GLOBAL BRASS & COPPER HOLDINGS, INC. - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - March 8, 2016

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8-K - 8-K - GLOBAL BRASS & COPPER HOLDINGS, INC.brss-q4x2015x8xk.htm


Exhibit 99.1


FOR IMMEDIATE RELEASE

GLOBAL BRASS AND COPPER HOLDINGS, INC. REPORTS FOURTH QUARTER 2015 AND FISCAL YEAR 2015 FINANCIAL RESULTS

Fourth Quarter Highlights
•
Volume of 120.8 million pounds, an increase of 1.1% year-over-year;
•
Adjusted sales of $124.4 million, a decrease of 2.1% year-over-year;
•
Adjusted EBITDA of $20.2 million, a decrease of 3.8% year-over-year;
•
Adjusted diluted earnings per common share of $0.28, flat compared to the prior year period;
•
Net sales of $323.4 million, a decrease of 17.1% year-over-year;
•
Net income attributable to GBC of $3.5 million, which includes a $1.8 million lower of cost or market charge and a $0.8 million loss on extinguishment of debt; and
•
Diluted earnings per common share of $0.16, an increase of 23.1% versus $0.13 per diluted share in the prior year period.

Full Year Highlights
•
Volume of 511.9 million pounds, a decrease of 1.6% year-over-year;
•
Adjusted sales of $534.3 million, a decrease of 1.5% year-over-year;
•
Adjusted EBITDA of $121.1 million, an increase of 10.4% year-over-year;
•
Adjusted diluted earnings per common share of $2.20 versus $1.77 in the prior year period;
•
Net sales of $1,506.2 million, a decrease of 12.0% year-over-year;
•
Net income attributable to GBC of $35.6 million, which includes a $4.8 million gain on the sale of our Dowa Joint Venture, a $6.6 million lower of cost or market charge and a $3.1 million loss on extinguishment of debt;
•
Diluted earnings per common share of $1.66, an increase of 11.4% versus $1.49 per diluted share in the prior year period; and
•
The Company is providing 2016 full-year guidance.


Schaumburg, IL., March 8, 2016 Global Brass and Copper Holdings, Inc. (NYSE:BRSS) (“GBC” or the “Company”) today announced the results for the fourth quarter and full year ended December 31, 2015.

Fourth Quarter Operating Results
Volume for the fourth quarter of 2015 increased by 1.1% to 120.8 million pounds compared to 119.5 million pounds in the fourth quarter of 2014. Volumes increased as a result of higher coinage demand, partially offset by lower demand in the munitions and industrial machinery and equipment markets.

“We are pleased with our full year 2015 financial results, which were in line with our expectations and included meaningful earnings growth, improved margins, and $89 million of cash generated from our operating activities, all while in a soft volume environment. In 2015, we improved our operating performance and helped build a strong foundation for growth. We continue to differentiate ourselves in this volatile macroeconomic environment as commodity prices decline. Despite the fact that copper prices declined more than 25% year-over-year in Q4 alone, our balanced book approach effectively insulates our earnings from these fluctuations in commodity prices, as evidenced by our stable margins through this volatile period. We maintained steady

1


margins because we are a metals converter, not a metals producer,” said John Wasz, GBC’s President and Chief Executive Officer.

Mr. Wasz concluded, “As we enter 2016, we plan to further execute on our balanced book, strategic pricing and asset management practices to create future value for our shareholders and strengthen our competitive positioning. We remain committed to driving improved cost performance throughout our businesses as well as enhancing the value proposition we provide to our customers by delivering superior quality and service. We remain in a strong financial position and are ready to capitalize on opportunities as market conditions dictate.”

Net sales for the fourth quarter of 2015 decreased to $323.4 million from $390.3 million in the fourth quarter of 2014. The decline in net sales was primarily attributable to lower metal prices and lower sales of unprocessed metals. On the other hand, adjusted sales, our non-GAAP financial measure that reflects the value added premium over metal replacement cost recovery, only decreased by 2.1% to $124.4 million from $127.1 million in 2014. A reconciliation of net sales to adjusted sales is provided later in this press release.

