate used to determine expense | 4.2 | % | 3.2 | % | 4.3 | % | |||
Discount rate used to determine end of period benefit obligations | 3.6 | % | 4.2 | % | 3.2 | % | |||
Health care cost trend rate assumed for next year | 7.2 | % | 7.2 | % | 7.4 | % | |||
Ultimate trend rate | 4.5 | % | 4.5 | % | 4.5 | % | |||
Year rate reaches ultimate trend rate | 2027 | 2027 | 2027 | ||||||
Assumed health care cost trend rates have an effect on the amounts reported for postretirement benefit plans. A one-percentage change in assumed health care cost trend rates would have the following effects:
1% increase | 1% decrease | |||||||
Effect on total service and interest components | $ | 0.1 | $ | (0.1 | ) | |||
Effect on postretirement benefit obligations | 2.2 | (1.8 | ) | |||||
33
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
Plan Contributions. Our policy for the plan is to make contributions equal to the benefits paid during the year.
Expected Future Benefit Payments. The following benefit payments are expected to be paid for the periods indicated:
Gross Benefit Payment | Net of Medicare Part D Subsidy | |||||||
2015 | $ | 4.3 | $ | 4.0 | ||||
2016 | 4.3 | 4.0 | ||||||
2017 | 4.2 | 4.0 | ||||||
2018 | 4.1 | 3.9 | ||||||
2019 | 3.9 | 3.6 | ||||||
2020 - 2024 | 16.3 | 16.3 | ||||||
Early Retirement Plans
Our Belgian and German subsidiaries sponsor various unfunded early retirement benefit plans. The obligations under these plans at December 31, 2014 and 2013 totaled $11.9 and $14.5, respectively, of which $3.3 and $4.0 are included within “Liabilities of discontinued operations” in the Consolidated Balance Sheet. Of the $8.6 of obligations associated with continuing operations at December 31, 2014, the estimated payments of $3.7 under these plans for the year ending December 31, 2015 was classified as a current liability.
11. STOCK-BASED COMPENSATION
On June 1, 2010, the Board of Directors of Aleris Corporation (the “Board”) approved the Aleris Corporation 2010 Equity Incentive Plan (the “2010 Equity Plan”). Stock options, restricted stock units and restricted shares have been granted under the 2010 Equity Plan to certain members of senior management of the Company and other non-employee directors. All stock options granted have a life not to exceed ten years and vest over a period not to exceed four years. New common shares are issued upon stock option exercises from available common shares. The restricted stock units and restricted shares also vest over a period not to exceed four years. A portion of the stock options, as well as a portion of the restricted stock units and restricted shares, may vest upon a change in control event should the event occur prior to full vesting of these awards, depending on the amount of vesting that has already occurred at the time of the event in comparison to the change in our three largest stockholders’ overall level of the ownership that results from the event.
On April 30, 2013, we paid a cash dividend of $10.00 per share, or approximately $313.0, pro rata, to our stockholders of record as of April 19, 2013. As provided in the 2010 Equity Plan, the Board approved the necessary actions to effectuate an option adjustment to (i) increase the number of shares underlying each option outstanding as of the dividend record date and (ii) proportionately decrease the exercise price of each option to reflect the dilutive impact of the dividends paid. The option adjustments did not result in incremental compensation costs. All stock option activity shown below has been adjusted to reflect the option adjustments approved by the Board.
A summary of stock option activity for the year ended December 31, 2014 is as follows:
Weighted | Weighted average | Weighted | |||||||||||
average | remaining | average | |||||||||||
exercise price | contractual | grant date | |||||||||||
Service-based options | Options | per option | term in years | fair value | |||||||||
Outstanding at January 1, 2014 | 3,308,286 | $ | 24.34 | $ | 9.41 | ||||||||
Granted | 1,007,533 | 27.20 | 14.29 | ||||||||||
Exercised | (15,969 | ) | 21.35 | 10.47 | |||||||||
Forfeited | (224,565 | ) | 28.25 | 13.37 | |||||||||
Outstanding at December 31, 2014 | 4,075,285 | $ | 24.84 | 6.4 | $ | 10.40 | |||||||
Options vested and expected to vest at December 31, 2014 | 3,968,390 | $ | 24.75 | 6.3 | $ | 10.28 | |||||||
Options exercisable at December 31, 2014 | 3,033,765 | $ | 23.78 | 5.6 | $ | 8.95 | |||||||
The range of exercise prices of options outstanding at December 31, 2014 was $16.78 - $47.58.
Because the Company does not have historical stock option exercise experience excluding former option holders that have terminated employment, which would provide a reasonable basis upon which to estimate the expected life of the stock options granted during the years ended December 31, 2014, 2013 and 2012, the Company has elected to use the simplified
34
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
method to estimate the expected life of the stock options granted, as allowed by SEC SAB No. 107, and the continued acceptance of the simplified method indicated in SEC SAB No. 110.
At December 31, 2014, there was $18.3 of unrecognized compensation expense related to the stock options and restricted stock units. These amounts are expected to be recognized over a weighted-average period of 1.4 years.
The Black-Scholes method was used to estimate the fair value of the stock options granted. Under this method, the estimate of fair value is affected by the assumptions included in the following table. Expected equity volatility was determined based on historical stock prices and implied and stated volatilities of our peer companies. Intrinsic value is measured using the fair value at the date of exercise less the applicable exercise price. The following table summarizes the significant assumptions used to determine the fair value of the stock options granted during the years ended December 31, 2014, 2013 and 2012 and other information:
For the years ended December 31, | |||||||||
2014 | 2013 | 2012 | |||||||
Weighted average expected option life in years | 6.0 | 3.6 | 6.0 | ||||||
Weighted average grant date fair value | $14.29 | $10.68 | $24.47 | ||||||
Risk-free interest rate | 2.0 | % | 1.1% - 1.6% | 0.8% - 1.0% | |||||
Equity volatility factor | 55 | % | 41 | % | 55 | % | |||
Dividend yield | — | % | — | % | — | % | |||
Intrinsic value of options exercised | $0.1 | $5.0 | $0.3 | ||||||
A summary of restricted stock units and restricted shares activity for the year ended December 31, 2014 is as follows:
Weighted | |||||||
average | |||||||
grant date | |||||||
Restricted Stock Units and Restricted Shares | Shares | fair value | |||||
Outstanding at January 1, 2014 | 189,009 | $ | 35.54 | ||||
Granted | 345,764 | 27.17 | |||||
Vested | (87,251 | ) | 33.64 | ||||
Forfeited | (28,607 | ) | 31.71 | ||||
Outstanding at December 31, 2014 | 418,915 | $ | 29.09 | ||||
The fair value of shares vested during the years ended December 31, 2014, 2013 and 2012 was $2.9, $2.8 and $2.8, respectively. The weighted average grant date fair value of restricted stock units and restricted shares granted during the years ended December 31, 2014, 2013 and 2012 was $27.17, $34.65 and $48.00, respectively.
12. DERIVATIVE AND OTHER FINANCIAL INSTRUMENTS
We use forward contracts and options, as well as contractual price escalators, to reduce the risks associated with our metal, natural gas and other supply requirements and certain currency exposures. Generally, we enter into master netting arrangements with our counterparties and offset net derivative positions with the same counterparties against amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral under those arrangements in our Consolidated Balance Sheet. For classification purposes, we record the net fair value of each type of derivative position that is expected to settle in less than one year with each counterparty as a net current asset or liability and each type of long-term position as a net long-term asset or liability. At December 31, 2014 and 2013, no cash collateral was posted. The amounts shown in the table below represent the gross amounts of recognized assets and liabilities, the amounts offset in the Consolidated Balance Sheet and the net amounts of assets and liabilities presented therein. As of December 31, 2014 and 2013, there were no amounts subject to an enforceable master netting arrangement or similar agreement that have not been offset in the Consolidated Balance Sheet.
35
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
Fair Value of Derivatives as of December 31, | ||||||||||||||||
2014 | 2013 | |||||||||||||||
Derivatives by Type | Asset | Liability | Asset | Liability | ||||||||||||
Metal | $ | 28.6 | $ | (21.4 | ) | $ | 13.3 | $ | (17.0 | ) | ||||||
Natural gas | — | (3.4 | ) | 0.4 | — | |||||||||||
Total | 28.6 | (24.8 | ) | 13.7 | (17.0 | ) | ||||||||||
Effect of counterparty netting | (19.6 | ) | 19.6 | (12.3 | ) | 12.3 | ||||||||||
Net derivatives as classified in the balance sheet | $ | 9.0 | $ | (5.2 | ) | $ | 1.4 | $ | (4.7 | ) | ||||||
The fair value of our derivative financial instruments at December 31, 2014 and 2013 are recorded on the Consolidated Balance Sheet as follows:
December 31, | ||||||||||
Asset Derivatives | Balance Sheet Location | 2014 | 2013 | |||||||
Metal | Prepaid expenses and other current assets | $ | 8.7 | $ | 1.0 | |||||
Other long-term assets | 0.3 | — | ||||||||
Natural gas | Prepaid expenses and other current assets | — | 0.4 | |||||||
Total | $ | 9.0 | $ | 1.4 | ||||||
December 31, | ||||||||||
Liability Derivatives | Balance Sheet Location | 2014 | 2013 | |||||||
Metal | Accrued liabilities | $ | 0.5 | $ | 1.7 | |||||
Other long-term liabilities | 1.3 | 3.0 | ||||||||
Natural gas | Accrued liabilities | 3.4 | — | |||||||
Total | $ | 5.2 | $ | 4.7 | ||||||
Derivative contracts are recorded at fair value under ASC 820 using quoted market prices and significant other observable inputs. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3—Inputs that are both significant to the fair value measurement and unobservable.
We endeavor to utilize the best available information in measuring fair value. Where appropriate, valuations are adjusted for various factors such as liquidity, bid/offer spreads, and credit considerations. Such adjustments are generally based on available market evidence and unobservable inputs. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables set forth our financial assets and liabilities that are accounted for at fair value on a recurring basis as of December 31, 2014 and 2013 and the level in the fair value hierarchy:
36
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
Fair Value Measurements at December 31, 2014 Using: | ||||||||||||||||
Total Carrying | Quoted Prices in | Significant | Significant | |||||||||||||
Value in the | Active Markets for | Other Observable | Unobservable | |||||||||||||
Consolidated | Identical Assets | Inputs | Inputs | |||||||||||||
Description | Balance Sheet | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Derivative assets | $ | 28.6 | $ | — | $ | 28.6 | $ | — | ||||||||
Derivative liabilities | (24.8 | ) | — | (24.8 | ) | — | ||||||||||
Net derivative assets | $ | 3.8 | $ | — | $ | 3.8 | $ | — | ||||||||
Fair Value Measurements at December 31, 2013 Using: | ||||||||||||||||
Total Carrying | Quoted Prices in | Significant | Significant | |||||||||||||
Value in the | Active Markets for | Other Observable | Unobservable | |||||||||||||
Consolidated | Identical Assets | Inputs | Inputs | |||||||||||||
Description | Balance Sheet | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Derivative assets | $ | 13.7 | $ | — | $ | 13.7 | $ | — | ||||||||
Derivative liabilities | (17.0 | ) | — | (17.0 | ) | — | ||||||||||
Net derivative liabilities | $ | (3.3 | ) | $ | — | $ | (3.3 | ) | $ | — | ||||||
Both realized and unrealized gains and losses on derivative financial instruments of continuing operations are included within “Losses (gains) on derivative financial instruments” in the Consolidated Statements of Operations. Realized losses (gains) on derivative financial instruments totaled the following during the years ended December 31, 2014, 2013 and 2012:
Realized Losses (Gains) on Derivative Financial Instruments | ||||||||||||
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Metal | $ | 17.6 | $ | (26.3 | ) | $ | 5.0 | |||||
Natural gas | (1.1 | ) | 0.6 | 6.4 | ||||||||
Currency | — | — | 1.6 | |||||||||
Total realized losses (gains) | 16.5 | (25.7 | ) | 13.0 | ||||||||
Realized losses reclassified to income from discontinued operations | 0.3 | 3.7 | 4.3 | |||||||||
Realized losses (gains) of continuing operations | $ | 16.2 | $ | (29.4 | ) | $ | 8.7 | |||||
Metal Hedging
The selling prices of the majority of the orders for our products are established at the time of order entry or, for certain customers, under long-term contracts. As the related raw materials used to produce these orders are purchased several months or years after the selling prices are fixed, margins are subject to the risk of changes in the purchase price of the raw materials used for these fixed price sales. In order to manage this transactional exposure, LME future or forward purchase contracts are purchased at the time the selling prices are fixed. As metal is purchased to fill these fixed price sales orders, LME future or forward contracts are then sold. We also maintain a significant amount of inventory on-hand to meet anticipated and unpriced future sales. In order to preserve the value of this inventory, LME future or forward contracts are sold at the time inventory is purchased. As sales orders are priced, LME future or forward contracts are purchased. These derivatives generally settle within three months. We can also use call option contracts, which function in a manner similar to the natural gas call option contracts discussed below and put option contracts for managing metal price exposures. Option contracts require the payment of a premium which is recorded as a realized loss upon settlement or expiration of the option contract. Upon settlement of a put option contract, we receive cash and recognize a related gain if the LME closing price is less than the strike price of the put option. If the put option strike price is less than the LME closing price, no amount is paid and the option expires. As of December 31, 2014 and 2013, we had 0.2 metric tons and 0.2 metric tons of metal buy and sell forward contracts, respectively.
Natural Gas Hedging
To manage our price exposure for natural gas purchases, we fix the future price of a portion of our natural gas requirements by entering into financial hedge agreements. Under these agreements, payments are made or received based on the differential between the monthly closing price on the New York Mercantile Exchange (“NYMEX”) and the contractual hedge price. We can use a combination of call option contracts and put option contracts for managing the exposure to increasing prices while maintaining our ability to benefit from declining prices. Upon settlement of call option contracts, we receive cash and recognize a related gain if the NYMEX closing price exceeds the strike price of the call option. If the call option strike price exceeds the NYMEX closing price, no amount is received and the option expires unexercised. Upon settlement of a put option contract, we pay cash and recognize a related loss if the NYMEX closing price is lower than the strike price of the put option. If the put option strike price is less than the NYMEX closing price, no amount is paid and the option expires
37
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
unexercised. Option contracts require the payment of a premium which is recorded as a realized loss upon settlement or expiration of the option contract. Natural gas cost can also be managed through the use of cost escalators included in some of our long-term supply contracts with customers, which limits exposure to natural gas price risk. As of December 31, 2014 and 2013, we had 3.5 trillion and 2.9 trillion of British thermal unit forward buy contracts, respectively.
