Goldman Sachs Downgrades Global Brass and Copper (BRSS) to Neutral

Global Brass and Copper Holdings, Inc. Reports Third Quarter 2014 Financial Results

Third Quarter Highlights

Volume of 131.8 million pounds, a decrease of 0.2% year-over-year; Adjusted sales of $136.7 million, a decrease of 2.1% year-over-year; Adjusted EBITDA of $30.4 million, a decrease of 0.3% year-over-year; Adjusted diluted earnings per common share of $0.51; Net sales of $436.8 million, a decrease of 0.5% year-over-year; and Net income attributable to GBC of $10.2 million, or $0.48 per diluted share, versus net income of $9.9 million, or $0.47 per diluted share in prior year period.

SCHAUMBURG, Ill.--(BUSINESS WIRE)-- Global Brass and Copper Holdings, Inc. (NYSE: BRSS) (GBC or the Company) today announced the results for the third quarter ended September 30, 2014.

Third Quarter Operating Results

Volume for the third quarter of 2014 decreased by 0.2% to 131.8 million pounds compared to 132.0 million pounds in the third quarter of 2013. The decrease in volume was primarily attributable to lower demand in the munitions end market as well as the electronics/electrical components end market. The lower demand in the munitions end market was due to the reduction in demand following an unprecedented peak in demand for the last several quarters. The lower demand in the electronics/electrical components end market resulted primarily from a customer sourcing their finished products offshore, which negatively impacted demand for brass rod in this end market. The decrease in volume was partially offset by higher demand in the building and housing, automotive and transportation end markets. By segment, Chase Brass and A.J. Oster volume increased by 4.1% and 5.9% during the third quarter, respectively, while Olin Brass volume decreased by 2.1%.

While our third quarter results fell short of our expectations, driven largely by the lower demand in the munitions end market, we experienced significant improvement late in the quarter resulting from our focused efforts on improving operational efficiencies at Olin Brass. In addition, our growth initiatives at A.J. Oster gained further momentum, and we believe the strengthening building and housing market should translate into continued growth for our Chase Brass and A.J. Oster businesses, said John Wasz, GBCs President and Chief Executive Officer. Looking ahead, we intend to drive supply chain and operational improvements, and execute strategic initiatives to achieve profitable growth across GBC. In addition, we will sharpen our focus on the cost of complexity at our Olin Brass rolling mill with the goal of offering a compelling value proposition to our customers, while improving the return on the significant capital investment both in inventory and in equipment upkeep required by this segment of our business. Overall, we are excited about GBC and are committed to the initiatives and strategy required to optimize our business and to position the Company for higher levels of growth and earnings.

Net sales for the third quarter of 2014 decreased by 0.5% to $436.8 million compared to $439.2 million in the third quarter of 2013. The decline in net sales was attributable to lower sales of unprocessed metals, a shift in product mix and lower metal prices, partially offset by an increase in average selling prices and the effect of changes in volume by segment. Adjusted sales, a non-GAAP financial measure which reflects the value added premium over metal replacement cost recovery, decreased by 2.1% to $136.7 million for the third quarter of 2014 from $139.7 million for the same period of 2013. See Non-GAAP Measures and the reconciliation of net sales to adjusted sales later in this press release.

Net income attributable to GBC for the quarter was $10.2 million, or $0.48 per diluted share, compared to net income of $9.9 million, or $0.47 per diluted share, for the same period of 2013. The increase in net income attributable to GBC for the quarter was mainly due to a decrease in selling, general and administrative expenses, partially offset by a decrease in gross profit and an increase in the provision for income taxes.

Adjusted EBITDA, a non-GAAP measure of consolidated GBC profitability, was $30.4 million for the third quarter of 2014, a decrease of 0.3% compared to the third quarter of 2013, driven primarily by a shift in product mix. Partially offsetting the decrease were lower manufacturing conversion costs, the effect of changes in volume by segment, increases in average selling prices and a decrease in selling, general and administrative costs. See Non-GAAP Measures and the reconciliation of net income attributable to Global Brass and Copper Holdings, Inc. to Adjusted EBITDA later in this press release.

Cash Flow and Leverage

During the third quarter of 2014, the Company reported net cash provided by operating activities of $9.9 million, which was driven by earnings, partially offset by increased investment in working capital.

The Company ended the quarter with cash of $17.4 million, borrowings of $8.5 million under its asset based revolving lending facility (ABL Facility), borrowing availability of $191.0 million under its ABL Facility, and senior secured notes of $375.0 million.

2014 Guidance

The Company is updating its full-year 2014 guidance. For the full-year 2014, GBC expects:

Shipment volumes to range from 510 million pounds to 518 million pounds, which is a reduction from the prior guidance of 536 million pounds to 542 million pounds; Adjusted sales to range from $529 million to $537 million, which is a reduction from the prior guidance of $568 million to $575 million; and Adjusted EBITDA is expected to range from $108 million to $111 million, which is a reduction from the prior guidance of $118 million to $123 million.

Conference Call

The Company will host a teleconference and webcast at 8:30 a.m. (Central Time) on Thursday, November 13 to review the results. To listen to the live... More