Wise Metals Group LLC Announces First Quarter 2007 Results

BALTIMORE, May 14 /PRNewswire/ -- Shipments of Wise Metals Group (Company) aluminum beverage can stock, other rolled aluminum products and scrap in the first quarter of 2007 totaled 169.3 million pounds compared to 169.9 million for the same period in 2006. Shipments of scrap at Wise Recycling increased 24 percent in the first quarter of 2007 versus the first quarter of 2006 while shipments at Wise Alloys decreased 4.7 percent including a 19-percent decrease of can sheet shipments offset by an 82-percent increase in commercial products. The decrease in can sheet shipment volumes was due mostly to can sheet customers reducing inventory quantities from year-end levels combined also with the effects of slightly lower contractual volumes from existing can sheet customers which resulted from negotiations to improve pricing.

Net income for the first quarter of 2007 was $3.6 million, which includes an $11.0 million favorable impact for FAS 133 (Accounting for Derivative Instruments and Hedging Activities). This compares to a net income of $3.5 million in the first quarter of 2006, which includes a $4.7 million favorable impact for FAS 133.

After adjusting for FAS 133, net loss for the first quarter of 2007 was $7.4 million, compared to a loss of $1.2 million in the first quarter of 2006, adjusting for similar items. The difference of approximately $6.2 million includes the effects of sales mix and reduced overall production levels. Also affecting the quarter was a $2.0 million increase in interest expense and a $1.5 million increase in selling, general and administrative expenses due to a specific customer reserve. These items were offset in the quarter by decreased natural gas costs of $3.5 million.

Earnings before interest and fees, taxes, depreciation and amortization (EBITDA) adjusted for the effects of FAS 133 (Adjusted EBITDA) for the quarter was $5.0 million compared to $9.0 million for the first quarter of 2006.

On January 3, 2007, the Company completed the funding of a $29.9 million financing with The Employees' Retirement Systems of Alabama. The agreement which was executed on November 13, 2006, provided Wise Metals with an initial funding of $14.95 million followed by the second funding completed on January 3, 2007. The Agreement is for a three-year term.

Subsequent to the quarter end and on April 9, 2007, the Company increased the limit of its asset sale agreement from $10 million to $20 million. As of March 31, 2007, the Company had sold $10 million under this agreement which subsequent to March 31, 2007, the amount of receivables under this agreement had reached $20 million.

"Our increased expenses due to a specific customer reserve evidences that our accomplishments, such as last year's elimination of metal price caps, will not come in the form of a light switch but will instead be achieved over time," said Wise Metals Group Chairman and Chief Executive Officer David F. D'Addario. "We remain on the right path."

Selling, general and administrative expenses for the quarter totaled $4.5 million which includes a $1.5 million increase impact due to a customer reserve. The Company remains in dispute with one of its larger customers over interpretation of a contract clause that affects a pricing formula used to derive the final sales price. The $1.5 million increase in selling, general and administrative expenses is a direct result of this dispute.

"While we intend to fully collect all amounts owed to us under contract, we felt it prudent to reserve appropriately, recognizing the uncertainty of the timing and result of these proceedings, added Wise Metals Group Chief Financial Officer Ken Stastny. "We were able to begin realizing some benefits of energy savings due mostly to reduced prices paid for natural gas and would expect this trend to continue."

The Company's cost for natural gas in the quarter averaged $9.21 per mmBTU, down approximately 25% from 2006 prices.

"The most significant driver holding back this quarter's profitability was the direct result of reduced production levels," said Wise Metals Group Executive Vice President and Chief Strategic Officer Danny Mendelson. "This is owing to customer-announced intentions to undergo significant de-stocking of year-end inventories. Recognizing this, we took measures to reduce our inventories in the fourth quarter of last year and are in the process now of rebuilding those inventory levels and resulting production levels to meet contracted volume commitments."

"Our path to a return to profitability has completed an important first step but this is no time to rest upon any accomplishments as we move into 2007," added D'Addario.

Cautionary Note Regarding Forward-Looking Statements

Certain statements made in this news release constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act, regarding the company's future plans, objectives, and expected performance. Statements that are not historical facts, including statements accompanied by words such as "believe," "expect," "estimate," "intend," or "plan" are intended to identify forward-looking statements and convey the uncertainty of future events or outcomes. The company cautions that any such forward-looking statements are based on assumptions that the company believes are reasonable, but are subject to a wide range of risks, and actual results may differ materially. Certain risks and uncertainties are summarized in the company's filings with the Securities and Exchange Commission. The company takes no obligation to publicly update or revise any future looking statements to reflect the occurrence of future events or circumstances.