Net income attributable to Global Brass and Copper Holdings, Inc. for the fourth quarter of 2015 was $3.5 million, or $0.16 per diluted share, compared to $2.8 million, or $0.13 per diluted share, for the same period of 2014. The increase was primarily due to higher gross profit (with favorable movement in our derivative contracts, partially offset by a non-cash lower of cost or market inventory charge) and a reduction in interest expense, partially offset by a $0.8 million loss on the extinguishment of debt.

Adjusted EBITDA, our non-GAAP measure of consolidated profitability, was $20.2 million for the fourth quarter of 2015, a decrease of 3.8% compared to 2014. The slight decline was the result of unfavorable changes in product mix, partially offset by lower manufacturing conversion costs and higher volume. A reconciliation of net income attributable to GBC to Adjusted EBITDA is provided later in this press release.

Adjusted diluted earnings per common share, another one of our non-GAAP measures, was $0.28 for the fourth quarter of 2015 and remained unchanged versus the prior year comparable period. A reconciliation of diluted net income attributable to GBC per common share to adjusted diluted earnings per common share is provided later in this press release.
Full Year Operating Results
Volume for the full year 2015 decreased by 1.6% to 511.9 million pounds compared to 520.4 million pounds in 2014. Volumes decreased as a result of lower demand in the munitions market, partially offset by higher coinage demand.

Net sales for the full year 2015 decreased to $1,506.2 million from $1,711.4 million in 2014. The decline in net sales was primarily attributable to decreased metal prices and lower sales of unprocessed metals. On the other hand, adjusted sales decreased by 1.5% to $534.3 million from $542.6 million in 2014. A reconciliation of net sales to adjusted sales is provided later in this press release.

Net income attributable to Global Brass and Copper Holdings, Inc. for the full year 2015 was $35.6 million, or $1.66 per diluted share, compared to $31.7 million, or $1.49 per diluted share, for 2014. The increase was primarily due to an increase in gross profit and the gain on the sale of the investment in our joint venture, partially offset by an increase in selling, general and administrative expenses and the loss on extinguishment of debt.

Adjusted EBITDA was $121.1 million for the full year 2015, an increase of 10.4% compared to 2014. The increase was the result of decreased manufacturing conversion costs and the gain on the sale of the investment in our joint venture, partially offset by an increase in selling, general and administrative expenses. A reconciliation of net income attributable to GBC to Adjusted EBITDA is provided later in this press release.


2


Adjusted diluted earnings per common share was $2.20 for the full year 2015 as compared to $1.77 in 2014. A reconciliation of diluted net income attributable to GBC per common share to adjusted diluted earnings per common share is provided later in this press release.

Cash Flow and Leverage
During the fourth quarter of 2015, we generated $28.8 million of cash from operating activities largely due to improved earnings and decreased investment in working capital. During the full year of 2015, we generated $88.8 million of cash from operating activities, driven by earnings and working capital improvements.

After purchasing $29.7 million of our debt in the open market, we ended the fourth quarter with cash of $83.5 million, $345.3 million of senior secured notes, and $196.9 million of availability under our asset-based revolving loan facility. We purchased an additional $31.0 million of our debt through the end of February 2016.

2016 Guidance
For the full-year 2016, GBC expects:

•
Shipment volumes to range from 510 million pounds to 545 million pounds; and
•
Adjusted EBITDA to range from $115 million to $125 million.

Conference Call
The Company will host a teleconference and webcast at 8:30 a.m. (Central Time) on Wednesday, March 9, 2016 to review the results. To listen to the live call, individuals can access the webcast at the investor relations portion of the Company’s website at http://ir.gbcholdings.com, or by dialing 855-878-0250, passcode #55345185 approximately 10 minutes before the scheduled start time. For those who cannot listen to the live broadcast, replays will be available shortly after the call on the Company’s website.

