Global Brass and Copper Holdings, Inc. Reports Second Quarter 2018 Financial Results, Increases Its Dividend, and Announces Share Repurchase Program
SCHAUMBURG, Ill.--(BUSINESS WIRE)--Aug 2, 2018--Today, Global Brass and Copper Holdings, Inc. (NYSE:BRSS) (“GBC” or the “Company”) reported results for the second quarter ended June 30, 2018 and announced a quarterly dividend of $0.09 per share.
Second Quarter Operating Results
Volume for the second quarter of 2018 increased by 21.3 million pounds, or 16.9%, to 147.5 million pounds compared to 126.2 million pounds in the second quarter of 2017. The increase in volumes includes 15.4 million pounds of incremental volume from A.J. Oster’s acquisition of Alumet. In addition, A.J. Oster grew base volumes in the automotive and electronics / electrical components markets. Olin Brass experienced increased demand in the munitions, automotive and coinage markets. Chase Brass’s electronics / electrical components market volumes increased, but were more than offset by volume declines in the industrial and machinery equipment and building and housing markets.
“Global Brass and Copper’s business continues to strengthen and we are pleased with our second quarter operating results. Our supply chain initiatives, continued focus on driving profitable growth, and the advancement of our strategic initiatives helped drive our strong second quarter results. Olin Brass benefitted from favorable metal mix and sourcing and is continuing to improve profitability through effective product pricing and operational cost management. A.J. Oster results benefited from the integration of the Alumet business and improved service metrics. Despite some operational challenges, Chase Brass improved financial performance with better metal margins and improved raw material sourcing. We refinanced our term loan debt during the second quarter, which reduced our interest rate by 75 basis points, and are utilizing our strong cash position to return value to our shareholders by increasing our quarterly dividend and initiating a $35.0 million share repurchase program,” said John Wasz, GBC’s President and Chief Executive Officer.
Net sales for the second quarter of 2018 increased to $459.4 million from $374.8 million in the second quarter of 2017. The increase was primarily attributable to increased commodity prices, the addition of Alumet, and increased volumes. Adjusted sales, our non-GAAP financial measure that reflects the value-added premium over metal replacement cost recovery, increased $30.2 million compared to the prior year, primarily due to our Alumet acquisition ($16.4 million), organic volume increases, and favorable metal mix and sourcing along with improved metal margins. 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 second quarter was $21.0 million in 2018, or $0.94 per diluted share, compared to $15.7 million, or $0.71 per diluted share, in 2017. The increase can be attributed to the net of the following:favorable metal mix and sourcing along with improved metal margins ($5.1 million); favorable fluctuations in unrealized gains / losses on derivative contracts of $2.4 million; $2.1 million of income generated from Alumet, a business we acquired in November 2017; favorable lower of cost or market adjustment to inventory of $0.9 million; a decrease in tax expense of $0.8 million, driven by a reduction in the effective tax rate from 35.8% to 27.5%; a decrease in interest expense of $0.4 million; a decrease in share based compensation expense of $0.4 million; refinancing costs of $1.6 million associated with our May 2018 debt refinancing; increased depreciation expense of $0.7 million; and the absence of a $4.4 million benefit recorded in the prior year related to the recovery of insurance proceeds associated with our 2016 production outage.
Adjusted EBITDA, our non-GAAP measure of consolidated profitability, was $39.6 million for the second quarter of 2018. As compared to the prior year’s second quarter and excluding the $4.4 million of income related to the recovery of insurance proceeds, our Adjusted EBITDA increased by $7.2 million as we had favorable metal mix and sourcing along with improved metal margins of $5.1 million and generated $2.1 million from our Alumet acquisition.
Adjusted diluted earnings per common share, another non-GAAP measure, was $0.97 for the second quarter of 2018 compared to $0.80 in the prior year. 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. Adjusted diluted earnings per share fluctuated for reasons similar to the fluctuation in Adjusted EBITDA, in addition to a decrease in tax and interest expense, partially offset by an increase in depreciation expense.
Cash Flow and Leverage
For the six months ended June 30, 2018, we generated $55.3 million of cash from operating activities largely due to cash from earnings.
We ended the quarter with cash of $91.1 million, $314.4 million outstanding under our term loan facility, and $195.4 million available under our asset-based revolving loan facility.
We affirm our full-year 2018 guidance and expect:Shipment volumes to range from 570 million pounds to 610 million pounds; and Adjusted EBITDA to range from $127 million to $137 million.
Due to the forward looking nature of Adjusted EBITDA guidance, we are unable to reconcile this non-GAAP financial measure to the most directly comparable GAAP financial measure, as we are unable to project certain reconciling items, in particular unrealized gains / losses on derivative contracts, LIFO liquidation gains / losses and lower of cost or market adjustments to inventory, for future periods due to market volatility.
On August 2, 2018, our Board of Directors declared an increase in the quarterly cash dividend from $0.06 per share to $0.09 per share on the Company’s common stock for the second quarter of 2018, an increase of 50%. The dividend will be paid on August 22, 2018 to stockholders of record on the close of business on August 13, 2018.
Stock Repurchase Program
On July 31, 2018, the Company’s Board of Directors authorized a share repurchase program (the “2018 Share Repurchase Program”), whereby we may repurchase up to $35.0 million of our common stock through September 30, 2020.
The Company will host a teleconference and webcast at 9:00 a.m. (Central Time) on Friday, August 3, 2018 to review the results. To listen to the live call, individuals can access the webcast approximately 10 minutes before the scheduled start time at the investor relations portion of the Company’s website at http://ir.gbcholdings.com, or by dialing 855-878-0250, passcode #1549886. For those who cannot listen to the live webcast, replays will be available shortly after the call on the Company’s website.
About Global Brass and Copper
Global Brass and Copper Holdings, 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, stamping, and coating 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, painted and fabricated metal component products. 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.
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