Ormet Announces Favorable Ruling by the Public Utilities Commission of Ohio and Its 2nd Quarter 2012 Financial Results

HANNIBAL, Ohio--(BUSINESS WIRE)--Faced with declining London Metals Exchange (“LME”) prices compared to 2011 and higher electric power prices, the Company has reduced operations and has taken other measures to mitigate these developments. The Company’s liquidity will continue to be pressured because the 2012 contractual discounts that the Company received from its power supplier were fully utilized in August 2012.

In addition, the Company has engaged Evercore Group L.L.C. to assist in identifying and evaluating strategic alternatives. Representative initiatives being explored include: asset sales, new sources of funds, vendor contract re-negotiations and debt restructuring.

To that end, the Company has been in negotiations with its various constituents (i.e. Term Loan lenders, ABL lender, the United Steelworkers International, its electricity and other trade vendors and state government agencies).

The Public Utilities Commission of Ohio (“PUCO”) approved the Company’s request on October 17, 2012 for a deferral of AEP’s power bills that would be payable in November 2012 and December 2012. These power bills, totaling approximately $27 million, would have normally been paid twenty-one days after receipt by the Company. According to the agreement, the payment for these bills will be made in seventeen equal monthly installments beginning in January 2014 and ending in May 2015. While this approval provides the Company significant relief, the Company’s longer term liquidity will only be achieved if all constituents and the Company reach satisfactory agreements. The outcome of these remaining negotiations and the impact on the Company is uncertain at this time.

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Ormet announces a $13.9 million and $15.0 million net loss for the second quarter of 2012 and first half of 2012, respectively. Net loss per common share outstanding was $0.74 for the quarter and $0.80 the first half of 2012. These results were significantly influenced by significantly lower selling prices and increased electric power costs.

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Jeffrey Marshall notified the Board of Directors on October 17, 2012 that he was resigning as a Director and Chairman of the Board, immediately, due to health reasons. The Board has accepted his resignation with regret and extended its thanks for his many years of service. In his capacity as Vice Chairman, Robert Prusak, will assume the responsibilities of Chairman, effective immediately.

Mike Tanchuk, Ormet’s President and CEO commented, “Today, we received approval from the PUCO for the short term relief Ormet needed to move forward with improving our financial strength. On behalf of Ormet, its employees and the families of our community, I want to thank Governor Kasich, the PUCO, JobsOhio and the members of our region's state and federal legislative delegations for their untiring support. There is much work yet to do but today was a big step forward toward success. Ormet looks forward to continuing to work with AEP toward a long term energy solution.

“We are facing difficult short term headwinds in the aluminum market driven mainly by global financial uncertainty. Yet, at the same time, there has never been a brighter future for growth of the use of aluminum in our everyday lives around the world. We are optimistic that the global aluminum market will continue to grow and Ormet will be a strong partner in the lives and economic well-being of the families and communities in the region,” said Mike Tanchuk.

The complete Rule 15c2-11 Information and Disclosure Statement for the six months ended June 30, 2012 is available on the Company’s website. Please visit the Investor section of the website at www.ormet.com.

Cautionary Statement

This Statement contains forward-looking statements that can be identified by use of words such as “anticipates,” “believes,” “estimates,” “expects,” “hopes,” “targets,” “should,” “forecast,” “outlook,” “projects” or other words of similar meaning. All statements that address the Company’s expectations or projections about the future, including statements about the Company’s strategy for growth, cost reduction goals, expenditures, financial results, liquidity and capital needs, are forward-looking statements. Forward-looking statements are based on the Company’s estimates, assumptions and expectations of future events and are subject to a number of risks and uncertainties and may or may not be realized. The Company cannot guarantee its future performance or results of operations. All forward-looking statements in this press release are based on information available to the Company on the date hereof. The Company disclaims any intention or obligation to update or revise any forward-looking statements, except as may be required by law. The Company’s business is subject to a number of significant risks and uncertainties. Reference is made to the risk factors and other disclosures contained in the Company's Information and Disclosure Statements for year ended December 31, 2011, which is available on the Company's website at www.ormet.com. Given the significant uncertainties and risks to which the Company is subject (a) the reader should not place undue reliance on forward-looking statements contained in this press release and (b) the Company’s future results could differ materially from the Company’s current results and from those anticipated in the Company’s forward-looking statements.

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Headquartered in Hannibal, Ohio, Ormet Corporation is a major U.S. producer of aluminum. Ormet employs approximately 1,250 people. For more information, visit the Company’s website at www.ormet.com.



Ormet Corporation
Financial Statements


Consolidated Balance Sheet
(Dollars in thousands)

	Unaudited
	6/30/2012			12/31/2011
ASSETS
Cash	$	6,103		$	2,468
Accounts Receivable:
Trade accounts receivable, net		8,930		$	20,619
Receivable from sales contract cancellation		-			23,000
Inventories		110,789			124,013
Prepaid expense and other current assets		14,674			12,411
Total current assets		140,496			182,511

Property and equipment		63,107			65,543
Goodwill		42,284			42,284
Deferred income tax asset, net		150,890			143,724
Other assets		1,388			1,864

