Ormet Releases Financial Results

HANNIBAL, Ohio--(BUSINESS WIRE)--Ormet Corporation, an independent U.S. producer of aluminum, announced its second quarter 2008 and six months ending June 30, 2008 results realizing a net loss of $5.1 million and a net income of $4.3 million for the quarter and year-to-date, respectively.

Second Quarter 2008 Results

Net sales from continuing operations for the three month period ending June 30, 2008 were $133.7 million compared to $133.6 million for the same period in 2007. A tolling agreement with Glencore began on April 1, 2008 wherein Ormet converts Glencore’s alumina into aluminum for a tolling fee. Overall aluminum/tolling revenue increased to $133.7 million versus $ 91.1 million in 2007; non-toll sales volume was 5,122 metric tons and toll sales volume was 63,423 metric tons in 2008 vs. 33,843 non-toll metric tons in 2007. Non-toll sales decreased $76.7 million while toll sales were $119.5 million. This was offset by the absence of billet sales in 2008 ($28.8 million). During the three month period, the monthly average cash settlement price on the LME including the Midwest premium was $ 1.38 per pound ($ 3,042/metric ton) and $ 1.28 per pound ($2,822 /metric ton) in 2008 and 2007, respectively. The tolling fee is fixed for 2008 and will not vary based on the LME pricing.

The gross profit for the three month period ending June 30, 2008 was $6.5 million (including the one time favorable effect of the business interruption claim of $4.4 million) compared to a gross profit of $11 million for the same period in 2007. The gross profit decline of $4.5 million, in spite of a 103% increase in sow volume sold, was principally due to increased anode costs of $7.8 million (28%), partially offset by the favorable effects of the business interruption claim of $4.4 million, $1.7 million in lower refinery idle costs, absence of the 2007 restart expenses of $4.3 million and absence of the 2007 unfavorable billet margin of $4.0 million.

Operating expenses for the three month period ended June 30, 2008 totaled $8.0 million, a $2.5 million improvement compared to the same period in 2007. Absence of the 2007 one-time employment-related expense of $3.5 million offset by increased amortization of loan fees of $1.6 million, due to the early repayment of the term loan balance, was the principal cause of the improvement.

For the three month period ended June 30, 2008 the Company reported a $1.5 million operating loss compared to an operating profit of $.6 million in the same period of 2007.

The average number of shares of common stock issued and outstanding during the three month period ended June 30, 2008 was 18,458,379 shares. The resulting net loss from continuing operations for the period was $.27 per share compared to a loss for the same period in 2007 of $.11 per share with 17,105,419 shares outstanding.

Six Months Ended June 30, 2008 Results

Net sales from continuing operations for the six month period ended June 30, 2008 were $296.0 million compared to $191.3 million for the same period in 2007. A tolling agreement began on April 1, 2008 with Glencore. Overall aluminum/ tolling revenues increased to $288.8 million versus $111.3 million in 2007; non-toll volume was 65,237 metric tons in 2008 and toll volume was 63,423 metric tons vs. all non-toll volume of 41,255 metric tons in 2007. Non-toll sales increased $58 million while toll sales totaled $119.5 million. This was offset by the absence of billet sales in 2008 ($58.8 million). During the six month period, the monthly average cash settlement price on the LME including the Midwest premium was $1.33 per pound ($2,932/metric ton) and $1.29 per pound ($2,844 /metric ton) in 2008 and 2007, respectively. While the Company’s tolling arrangement ensures that a committed outlet for aluminum production exists during the remainder of 2008 and during 2009, market prices for aluminum have increased significantly from levels existing at the time the Company previously entered into the pre-pricing agreements for its 2008 and 2009 aluminum production. The Company has not benefited from these increases and will not benefit in 2008 or 2009 if there are further increases in aluminum prices.

The gross profit for the six month period ended June 30, 2008 was $26.0 million compared to a gross profit of $2.0 million for the same period in 2007. The $24.0 million improvement in gross profit was principally due to a 212 percent increase in sow production volume, absence of the $12.4 million 2007 restart expense, the non recurring $4.4 million business interruption insurance recovery and $4.3 million in lower alumina refinery idle cost. These items were partially offset by a $10.7 million (24%) unfavorable anode price increase of 43 percent and the absence of $5.2 million of billet margin.

Operating expenses for the six month period ended June 30, 2008 totaled $13.8 million, a $7.6 million improvement compared to the same period in 2007. Absence of the 2007 one-time employment-related expense of $8.4 million offset by increased amortization of loan fees of $1.4 million, due to the early repayment of the term loan balance, were the main factors of the improvement.

For the six month period ended June 30 2008, the Company reported a $12.3 million operating profit compared to an operating loss of $19.4 million in the same period of 2007.