Currency Exchange Hedging
From time to time, we may enter into currency forwards, futures, call options and similar derivative financial instruments to limit our exposure to fluctuations in currency exchange rates. During 2011 and 2012, Aleris Zhenjiang entered into euro call option contracts to manage certain exposures related to euro-denominated equipment contracts. As of December 31, 2014 and 2013, no euro call option contracts were outstanding.
Credit Risk
We are exposed to losses in the event of non-performance by the counterparties to the derivative financial instruments discussed above; however, we do not anticipate any non-performance by the counterparties. The counterparties are evaluated for creditworthiness and risk assessment prior to initiating trading activities with the brokers and periodically throughout each year while actively trading.
Other Financial Instruments
The carrying amount and fair values of our other financial instruments at December 31, 2014 and 2013 are as follows:
December 31, | ||||||||||||||||
2014 | 2013 | |||||||||||||||
Carrying | Carrying | |||||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
Cash and cash equivalents | $ | 28.6 | $ | 28.6 | $ | 60.1 | $ | 60.1 | ||||||||
ABL Facility | 224.0 | 224.0 | — | — | ||||||||||||
Exchangeable Notes | 44.2 | 63.3 | 44.2 | 72.7 | ||||||||||||
7 5/8% Senior Notes | 495.5 | 508.0 | 494.1 | 530.0 | ||||||||||||
7 7/8% Senior Notes | 493.6 | 497.5 | 492.5 | 531.3 | ||||||||||||
Zhenjiang Term Loans | 191.5 | 192.4 | 192.2 | 193.2 | ||||||||||||
Zhenjiang Revolver | 24.2 | 24.4 | — | — | ||||||||||||
The following tables set forth our other financial instruments for which fair value is disclosed and the level in the fair value hierarchy within which the fair value measurements are categorized as of December 31, 2014 and 2013:
Fair value measurements at December 31, 2014 using: | ||||||||||||||||
Description | Total estimated fair value | Quoted prices in active markets for identical assets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||||
Cash and cash equivalents | $ | 28.6 | $ | 28.6 | $ | — | $ | — | ||||||||
ABL Facility | 224.0 | — | 224.0 | — | ||||||||||||
Exchangeable Notes | 63.3 | — | — | 63.3 | ||||||||||||
7 5/8% Senior Notes | 508.0 | 508.0 | — | — | ||||||||||||
7 7/8% Senior Notes | 497.5 | 497.5 | — | — | ||||||||||||
Zhenjiang Term Loans | 192.4 | — | — | 192.4 | ||||||||||||
Zhenjiang Revolver | 24.4 | — | — | 24.4 | ||||||||||||
38
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
Fair value measurements at December 31, 2013 using: | ||||||||||||||||
Description | Total estimated fair value | Quoted prices in active markets for identical assets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||||
Cash and cash equivalents | $ | 60.1 | $ | 60.1 | $ | — | $ | — | ||||||||
Exchangeable Notes | 72.7 | — | — | 72.7 | ||||||||||||
7 5/8% Senior Notes | 530.0 | 530.0 | — | — | ||||||||||||
7 7/8% Senior Notes | 531.3 | 531.3 | — | — | ||||||||||||
Zhenjiang Term Loans | 193.2 | — | — | 193.2 | ||||||||||||
The principal amount of the ABL Facility approximates fair value because the interest rate paid is variable and there have been no significant changes in the credit risk of Aleris International subsequent to the borrowings. The fair value of Aleris International’s Exchangeable Notes was estimated using a binomial lattice pricing model based on the fair value of our common stock, a risk-free interest rate of 1.7% as of December 31, 2014 and 2.3% as of December 31, 2013 and expected equity volatility of 45% as of December 31, 2014 and 55% as of December 31, 2013. Expected equity volatility was determined based on historical stock prices and implied and stated volatilities of our peer companies. The fair values of the 7 5/8% Senior Notes and the 7 7/8% Senior Notes were estimated using market quotations. The principal amount of the Zhenjiang Term Loans and Zhenjiang Revolver approximates fair value because the interest rate paid is variable, is set for periods of six months or less and there have been no significant changes in the credit risk of Aleris Zhenjiang subsequent to the inception of the China Loan Facility.
13. INCOME TAXES
The (loss) income before income taxes was as follows:
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
U.S. | $ | (133.3 | ) | $ | (101.1 | ) | $ | (28.6 | ) | |||
International | 57.6 | 23.9 | 93.3 | |||||||||
(Loss) income from continuing operations before income taxes | (75.7 | ) | (77.2 | ) | 64.7 | |||||||
Income from discontinued operations before income taxes | 36.2 | 38.5 | 67.7 | |||||||||
Total (loss) income before income taxes | $ | (39.5 | ) | $ | (38.7 | ) | $ | 132.4 | ||||
39
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
The (benefit from) provision for income taxes, which reflects the application of the intraperiod tax allocation requirements of ASC 740-20, “Intraperiod Tax Allocation,” was as follows:
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Current: | ||||||||||||
Federal | $ | (0.3 | ) | $ | (0.1 | ) | $ | (1.2 | ) | |||
State | — | (0.2 | ) | 0.3 | ||||||||
International | 8.4 | 11.1 | 14.1 | |||||||||
8.1 | 10.8 | 13.2 | ||||||||||
Deferred: | ||||||||||||
Federal | (32.0 | ) | (8.6 | ) | (12.4 | ) | ||||||
State | (3.0 | ) | (1.5 | ) | (2.0 | ) | ||||||
International | (102.6 | ) | (14.9 | ) | 7.0 | |||||||
(137.6 | ) | (25.0 | ) | (7.4 | ) | |||||||
(Benefit from) provision for income taxes of continuing operations | (129.5 | ) | (14.2 | ) | 5.8 | |||||||
Provision for income taxes of discontinued operations | 2.0 | 11.6 | 19.6 | |||||||||
Total (benefit from) provision for income taxes | $ | (127.5 | ) | $ | (2.6 | ) | $ | 25.4 | ||||
The income tax (benefit) expense of continuing operations, computed by applying the federal statutory tax rate to the (loss) income of continuing operations before income taxes, differed from the (benefit from) provision for income taxes of continuing operations as follows:
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Income tax (benefit) expense at the federal statutory rate | $ | (26.5 | ) | $ | (27.0 | ) | $ | 22.6 | ||||
Foreign income tax rate differential and permanent differences, net | (24.3 | ) | (15.6 | ) | (14.3 | ) | ||||||
State income taxes, net | (0.7 | ) | (5.4 | ) | (2.6 | ) | ||||||
Permanent differences, net | 0.9 | 2.1 | (0.6 | ) | ||||||||
Tax on deemed dividend of foreign earnings, net of foreign tax credit | (1.3 | ) | (3.8 | ) | 7.1 | |||||||
Change in uncertain tax position | 0.1 | 0.8 | 0.4 | |||||||||
Change in valuation allowance | (89.2 | ) | 33.9 | (7.8 | ) | |||||||
Effect of intraperiod tax allocation | 11.2 | — | — | |||||||||
Other, net | 0.3 | 0.8 | 1.0 | |||||||||
(Benefit from) provision for income taxes of continuing operations | $ | (129.5 | ) | $ | (14.2 | ) | $ | 5.8 | ||||
The favorable foreign income tax rate differential results primarily from notional interest deductions in Belgium and Luxembourg in all three years and the establishment, in 2014, of a deferred tax asset for the difference between outside book and tax basis on foreign subsidiaries held for sale.
A $(146.3) and $134.4 tax effect and corresponding valuation allowance related to a change in the tax net operating loss in a non-U.S. tax jurisdiction were excluded from “Foreign income tax rate differential and permanent differences, net” and “Change in valuation allowance” in the preceding reconciliation for the years ended December 31, 2014 and December 31, 2012, respectively.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
40
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
Significant components of our deferred tax liabilities and assets are as follows:
December 31, | ||||||||
2014 | 2013 | |||||||
Deferred Tax Liabilities | ||||||||
Property, plant and equipment and intangible assets | $ | 38.6 | $ | 43.4 | ||||
Other | 13.1 | 9.4 | ||||||
Total deferred tax liabilities | 51.7 | 52.8 | ||||||
Deferred Tax Assets | ||||||||
Net operating loss carryforwards | 280.3 | 421.5 | ||||||
Property, plant and equipment and intangible assets | 61.9 | 72.7 | ||||||
Accrued pension benefits | 45.2 | 27.2 | ||||||
Accrued liabilities | 24.5 | 18.1 | ||||||
Other | 70.4 | 57.8 | ||||||
482.3 | 597.3 | |||||||
Valuation allowance | (262.3 | ) | (515.2 | ) | ||||
Total deferred tax assets | 220.0 | 82.1 | ||||||
Net deferred tax assets of continuing operations | 168.3 | 29.3 | ||||||
Net deferred tax assets included within assets and liabilities of discontinued operations | 24.1 | 14.7 | ||||||
Net deferred tax assets | $ | 192.4 | $ | 44.0 | ||||
At December 31, 2014 and 2013, we had valuation allowances recorded against deferred tax assets of continuing operations of $262.3 and $515.2, respectively, to reduce certain deferred tax assets to amounts that are more likely than not to be realized. Of the total December 31, 2014 and 2013 valuation allowances, $109.0 and $379.9 relate primarily to net operating losses and future tax deductions for pension benefits in non-U.S. tax jurisdictions, $137.6 and $118.3 relate primarily to the U.S. federal effects of net operating losses and amortization and $15.7 and $17.0 relate primarily to the state effects of net operating losses and amortization, respectively.The net decrease in the valuation allowance is primarily attributable to expected 2015 taxable income in the U.S. resulting from the taxable gain from the sale of the recycling and specification alloys business, which will allow the use of net operating losses, and recent and expected future taxable income in a non-U.S. tax jurisdiction. We will maintain valuation allowances against our remaining net deferred tax assets in the U.S. and other applicable jurisdictions until objective positive evidence exists to reduce or eliminate the valuation allowance.
The following table summarizes the change in the valuation allowances:
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Balance at beginning of the period | $ | 533.9 | $ | 502.8 | $ | 364.6 | ||||||
(Reversals) additions recorded in the (benefit from) provision for income taxes | (234.4 | ) | 33.0 | 126.4 | ||||||||
Accumulated other comprehensive income (loss) | 15.6 | (15.3 | ) | 6.6 | ||||||||
Currency translation | (43.3 | ) | 13.4 | 5.2 | ||||||||
Balance at end of the period | 271.8 | 533.9 | 502.8 | |||||||||
Balance at end of the period included within discontinued operations | (9.5 | ) | (18.7 | ) | (22.7 | ) | ||||||
Balance related to continuing operations | $ | 262.3 | $ | 515.2 | $ | 480.1 | ||||||
The provisions related to the tax accounting for stock-based compensation prohibit the recognition of a deferred tax asset for an excess tax benefit that has not yet been realized. As a result, we will recognize a tax benefit from $4.7 of stock-based compensation expense in additional paid-in capital if an incremental tax benefit is realized or realizable after all other tax attributes currently available to us have been utilized.
At December 31, 2014, we had approximately $642.9 of unused net operating loss carryforwards associated with non-U.S. tax jurisdictions, of which $488.8 can be carried forward indefinitely. The remaining net operating loss carryforwards may be carried forward from 5 to 20 years. At December 31, 2014, the U.S. federal net operating loss carryforward was $234.2. The tax benefits associated with state net operating loss carryforwards at December 31, 2014 were $11.1.
At December 31, 2014 and 2013, we had $5.0 and $4.7, respectively, of unused state tax credit carryforwards against most of which a full valuation allowance has been provided.
41
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
Substantially all of the $316.9 of undistributed earnings of our non-U.S. investments are considered permanently reinvested and, accordingly, no additional U.S. income taxes or non-U.S. withholding taxes have been provided. It is not practicable to calculate the deferred taxes associated with the remittance of these earnings.
Aleris Corporation and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions.
The following table summarizes the change in uncertain tax positions, all of which are recorded in continuing operations:
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Balance at beginning of the period | $ | 2.8 | $ | 18.5 | $ | 17.6 | ||||||
Additions based on tax positions related to current year | — | — | 2.1 | |||||||||
Additions for tax positions of prior years | 0.5 | 2.2 | 0.4 | |||||||||
Reductions for tax positions of prior years | (0.5 | ) | (0.2 | ) | (0.5 | ) | ||||||
Settlements | (0.1 | ) | (17.7 | ) | (1.1 | ) | ||||||
Balance at end of period | $ | 2.7 | $ | 2.8 | $ | 18.5 | ||||||
The majority of the gross unrecognized tax benefits, if recognized, would affect the annual effective tax rate.
We recognize interest and penalties related to uncertain tax positions within “(Benefit from) provision for income taxes” in the Consolidated Statements of Operations. Interest of $0.3 and $0.2 was accrued on the uncertain tax positions as of December 31, 2014 and 2013, respectively. Total interest of $0.2, $0.3 and $1.5, was recognized as part of the (benefit from) provision for income taxes for the years ended December 31, 2014, 2013 and 2012, respectively. Accrued penalties are not significant.
The 2009 through 2013 tax years remain open to examination. The IRS completed an examination of our tax returns for years ended December 31, 2011 and 2010, which it commenced during the first quarter of 2013. The IRS adjustment to foreign deemed dividends resulted in a decrease in the reserve of $0.3. During the fourth quarter of 2013, a non-U.S. taxing jurisdiction commenced an examination of our tax returns for the years ended December 31, 2012, 2011, 2010 and 2009 that is anticipated to be completed within nine months of the reporting date.
