-- Revenues in the first nine months amounted to $ 4.03 billion --
-- Operating income in the first nine months
amounted to $114.3 million --
-- Net loss in the first nine months amounted to $339.8 million --
MOSCOW, Dec. 8, 2009 (GLOBE NEWSWIRE) -- Mechel OAO (NYSE:MTL), a leading Russian integrated mining and steel group, today announced financial results for the nine months ended September 30, 2009.
Igor Zyuzin, Mechel's Chief Executive Officer, commented on the third quarter results: "Third quarter of 2009 appeared to be a good evidence of the fact that Mechel had successfully overcome the most difficult period of the world financial crisis and proved that our decisions were correct and we were able to change and adopt in a very difficult situation. We have stabilized our cash flows, restructured major part of our debt with international syndicate of banks, and moreover in the beginning of the fourth quarter we also restructured VTB loan, we totally recovered our steel production and most of it in mining. Hard work in the beginning of the year helped us to end third quarter with positive operational income and net income and significant EBITDA margin."
Consolidated Results for the nine months of 2009
---------------------------------------------------------------------
US$ thousand 9M 2009 9M 2008 Change Y-on-Y
---------------------------------------------------------------------
Revenues from
external customers 4,034,220 8,580,681 -53.0%
---------------------------------------------------------------------
Intersegment sales 575,850 1,161,137 -50.4%
---------------------------------------------------------------------
Net operating income 114,278 2,807,535 -95.9%
---------------------------------------------------------------------
Net operating margin 2.8% 32.7% --
---------------------------------------------------------------------
Net income/(loss) (339,784) 1,637,474 -120.8%
---------------------------------------------------------------------
EBITDA (1) 315,649 2,864,134 -89.0%
---------------------------------------------------------------------
EBITDA, margin(1) 7.8% 33.4% --
---------------------------------------------------------------------
EBITDA, FX
adjusted(1)(2) 485,863 3,047,413 -84.1%
---------------------------------------------------------------------
(1) See Attachment A.
(2) For comparison convenience the EBITDA is also provided without
correction of Forex gain/loss
---------------------------------------------------------------------
US$ thousand 3Q 2009 2Q 2009 Change Q-on-Q
---------------------------------------------------------------------
Revenues from
external customers 1,574,000 1,280,816 22.9%
---------------------------------------------------------------------
Intersegment sales 229,317 173,349 32.3%
---------------------------------------------------------------------
Net operating income 155,221 (54,725) 383.6%
---------------------------------------------------------------------
Net operating margin 9.9% -4.3% --
---------------------------------------------------------------------
Net income/(loss) 131,594 219,322 -40.0%
---------------------------------------------------------------------
EBITDA (1) 419,984 369,960 13.5%
---------------------------------------------------------------------
EBITDA, margin(1) 26.7% 28.9% --
---------------------------------------------------------------------
EBITDA, FX
adjusted (1)(2) 302,364 65,864 359.1%
---------------------------------------------------------------------
(1) See Attachment A.
(2) For comparison convenience the EBITDA is also provided without
correction of Forex gain/loss
Net revenues in the third quarter of 2009 increased by 22.9% to $1.57 billion compared to $1.28 billion in the second quarter of 2009. Operating income amounted to $155.2 million versus operating loss of $54.7 million in the second quarter of 2009.
In the third quarter of 2009, Mechel reported consolidated net income of $131.6 million which is 40% lower compared to consolidated net income of $219.3 million in the second quarter of 2009.
Consolidated EBITDA in the third quarter of 2009 increased by 13.5% compared to consolidated EBITDA in the second quarter and amounted to $420.0 million. Depreciation, depletion and amortization in the third quarter were $107.7 million, an increase of 11.1% over $97.0 million in the second quarter of 2009.
Mining Segment Results
---------------------------------------------------------------------
US$ thousand 9M 2009 9M 2008 Change Y-on-Y
---------------------------------------------------------------------
Revenues from
external customers 1,090,640 2,829,137 -61.4%
---------------------------------------------------------------------
Intersegment sales 172,150 564,065 -69.5%
---------------------------------------------------------------------
Net operating income 135,320 1,560,449 -91.3%
---------------------------------------------------------------------
Net income 113,058 1,021,911 -88.9%
---------------------------------------------------------------------
EBITDA* 463,763 1,685,011 -72.5%
---------------------------------------------------------------------
EBITDA, margin** 36.7% 49.7% --
---------------------------------------------------------------------
* See Attachment A.
** EBITDA margin is calculated as a percentage of consolidated
revenues of the segment, including intersegment sales.
---------------------------------------------------------------------
US$ thousand 3Q 2009 2Q 2009 Change Q-on-Q
---------------------------------------------------------------------
Revenues from
external customers 415,775 330,629 25.8%
---------------------------------------------------------------------
Intersegment sales 67,386 53,014 27.1%
---------------------------------------------------------------------
Net operating income 72,687 12,625 475.4%
---------------------------------------------------------------------
Net income/(loss) 129,130 49,724 159.7%
---------------------------------------------------------------------
EBITDA 282,458 139,460 102.5%
---------------------------------------------------------------------
EBITDA, margin* 58.5% 36.4% --
---------------------------------------------------------------------
* EBITDA margin is calculated as a percentage of consolidated
revenues of the segment, including intersegment sales.