About Global Brass and Copper
Global Brass and Copper Holdings, Inc. through its wholly-owned principal operating subsidiary, Global Brass and Copper, Inc., is a leading, value-added converter, fabricator, processor and distributor of specialized non-ferrous products in North America. We engage in metal melting and casting, rolling, drawing, extruding, welding and stamping to fabricate finished and semi-finished alloy products from processed scrap, virgin metals and other refined metals. Our products include a wide range of sheet, strip, foil, rod, tube and fabricated metal component products that we sell under the Olin Brass, Chase Brass and A.J. Oster brand names. Our products are used in a variety of applications across diversified markets, including the building and housing, munitions, automotive, transportation, coinage, electronics/electrical components, industrial machinery and equipment and general consumer markets.

CONTACT:
 
Robert T. Micchelli
 
 
Global Brass and Copper Holdings, Inc.
 
 
Chief Financial Officer
 
 
(847) 240-4700
 
 
 
 
 
David Beré
 
 
FTI Consulting
 
 
(312) 252-4035

3


Global Brass and Copper Holdings, Inc.
Consolidated Statements of Operations (Unaudited)

 
 
Three Months Ended
December 31,
 
Year Ended
December 31,
(In millions, except per share data)
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Net sales
 
$
323.4

 
$
390.3

 
$
1,506.2

 
$
1,711.4

Cost of sales
 
(289.9
)
 
(358.1
)
 
(1,335.9
)
 
(1,546.8
)
Gross profit
 
33.5

 
32.2

 
170.3

 
164.6

Selling, general and administrative expenses
 
(19.7
)
 
(19.4
)
 
(83.2
)
 
(76.9
)
Operating income
 
13.8

 
12.8

 
87.1

 
87.7

Interest expense
 
(9.3
)
 
(9.9
)
 
(39.1
)
 
(39.6
)
Loss on extinguishment of debt
 
(0.8
)
 
—

 
(3.1
)
 
—

Gain on the sale of investment in joint venture
 
—

 
—

 
6.3

 
—

Other (expense) income, net
 
—

 
(0.2
)
 
0.2

 
(0.5
)
Income before provision for income taxes and equity income
 
3.7

 
2.7

 
51.4

 
47.6

Provision for income taxes
 
(0.2
)
 
(0.1
)
 
(15.9
)
 
(16.6
)
Income before equity income
 
3.5

 
2.6

 
35.5

 
31.0

Equity income, net of tax
 
—

 
0.3

 
0.3

 
1.1

Net income
 
3.5

 
2.9

 
35.8

 
32.1

Net income attributable to noncontrolling interest
 
—

 
(0.1
)
 
(0.2
)
 
(0.4
)
Net income attributable to Global Brass and Copper
 Holdings, Inc.
 
$
3.5

 
$
2.8

 
$
35.6

 
$
31.7

 
 
 
 
 
 
 
 
 
Net income attributable to Global Brass and
  Copper Holdings, Inc. per common share:
 
 
 
 
 
 
 
 
Basic
 
$
0.16

 
$
0.13

 
$
1.67

 
$
1.50

Diluted
 
$
0.16

 
$
0.13

 
$
1.66

 
$
1.49

Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
21.3

 
21.2

 
21.3

 
21.2

Diluted
 
21.5

 
21.3

 
21.4

 
21.3

 
 
 
 
 
 
 
 
 
Supplemental Non-GAAP Reconciliation
 
 
 
 
 
 
 
 
Net sales
 
$
323.4

 
$
390.3

 
$
1,506.2

 
$
1,711.4

Metal component of net sales
 
(199.0
)
 
(263.2
)
 
(971.9
)
 
(1,168.8
)
Adjusted sales
 
$
124.4

 
$
127.1

 
$
534.3

 
$
542.6

 
 
 
 
 
 
 
 
 
Diluted net income attributable to Global Brass and
  Copper Holdings, Inc. per common share, as reported
 
$
0.16

 
$
0.13

 
$
1.66

 
$
1.49

Unrealized (gain) loss on derivative contracts
 
(0.02
)
 
0.09

 
(0.02
)
 