14. COMMITMENTS AND CONTINGENCIES
Operating Leases
We lease various types of equipment and property, primarily office space at various locations and the equipment utilized in our operations. The future minimum lease payments required under operating leases that have initial or remaining non-cancellable lease terms in excess of one year, which may also contain renewal options, as of December 31, 2014, are as follows:
2015 | 2016 | 2017 | 2018 | 2019 | Thereafter | |||||||||||||||||||
Operating leases of continuing operations | $ | 2.6 | $ | 2.4 | $ | 1.6 | $ | 1.5 | $ | 1.4 | $ | 6.8 | ||||||||||||
Operating leases of discontinued operations | 3.0 | 2.5 | 2.0 | 0.6 | 0.2 | 0.1 | ||||||||||||||||||
Total operating leases | $ | 5.6 | $ | 4.9 | $ | 3.6 | $ | 2.1 | $ | 1.6 | $ | 6.9 | ||||||||||||
Rental expense for the years ended December 31, 2014, 2013 and 2012 was $15.1, $14.9 and $16.0, respectively. Of these amounts, $6.1, $7.0 and $7.4 have been included within “Income from discontinued operations, net of tax” in the Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012, respectively.
Purchase Obligations
Our non-cancellable purchase obligations are principally for materials, such as metals and fluxes used in our manufacturing operations, natural gas and other services. Our purchase obligations are long-term agreements to purchase goods or services that are enforceable and legally binding on us that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase obligations include the pricing of anticipated metal purchases using contractual metal prices or, where pricing is dependent upon the prevailing LME metal prices at the time of delivery, market metals prices as of December 31, 2014, as well as natural gas and electricity purchases using minimum contractual quantities and either contractual prices or prevailing rates. As a result of the variability in the pricing of many of our metals purchase obligations, actual amounts paid may vary from the
42
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
amounts shown below. As of December 31, 2014, amounts due under long-term non-cancellable purchase obligations are as follows:
2015 | 2016 | 2017 | 2018 | 2019 | Thereafter | |||||||||||||||||||
Purchase obligations of continuing operations | $ | 434.0 | $ | 256.3 | $ | 176.9 | $ | 21.2 | $ | 0.6 | $ | 4.8 | ||||||||||||
Purchase obligations of discontinued operations | 2.7 | 2.6 | 0.3 | 0.2 | — | — | ||||||||||||||||||
Total purchase obligations | $ | 436.7 | $ | 258.9 | $ | 177.2 | $ | 21.4 | $ | 0.6 | $ | 4.8 | ||||||||||||
Amounts purchased under long-term purchase obligations during the years ended December 31, 2014, 2013 and 2012 approximated previously projected amounts.
Employees
Approximately 65% of our U.S. employees (or 51% including U.S. employees from discontinued operations) and substantially all of our non-U.S. employees are covered by collective bargaining agreements.
Environmental Proceedings
Our operations are subject to environmental laws and regulations governing air emissions, wastewater discharges, the handling, disposal and remediation of hazardous substances and wastes and employee health and safety. These laws can impose joint and several liabilities for releases or threatened releases of hazardous substances upon statutorily defined parties, including us, regardless of fault or the lawfulness of the original activity or disposal. Given the changing nature of environmental legal requirements, we may be required, from time to time, to take environmental control measures at some of our facilities to meet future requirements.
We have been named as a potentially responsible party in certain proceedings initiated pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act and similar stated statutes and may be named a potentially responsible party in other similar proceedings in the future. It is not anticipated that the costs incurred in connection with the presently pending proceedings will, individually or in the aggregate, have a material adverse effect on our financial position, results of operations or cash flows.
We are performing operations and maintenance at two Superfund sites for matters arising out of past waste disposal activity associated with closed facilities. We are also under orders to perform environmental remediation by agencies in five states and one non-U.S. country at nine sites, including two sites within discontinued operations.
The changes in our accruals for environmental liabilities are as follows:
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Balance at the beginning of the period | $ | 35.3 | $ | 34.2 | $ | 36.5 | ||||||
Revisions and liabilities incurred | 2.2 | 1.1 | (1.8 | ) | ||||||||
Liabilities acquired | 12.0 | — | — | |||||||||
Payments | (1.9 | ) | (1.7 | ) | (0.6 | ) | ||||||
Translation and other charges | (0.9 | ) | 1.7 | 0.1 | ||||||||
Balance at the end of the period | 46.7 | 35.3 | 34.2 | |||||||||
Balance reclassified to liabilities of discontinued operations | (22.3 | ) | (21.3 | ) | (19.9 | ) | ||||||
Balance related to continuing operations | $ | 24.4 | $ | 14.0 | $ | 14.3 | ||||||
Our reserves for environmental remediation liabilities related to continuing operations have been classified as “Other long-term liabilities” and “Accrued liabilities” in the Consolidated Balance Sheet, of which $15.0 and $6.3, respectively, are subject to indemnification by third parties at December 31, 2014 and December 31, 2013. These amounts are in addition to our asset retirement obligations discussed in Note 8, “Asset Retirement Obligations,” and represent the most probable costs of remedial actions. We estimate the costs related to currently identified remedial actions will be paid out primarily over the next 10 years.
Legal Proceedings
We are party to routine litigation and proceedings as part of the ordinary course of business and do not believe that the outcome of any existing proceedings would have a material adverse effect on our financial position, results of operations or cash flows. We have established accruals for those loss contingencies, including litigation and environmental contingencies, for
43
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
which it has been determined that a loss is probable; none of such loss contingencies is material. For those loss contingencies, including litigation and environmental contingencies, which have been determined to be reasonably possible, an estimate of the possible loss or range of loss cannot be determined because the claims, amount claimed, facts or legal status are not sufficiently developed or advanced in order to make such a determination. While we cannot estimate the loss or range of loss at this time, we do not believe that the outcome of any of these existing proceedings would be material to our financial position, results of operations or cash flows.
15. SEGMENT AND GEOGRAPHIC INFORMATION
The Company’s operating structure provides the appropriate focus on our global rolled products markets, including aerospace, automotive, building and construction, and commercial and defense plate and heat exchangers, as well as on our regionally-based products and customers. We report three operating segments in our continuing operations (each of which is considered a reportable segment). The reportable segments are based on the organizational structure that is used by the Company’s chief operating decision maker to evaluate performance, make decisions on resource allocation and for which discrete financial information is available. The Company’s operating segments are North America, Europe and Asia Pacific.
North America
Our North America segment consists of 10 manufacturing facilities, including those facilities acquired in the April 2014 acquisition of Nichols Aluminum LLC (“Nichols”), located throughout the United States that produce rolled aluminum and coated products. Our North America segment produces rolled products for a wide variety of applications, including building and construction, distribution, transportation and other uses in the consumer durables general industrial segments. Except for depot sales, which are for standard size products, substantially all of our rolled aluminum products in the U.S. are manufactured to specific customer requirements, using direct-chill, continuous cast technologies that allow us to use and offer a variety of alloys and products for a number of end-uses. Specifically, those products are integrated into, among other applications, building products, truck trailers, gutters, appliances, cars and recreational vehicles.
Europe
Our Europe segment consists of two rolled aluminum products manufacturing facilities, located in Koblenz, Germany and Duffel, Belgium, as well as an aluminum casting plant in Germany that produces rolling slab used by our Europe segment. Our Europe segment produces rolled products for a wide variety of technically sophisticated applications, including aerospace plate and sheet, brazing sheet (clad aluminum material used for, among other applications, vehicle radiators and HVAC systems), automotive sheet, and heat treated plate for engineering uses, as well as for other uses in the transportation, construction and packaging industries. Substantially all of our rolled aluminum products in Europe are manufactured to specific customer requirements using direct-chill ingot cast technologies that allow us to use and offer a variety of alloys and products for a number of technically demanding end-uses.
Asia Pacific
Our Asia Pacific segment consists of a state-of-the art aluminum rolling mill in Zhenjiang City, Jiangsu Province in China that produces value-added plate products for the aerospace, engineering, distribution, building and construction and other transportation industry segments worldwide. We designed the mill with the capability to expand into other high value-added products with a wide variety of technically sophisticated applications. Construction of the mill was substantially complete in 2012 and limited production began in 2013. The mill continued to incur start-up expenses through December 31, 2014 as we increased volume to full production and obtained qualification from our aerospace customers. These start-up expenses represent operating losses incurred while the mill was ramping up production, as well as expenses associated with obtaining certification to produce aircraft plate. Substantially all of our rolled aluminum products in China are manufactured to specific customer requirements using direct-chill ingot cast technologies that allow us to use and offer a variety of alloys and products for a number of technically demanding end-uses. For the years ended December 31, 2014, 2013 and 2012, substantially all of Aleris Zhenjiang’s operating losses were categorized as start-up expenses, which are not included in management’s definition of segment performance, as defined below.
Measurement of Segment Income or Loss and Segment Assets
The accounting policies of the reportable segments are the same as those described in Note 2, “Summary of Significant Accounting Policies.” Our measure of profitability for our operating segments is referred to as segment income and loss. Segment income and loss includes gross profits, segment specific realized gains and losses on derivative financial instruments, segment specific other income and expense, segment specific selling, general and administrative (“SG&A”) expense and an allocation of certain regional and global functional SG&A expenses. Segment income and loss excludes provisions for and benefits from income taxes, restructuring items, interest, depreciation and amortization, unrealized and certain realized gains
44
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
and losses on derivative financial instruments, corporate general and administrative costs, start-up expenses, gains and losses on asset sales, currency exchange gains and losses on debt and certain other gains and losses. Intra-entity sales and transfers are recorded at market value. Consolidated cash, net capitalized debt costs, deferred tax assets and assets related to our headquarters offices are not allocated to the segments.
Reportable Segment Information
The following table shows our revenues, segment income (loss) and other financial information for each of our reportable segments:
North | Asia | Intra-entity | ||||||||||||||||||
America | Europe | Pacific | Revenues | Total | ||||||||||||||||
Year Ended December 31, 2014 | ||||||||||||||||||||
Revenues to external customers | $ | 1,558.0 | $ | 1,279.6 | $ | 44.8 | $ | 2,882.4 | ||||||||||||
Intra-entity revenues | 3.8 | 122.8 | 7.9 | $ | (134.5 | ) | — | |||||||||||||
Total revenues | 1,561.8 | 1,402.4 | 52.7 | (134.5 | ) | 2,882.4 | ||||||||||||||
Segment income | 94.6 | 147.6 | — | 242.2 | ||||||||||||||||
Segment assets | 790.9 | 701.9 | 433.3 | 1,926.1 | ||||||||||||||||
Payments for property, plant and equipment | 62.4 | 34.9 | 17.8 | 115.1 | ||||||||||||||||
Year Ended December 31, 2013 | ||||||||||||||||||||
Revenues to external customers | $ | 1,192.6 | $ | 1,317.7 | $ | 10.5 | $ | 2,520.8 | ||||||||||||
Intra-entity revenues | 2.2 | 125.5 | 10.2 | $ | (137.9 | ) | — | |||||||||||||
Total revenues | 1,194.8 | 1,443.2 | 20.7 | (137.9 | ) | 2,520.8 | ||||||||||||||
Segment income (loss) | 81.8 | 132.1 | (0.2 | ) | 213.7 | |||||||||||||||
Segment assets | 524.7 | 699.2 | 439.4 | 1,663.3 | ||||||||||||||||
Payments for property, plant and equipment | 44.1 | 41.0 | 92.5 | 177.6 | ||||||||||||||||
Year Ended December 31, 2012 | ||||||||||||||||||||
Revenues to external customers | $ | 1,297.7 | $ | 1,254.6 | $ | — | $ | 2,552.3 | ||||||||||||
Intra-entity revenues | 2.0 | 70.3 | — | $ | (72.3 | ) | — | |||||||||||||
Total revenues | 1,299.7 | 1,324.9 | — | (72.3 | ) | 2,552.3 | ||||||||||||||
Segment income | 117.6 | 144.6 | — | 262.2 | ||||||||||||||||
Payments for property, plant and equipment | 54.0 | 62.8 | 173.8 | 290.6 | ||||||||||||||||
45
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
Reconciliations of total reportable segment disclosures to our consolidated financial statements are as follows:
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Profits | ||||||||||||
Total segment income | $ | 242.2 | $ | 213.7 | $ | 262.2 | ||||||
Unallocated amounts: | ||||||||||||
Depreciation and amortization | (123.2 | ) | (98.8 | ) | (62.5 | ) | ||||||
Corporate general and administrative expenses, excluding depreciation, amortization and start-up expenses | (77.8 | ) | (50.4 | ) | (56.2 | ) | ||||||
Restructuring charges | (2.8 | ) | (5.0 | ) | (8.5 | ) | ||||||
Interest expense, net | (107.4 | ) | (97.4 | ) | (52.1 | ) | ||||||
Unallocated gains on derivative financial instruments | 5.4 | 2.1 | 12.0 | |||||||||
Unallocated currency exchange gains (losses) | 12.6 | (3.8 | ) | (0.2 | ) | |||||||
Start-up expenses | (24.5 | ) | (35.6 | ) | (28.5 | ) | ||||||
Other expense, net | (0.2 | ) | (2.0 | ) | (1.5 | ) | ||||||
(Loss) income from continuing operations before income taxes | $ | (75.7 | ) | $ | (77.2 | ) | $ | 64.7 | ||||
Payments for property, plant and equipment | ||||||||||||
Total payments for property, plant and equipment for reportable segments | $ | 115.1 | $ | 177.6 | $ | 290.6 | ||||||
Other payments for property, plant and equipment | 49.7 | 60.7 | 99.6 | |||||||||
Total consolidated payments for property, plant and equipment of continuing operations | $ | 164.8 | $ | 238.3 | $ | 390.2 | ||||||
Assets | ||||||||||||
Total assets for reportable segments | $ | 1,926.1 | $ | 1,663.3 | ||||||||
Assets of discontinued operations | 655.4 | 647.0 | ||||||||||
Unallocated assets | 280.4 | 162.6 | ||||||||||
Total consolidated assets | $ | 2,861.9 | $ | 2,472.9 | ||||||||
Geographic Information of Continuing Operations
The following table sets forth the geographic breakout of our revenues (based on customer location) and long-lived tangible assets (net of accumulated depreciation and amortization):
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Revenues | ||||||||||||
United States | $ | 1,489.6 | $ | 1,239.4 | $ | 1,351.7 | ||||||
International: | ||||||||||||
Asia | 200.8 | 132.1 | 154.9 | |||||||||
Europe | 981.9 | 1,027.7 | 944.9 | |||||||||
Mexico, Canada and South America | 192.2 | 116.6 | 95.0 | |||||||||
Other | 17.9 | 5.0 | 5.8 | |||||||||
Total international revenues | 1,392.8 | 1,281.4 | 1,200.6 | |||||||||
Consolidated revenues | $ | 2,882.4 | $ | 2,520.8 | $ | 2,552.3 | ||||||
December 31, | ||||||||
2014 | 2013 | |||||||
Long-lived tangible assets | ||||||||
United States | $ | 355.5 | $ | 273.1 | ||||
International: | ||||||||
Asia | 337.7 | 357.8 | ||||||
Europe | 249.7 | 273.6 | ||||||
Total international | 587.4 | 631.4 | ||||||
Consolidated total | $ | 942.9 | $ | 904.5 | ||||
46
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
16. ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
The following table presents the components of “Accumulated other comprehensive (loss) income” in the Consolidated Balance Sheet, which are items that change equity during the reporting period, but are not included in earnings:
Currency | Pension and other | |||||||||||
Total | translation | postretirement | ||||||||||
Balance at January 1, 2012 | $ | (29.0 | ) | $ | 1.8 | $ | (30.8 | ) | ||||
Current year currency translation adjustments | 9.7 | 10.8 | (1.1 | ) | ||||||||
Recognition of net actuarial losses | (55.7 | ) | — | (55.7 | ) | |||||||
Amortization of net actuarial losses and prior service cost | 0.7 | — | 0.7 | |||||||||
Deferred tax benefit on pension and other postretirement liability adjustments | 11.9 | — | 11.9 | |||||||||
Balance at December 31, 2012 | (62.4 | ) | 12.6 | (75.0 | ) | |||||||
Current year currency translation adjustments | 31.5 | 33.2 | (1.7 | ) | ||||||||
Recognition of net actuarial gains | 41.9 | — | 41.9 | |||||||||
Amortization of net actuarial losses and prior service cost, including recognition of settlement loss | 4.0 | — | 4.0 | |||||||||
Deferred tax expense on pension and other postretirement liability adjustments | (1.2 | ) | — | (1.2 | ) | |||||||
Balance at December 31, 2013 | 13.8 | 45.8 | (32.0 | ) | ||||||||
Current year currency translation adjustments | (82.5 | ) | (93.0 | ) | 10.5 | |||||||
Recognition of net actuarial losses and prior service cost | (109.0 | ) | — | (109.0 | ) | |||||||
Amortization of net actuarial losses and prior service cost | (0.9 | ) | — | (0.9 | ) | |||||||
Deferred tax benefit on pension and other postretirement liability adjustments | 17.7 | — | 17.7 | |||||||||
Balance at December 31, 2014 | $ | (160.9 | ) | $ | (47.2 | ) | $ | (113.7 | ) | |||
A summary of reclassifications out of accumulated other comprehensive (loss) income for the year ended December 31, 2014 is provided below:
Description of reclassifications out of accumulated other comprehensive (loss) income | Amount reclassified | ||||
Amortization of defined benefit pension and other postretirement benefit items: | |||||
Amortization of net actuarial losses and prior service cost, before tax | $ | (0.9 | ) | (a) | |
Deferred tax benefit on pension and other postretirement liability adjustments | 0.4 | ||||
Losses reclassified into earnings, net of tax | $ | (0.5 | ) | ||
(a) This component of accumulated other comprehensive (loss) income is included in the computation of net periodic benefit expense and net postretirement benefit expense (see Note 10, “Employee Benefit Plans,” for additional detail).