TOTAL ASSETS	$	398,165		$	435,926

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Accounts payable		32,855			51,906
Deferred energy discount		14,028			-
Accrued compensation		12,346			18,670
Accrued interest		4,527			4,527
Postretirement obligations		5,487			9,858
Current portion of long term debt		127,146			-
Other accrued liabilities		5,578			5,773
Total current liabilities		201,967			90,734

Long term debt		-			124,378
Other liabilities:
Pension obligations		137,405			149,627
Postretirement obligations		39,217			37,615
Other liabilities		6,178			7,446
STOCKHOLDERS’ EQUITY
Common stock 50,000 shares authorized at $0.001 per share, 18,662 issued as of 6/30/2012 and 12/31/2011		19			19
Additional paid in capital and stock warrants		187,243			187,113
Accumulated deficit		(30,776	)		(15,790	)
Accumulated other comprehensive loss		(143,088	)		(145,216	)
Total stockholders' equity		13,398			26,126

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	398,165		$	435,926



CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

	(Dollars in thousands, except per share amounts)
	Three Months Ended						Six Months Ended
				As Adjusted						As Adjusted
	6/30/2012			6/30/2011			6/30/2012			6/30/2011

Net sales from continuing operations	$	151,975		$	148,099		$	290,495		$	272,280
Cost of sales
Production costs		163,207			121,641			293,727			230,109
Alumina refinery restart costs		-			5,830			-			7,694
Total cost of sales		163,207			127,471			293,727			237,803

Gross (loss) profit		(11,232	)		20,628			(3,232	)		34,477
Operating expenses (income)
General and administrative expenses		5,175			4,568			9,953			8,313
Gain on sale of assets		-			(5,827	)		-			(5,827	)

Operating (loss) income		(16,407	)		21,887			(13,185	)		31,991

Non-operating (expenses) income
Other income (expense), net		297			20			692			273
Interest expense		(5,354	)		(5,716	)		(10,716	)		(10,320	)

Total non-operating expenses		(5,057	)		(5,696	)		(10,024	)		(10,047	)

(Loss) income before income taxes		(21,464	)		16,191			(23,209	)		21,944

Income tax benefit		(7,605	)		(109,983	)		(8,223	)		(109,983	)

(Loss) income from continuing operations		(13,859	)		126,174			(14,986	)		131,927
Income from discontinued operations (Note 15)		-			11,189			-			10,971
Net (loss) income	$	(13,859	)	$	137,363		$	(14,986	)	$	142,898
Shares outstanding:
Average during period		18,662			18,607			18,662			18,559
As of June 30, 2012		18,662			18,662			18,662			18,662
Net (loss) income per share from continuing operations	$	(0.74	)	$	6.78		$	(0.80	)	$	7.11
Net (loss) income per share	$	(0.74	)	$	7.38		$	(0.80	)	$	7.70



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
(Dollars in thousands)

	Three months ended						Six months Ended
				As Adjusted						As Adjusted
	6/30/2012			6/30/2011			6/30/2012			6/30/2011
Net (loss) income	$	(13,859	)	$	137,363		$	(14,986	)	$	142,898
Other comprehensive income:
Unrealized gain (loss) on derivatives		1,789			5,014			(549	)		5,014
Recognized gain on derivatives		(2,546	)		-			(2,546	)		-
Defined benefit pension plan:
Adjusted prior service cost		20			20			40			40
Change in unrecognized net actuarial loss		3,152			1,745			6,366			3,488
Other Comprehensive income, pretax		2,415			6,779			3,311			8,542

Income tax expense		(864	)		(2,373	)		(1,183	)		(2,989	)

Other comprehensive income		1,551			4,406			2,128			5,553

Comprehensive (loss) income	$	(12,308	)	$	141,769		$	(12,858	)	$	148,451



CONSOLIDATED STATEMENT OF CASH FLOWS

	(Dollars in thousands)
	Unaudited
	Six Months Ended June 30,
	2012			As Adjusted 2011
Cash flows from operating activities
Net (loss) income	$	(14,986	)	$	142,898
Adjustments to reconcile net income (loss) to net cash from:
Depreciation and amortization		9,634			9,812
Receivable from sales contract cancellation		23,000			-
Non cash interest		1,620			2,088
Amortization of pension plan loss		6,375			3,529
Deferred gain on forward sales contracts		(2,546	)		-
Compensation expense related to options		130			363
Deferred income tax benefit		(8,223	)		(104,075	)
Amortization of deferred financing costs		545			518
Gain on sale of property and equipment		-			(22,891	)
Net change in:
Trade accounts receivable		11,689			(1,362	)
Inventory		13,224			14,046
Prepaid & other current assets		(2,579	)		(3,918	)
Accounts payable		(19,051	)		(12,044	)
Accrued liabilities & other assets		5,883			12,712
Pension and postretirement		(15,591	)		(15,766	)
Net cash provided by operating activities		9,124			25,910

Cash flows from investing activities
Proceeds from asset sales		-			26,891
Capital spending		(6,872	)		(13,672	)
Net cash (used in) provided by investing activities		(6,872	)		13,219

Cash flows from financing activities
Repayment of long term loan		-			(10,000	)
Proceeds from long term debt		1,500			28,500
Proceeds from exercised stock options		-			457
Payment of financing fees		(117	)		(433	)
Net cash provided by financing activities		1,383			18,524
Net increase in cash		3,635			57,653
Cash - beginning of period		2,468			3,085
Cash - end of period	$	6,103		$	60,738