0.08

Loss on extinguishment of debt
 
0.02

 
—

 
0.10

 
—

Non-cash accretion of income of Dowa Joint Venture
 
—

 
—

 
—

 
(0.02
)
Specified legal/professional expenses
 
0.02

 
0.03

 
0.10

 
0.13

Lower of cost or market adjustment to inventory
 
0.06

 
—

 
0.21

 
0.01

Loss on LIFO layer depletion
 
—

 
0.02

 
—

 
0.02

Share-based compensation expense
 
0.04

 
0.01

 
0.13

 
0.05

Restructuring and other business transformation charges
 
—

 
—

 
0.02

 
0.01

Adjusted diluted earnings per common share (1)
 
$
0.28

 
$
0.28

 
$
2.20

 
$
1.77

 
 
 
 
 
 
 
 
 
(1) All adjustments include a tax effect.

4


Global Brass and Copper Holdings, Inc.
Adjusted EBITDA Reconciliation

 
 
Three Months Ended
December 31,
 
Year Ended
December 31,
(in millions)
 
2015
 
2014
 
2015
 
2014
Net income attributable to Global Brass and Copper Holdings, Inc.
 
$
3.5

 
$
2.8

 
$
35.6

 
$
31.7

Interest expense
 
9.3

 
9.9

 
39.1

 
39.6

Provision for income taxes
 
0.2

 
0.1

 
15.9

 
16.6

Depreciation expense
 
3.5

 
3.4

 
13.5

 
12.2

Amortization expense
 
—

 
—

 
0.1

 
0.1

Unrealized (gain) loss on derivative contracts (a)
 
(0.7
)
 
2.7

 
(0.6
)
 
3.0

LIFO liquidation loss (b)
 
0.1

 
0.6

 
0.1

 
0.6

Loss on extinguishment of debt (c)
 
0.8

 
—

 
3.1

 
—

Non-cash accretion of income of Dowa Joint Venture (d)
 
—

 
(0.2
)
 
(0.2
)
 
(0.7
)
Specified legal/professional expenses (e)
 
0.6

 
1.2

 
2.8

 
4.3

Lower of cost or market adjustment to inventory (f)
 
1.8

 
—

 
6.6

 
0.2

Share-based compensation expense (g)
 
1.1

 
0.4

 
4.2

 
1.7

Restructuring and other business transformation charges (h)

—

 
0.1

 
0.9

 
0.4

Adjusted EBITDA
 
$
20.2

 
$
21.0

 
$
121.1

 
$
109.7



(a)
Represents unrealized gains and losses on derivative contracts.
(b)
Calculated based on the difference between the base year LIFO carrying value and the metal prices prevailing in the market at the time of inventory depletion.
(c)
Represents the loss on extinguishment of debt recognized in connection with the open market purchase of senior secured notes.
(d)
As a result of the application of purchase accounting in connection with the November 2007 acquisition, no carrying value was initially assigned to our equity investment in our Dowa Joint Venture. This adjustment represents the accretion of equity in our Dowa Joint Venture at the date of the acquisition over a 13-year period (which represents the estimated useful life of the technology and patents of the joint venture).
(e)
Represents selected professional fees for accounting, tax, legal and consulting services incurred as a public company that exceed our expected long-term requirements.
(f)
Represents non-cash lower of cost or market charges for the write down of domestic, non-copper metal inventory.
(g)
Represents share-based compensation expense resulting from the grant of non-qualified stock options, restricted stock and performance-based shares to certain employees, members of our management and our Board of Directors.
(h)
Restructuring and other business transformation charges for the three months ended December 31, 2014 and the year ended December 31, 2015 and 2014 represent severance charges at Olin Brass, one of our segments.