17. BUSINESS COMBINATIONS
On April 1, 2014, we acquired Nichols, a wholly owned subsidiary of Quanex Building Products Corporation, and a producer of aluminum sheet for the transportation, building and construction, machinery and equipment, consumer durables and electrical industries in North America for cash consideration of $107.4. The acquisition includes casting and finishing operations at two facilities in Davenport, Iowa, as well as finishing operations in Decatur, Alabama and Lincolnshire, Illinois.
We incurred transaction related expenses totaling approximately $2.9, which were recorded in “Selling, general and administrative expenses” in the Consolidated Statements of Operations.
47
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
The acquisition was accounted for as a business combination, with the purchase price allocated based on the fair values of the assets acquired and liabilities assumed. The following table presents the final allocation of the Nichols acquisition purchase price.
Accounts receivable | $ | 40.1 | ||
Inventories | 47.8 | |||
Property, plant and equipment | 71.3 | |||
Intangible assets | 2.9 | |||
Other assets | 11.7 | |||
Total assets acquired | 173.8 | |||
Accounts payable | 47.3 | |||
Accrued expenses and other liabilities | 22.0 | |||
Total liabilities assumed | 69.3 | |||
Net assets acquired | 104.5 | |||
Goodwill resulting from purchase | 2.9 | |||
Total consideration transferred | $ | 107.4 | ||
Recognized goodwill of $2.9 is attributable to anticipated synergies with Nichols, and is deductible for tax purposes. Intangible assets include estimated amounts recognized for the fair value of customer relationships. These intangible assets have a weighted average useful life of approximately 15 years. The valuation of the intangible assets acquired was based on management’s estimates, available information, and reasonable and supportable assumptions. The fair value of these assets was estimated using the income approach.
The liabilities assumed include $12.0 of estimated costs to perform environmental remediation at the Decatur, Alabama facility, which has been recognized based on the guidance in ASC 450, “Contingencies” and ASC 410-30, “Environmental Obligations.” Refer to Note 14, “Commitments and Contingencies,” for additional detail regarding environmental proceedings. The Company is indemnified for the costs of these remedial activities by Blue Point Capital Partners, the successor to the former owners of the Decatur facility, in an amount estimated to be $10.8 at the acquisition date, which has been recorded in “Prepaid expenses and other current assets” and “Other long-term assets” on the Consolidated Balance Sheet.
The operating results of Nichols were reported within the North America segment from the date of acquisition, which includes revenues of $350.1 during the year ended December 31, 2014. The pro forma effects of this acquisition would not materially impact the Company’s reported results for any period presented, and as a result no pro forma financial statements are included herein.
18. DISCONTINUED OPERATIONS
On October 17, 2014, we entered into a purchase and sale agreement with Signature Group Holdings (“Signature”) and certain of its affiliates to sell our North American and European recycling and specification alloys businesses. These businesses include substantially all of the operations and assets previously reported in the Recycling and Specification Alloys North America and Recycling and Specification Alloys Europe segments. On February 27, 2015, the transaction was completed, and we received $496.2 of cash, subject to a post-closing adjustment for working capital, and $5.0 of cash and 25,000 shares of Signature’s preferred stock have been placed in escrow to secure our indemnification obligations under the agreement. A gain on the sale will be recorded in the first quarter of 2015. Our operating results for the year ended December 31, 2014 included transaction costs of $13.7 in connection with the sale. The majority of these costs consisted of consulting and professional fees associated with preparing for and executing the transaction.
On December 17, 2014, we entered into a sale and purchase agreement with Sankyo Tateyama, a Japanese building products and extrusions manufacturer to sell the extrusions business. This business includes substantially all of the operations and assets previously reported in the Extrusions segment. On March 1, 2015, the transaction was completed, and we received approximately €29.6 (or equivalent to approximately $33.5) of cash, subject to a post-closing adjustment for working capital. Our operating results for the year ended December 31, 2014 included transaction costs of $5.0 in connection with the sale. The majority of these costs consisted of consulting and professional fees associated with preparing for and executing the transaction.
The operations of the recycling and specification alloys the extrusions businesses have been reported as discontinued operations in the Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012 and the assets
48
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
and liabilities are reported in current and long-term assets and liabilities of discontinued operations in the Consolidated Balance Sheet as of December 31, 2014 and 2013. The results of the prior periods have been restated to reflect this presentation. Upon classification as held for sale, a loss of approximately $11.2 was recorded to reduce the net carrying value of the extrusions disposal group to its estimated fair value, less costs to sell, which represents a level 3 fair value measurement. Fair value was determined based on the sale price and other provisions of the sale and purchase agreement.
The following table reconciles the major classes of assets and liabilities of discontinued operations of the recycling and specification alloys and extrusions businesses to the assets held for sale that are presented separately in the Consolidated Balance Sheet:
December 31, | |||||||
2014 | 2013 | ||||||
Cash and cash equivalents | $ | 7.4 | $ | 8.8 | |||
Accounts receivable, net | 143.7 | 168.4 | |||||
Inventories | 225.2 | 189.2 | |||||
Other assets | 9.3 | 9.4 | |||||
Total Current Assets | $ | 385.6 | $ | 375.8 | |||
Property, plant and equipment, net | $ | 251.6 | $ | 253.3 | |||
Other long-term assets | 29.4 | 17.9 | |||||
Loss recognized on classification as held for sale | (11.2 | ) | — | ||||
Total Long-Term Assets | $ | 269.8 | $ | 271.2 | |||
Accounts payable | $ | 139.6 | $ | 137.5 | |||
Accrued and other liabilities | 46.2 | 57.8 | |||||
Current portion of long-term debt | 10.1 | 5.7 | |||||
Total Current Liabilities | $ | 195.9 | $ | 201.0 | |||
Accrued pension benefits | 117.5 | 97.3 | |||||
Other long-term liabilities | 38.9 | 39.0 | |||||
Total Long-Term Liabilities | $ | 156.4 | $ | 136.3 | |||
The following table reconciles the major line items constituting “Income from discontinued operations, net of tax” presented in the Consolidated Statements of Operations:
For the years ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Revenues | $ | 1,833.5 | $ | 1,811.7 | $ | 1,860.1 | |||||
Cost of sales | 1,718.8 | 1,705.3 | 1,726.8 | ||||||||
Selling, general and administrative expenses | 57.0 | 53.9 | 61.4 | ||||||||
Loss recognized on classification as held for sale | 11.2 | — | — | ||||||||
Other operating expense (income), net | 9.7 | 12.4 | 4.0 | ||||||||
Operating income from discontinued operations | 36.8 | 40.1 | 67.9 | ||||||||
Other expense (income), net | 0.6 | 1.6 | 0.2 | ||||||||
Income from discontinued operations before income taxes | 36.2 | 38.5 | 67.7 | ||||||||
Provision for income taxes | 2.0 | 11.6 | 19.6 | ||||||||
Income from discontinued operations, net of tax | $ | 34.2 | $ | 26.9 | $ | 48.1 | |||||
49
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
The following table provides the depreciation, capital expenditures and significant operating noncash items of the discontinued operations that are included in the Consolidated Statements of Cash Flows:
For the years ended December 31, | |||||||||||
2014 | 2013 | 2012 | |||||||||
Depreciation | $ | 34.4 | $ | 30.7 | $ | 22.3 | |||||
Payments for property, plant and equipment | (43.4 | ) | (50.0 | ) | (74.8 | ) | |||||
Loss recognized on classification as held for sale | 11.2 | — | — | ||||||||
19. SUPPLEMENTAL INFORMATION
Supplemental cash flow information is as follows:
For the years ended December 31, | ||||||||||||
2014 | 2013 | 2012 | ||||||||||
Cash payments for: | ||||||||||||
Interest | $ | 100.5 | $ | 99.5 | $ | 51.2 | ||||||
Income taxes | 9.2 | 37.2 | 8.6 | |||||||||
Non-cash financing activity associated with lease contracts | 4.9 | 6.6 | 2.0 | |||||||||
20. STOCKHOLDERS’ EQUITY AND REDEEMABLE PREFERRED STOCK
The following table shows changes in the number of our outstanding common shares:
Outstanding common shares | |||
Balance at January 1, 2012 | 31,031,871 | ||
Issuance associated with options exercised | 8,843 | ||
Issuance associated with vested restricted stock units | 56,558 | ||
Balance at December 31, 2012 | 31,097,272 | ||
Issuance associated with options exercised | 69,794 | ||
Issuance associated with vested restricted stock units | 51,698 | ||
Issuance upon conversion of Exchangeable Notes | 10,300 | ||
Balance at December 31, 2013 | 31,229,064 | ||
Issuance associated with options exercised | 3,434 | ||
Issuance associated with vested restricted stock units | 47,808 | ||
Issuance upon conversion of Exchangeable Notes | 1,207 | ||
Balance at December 31, 2014 | 31,281,513 | ||
Our capital structure includes 5,000 shares of Aleris International Series A exchangeable preferred stock (the “Redeemable Preferred Stock”) with a liquidation preference of one thousand dollars per share and a par value of $0.01 per share. The Redeemable Preferred Stock accrues dividends at 8.0% per annum (payable semi-annually on January 15 and July 15 if and when declared by Aleris International’s Board). All shares of Redeemable Preferred Stock were issued on June 1, 2010 to Oaktree Capital Management, L.P., on behalf of the Oaktree Funds, certain investment funds managed by affiliates of Apollo Management Holdings, L.P., and Sankaty Advisors, LLC, on behalf of the investment funds advised by it, in exchange for $5.0. The Redeemable Preferred Stock is subject to mandatory redemption on June 1, 2015, and is currently exchangeable, at the holder’s option, prior to redemption, into our common stock on a per share dollar exchange ratio of $18.45 at December 31, 2014, subject to adjustment. The Redeemable Preferred Stock is classified as “Redeemable noncontrolling interest” (temporary equity) because its terms include a mandatory redemption feature on a fixed date for a fixed price.
50
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
21. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
On February 9, 2011 and October 23, 2012, Aleris International issued the 7 5/8% Senior Notes and the 7 7/8% Senior Notes, respectively. Aleris Corporation, the direct parent of Aleris International, and certain of its subsidiaries (the “Guarantor Subsidiaries”) are guarantors of the indebtedness under the Senior Notes. Aleris Corporation and each of the Guarantor Subsidiaries have fully and unconditionally guaranteed (subject, in the case of the Guarantor Subsidiaries, to customary release provisions as described below), on a joint and several basis, to pay principal and interest related to the Senior Notes and Aleris International and each of the Guarantor Subsidiaries are directly or indirectly 100% owned subsidiaries of Aleris Corporation. For purposes of complying with the reporting requirements of Aleris International and the Guarantor Subsidiaries, presented below are condensed consolidating financial statements of Aleris Corporation, Aleris International, the Guarantor Subsidiaries, and those other subsidiaries of Aleris Corporation that are not guaranteeing the indebtedness under the Senior Notes (the “Non-Guarantor Subsidiaries”). The condensed consolidating balance sheets are presented as of December 31, 2014 and 2013. The condensed consolidating statements of comprehensive (loss) income and cash flows are presented for the years ended December 31, 2014, 2013 and 2012.