                          Wise Metals Group LLC
                  Consolidated Statements of Operations
                               (Unaudited)

                                                     Three Months ended
                                                          March 31,
                                                   2007              2006

  Sales                                         $247,216          $216,276
  Cost of sales                                  241,052           207,394
  Gross margin                                     6,164             8,882

  Operating expenses:
    Selling, general, and administrative           4,512             2,973
  Operating income                                 1,652             5,909

  Other income (expense):
    Interest expense and fees, net                (9,106)           (7,120)
    Unrealized gain on derivative
     instruments                                  11,019             4,711

  Net income                                      $3,565            $3,500



                          Wise Metals Group LLC
                       Consolidated Balance Sheets

                                                  March 31,     December 31,
                                                     2007            2006
                                                 (unaudited)
                                                        (in thousands)
  Assets
  Current assets:
    Cash and cash equivalents                       $2,370          $2,280
    Restricted cash                                  3,320           7,889
    Accounts receivable, less allowance             90,913         104,096
    Inventories                                    158,376         120,565
    Other current assets                            10,730           9,830
  Total current assets                             265,709         244,660

  Non-current assets:
    Property and equipment, net                     84,471          84,589
    Other assets                                     9,670           8,724
    Goodwill                                           283             283
  Total non-current assets                          94,424          93,596

  Total assets                                    $360,133        $338,256

  Liabilities and members' deficit:
  Current liabilities:
    Accounts payable                               $73,926         $71,131
    Current portion of long-term debt                3,097           1,759
    Borrowings under revolving credit facility     182,493         177,187
    Accrued expenses, payroll and other             20,359          24,838
  Total current liabilities                        279,875         274,915

  Non-current liabilities:
    Term loans, less current portion                28,777          15,854
    Senior secured notes                           150,000         150,000
    Other liabilities                               13,398          12,969
  Total non-current liabilities                    192,175         178,823

  Members' deficit                                (111,917)       (115,482)
  Total liabilities and members' deficit          $360,133        $338,256



                          Wise Metals Group LLC
                  Consolidated Statements of Cash Flows
                               (Unaudited)

                                                       Three months ended
                                                            March 31,
                                                        2007         2006

  Cash flows from operating activities
  Net income                                           $3,565       $3,500
  Adjustments to reconcile net income to net cash
   used in operating activities:
    Depreciation and amortization                       3,346        3,114
    Amortization of deferred financing fees               479          351
    Bad debt expense                                    1,498           --
    Unrealized (gains) losses on derivatives          (11,019)      (4,711)
    Changes in operating assets and liabilities:
    Restricted cash                                     4,569           --
    Accounts receivable                                11,685        4,049
    Inventories                                       (37,811)     (39,281)
    Other current assets                                  864          662
    Accounts payable                                    2,795          430
    Accrued expenses, payroll and other                 3,780        6,904
  Net cash used in operating activities               (16,249)     (24,982)

  Cash flows from investing activities
  Purchase of equipment                                (3,228)      (3,802)
  Net cash used in investing activities                (3,228)      (3,802)

  Cash flows from financing activities
  Net issuance of short-term borrowings                 6,644       24,458
  Payments on long-term obligations                    12,923          (53)
  Net cash provided by financing activities            19,567       24,405

  Net increase (decrease) in cash and cash
   equivalents                                             90       (4,379)
  Cash and cash equivalents at beginning of
   period                                               2,280        6,456
  Cash and cash equivalents at end of period           $2,370       $2,077


  Non-GAAP Financial Measures

The company uses certain non-GAAP financial measures in evaluating its performance. These include Adjusted EBITDA. Adjusted EBITDA is not intended to represent cash flows from operations as defined using GAAP and should be considered in addition to, and not as a substitute for, cash flows as a measure of liquidity or net earnings as a measure of operating performance. A reconciliation of Adjusted EBITDA to net income (loss) is set forth in the financial tables below. The company includes Adjusted EBITDA information because this measure is used by management to measure our compliance with debt covenants and by investors and note holders to evaluate our ability to service debt. Our measure of Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

             Reconciliation of Net Income to Adjusted EBITDA

                                                        Three months
                                                       ended March 31,
                                                  2007                2006
  Net income                                    $3,565              $3,500
  Interest expense and fees                      9,106               7,120
  Depreciation and amortization                  3,346               3,114
  Unrealized gain on derivative
   instruments                                 (11,019)             (4,711)

  Adjusted EBITDA                               $4,998              $9,023


  About Wise Metals Group

Based in Baltimore, Md., Wise Metals Group LLC includes Wise Alloys, the world's third-leading producer of aluminum can stock for the beverage and food industries and an environmentally friendly company using recycled aluminum in the production of its can stock; Wise Recycling, one of the largest, direct- from-the-public collectors of aluminum beverage containers in the United States, operating shipping and processing locations throughout the United States that support a network of neighborhood collection centers; and Listerhill Total Maintenance Center, specializing in providing maintenance, repairs and fabrication to manufacturing and industrial plants worldwide ranging from small on-site repairs to complete turn-key maintenance.