5


Segment Results of Operations
 
 
Three Months Ended
December 31,
 
Change
2015 vs. 2014
(in millions)
 
2015
 
2014
 
Amount
 
Percent
Pounds shipped (a)
 
 
 
 
 
 
 
 
Olin Brass
 
62.3

 
60.5

 
1.8

 
3.0
 %
Chase Brass
 
50.2

 
49.8

 
0.4

 
0.8
 %
A.J. Oster
 
16.8

 
16.7

 
0.1

 
0.6
 %
Corporate (b)
 
(8.5
)
 
(7.5
)
 
(1.0
)
 
(13.3
)%
Total
 
120.8

 
119.5

 
1.3

 
1.1
 %
 
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
 
Olin Brass
 
$
154.6

 
$
190.2

 
$
(35.6
)
 
(18.7
)%
Chase Brass
 
115.1

 
133.7

 
(18.6
)
 
(13.9
)%
A.J. Oster
 
63.4

 
75.6

 
(12.2
)
 
(16.1
)%
Corporate (b)
 
(9.7
)
 
(9.2
)
 
(0.5
)
 
(5.4
)%
Total
 
$
323.4

 
$
390.3

 
$
(66.9
)
 
(17.1
)%
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
 
 
 
 
 
 
 
 
Olin Brass
 
$
6.3

 
$
5.8

 
$
0.5

 
8.6
 %
Chase Brass
 
14.9

 
15.0

 
(0.1
)
 
(0.7
)%
A.J. Oster
 
3.0

 
3.6

 
(0.6
)
 
(16.7
)%
Total Adjusted EBITDA of operating segments
 
$
24.2

 
$
24.4

 
$
(0.2
)
 
(0.8
)%
 
 
 
 
 
 
 
 
 
(a) Amounts exclude quantity of unprocessed metal sold.
 
 
 
 
 
 
(b) Amounts represent intercompany eliminations.
 
 
 
 
 
 

 
 
Year Ended
December 31,
 
Change
2015 vs. 2014
(in millions)
 
2015
 
2014
 
Amount
 
Percent
Pounds shipped (a)
 
 
 
 
 
 
 
 
Olin Brass
 
260.0

 
269.1

 
(9.1
)
 
(3.4
)%
Chase Brass
 
218.9

 
221.3

 
(2.4
)
 
(1.1
)%
A.J. Oster
 
73.1

 
68.7

 
4.4

 
6.4
 %
Corporate (b)
 
(40.1
)
 
(38.7
)
 
(1.4
)
 
(3.6
)%
Total
 
511.9

 
520.4

 
(8.5
)
 
(1.6
)%
 
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
 
Olin Brass
 
$
721.9

 
$
847.8

 
$
(125.9
)
 
(14.9
)%
Chase Brass
 
544.1

 
603.7

 
(59.6
)
 
(9.9
)%
A.J. Oster
 
293.3

 
313.9

 
(20.6
)
 
(6.6
)%
Corporate (b)
 
(53.1
)
 
(54.0
)
 
0.9

 
1.7
 %
Total
 
$
1,506.2

 
$
1,711.4

 
$
(205.2
)
 
(12.0
)%
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
 
 
 
 
 
 
 
 
Olin Brass
 
$
48.3

 
$
36.9

 
$
11.4

 
30.9
 %
Chase Brass
 
68.9

 
69.2

 
(0.3
)
 
(0.4
)%
A.J. Oster
 
15.8

 
16.2

 
(0.4
)
 
(2.5
)%
Total Adjusted EBITDA of operating segments
 
$
133.0

 
$
122.3

 
$
10.7

 
8.7
 %
 
 
 
 
 
 
 
 
 
(a) Amounts exclude quantity of unprocessed metal sold.
 
 
 
 
 
 
(b) Amounts represent intercompany eliminations.
 