The guarantee of a Guarantor Subsidiary will be automatically and unconditionally released and discharged in the event of:
▪ | any sale of the Guarantor Subsidiary or of all or substantially all of its assets; |
▪ | a Guarantor Subsidiary being designated as an “unrestricted subsidiary” in accordance with the indentures governing the Senior Notes; |
▪ | the release or discharge of a Guarantor Subsidiary from its guarantee under the ABL Facility or other indebtedness that resulted in the obligation of the Guarantor Subsidiary under the indentures governing the Senior Notes; and |
▪ | the requirements for legal defeasance or covenant defeasance or discharge of the indentures governing the Senior Notes having been satisfied. |
Upon the completion of the sale of the recycling and specification alloys business on February 27, 2015, the guarantees of the Guarantor Subsidiaries that were sold were automatically and unconditionally released.
51
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
As of December 31, 2014 | ||||||||||||||||||||||||
Aleris Corporation (Parent) | Aleris International, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current Assets | ||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | — | $ | — | $ | 28.6 | $ | — | $ | 28.6 | ||||||||||||
Accounts receivable, net | — | — | 122.8 | 148.2 | — | 271.0 | ||||||||||||||||||
Inventories | — | — | 272.6 | 355.3 | — | 627.9 | ||||||||||||||||||
Deferred income taxes | — | — | 19.5 | 8.6 | — | 28.1 | ||||||||||||||||||
Prepaid expenses and other current assets | — | 0.6 | 14.8 | 29.5 | — | 44.9 | ||||||||||||||||||
Intercompany receivables | — | 86.4 | 65.4 | 27.6 | (179.4 | ) | — | |||||||||||||||||
Assets of discontinued operations - current | — | — | 131.1 | 254.5 | — | 385.6 | ||||||||||||||||||
Total Current Assets | — | 87.0 | 626.2 | 852.3 | (179.4 | ) | 1,386.1 | |||||||||||||||||
Property, plant and equipment, net | — | — | 336.6 | 606.3 | — | 942.9 | ||||||||||||||||||
Intangible assets, net | — | — | 28.1 | 15.9 | — | 44.0 | ||||||||||||||||||
Deferred income taxes | — | — | 15.8 | 130.9 | — | 146.7 | ||||||||||||||||||
Other long-term assets | — | 8.3 | 7.0 | 57.1 | — | 72.4 | ||||||||||||||||||
Intercompany receivables | — | 4.3 | — | — | (4.3 | ) | — | |||||||||||||||||
Investments in subsidiaries | 296.9 | 1,566.4 | 10.4 | — | (1,873.7 | ) | — | |||||||||||||||||
Assets of discontinued operations - non-current | — | — | 107.5 | 162.3 | — | 269.8 | ||||||||||||||||||
Total Assets | $ | 296.9 | $ | 1,666.0 | $ | 1,131.6 | $ | 1,824.8 | $ | (2,057.4 | ) | $ | 2,861.9 | |||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||
Current Liabilities | ||||||||||||||||||||||||
Accounts payable | $ | — | $ | 10.4 | $ | 131.2 | $ | 126.6 | $ | — | $ | 268.2 | ||||||||||||
Accrued liabilities | — | 32.7 | 73.1 | 77.5 | — | 183.3 | ||||||||||||||||||
Deferred income taxes | — | — | — | 6.2 | — | 6.2 | ||||||||||||||||||
Current portion of long-term debt | — | — | 0.3 | 3.0 | — | 3.3 | ||||||||||||||||||
Intercompany payables | — | 62.9 | 89.7 | 26.8 | (179.4 | ) | — | |||||||||||||||||
Liabilities of discontinued operations - current | — | — | 71.1 | 124.8 | — | 195.9 | ||||||||||||||||||
Total Current Liabilities | — | 106.0 | 365.4 | 364.9 | (179.4 | ) | 656.9 | |||||||||||||||||
Long-term debt | — | 1,257.4 | 0.2 | 217.3 | — | 1,474.9 | ||||||||||||||||||
Deferred income taxes | — | — | — | 0.4 | — | 0.4 | ||||||||||||||||||
Accrued pension benefits | — | — | 57.4 | 121.3 | — | 178.7 | ||||||||||||||||||
Accrued postretirement benefits | — | — | 46.4 | — | — | 46.4 | ||||||||||||||||||
Other long-term liabilities | — | — | 14.8 | 34.4 | — | 49.2 | ||||||||||||||||||
Intercompany payables | 4.3 | — | — | — | (4.3 | ) | — | |||||||||||||||||
Liabilities of discontinued operations - non-current | — | — | 18.9 | 137.5 | — | 156.4 | ||||||||||||||||||
Total Long-Term Liabilities | 4.3 | 1,257.4 | 137.7 | 510.9 | (4.3 | ) | 1,906.0 | |||||||||||||||||
Redeemable noncontrolling interest | — | 5.7 | — | — | — | 5.7 | ||||||||||||||||||
Total Aleris Corporation Equity | 292.6 | 296.9 | 628.5 | 948.3 | (1,873.7 | ) | 292.6 | |||||||||||||||||
Noncontrolling interest | — | — | — | 0.7 | — | 0.7 | ||||||||||||||||||
Total Liabilities and Equity | $ | 296.9 | $ | 1,666.0 | $ | 1,131.6 | $ | 1,824.8 | $ | (2,057.4 | ) | $ | 2,861.9 | |||||||||||
52
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
As of December 31, 2013 | ||||||||||||||||||||||||
Aleris Corporation (Parent) | Aleris International, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current Assets | ||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 3.7 | $ | — | $ | 50.1 | $ | (2.5 | ) | $ | 51.3 | |||||||||||
Accounts receivable, net | — | — | 74.0 | 134.5 | — | 208.5 | ||||||||||||||||||
Inventories | — | — | 173.0 | 321.2 | — | 494.2 | ||||||||||||||||||
Deferred income taxes | — | — | 0.2 | 5.7 | — | 5.9 | ||||||||||||||||||
Prepaid expenses and other current assets | — | 0.5 | 14.2 | 8.6 | — | 23.3 | ||||||||||||||||||
Intercompany receivables | — | 362.4 | 378.3 | 192.4 | (933.1 | ) | — | |||||||||||||||||
Assets of discontinued operations - current | — | — | 125.7 | 250.1 | — | 375.8 | ||||||||||||||||||
Total Current Assets | — | 366.6 | 765.4 | 962.6 | (935.6 | ) | 1,159.0 | |||||||||||||||||
Property, plant and equipment, net | — | — | 272.8 | 631.7 | — | 904.5 | ||||||||||||||||||
Intangible assets, net | — | — | 27.6 | 15.9 | — | 43.5 | ||||||||||||||||||
Deferred income taxes | — | — | — | 28.3 | — | 28.3 | ||||||||||||||||||
Other long-term assets | — | 12.3 | 3.0 | 51.1 | — | 66.4 | ||||||||||||||||||
Intercompany receivables | — | 3.4 | — | — | (3.4 | ) | — | |||||||||||||||||
Investments in subsidiaries | 371.8 | 1,510.6 | 117.7 | — | (2,000.1 | ) | — | |||||||||||||||||
Assets of discontinued operations - non-current | — | — | 105.3 | 165.9 | — | 271.2 | ||||||||||||||||||
Total Assets | $ | 371.8 | $ | 1,892.9 | $ | 1,291.8 | $ | 1,855.5 | $ | (2,939.1 | ) | $ | 2,472.9 | |||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||
Current Liabilities | ||||||||||||||||||||||||
Accounts payable | $ | — | $ | 0.4 | $ | 63.3 | $ | 104.5 | $ | (2.5 | ) | $ | 165.7 | |||||||||||
Accrued liabilities | — | 21.7 | 37.0 | 85.2 | — | 143.9 | ||||||||||||||||||
Deferred income taxes | — | — | — | 3.2 | — | 3.2 | ||||||||||||||||||
Current portion of long-term debt | — | — | 0.3 | 2.2 | — | 2.5 | ||||||||||||||||||
Intercompany payables | — | 462.4 | 371.7 | 99.0 | (933.1 | ) | — | |||||||||||||||||
Liabilities of discontinued operations - current | — | — | 84.0 | 117.0 | — | 201.0 | ||||||||||||||||||
Total Current Liabilities | — | 484.5 | 556.3 | 411.1 | (935.6 | ) | 516.3 | |||||||||||||||||
Long-term debt | — | 1,030.9 | 0.5 | 195.4 | — | 1,226.8 | ||||||||||||||||||
Deferred income taxes | — | — | 0.2 | 1.5 | — | 1.7 | ||||||||||||||||||
Accrued pension benefits | — | — | 33.8 | 97.4 | — | 131.2 | ||||||||||||||||||
Accrued postretirement benefits | — | — | 40.9 | — | — | 40.9 | ||||||||||||||||||
Other long-term liabilities | — | — | 14.4 | 30.9 | — | 45.3 | ||||||||||||||||||
Intercompany payables | 3.4 | — | — | — | (3.4 | ) | — | |||||||||||||||||
Liabilities of discontinued operations - non-current | — | — | 18.6 | 117.7 | — | 136.3 | ||||||||||||||||||
Total Long-Term Liabilities | 3.4 | 1,030.9 | 108.4 | 442.9 | (3.4 | ) | 1,582.2 | |||||||||||||||||
Redeemable noncontrolling interest | — | 5.7 | — | — | — | 5.7 | ||||||||||||||||||
Total Aleris Corporation Equity | 368.4 | 371.8 | 627.1 | 1,001.2 | (2,000.1 | ) | 368.4 | |||||||||||||||||
Noncontrolling interest | — | — | — | 0.3 | — | 0.3 | ||||||||||||||||||
Total Liabilities and Equity | $ | 371.8 | $ | 1,892.9 | $ | 1,291.8 | $ | 1,855.5 | $ | (2,939.1 | ) | $ | 2,472.9 | |||||||||||
53
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
For the year ended December 31, 2014 | ||||||||||||||||||||||||
Aleris Corporation (Parent) | Aleris International, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Revenues | $ | — | $ | — | $ | 1,559.5 | $ | 1,403.9 | $ | (81.0 | ) | $ | 2,882.4 | |||||||||||
Cost of sales | — | — | 1,480.8 | 1,235.1 | (81.0 | ) | 2,634.9 | |||||||||||||||||
Gross profit | — | — | 78.7 | 168.8 | — | 247.5 | ||||||||||||||||||
Selling, general and administrative expenses | — | 13.6 | 112.2 | 96.1 | — | 221.9 | ||||||||||||||||||
Restructuring charges | — | — | 1.6 | 1.2 | — | 2.8 | ||||||||||||||||||
(Gains) losses on derivative financial instruments | — | — | (2.3 | ) | 13.2 | — | 10.9 | |||||||||||||||||
Other operating expense (income), net | — | — | 0.5 | (0.3 | ) | — | 0.2 | |||||||||||||||||
Operating (loss) income | — | (13.6 | ) | (33.3 | ) | 58.6 | — | 11.7 | ||||||||||||||||
Interest expense, net | — | — | 90.6 | 16.8 | — | 107.4 | ||||||||||||||||||
Other income, net | — | (2.0 | ) | (5.9 | ) | (12.1 | ) | — | (20.0 | ) | ||||||||||||||
Equity in net earnings of affiliates | (87.1 | ) | (98.7 | ) | (0.8 | ) | — | 186.6 | — | |||||||||||||||
Income (loss) before income taxes | 87.1 | 87.1 | (117.2 | ) | 53.9 | (186.6 | ) | (75.7 | ) | |||||||||||||||
Benefit from income taxes | — | — | (35.7 | ) | (93.8 | ) | — | (129.5 | ) | |||||||||||||||
Income (loss) from continuing operations | 87.1 | 87.1 | (81.5 | ) | 147.7 | (186.6 | ) | 53.8 | ||||||||||||||||
Income from discontinued operations, net of tax | — | — | 30.1 | 4.1 | — | 34.2 | ||||||||||||||||||
Net income (loss) | 87.1 | 87.1 | (51.4 | ) | 151.8 | (186.6 | ) | 88.0 | ||||||||||||||||
Net income from discontinued operations attributable to noncontrolling interest | — | — | — | 0.9 | — | 0.9 | ||||||||||||||||||
Net income (loss) attributable to Aleris Corporation | $ | 87.1 | $ | 87.1 | $ | (51.4 | ) | $ | 150.9 | $ | (186.6 | ) | $ | 87.1 | ||||||||||
Comprehensive (loss) income | $ | (87.6 | ) | $ | (87.6 | ) | $ | (90.8 | ) | $ | 16.5 | $ | 162.8 | $ | (86.7 | ) | ||||||||
Comprehensive income attributable to noncontrolling interest | — | — | — | 0.9 | — | 0.9 | ||||||||||||||||||
Comprehensive (loss) income attributable to Aleris Corporation | $ | (87.6 | ) | $ | (87.6 | ) | $ | (90.8 | ) | $ | 15.6 | $ | 162.8 | $ | (87.6 | ) | ||||||||
54
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
For the year ended December 31, 2013 | ||||||||||||||||||||||||
Aleris Corporation (Parent) | Aleris International, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Revenues | $ | — | $ | — | $ | 1,192.7 | $ | 1,329.1 | $ | (1.0 | ) | $ | 2,520.8 | |||||||||||
Cost of sales | — | — | 1,137.4 | 1,200.9 | (1.0 | ) | 2,337.3 | |||||||||||||||||
Gross profit | — | — | 55.3 | 128.2 | — | 183.5 | ||||||||||||||||||
Selling, general and administrative expenses | — | 0.2 | 91.6 | 92.3 | — | 184.1 | ||||||||||||||||||
Restructuring charges | — | — | 1.6 | 3.4 | — | 5.0 | ||||||||||||||||||
Gains on derivative financial instruments | — | — | (17.9 | ) | (13.6 | ) | — | (31.5 | ) | |||||||||||||||
Other operating expense (income), net | — | — | 0.7 | (1.0 | ) | — | (0.3 | ) | ||||||||||||||||
Operating (loss) income | — | (0.2 | ) | (20.7 | ) | 47.1 | — | 26.2 | ||||||||||||||||
Interest expense, net | — | — | 88.9 | 8.5 | — | 97.4 | ||||||||||||||||||
Other (income) expense, net | — | — | (3.8 | ) | 9.8 | — | 6.0 | |||||||||||||||||
Equity in net losses (earnings) of affiliates | 37.1 | 36.9 | (1.1 | ) | — | (72.9 | ) | — | ||||||||||||||||
(Loss) income before income taxes | (37.1 | ) | (37.1 | ) | (104.7 | ) | 28.8 | 72.9 | (77.2 | ) | ||||||||||||||
Benefit from income taxes | — | — | (10.7 | ) | (3.5 | ) | — | (14.2 | ) | |||||||||||||||
(Loss) income from continuing operations | (37.1 | ) | (37.1 | ) | (94.0 | ) | 32.3 | 72.9 | (63.0 | ) | ||||||||||||||
Income from discontinued operations, net of tax | — | — | 14.0 | 12.9 | — | 26.9 | ||||||||||||||||||
Net (loss) income | (37.1 | ) | (37.1 | ) | (80.0 | ) | 45.2 | 72.9 | (36.1 | ) | ||||||||||||||
Net income from discontinued operations attributable to noncontrolling interest | — | — | — | 1.0 | — | 1.0 | ||||||||||||||||||