The average number of shares of common stock issued and outstanding during the six month period ended June 30, 2008 was 18,138,499 shares. The resulting net income from continuing operations for the period was per $.27 per share compared to a net loss for the same period of 2007 of $1.44 per share with 16,476,817 shares outstanding.

Year to Date Highlights

On May 5, 2008, the Company and Glencore, Ltd. (Glencore), an international trading company headquartered in Switzerland, entered into a tolling agreement for 2008 (retro-active to April 1, 2008) and 2009. Under the tolling agreement, the Company's smelting operation in Hannibal, Ohio is dedicated during the remainder of 2008 and for all of 2009 to producing aluminum sow from Glencore supplied alumina, pursuant to which the Company receives tolling fees. As part of the tolling arrangement, Glencore purchased, as of the effective date of the agreement, substantially all of the Company's then existing inventory for alumina, molten aluminum and finished goods. The agreement supersedes contracts that the Company and Glencore were parties to and associated with the Company's alumina supply for 2008 and an aluminum sales agreement and pre-pricing agreements that were in place for 2008 and 2009. Glencore also agreed to purchase from the Company during the balance of 2008 alumina, which the Company is currently under contract to purchase from a third party.

The Company spent $12.5 million on capital expenditures during the six months ended June 30, 2008. These capital expenditures were incurred at the aluminum smelter in Hannibal, Ohio. The revolving credit agreement limits the Company’s ability to make capital expenditures at its facilities in the future based on the projected amounts in the credit agreement.

During first six months of 2008, the Company used $.7 million to make required contributions to the Hourly VEBA Benefit Trust for its retirees, and $.5 million to make discretionary payments to the Salary VEBA Trust.

The Company’s lenders and the PBGC have agreed to terms of an appropriate subordination agreement providing for the subordination of the PBGC lien to the existing liens held by the lenders. The Inter-creditor Agreement was concluded in January 2008.

Through July 15, 2008, the Company has made all required payments into the pension plans in accordance with the IRS pension funding waiver. These payments total $48.1 million since the date of the waiver application.

”I am very proud of the people at Ormet and the achievements they have realized in the start-up of the smelter. We are now at full capacity and are focusing on reducing cost,” said Mike Tanchuk, Ormet’s CEO.

For a complete review of Ormet’s financial statements, please visit the Investor section of its website at www.ormet.com.

Headquartered in Hannibal, Ohio, Ormet Corporation is a major U.S. producer of aluminum. Ormet employs approximately 1,000 people. For more information, visit the website at www.ormet.com.

THIS INFORMATION AND DISCLOSURE STATEMENT HAS BEEN PREPARED TO FULFILL THE REQUIREMENTS OF (1) RULE 15C2-11(A)(5) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED AND (2) THE COMPANY’S BY-LAWS. IT IS INTENDED AS INFORMATION TO BE USED BY SECURITIES BROKERS AND DEALERS IN SUBMITTING OR PUBLISHING QUOTATIONS ON THE COMMON STOCK OF THE COMPANY AS CONTEMPLATED BY RULE 15C2-11.

NO BROKER, DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED HEREIN IN CONNECTION WITH THE COMPANY. ANY REPRESENTATIONS NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN MADE OR AUTHORIZED BY THE COMPANY.

THIS STATEMENT HAS NOT BEEN FILED BY THE COMPANY WITH THE SEC, THE NASD OR ANY OTHER REGULATORY AGENCY.

Ormet Corporation
Consolidated Financial Statements
June 30, 2008
Consolidated Balance Sheet
(000’s omitted)
	(Unaudited)
		6/30/2008				12/31/2007
ASSETS
Cash	$	3,306			$	2,310
Restricted cash		150				150
Trade accounts receivable		16,170				16,453
Inventories (Note 2)		66,548				97,933
Prepaid expense and other current assets (Note 5)		39,232				37,224
Total current assets		125,406				154,070
Property and equipment (Note 3)		57,302				49,931
Goodwill		42,284				42,284
Intangible assets, net (Note 4)		416				414
Assets held for sale (Note 14)		3,025				3,025
Other assets (Note 5)		5,157				7,185
TOTAL ASSETS	$	233,590			$	256,909
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Accounts payable	$	18,527			$	13,207
Bank line of credit (Note 6)		49,896				56,040
Current portion of term debt (Note 7)		-				5,000
Accrued and other current liabilities
Accrued compensation		6,939				8,120
Accrued interest		393				826
Postretirement obligations (Note 12)		5,340				2,340
Pension obligations (Note 11)		-				-
Other accrued liabilities		11,019				11,024
Total current liabilities		92,114				96,557
Long term debt (Note 7)		33,035				38,057
Other Long-term Liabilities:
Pension obligations (Note 11)		106,376				122,732
Postretirement obligations (Note 12)		59,653				61,887
Other liabilities (Note 10)		5,427				6,193
STOCKHOLDERS’ DEFICIT		(63,015	)			(68,517	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	233,590			$	256,909