 
 
 
 
 

6


Global Brass and Copper Holdings, Inc.
Consolidated Balance Sheets (Unaudited)

 
 
As of
(In millions, except share and par value data)
 
December 31, 2015
 
December 31, 2014
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash
 
$
83.5

 
$
44.6

Accounts receivable (net of allowance of $1.2 and $1.0, respectively)
 
119.6

 
152.3

Inventories
 
176.3

 
189.0

Prepaid expenses and other current assets
 
17.4

 
26.2

Income tax receivable
 
2.4

 
8.3

Total current assets
 
399.2

 
420.4

Property, plant and equipment, net
 
111.1

 
103.5

Investment in joint venture
 
—

 
2.0

Goodwill
 
4.4

 
4.4

Intangible assets, net
 
0.5

 
0.6

Deferred income taxes
 
38.0

 
30.1

Other noncurrent assets
 
4.0

 
5.3

Total assets
 
$
557.2

 
$
566.3

Liabilities and equity
 
 
 
 
Current liabilities:
 
 
 
 
Current portion of capital lease obligation
 
$
1.1

 
$
1.0

Accounts payable
 
71.0

 
82.5

Accrued liabilities
 
53.9

 
57.3

Accrued interest
 
3.0

 
3.2

Income tax payable
 
0.2

 
0.5

Total current liabilities
 
129.2

 
144.5

Noncurrent portion of debt
 
342.0

 
370.4

Other noncurrent liabilities
 
25.3

 
25.4

Total liabilities
 
496.5

 
540.3

Commitments and contingencies
 
 
 
 
Global Brass and Copper Holdings, Inc. stockholders’ equity:
 
 
 
 
Common stock - $0.01 par value; 80,000,000 shares authorized; 21,553,883 and 21,369,407 shares issued, respectively
 
0.2

 
0.2

Additional paid-in capital
 
36.9

 
32.5

Retained earnings (accumulated deficit)
 
22.3

 
(10.1
)
Treasury stock - 46,729 and 29,200 shares, respectively
 
(0.7
)
 
(0.4
)
Accumulated other comprehensive loss
 
(2.3
)
 
(0.6
)
Total Global Brass and Copper Holdings, Inc. stockholders’ equity
 
56.4

 
21.6

Noncontrolling interest
 
4.3

 
4.4

Total equity
 
60.7

 
26.0

Total liabilities and equity
 
$
557.2

 
$
566.3


7


Global Brass and Copper Holdings, Inc.
Consolidated Statements of Cash Flows (Unaudited)
 
Year Ended
December 31,
(In millions)
2015
 
2014
Cash flows from operating activities
 
 
 
Net income
$
35.8

 
$
32.1

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Lower of cost or market adjustment to inventory
6.6

 
0.2

Unrealized (gain) loss on derivatives
(0.6
)
 
3.0

Depreciation
13.5

 
12.2

Amortization of intangible assets
0.1

 
0.1

Amortization of debt issuance costs
2.8

 
2.7

Loss on extinguishment of debt
3.1

 
—

Share-based compensation expense
4.2

 
1.7

Excess tax benefit from share-based compensation
(0.1
)
 
(0.2
)
Provision for bad debts, net of reductions
0.3

 
—

Deferred income taxes
(7.3
)
 
6.4

Loss on disposal of property, plant and equipment
0.4

 
—

Gain on sale of investment in joint venture
(6.3
)
 
—

Equity earnings, net of distributions
0.1

 
(0.7
)
Change in assets and liabilities:
 
 
 
Accounts receivable
31.4

 
18.9

Inventories
4.8

 
0.9

Prepaid expenses and other current assets
9.3

 
(7.0
)
Accounts payable

More detailed information about these and other risks and uncertainties are contained in the Company’s filings with the Securities and Exchange Commission, including under “Risk Factors” and elsewhere in our Annual Report on Form 10-K filed with the Securities and Exchange Commission and our reports filed with the Securities and Exchange Commission from time-to-time, including Quarterly Reports on Form 10-Q, copies of which may be obtained by visiting the Company’s Investor Relations website at http://ir.gbcholdings.com or the SEC’s website at www.sec.gov. All forward-looking information in this press release is expressly qualified in its entirety by these cautionary statements. All forward-looking statements contained in this press release are based upon information available to the Company on the date of this press release.

In addition, the matters referred to in the forward-looking statements contained in this press release may not in fact occur. Accordingly, investors should not place undue reliance on those statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.



11

GLOBAL BRASS & COPPER HOLDINGS, INC. Reports