Net (loss) income attributable to Aleris Corporation | $ | (37.1 | ) | $ | (37.1 | ) | $ | (80.0 | ) | $ | 44.2 | $ | 72.9 | $ | (37.1 | ) | ||||||||
Comprehensive income (loss) | $ | 39.1 | $ | 39.1 | $ | (41.0 | ) | $ | 80.3 | $ | (77.4 | ) | $ | 40.1 | ||||||||||
Comprehensive income attributable to noncontrolling interest | — | — | — | 1.0 | — | 1.0 | ||||||||||||||||||
Comprehensive income (loss) attributable to Aleris Corporation | $ | 39.1 | $ | 39.1 | $ | (41.0 | ) | $ | 79.3 | $ | (77.4 | ) | $ | 39.1 | ||||||||||
55
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
For the year ended December 31, 2012 | ||||||||||||||||||||||||
Aleris Corporation (Parent) | Aleris International, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Revenues | $ | — | $ | — | $ | 1,299.8 | $ | 1,254.7 | $ | (2.2 | ) | $ | 2,552.3 | |||||||||||
Cost of sales | — | — | 1,179.7 | 1,042.9 | (2.2 | ) | 2,220.4 | |||||||||||||||||
Gross profit | — | — | 120.1 | 211.8 | — | 331.9 | ||||||||||||||||||
Selling, general and administrative expenses | — | 0.4 | 101.6 | 105.5 | — | 207.5 | ||||||||||||||||||
Restructuring charges | — | — | 1.9 | 6.6 | — | 8.5 | ||||||||||||||||||
Losses (gains) on derivative financial instruments | — | — | 3.8 | (7.4 | ) | — | (3.6 | ) | ||||||||||||||||
Other operating expense, net | — | — | 0.5 | 0.1 | — | 0.6 | ||||||||||||||||||
Operating (loss) income | — | (0.4 | ) | 12.3 | 107.0 | — | 118.9 | |||||||||||||||||
Interest expense, net | — | — | 51.5 | 0.6 | — | 52.1 | ||||||||||||||||||
Other (income) expense, net | — | — | (5.2 | ) | 7.3 | — | 2.1 | |||||||||||||||||
Equity in net earnings of affiliates | (107.5 | ) | (107.9 | ) | (2.3 | ) | — | 217.7 | — | |||||||||||||||
Income (loss) before income taxes | 107.5 | 107.5 | (31.7 | ) | 99.1 | (217.7 | ) | 64.7 | ||||||||||||||||
(Benefit from) provision for income taxes | — | — | (15.9 | ) | 21.7 | — | 5.8 | |||||||||||||||||
Income (loss) from continuing operations | 107.5 | 107.5 | (15.8 | ) | 77.4 | (217.7 | ) | 58.9 | ||||||||||||||||
Income from discontinued operations, net of tax | — | — | 18.7 | 29.4 | — | 48.1 | ||||||||||||||||||
Net income | 107.5 | 107.5 | 2.9 | 106.8 | (217.7 | ) | 107.0 | |||||||||||||||||
Net loss from continuing operations attributable to noncontrolling interest | — | — | — | (1.8 | ) | — | (1.8 | ) | ||||||||||||||||
Net income from discontinued operations attributable to noncontrolling interest | — | — | — | 1.3 | — | 1.3 | ||||||||||||||||||
Net income attributable to Aleris Corporation | $ | 107.5 | $ | 107.5 | $ | 2.9 | $ | 107.3 | $ | (217.7 | ) | $ | 107.5 | |||||||||||
Comprehensive income (loss) | $ | 74.1 | $ | 74.1 | $ | (15.6 | ) | $ | 91.8 | $ | (150.8 | ) | $ | 73.6 | ||||||||||
Comprehensive loss attributable to noncontrolling interest | — | — | — | (0.5 | ) | — | (0.5 | ) | ||||||||||||||||
Comprehensive income (loss) attributable to Aleris Corporation | $ | 74.1 | $ | 74.1 | $ | (15.6 | ) | $ | 92.3 | $ | (150.8 | ) | $ | 74.1 | ||||||||||
56
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
For the year ended December 31, 2014 | |||||||||||||||||||||||
Aleris Corporation (Parent) | Aleris International, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Net cash provided (used) by operating activities | $ | 1.0 | $ | (108.9 | ) | $ | (32.6 | ) | $ | 147.4 | $ | (6.9 | ) | $ | — | ||||||||
Investing activities | |||||||||||||||||||||||
Payments for property, plant and equipment | — | — | (81.9 | ) | (82.9 | ) | — | (164.8 | ) | ||||||||||||||
Net proceeds from the disposal of property, plant and equipment | — | — | 1.5 | 1.3 | — | 2.8 | |||||||||||||||||
Purchase of a business | — | — | (77.5 | ) | (29.9 | ) | — | (107.4 | ) | ||||||||||||||
Disbursements of intercompany loans | — | (15.0 | ) | (17.8 | ) | (101.0 | ) | 133.8 | — | ||||||||||||||
Repayments from intercompany loans | — | 15.0 | 17.0 | 87.0 | (119.0 | ) | — | ||||||||||||||||
Equity contributions in subsidiaries | — | (201.3 | ) | — | — | 201.3 | — | ||||||||||||||||
Return of investments in subsidiaries | — | 68.9 | 98.2 | — | (167.1 | ) | — | ||||||||||||||||
Other | — | — | 0.3 | 3.8 | — | 4.1 | |||||||||||||||||
Net cash used by investing activities | — | (132.4 | ) | (60.2 | ) | (121.7 | ) | 49.0 | (265.3 | ) | |||||||||||||
Financing activities | |||||||||||||||||||||||
Proceeds from the ABL Facility | — | 389.0 | — | 45.0 | — | 434.0 | |||||||||||||||||
Payments on the ABL Facility | — | (165.0 | ) | — | (45.0 | ) | — | (210.0 | ) | ||||||||||||||
Proceeds from Zhenjiang Revolver | — | — | — | 24.4 | — | 24.4 | |||||||||||||||||
Net (payments on) proceeds from other long-term debt | — | — | (0.5 | ) | 0.2 | — | (0.3 | ) | |||||||||||||||
Dividends paid | — | — | (68.9 | ) | (107.6 | ) | 176.5 | — | |||||||||||||||
Proceeds from intercompany loans | — | 96.0 | 5.0 | 32.8 | (133.8 | ) | — | ||||||||||||||||
Repayments on intercompany loans | — | (82.0 | ) | (5.0 | ) | (32.0 | ) | 119.0 | — | ||||||||||||||
Proceeds from intercompany equity contributions | — | — | 162.2 | 39.1 | (201.3 | ) | — | ||||||||||||||||
Other | (1.0 | ) | (0.4 | ) | — | (0.6 | ) | — | (2.0 | ) | |||||||||||||
Net cash (used) provided by financing activities | (1.0 | ) | 237.6 | 92.8 | (43.7 | ) | (39.6 | ) | 246.1 | ||||||||||||||
Effect of exchange rate differences on cash and cash equivalents | — | — | — | (4.9 | ) | — | (4.9 | ) | |||||||||||||||
Net decrease in cash and cash equivalents | — | (3.7 | ) | — | (22.9 | ) | 2.5 | (24.1 | ) | ||||||||||||||
Cash and cash equivalents at beginning of period | — | 3.7 | — | 58.9 | (2.5 | ) | 60.1 | ||||||||||||||||
Cash and cash equivalents at end of period | — | — | — | 36.0 | — | 36.0 | |||||||||||||||||
Cash and cash equivalents included within assets of discontinued operations - current | — | — | — | (7.4 | ) | — | (7.4 | ) | |||||||||||||||
Cash and cash equivalents of continuing operations | $ | — | $ | — | $ | — | $ | 28.6 | $ | — | $ | 28.6 | |||||||||||
57
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
For the year ended December 31, 2013 | |||||||||||||||||||||||
Aleris Corporation (Parent) | Aleris International, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Net cash provided by operating activities | $ | 132.1 | $ | 66.2 | $ | 119.6 | $ | 13.5 | $ | (299.5 | ) | $ | 31.9 | ||||||||||
Investing activities | |||||||||||||||||||||||
Payments for property, plant and equipment | — | — | (73.3 | ) | (165.0 | ) | — | (238.3 | ) | ||||||||||||||
Net proceeds from the disposal of property, plant and equipment | — | — | 0.9 | 2.0 | — | 2.9 | |||||||||||||||||
Disbursements of intercompany loans | — | (60.0 | ) | (50.8 | ) | — | 110.8 | — | |||||||||||||||
Repayments from intercompany loans | — | 60.0 | 66.0 | 0.9 | (126.9 | ) | — | ||||||||||||||||
Equity contributions in subsidiaries | — | (510.7 | ) | (16.8 | ) | — | 527.5 | — | |||||||||||||||
Return of investments in subsidiaries | 180.9 | 292.6 | — | — | (473.5 | ) | — | ||||||||||||||||
Net cash provided (used) by investing activities | 180.9 | (218.1 | ) | (74.0 | ) | (162.1 | ) | 37.9 | (235.4 | ) | |||||||||||||
Financing activities | |||||||||||||||||||||||
Proceeds from the ABL Facility | — | 10.3 | — | 20.0 | — | 30.3 | |||||||||||||||||
Payments on the ABL Facility | — | (10.3 | ) | — | (20.0 | ) | — | (30.3 | ) | ||||||||||||||
Proceeds from Zhenjiang Term Loans | — | — | — | 0.2 | — | 0.2 | |||||||||||||||||
Proceeds from Zhenjiang Revolver | — | — | — | 4.1 | — | 4.1 | |||||||||||||||||
Payments on Zhenjiang Revolver | — | — | — | (4.1 | ) | — | (4.1 | ) | |||||||||||||||
Net payments on other long-term debt | — | — | — | (5.2 | ) | — | (5.2 | ) | |||||||||||||||
Redemption of noncontrolling interest | — | — | — | (8.9 | ) | — | (8.9 | ) | |||||||||||||||
Dividends paid | (313.0 | ) | (313.0 | ) | (292.6 | ) | (166.0 | ) | 771.6 | (313.0 | ) | ||||||||||||
Proceeds from intercompany loans | — | — | — | 110.8 | (110.8 | ) | — | ||||||||||||||||
Repayments on intercompany loans | — | — | (0.9 | ) | (126.0 | ) | 126.9 | — | |||||||||||||||
Proceeds from intercompany equity contributions | — | — | 247.9 | 279.6 | (527.5 | ) | — | ||||||||||||||||
Other | — | (3.8 | ) | — | (0.9 | ) | — | (4.7 | ) | ||||||||||||||
Net cash (used) provided by financing activities | (313.0 | ) | (316.8 | ) | (45.6 | ) | 83.6 | 260.2 | (331.6 | ) | |||||||||||||
Effect of exchange rate differences on cash and cash equivalents | — | — | — | 2.3 | — | 2.3 | |||||||||||||||||
Net decrease in cash and cash equivalents | — | (468.7 | ) | — | (62.7 | ) | (1.4 | ) | (532.8 | ) | |||||||||||||
Cash and cash equivalents at beginning of period | — | 472.4 | — | 121.6 | (1.1 | ) | 592.9 | ||||||||||||||||
Cash and cash equivalents at end of period | — | 3.7 | — | 58.9 | (2.5 | ) | 60.1 | ||||||||||||||||
Cash and cash equivalents included within assets of discontinued operations - current | — | — | — | (8.8 | ) | — | (8.8 | ) | |||||||||||||||
Cash and cash equivalents of continuing operations | $ | — | $ | 3.7 | $ | — | $ | 50.1 | $ | (2.5 | ) | $ | 51.3 | ||||||||||
58
ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(in millions, except share and per share data)
For the year ended December 31, 2012 | |||||||||||||||||||||||
Aleris Corporation (Parent) | Aleris International, Inc. | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Net cash provided by operating activities | $ | 1.5 | $ | 32.1 | $ | 84.6 | $ | 36.1 | $ | (1.8 | ) | $ | 152.5 | ||||||||||
Investing activities | |||||||||||||||||||||||
Payments for property, plant and equipment | — | — | (122.1 | ) | (268.1 | ) | — | (390.2 | ) | ||||||||||||||
Purchase of a Business | — | — | — | (21.5 | ) | — | (21.5 | ) | |||||||||||||||
Net (payments on) proceeds from the disposal of property, plant and equipment | — | — | (0.3 | ) | 0.8 | — | 0.5 | ||||||||||||||||
Disbursements of intercompany loans | — | — | (19.1 | ) | — | 19.1 | — | ||||||||||||||||
Repayments from intercompany loans | — | — | 57.6 | 0.8 | (58.4 | ) | — | ||||||||||||||||
Equity contributions in subsidiaries | — | (116.2 | ) | (5.9 | ) | — | 122.1 | — | |||||||||||||||
Other | — | — | 0.1 | — | — | 0.1 | |||||||||||||||||
Net cash used by investing activities | — | (116.2 | ) | (89.7 | ) | (288.0 | ) | 82.8 | (411.1 | ) | |||||||||||||
Financing activities | |||||||||||||||||||||||
Proceeds from the issuance of 7 7/8% Senior Notes, net of discount of $8.7 | — | 491.3 | — | — | — | 491.3 | |||||||||||||||||
Proceeds from Zhenjiang Term Loans | — | — | — | 130.9 | — | 130.9 | |||||||||||||||||
Net payments on other long-term debt | — | — | — | (0.2 | ) | — | (0.2 | ) | |||||||||||||||
Debt issuance costs | — | (1.8 | ) | — | (0.5 | ) | — | (2.3 | ) | ||||||||||||||
Dividends paid | — | — | — | (2.1 | ) | 2.1 | — | ||||||||||||||||
Proceeds from intercompany loans | — | — | — | 19.1 | (19.1 | ) | — | ||||||||||||||||
Repayments on intercompany loans | — | — | (0.8 | ) | (57.6 | ) | 58.4 | — | |||||||||||||||
Proceeds from intercompany equity contributions | — | — | 5.9 | 116.2 | (122.1 | ) | — | ||||||||||||||||
Other | (1.5 | ) | (0.1 | ) | — | (0.9 | ) | — | (2.5 | ) | |||||||||||||
Net cash (used) provided by financing activities | (1.5 | ) | 489.4 | 5.1 | 204.9 | (80.7 | ) | 617.2 | |||||||||||||||
Effect of exchange rate differences on cash and cash equivalents | — | — | — | 2.9 | — | 2.9 | |||||||||||||||||
Net increase (decrease) in cash and cash equivalents | — | 405.3 | — | (44.1 | ) | 0.3 | 361.5 | ||||||||||||||||
Cash and cash equivalents at beginning of period | — | 67.1 | — | 165.7 | (1.4 | ) | 231.4 | ||||||||||||||||
Cash and cash equivalents at end of period | — | 472.4 | — | 121.6 | (1.1 | ) | 592.9 | ||||||||||||||||
Cash and cash equivalents included within assets of discontinued operations - current | — | — | — | (10.0 | ) | — | (10.0 | ) | |||||||||||||||
Cash and cash equivalents of continuing operations | $ | — | $ | 472.4 | $ | — | $ | 111.6 | $ | (1.1 | ) | $ | 582.9 | ||||||||||
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)(1) Financial Statements
See Item 8. – “Financial Statements and Supplementary Data.”