Ormet Corporation
Consolidated Financial Statements
June 30, 2008
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(000's omitted)
		Three Months Ended								Six Months Ended
			6/30/2008				6/30/2007				6/30/2008			6/30/2007
Net Sales from Continuing Operations		$	133,691			$	133,614			$	295,966		$	191,310
Cost of sales
Production			127,207				118,255				269,927			176,980
Restart expenses			-				4,300				-			12,367
Total cost of sales			127,207				122,555				269,927			189,347
Gross Profit			6,484				11,059				26,039			1,963
Operating expenses			7,962				10,412				13,758			21,365
Operating Income (Loss)			(1,478	)			647				12,281			(19,402	)
Non-operating Expenses
Other expense, net			165				15				81			89
Interest expense			3,383				2,479				7,252			4,233
Total Non-operating Expenses			3,548				2,494				7,333			4,322
Profit (Loss) Before Income Tax			(5,026	)			(1,847	)			4,948			(23,724	)
Income tax (recovery) expense			-				-				-			-
Profit (Loss) from Continuing Operations			(5,026	)			(1,847	)			4,948			(23,724	)
Loss from discontinued operations			49				2,198				669			4,213
Net Income (Loss)		$	(5,075	)		$	(4,045	)		$	4,279		$	(27,937	)
Shares Outstanding:
Average during period			18,458				17,105				18,138			16,477
As of June 30			18,458				17,819				18,458			17,819
Net Income (Loss) per share from Continuing Operations		$	(0.27	)		$	(0.11	)		$	0.27		$	(1.44	)
Net Income (Loss) per share		$	(0.27	)		$	(0.24	)		$	0.23		$	(1.70	)

Ormet Corporation
Consolidated Financial Statements
June 30, 2008
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT (Unaudited)
(000's omitted)
	Common Stock			Additional Paid-in Capital			Accumulated Deficit				Accumulated Other Comprehensive Loss				Total
Balance - December 31, 2007	$	18		$	175,843		$	(220,868	)		$	(23,510	)		$	( 68,517	)
Comprehensive income/(loss):
Net income/(loss)		-			-			9,354				-				9,354
Total Comprehensive income/(loss)		-			-			9,354				-				9,354
Stock option grants (Note 17)		-			514			-				-				514
Balance March 31, 2008	$	18		$	176,357		$	(211,514	)		$	(23,510	)		$	(58,649	)
Comprehensive income/(loss):
Net income/(loss)		-			-			(5,075	)			-				(5,075	)
Total Comprehensive income/(loss)		-			-			(5,075	)			-				(5,075	)
Stock option grants (Note 17)		-			709			-				-				709
Balance June 30, 2008	$	18		$	177,066		$	(216,589	)		$	(23,510	)		$	(63,015	)

Ormet Corporation
Consolidated Financial Statements
June 30, 2008
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(000's omitted)
	Six Months Ended June 30,
	2008				2007
Cash Flows from Operating Activities
Net income/(loss)	$	4,279			$	(27,937	)
Adjustments to Reconcile Net Income (Loss ) to Net Cash from:
Depreciation and amortization		5,119				2,690
Bad debt expense		88				714
Deferred interest expense		3,388				-
Compensation expense related to options		1,223				383
Amortization of deferred financing costs		4,145				2,550
(Gain) loss on sale of property and equipment		16				(495	)
Net change in:
Trade accounts receivable		195				(24,406	)
Inventory		31,385				(17,819	)
Other assets		170				(2,064	)
Prepaid expenses & other		(2,008	)			(18,083	)
Accounts payable		5,320				398
Accrued liabilities & other		(2,629	)			(1,030	)
Pension and other postretirement		(15,590	)			(1,471	)
Net Cash Provided (Used) in Operating Activities		35,101				(86,570	)
Cash Flows from Investing Activities
Proceeds from asset sales		11				6,501
Capital spending		(12,519	)			(10,739	)
Net Cash provided (Used) in Investing Activities		(12,508	)			(4,238	)
Cash Flows from Financing Activities
Proceeds/(Repayment )of long term loan		(13,166	)			17,666
Proceeds/ (Reduction) from bank line of credit - net		(6,144	)			16,313
Payment of financing fees		(2,287	)			(6,358	)
Proceeds from issuance of equity interest						36,365
Net Cash provided (used) by financing activities		(21,597	)			63,986
Net (Decrease) Increase in Cash		996				(26,822	)
Cash - beginning of period		2,460				32,056
Cash - end of period	$	3,456			$	5,234