International Operations Influence IMCO Recycling's First Quarter Results
Irving, TX— IMCO Recycling Inc. reported first
quarter 2003 net earnings of $1.3 million or $.09 per common diluted share.
In the first quarter of 2002 the company's earnings
were $382,000 or $.03 per share before the cumulative effect of a required
accounting change regarding amortization of goodwill that was adopted
effective January 1, 2002. After the cumulative effect of the accounting
change, IMCO recorded a net loss of $58.3 million or $3.95 per share for
the first quarter of 2002.
Don V. Ingram, chairman and chief executive officer,
said: "The improvement in our first quarter profitability was a result
of the recent significant expansion of our international operations. We
believe this trend will continue throughout the year because we now have
full ownership of VAW-IMCO, our former joint venture in Germany, and because
our plants in Brazil and Mexico are expected to sharply raise their volume
in 2003 from last year's level.
"First quarter income of our aluminum segment was
seven percent below that of the same period last year," he said.
"We achieved higher volume and better margins in the production and
sale of specialty alloys that are provided to vehicle manufacturers and
their component suppliers. However, our domestic aluminum recycling volume
continues to be negatively affected by the low level of U.S. manufacturing
activity. Volume at our U.S. aluminum recycling plants has also been reduced
by weak demand from can stock producers, a decline in the beverage can
recycling rate, and the continued shutdown of primary smelters in the
Pacific Northwest. We are continuing to make progress in reduction of
plant operating costs and gains in productivity achieved through installation
of technically advanced equipment and processes. While the aluminum segment's
total volume declined in the first quarter, its income per pound processed
In March 2003 IMCO signed an agreement under which its
joint venture in Germany, VAW-IMCO, finalized the redemption value for
the shares in the firm held by a partner. This agreement resulted in VAW-IMCO
becoming a consolidated subsidiary of IMCO Recycling.
The company previously reported VAW-IMCO's financial
results under the equity method of accounting, which recorded only IMCO
Recycling's 50 percent share of VAW-IMCO's after-tax earnings. This accounting
method was used in January and February of 2003 and equity in earnings
of affiliates increased significantly in the first quarter because of
improved volume and margins in VAW-IMCO's transportation market business.
Effective March 1, 2003, all of VAW-IMCO's accounts
were consolidated into IMCO Recycling's financial statements. In addition,
effective with the first quarter of this year, the company is reporting
separate segment results for its international activities as well as its
domestic aluminum and zinc operations.
The consolidation of VAW-IMCO's accounts into IMCO Recycling's
financial statements was the principal reason for increases in the company's
first quarter processing volume, revenues, cost of sales and selling,
general and administrative expense. Operation of the company's Brazilian
plant that was acquired in 2002 and of its Mexican facility that was expanded
and upgraded last year also contributed to these increases.
Total aluminum and zinc processing volume was 663.2
million pounds, eight percent above volume of 611.6 million pounds in
2002's first quarter.
IMCO Recycling's management and lenders have agreed
on an amendment to the company's revolving credit agreement that, among
other things, eases certain restrictive financial covenants effective
March 31, 2003 and for the remainder of 2003.