(a)(2) Financial Statement Schedules
We have omitted financial statement schedules because they are not required or are not applicable, or the required information is shown in the consolidated financial statements or the notes to the consolidated financial statements. See Item 8. – “Financial Statements and Supplementary Data.”
(a)(3) Exhibits
The exhibits that are incorporated by reference in this Amendment, or are filed with this Amendment, are listed in the EXHIBIT INDEX following the signature page of this Report.
59
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ALERIS CORPORATION | ||
November 3, 2015 | By: | /s/ Eric M. Rychel |
Eric M. Rychel Executive Vice President, Chief Financial Officer and Treasurer | ||
60
Exhibit Index | ||
Exhibit | ||
Number | Description | |
2.1 | First Amended Joint Plan of Reorganization of Aleris International, Inc. and its Affiliated Debtors, as modified, Mar. 19, 2010 (filed as Exhibit 2.1 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
2.2 | Purchase and Sale Agreement, dated October 17, 2014, among Aleris Corporation, Aleris International, Inc., Aleris Aluminum Netherlands B.V., Aleris Deutschland Holding GmbH, Aleris Holding Canada Limited, Dutch Aluminum C.V., Aleris Deutschland Vier GmbH Co KG, SGH Acquisition Holding, Inc., Evergreen Holding Germany GmbH and Signature Group Holdings, Inc. (filed as Exhibit 2.1 to Aleris Corporation’s Current Report on Form 8-K (File No. 333-185443) filed October 23, 2014, and incorporated herein by reference). |
2.3 | Backstop Agreement, dated October 17, 2014, between Aleris Corporation and Signature Group Holdings, Inc. (filed as Exhibit 2.2 to Aleris Corporation’s Current Report on Form 8-K (File No. 333-185443) filed on October 23, 2014, and incorporated herein by reference). |
3.1 | Certificate of Incorporation of Aleris Corporation, as amended. |
3.2 | Amended and Restated Bylaws of Aleris Holding Company (n/k/a Aleris Corporation). |
4.1 | Stockholders Agreement, dated June 1, 2010, between Aleris Holding Company and the stockholders of Aleris Holding Company named therein (filed as Exhibit 10.9 to Aleris International, Inc.’s Registration Statement Form on S-4 (File No. 333-173180), and incorporated herein by reference). |
4.2 | Registration Rights Agreement, dated June 1, 2010, among Aleris Holding Company and the parties listed therein (filed as Exhibit 10.3.1 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
4.3 | Indenture, dated as of February 9, 2011, by and among Aleris International, Inc., the guarantors named therein, and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
4.4 | Registration Rights Agreement, dated as of February 9, 2011, by and among Aleris International, Inc., the guarantors named therein, and Merrill, Lynch, Pierce, Fenner & Smith Incorporated, Barclays Capital Inc., Deutsche Bank Securities Inc., J.P. Morgan Securities LLC, UBS Securities LLC, KeyBanc Capital Markets Inc., and Moelis & Company LLC, as Initial Purchasers (filed as Exhibit 4.2 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
4.5 | Form of 7 5/8 % Senior Notes due 2018 (included as part of Exhibit 4.1 above). |
4.6 | Indenture, dated as of October 23, 2012, among the Company, the guarantors named therein and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to Aleris International, Inc.’s Current Report on Form 8-K (File No. 333-173170) filed October 25, 2012, and incorporated herein by reference). |
4.7 | Registration Rights Agreement, dated as of October 23, 2012, among the Company, the guarantors named therein and J.P. Morgan Securities LLC, Barclays Capital Inc., Deutsche Bank Securities Inc., Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Keybanc Capital Markets Inc., Moelis & Company LLC and UBS Securities LLC (filed as Exhibit 4.3 to Aleris International, Inc.’s Current Report on Form 8-K (File No. 333-173170) filed on October 25, 2012, and incorporated herein by reference). |
4.8 | Form of 7 7/8% Senior Notes due 2020 (included as part of Exhibit 4.6 above). |
4.9 | First Supplemental Indenture, dated as of December 12, 2012, among Aleris Corporation, Aleris International, Inc., the guarantors named therein and U.S. Bank National Association, as trustee, to the Indenture dated as of February 9, 2011, among the Company, the guarantors named therein, and U.S. Bank National Association, as trustee (filed as Exhibit 4.9 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-185443), and incorporated herein by reference). |
61
Exhibit | ||
Number | Description | |
4.10 | First Supplemental Indenture, dated as of December 12, 2012, among Aleris Corporation, Aleris International, Inc., the guarantors named therein and U.S. Bank National Association, as trustee, to the Indenture dated as of October, 23, 2012, among the Company, the guarantors named therein, and U.S. Bank National Association, as trustee (filed as Exhibit 4.10 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-185443), and incorporated herein by reference). |
10.1.1 | Amended and Restated Credit Agreement dated June 30, 2011 among Aleris International, Inc., each subsidiary of Aleris International, Inc. a party thereto, the lenders party thereto from time to time, Bank of America, N.A., as Administrative Agent, J.P. Morgan Securities LLC, as Syndication Agent, RBS Business Capital, as a Senior Managing Agent, Bank of America, N.A., Deutsche Bank AG New York Branch and JPMorgan Chase Bank, N.A., as Co-Collateral Agents, Barclays Capital, Deutsche Bank AG New York Branch and UBS Securities LLC, as Co-Documentation Agents (filed as Exhibit 10.1 to Aleris International, Inc.’s Amendment No. 4 to Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.2 | U.S. Security Agreement, dated as of June 1, 2010, by and among Aleris International, Inc. and certain of its subsidiaries, as assignors, and Bank of America, as administrative agent, relating to the Credit Agreement (filed as Exhibit 10.3 to Aleris International, Inc.’s Amendment No. 1 to Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.3 | Syndicated Facility Agreement, dated as of August 8, 2012, between Aleris Dinsheng Aluminum (Zhenjiang) Co. Ltd., as borrower, with: Bank of China Limited, Shenjiang Branch, as lead arranger; Agricultural Bank of China Limited, Zhenjiang Branch, as secondary arranger; Bank of China Limited, Zhenjiang Jingkou Sub-Branch, as facility agent and security agent; and Bank of China Limited, Zhenjiang Jingkou Sub-Branch, Agricultural Bank of China Limited, Zhenjian Runshou Sub-Branch, and Shanghai Pudong Development Bank, Luwan Sub-Branch (as lenders) (English translation) (filed as Exhibit 10.3 to Aleris Corporation’s Annual Report on Form 10-K (File No. 333-185443) filed March 5, 2013, and incorporated herein by reference). |
10.4† | Employment Agreement dated as of June 1, 2010 by and among Aleris International, Inc., Aleris Holding Company and Steven J. Demetriou (filed as Exhibit 10.5 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.4.1† | Letter Agreement dated April 5, 2011 between Aleris International, Inc. and Steven J. Demetriou amending Mr. Demetriou’s Employment Agreement and Restricted Stock Unit Award Agreement (filed as Exhibit 10.2 to Aleris International, Inc.’s Quarterly Report on Form 10-Q (File No. 333-173180) filed May 13, 2011 and incorporated herein by reference). |
10.4.2† | Amendment 2 to Employment Agreement by and among Aleris Corporation and Steven J. Demetriou (filed as Exhibit 10.4.1 to Aleris International, Inc.’s Amendment No. 3 to Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.5† | Employment Agreement dated as of June 1, 2010 by and among Aleris International, Inc., the Company and Sean M. Stack (filed as Exhibit 10.6 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.5.1† | Letter Agreement dated April 5, 2011, between Aleris International, Inc. and Sean M. Stack amending Mr. Stack’s Employment Agreement and Restricted Stock Unit Award Agreement (filed as Exhibit 10.3 to Aleris International, Inc.’s Quarterly Report on Form 10-Q (File No. 333-173180) filed May 13, 2011, and incorporated herein by reference). |
10.5.2† | Amendment 2 to Employment Agreement by and among Aleris Corporation and Sean M. Stack (filed as Exhibit 10.5.2 to Aleris Corporation’s Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-173721), and incorporated herein by reference). |
10.6† | Form of Employment Agreement dated as of June 1, 2010 by and among Aleris International, Inc., Aleris Holding Company and each of Christopher R. Clegg and Thomas W. Weidenkopf (filed as Exhibit 10.7 to |
62
Exhibit | ||
Number | Description | |
Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference).
10.6.1† | Form of Amendment of Form of Employment Agreement by and among Aleris Corporation and each of Christopher R. Clegg and Thomas W. Weidenkopf (filed as Exhibit 10.6.1 to Aleris Corporation’s Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-173721), and incorporated herein by reference). |
10.6.2† | Form of Amendment to Employment Agreement by and among Aleris International, Inc. (with respect to Messrs. Stack, Clegg and Weidenkopf), Aleris Switzerland GmbH (with respect to Mr. Baan), Aleris Corporation and each of Sean M. Stack, Christopher R. Clegg, Thomas W. Weidenkopf and Roeloff IJ. Baan (filed as Exhibit 10.6 to Aleris Corporation’s Current Report on Form 8-K (File No. 333-173721) filed January 22, 2014, and incorporated herein by reference). |
10.7† | Aleris Holding Company (n/k/a Aleris Corporation) 2010 Equity Incentive Plan, effective as of June 1, 2010 (filed as Exhibit 10.8 to Aleris International’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.7.1† | Amendment to Aleris Holding Company (n/k/a Aleris Corporation) 2010 Equity Incentive Plan, effective as of September 15, 2013 (filed as Exhibit 10.5 to Aleris Corporation’s Quarterly Report on Form 10-Q (File No. 333-185443), filed November 7, 2013, and incorporated herein by reference). |
10.7.2† | Amendment to Aleris Holding Company (n/k/a Aleris Corporation) 2010 Equity Incentive Plan, effective as of January 15, 2014 (filed as Exhibit 10.1 to Aleris Corporation’s Current Report on Form 8-K (File No. 333-185443), filed January 22, 2014, and incorporated herein by reference). |
10.7.3† | Amendment to Aleris Holding Company (n/k/a Aleris Corporation) 2010 Equity Incentive Plan, effective as of January 21, 2014 (filed as Exhibit 10.2 to Aleris Corporation’s Current Report on Form 8-K (File No. 333-185443), filed January 22, 2014, and incorporated herein by reference). |
10.8† | Aleris Holding Company (n/k/a Aleris Corporation) 2010 Equity Incentive Plan Stock Option Agreement dated June 1, 2010 between Aleris Holding Company and Steven J. Demetriou (filed as Exhibit 10.10 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.8.1† | Amendment 1 to the Aleris Corporation 2010 Equity Incentive Plan Stock Option Agreement between Aleris Corporation and Steven J. Demetriou (filed as Exhibit 10.9.1 to Aleris International, Inc.’s Amendment No. 3 to Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.8.2† | Amendment 2 to the Aleris Corporation 2010 Equity Incentive Plan Stock Option Agreement between Aleris Corporation and Steven J. Demetriou (filed as Exhibit 10.8.2 to Aleris Corporation’s Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-173721), and incorporated herein by reference). |
10.8.3† | Partial Option Cancellation Amendment Agreement, dated as of September 15, 2013, by and between Steven Demetriou and Aleris Corporation (filed as Exhibit 10.2 to Aleris Corporation’s Quarterly Report on Form 10-Q (File No. 333-173721) filed November 7, 2013, and incorporated herein by reference). |
10.9† | Form of Aleris Holding Company (n/k/a Aleris Corporation) 2010 Equity Incentive Plan Stock Option Agreement, dated as of June 1, 2010 between Aleris Holding Company and each of Sean M. Stack, Christopher R. Clegg and Thomas W. Weidenkopf (filed as Exhibit 10.11 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.9.1† | Form of Amendment 1 to the Aleris Corporation 2010 Equity Incentive Plan Stock Option Agreement between Aleris Corporation and each of Sean M. Stack, Christopher R. Clegg and Thomas W. Weidenkopf(filed as Exhibit 10.10.1 to Aleris International, Inc.’s Amendment No. 3 to Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.9.2† | Form of Amendment 2 to the Aleris Corporation 2010 Equity Incentive Plan Stock Option Agreement between Aleris Corporation and each of Sean M. Stack, Christopher R. Clegg and Thomas W. Weidenkopf |
63
Exhibit | ||
Number | Description | |
(filed as Exhibit 10.9.2 to Aleris Corporation’s Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-173721), and incorporated herein by reference).
10.10† | Form of Aleris Corporation 2010 Equity Incentive Plan Management Restricted Stock Unit Award Agreement (filed as Exhibit 10.1 to Aleris Corporation’s Current Report on Form 8-K/A (File No. 333-185443, SEC Accession No. 0001518587-14-000028) filed April 21, 2014, and incorporated herein by reference). |
10.11† | Aleris Corporation 2010 Equity Incentive Plan 2013 Stock Option Agreement, effective as of September 15, 2013, between Aleris Corporation and Steven Demetriou (filed as exhibit 10.3 to Aleris Corporation’s Quarterly Report on Form 10-Q (File No. 33-185443) filed November 7, 2013, and incorporated herein by reference). |
10.12† | Aleris Holding Company (n/k/a Aleris Corporation) 2010 Equity Incentive Plan Restricted Stock Unit Agreement dated June 1, 2010 between Aleris Holding Company and Steven J. Demetriou (filed as Exhibit 10.14 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.12.1† | Amendment 2 to the Aleris Corporation 2010 Equity Incentive Plan Restricted Stock Unit Agreement between Aleris Corporation and Steven J. Demetriou (filed as Exhibit 10.12.1 to Aleris Corporation’s Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-173721), and incorporated herein by reference). |
10.13† | Aleris Holding Company (n/k/a Aleris Corporation) 2010 Equity Incentive Plan Restricted Stock Unit Agreement, dated as of June 1, 2010 between Aleris Holding Company and Sean M. Stack (filed as Exhibit 10.15 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.13.1† | Amendment 2 to the Aleris Corporation 2010 Equity Incentive Plan Restricted Stock Unit Agreement between Aleris Corporation and Sean M. Stack (filed as Exhibit 10.13.1 to Aleris Corporation’s Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-185443), and incorporated herein by reference). |
10.14† | Form of Aleris Holding Company (n/k/a Aleris Corporation) 2010 Equity Incentive Plan Restricted Stock Unit Agreement dated as of June 1, 2010 between Aleris Holding Company and each of Christopher R. Clegg and Thomas W. Weidenkopf (filed as Exhibit 10.14 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.14.1† | Form of Amendment 1 to the Aleris Corporation 2010 Equity Incentive Plan Restricted Stock Unit Agreement between Aleris Corporation and each of Christopher R. Clegg and Thomas W. Weidenkopf (filed as Exhibit 10.14.1 to Aleris Corporation’s Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-173721), and incorporated herein by reference). |
10.15† | Form of Aleris Corporation 2010 Equity Incentive Plan Management Stock Option Award Agreement (filed as Exhibit 10.2 to Aleris Corporation’s Current Report on Form 8-K/A (File No. 333-185443, SEC Accession No. 0001518587-14-000028) filed on April 21, 2014, and incorporated herein by reference). |
10.16† | Aleris Corporation 2010 Equity Incentive Plan Restricted 2013 Stock Unit Agreement, effective as of September 15, 2013, between Aleris Corporation and Steven Demetriou (filed as Exhibit 10.4 to Aleris Corporation’s Quarterly Report on Form 10-Q (File No. 333-185443) filed November 7, 2013, and incorporated herein by reference). |
10.17† | Aleris International, Inc. Deferred Compensation and Retirement Benefit Restoration Plan, effective January 1, 2009 (filed as Exhibit 10.19 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.18† | Aleris Cash Balance Plan, as amended and restated as of June 1, 2010 (filed as Exhibit 10.20 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
64
Exhibit | ||
Number | Description | |
10.19† | Eric Rychel Letter Agreement, dated June 21, 2012, from Aleris International, Inc. (filed as Exhibit 10.19 to Aleris Corporation’s Annual Report on Form 10-K (File No. 333-185443) filed on March 27, 2015, and incorporated herein by reference). |
10.20† | Aleris Switzerland GmbH, Neuhausen am Rheinfall, effective as of April 1, 2008, with respect to pension benefits for Roeland Baan (filed as Exhibit 10.22 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.21† | Form of Aleris Holding Company (n/k/a Aleris Corporation) 2010 Equity Incentive Plan Director Stock Option Award Agreement with each of Scott L. Graves and Brian Laibow (filed as Exhibit 10.23 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.21.1† | Form of Amendment 2 to the Aleris Corporation 2010 Equity Incentive Plan Director Stock Option Award Agreement with each of Scott L. Graves and Brian Laibow (filed as Exhibit 10.21.2 to Aleris Corporation’s Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-173721), and incorporated herein by reference). |
10.22† | Form of Aleris Holding Company (n/k/a Aleris Corporation) 2010 Equity Incentive Plan Director Restricted Stock Unit Award Agreement with each of Scott L. Graves and Brian Laibow (filed as Exhibit 10.24 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.23† | Form of Aleris Holding Company (n/k/a Aleris Corporation) 2010 Equity Incentive Plan Director Stock Option Award Agreement with each of Christopher M. Crane, Lawrence Stranghoener, and Emily Alexander (n/k/a Emily Stephens)(filed as Exhibit 10.25 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.23.1† | Form of Amendment 2 to the Aleris Corporation 2010 Equity Incentive Plan Director Stock Option Award Agreement with each of Christopher M. Crane, Lawrence Stranghoener, and Emily Stephens (filed as Exhibit 10.23.2 to Aleris Corporation’s Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-173721), and incorporated herein by reference). |
10.24† | Form of Aleris Holding Company (n/k/a Aleris Corporation) 2010 Equity Incentive Plan Director Restricted Stock Unit Award Agreement with each of Christopher M. Crane, Lawrence Stranghoener, and Emily Stephens (filed as Exhibit 10.26 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.25† | Aleris Holding Company (n/k/a Aleris Corporation) 2010 Equity Incentive Plan Director Restricted Stock Award Agreement with G. Richard Wagoner, Jr. (filed as Exhibit 10.27 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.26† | Employment Agreement dated as of June 1, 2010 by and among Aleris Switzerland GmbH and Roelof IJ. Baan (filed as Exhibit 10.28 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.26.1† | Amendment 1 to Employment Agreement by and among Aleris Switzerland GmbH and Roelof IJ. Baan (filed as Exhibit 10.26.1 to Aleris Corporation’s Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-173721), and incorporated herein by reference). |
10.26.2† | Amendment No. 3 to the Employment Agreement, dated as of June 1, 2010, as amended, by and among Aleris Switzerland GmbH, Roeland Baan (also known as Roelof IJ. Baan), and for the limited purposes specified therein, Aleris Corporation, dated October 30, 2014 (filed as Exhibit 10.1 to Aleris Corporation’s Current Report on Form 8-K (File No. 333-185443) filed October 30, 2014, and incorporated herein by reference). |
10.27† | Aleris Holding Company (n/k/a Aleris Corporation) 2010 Equity Incentive Plan Stock Option Agreement dated as of June 1, 2010 between Aleris Holding Company and Roelof IJ. Baan (filed as Exhibit 10.29 to |
65
Exhibit | ||
Number | Description | |
Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference).
10.27.1† | Amendment 2 to the Aleris Corporation 2010 Equity Incentive Plan Stock Option Agreement between Aleris Corporation and Roelof IJ. Baan (filed as Exhibit 10.27.2 to Aleris Corporation’s Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-173721), and incorporated herein by reference). |
10.28† | Aleris Holding Company (n/k/a Aleris Corporation) 2010 Equity Incentive Plan Restricted Stock Unit Agreement as of June 1, 2010 between Aleris Holding Company and Roelof IJ. Baan (filed as Exhibit 10.30 to Aleris International, Inc.’s Registration Statement on Form S-4 (File No. 333-173180), and incorporated herein by reference). |
10.29 | Revolving Loan Facility Agreement, dated as of August 22, 2012, between Aleris Dingsheng Aluminum (Zhenjiang) Co. Ltd., as borrower, and Bank of China Limited, Zhenjiang Jingkou Sub-Branch, as the lender (English translation) (filed as Exhibit 10.29 to Aleris Corporation’s Annual Report on Form 10-K (File No. 333-185443) filed March 5, 2013 and incorporated herein by reference). |
10.29.1 | Amendment Agreement to Facility Agreement, dated as of March 25, 2013, between Aleris Aluminum (Zhenjiang) Co. Ltd., as borrower, and Bank of China Limited, Zhenjiang Jingkou Sub-Branch, as the lender (English translation) (filed as Exhibit 10.1 to Aleris Corporation’s Quarterly Report on Form 10-Q (File No. 333-185443) filed May 9, 2013, and incorporated herein by reference). |
10.30† | Form of Aleris Corporation 2010 Equity Incentive Plan Director Restricted Stock Unit Award Agreement(filed as Exhibit 10.30 to Aleris Corporation’s Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-173721), and incorporated herein by reference). |
10.31† | Form of Aleris Corporation 2010 Equity Incentive Plan Director Stock Option Award Agreement (filed as Exhibit 10.31 to Aleris Corporation’s Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-173721), and incorporated herein by reference). |
10.32† | Aleris Corporation 2010 Equity Incentive Plan 2014 Stock Option Agreement, dated January 15, 2014, between Aleris Corporation and Steven Demetriou (filed as Exhibit 10.3 to Aleris Corporation’s Current Report on Form 8-K (File No. 333-185443) filed January 22, 2014, and incorporated herein by reference). |
10.33† | Form of Aleris Corporation 2010 Equity Incentive Plan Director Stock Option Award Agreement Amendment (regarding equitable dividend adjustments) (filed as Exhibit 10.34 to Aleris Corporation’s Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-173721), and incorporated herein by reference.) |
10.34† | Form of Aleris Corporation 2010 Equity Incentive Plan Stock Option Award Agreement Amendment (regarding equitable dividend adjustments) (filed as Exhibit 10.35 to Aleris Corporation’s Amendment No. 9 to Registration Statement on Form S-1 (File No. 333-185443), and incorporated herein by reference). |
10.35† | Form of Aleris Corporation 2010 Equity Incentive Plan Executive Stock Option Agreement (filed as Exhibit 10.4 to Aleris Corporation’s Current Report on Form 8-K (File No. 333-173721) filed January 22, 2014, and incorporated herein by reference). |
10.36† | Form of Aleris Corporation 2010 Equity Incentive Plan Executive Restricted Stock Unit Agreement (filed as Exhibit 10.5 to Aleris Corporation’s Current Report on Form 8-K (File No. 333-173721) filed January 22, 2014, and incorporated herein by reference). |
10.37† | Form of Aleris Corporation 2010 Equity Incentive Plan Non-Employee Director Restricted Stock Unit Agreement (filed as Exhibit 10.7 to Aleris Corporation’s Current Report on Form 8-K (File No. 333-185443) filed January 22, 2014, and incorporated herein by reference). |
10.38† | Amended and Restated Employment Agreement, dated and effective as of September 15, 2013, by and among Aleris International, Inc., Aleris Corporation and Steven Demetriou (filed as Exhibit 10.1 to Aleris Corporation’s Quarterly Report on Form 10-Q (File No. 333-185443) filed November 7, 2013, and incorporated herein by reference). |
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Exhibit | ||
Number | Description | |
10.39† | Form of Executive Employment Agreement with Aleris International, Inc. and the Company (filed as Exhibit 10.39 to Aleris Corporation’s Annual Report on Form 10-K (File No. 333-185443) filed on March 27, 2015, and incorporated herein by reference). |
21.1 | List of Subsidiaries of Aleris Corporation as of December 31, 2014 (filed as Exhibit 21.1 to Aleris Corporation’s Annual Report on Form 10-K (File No. 333-185443) filed on March 27, 2015, and incorporated herein by reference). |
31.1* | Rule 13a-14(a)/15d-14(a) Certification of Aleris Corporation’s Chief Executive Officer. |
31.2* | Rule 13a-14(a)/15d-14(a) Certification of Aleris Corporation’s Chief Financial Officer. |
32.1* | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS | XBRL Instance Document (filed as Exhibit 101.INS to Aleris Corporation’s Annual Report on Form 10-K (File No. 333-185443) filed on March 27, 2015, and incorporated herein by reference). |
101.SCH | XBRL Taxonomy Extension Schema (filed as Exhibit 101.SCH to Aleris Corporation’s Annual Report on Form 10-K (File No. 333-185443) filed on March 27, 2015, and incorporated herein by reference). |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase (filed as Exhibit 101.CAL to Aleris Corporation’s Annual Report on Form 10-K (File No. 333-185443) filed on March 27, 2015, and incorporated herein by reference). |
101.DEF | XBRL Taxonomy Extension Definition Linkbase (filed as Exhibit 101.DEF to Aleris Corporation’s Annual Report on Form 10-K (File No. 333-185443) filed on March 27, 2015, and incorporated herein by reference). |
101.LAB | XBRL Taxonomy Extension Label Linkbase (filed as Exhibit 101.LAB to Aleris Corporation’s Annual Report on Form 10-K (File No. 333-185443) filed on March 27, 2015, and incorporated herein by reference). |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase (filed as Exhibit 101.PRE to Aleris Corporation’s Annual Report on Form 10-K (File No. 333-185443) filed on March 27, 2015, and incorporated herein by reference). |
________________________________________
† | Management contract or compensatory plan or arrangement |
* | Filed herewith. |
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