Mining Segment Output
---------------------------------------------------------------------
Product 9M 2009, 3Q 2009, 3Q2009 vs.
thousand thousand 2Q2009
tonnes tonnes
---------------------------------------------------------------------
Coal 12,349 5,445 +57%
---------------------------------------------------------------------
Coking coal 6,546 3,739 +109%
---------------------------------------------------------------------
Steam coal 5,803 1,706 +0.7%
---------------------------------------------------------------------
Coal concentrate* 6,382 3,044 +44%
---------------------------------------------------------------------
Coking 4,933 2,638 +67%
---------------------------------------------------------------------
Steam 1,449 406 -24%
---------------------------------------------------------------------
Iron ore
concentrate 3,170 1,216 +13%
---------------------------------------------------------------------
* The coal concentrate has been produced from the part of the raw
coal output.
Mining segment revenues from external customers for the third quarter of 2009 totaled $415.8 million, or 26% of consolidated net revenue, an increase of 25.8% over net segment revenue from external customers of $330.6 million in the second quarter of 2009.
As of June 30, 2009, Mechel's acquisition of Bluestone Coal Group companies was accounted for on a tentative basis subject to the finalization of assets appraisals and consideration paid measurement. Specifically, the Group has not yet determined the appropriate values of the Preferred Shares issued, the CVR and the Drilling program related contingent payments (the components of the consideration paid); and the allocation of the purchase consideration to the assets of the BCG companies acquired and liabilities incurred has not been completed. As of the appropriate acquisition date, the estimated amounts of Bluestone Coal Group companies non-current assets were $180.2 million, and total assets and liabilities amounted to $232.6 million and $205.4 million, respectively. Assets and liabilities are currently accounted for based on their historic values rather than appraised amounts.
Goodwill arising on the acquisition of Bluestone Coal Group companies tentatively amounted to $994.4 million. Specifically the majority of the existing goodwill is expected to be primarily allocated to mineral licenses based on the ongoing third-party valuation.
Operating income in the mining segment in the third quarter of 2009 increased by 475.4% to $72.7 million, or 15.0% of total segment revenue, compared to operating income of $12.6 million in the second quarter of 2009. EBITDA in the mining segment in the third quarter of 2009 totaled $282.5 million, an increase of 102.5% over segment EBITDA of $139.5 million in the second quarter of 2009. The EBITDA margin for the mining segment increased from 36.4% in the second quarter of 2009 to 58.5% in the third quarter of 2009. Depreciation, depletion and amortization in mining segment amounted to $53.7 million, an increase of 9.4% over $49.1 million in the previous quarter.
Mechel's Senior Vice-president, Vladimir Polin, commented on the mining segment operating results: "A number of significant contracts with Chinese, Japanese and South Korean companies, as well as active development of spot sales, allowed us to greatly increase our capacity utilization in coking coal concentrate and continue their restoration to pre-crisis levels. At Bluestone we even managed to overcome historical maximums in production of coking coal concentrate. Growth in production resulted in ability to significantly decrease cash costs per tonne of product, bringing them back to pre-crisis levels. Today we can state with confidence that for our mining segment the worst period of 2009 is already behind us. Supported by the successful implementation of a new financing system, we also actively continue the construction of the railway link to Elga coking coal deposit, simultaneously preparing necessary steps to start construction of the mine itself in 2010. Those steps will allow us to mine first coal at this deposit, strategic for the company, already next year. The market conditions we witness today give us reason to expect further growth in prices of coal and iron ore, which, together with increased production in 2010, will improve segment's performance even better."
Steel Segment Results
---------------------------------------------------------------------
US$ thousand 9M 2009 9M 2008 Change Y-on-Y
---------------------------------------------------------------------
Revenues from
external customers 2,324,326 4,829,209 -51.9%
---------------------------------------------------------------------
Intersegment sales 127,412 198,702 -35.9%
---------------------------------------------------------------------
Operating
income / (loss) (90,659) 1,133,777 -108.0%
---------------------------------------------------------------------
Net income / (loss) (275,284) 633,624 -143.4%
---------------------------------------------------------------------
EBITDA* (23,239) 1,137,945 -102.0%
---------------------------------------------------------------------
EBITDA, margin** -1.0% 22.6% --
---------------------------------------------------------------------
* See Attachment A.
** EBITDA margin is calculated as a percentage of consolidated
revenues of the segment, including intersegment sales.
---------------------------------------------------------------------
US$ thousand 3Q 2009 2Q 2009 Change Q-on-Q
---------------------------------------------------------------------
Revenues from
external customers 926,472 754,700 22.8%
---------------------------------------------------------------------
Intersegment sales 50,567 35,147 43.9%
---------------------------------------------------------------------
Operating income 68,035 (73,506) 192.6%
---------------------------------------------------------------------
Net income / (loss) 46,223 36,591 26.3%
---------------------------------------------------------------------
EBITDA 157,577 79,452 98.3%
---------------------------------------------------------------------
EBITDA, margin* 16.1% 10.1% --
---------------------------------------------------------------------
* EBITDA margin is calculated as a percentage of consolidated
revenues of the segment, including intersegment sales.
Steel Segment Output
---------------------------------------------------------------------
Product 9M 2009, 3Q 2009, 3Q 2009 vs.
thousand thousand 2Q2009
tonnes tonnes
---------------------------------------------------------------------
Coke 2,243 977 +35%
---------------------------------------------------------------------
Pig iron 2,725 1,074 +11%
---------------------------------------------------------------------
Steel 3,972 1,477 +6%
---------------------------------------------------------------------
Rolled products 3,891 1,457 +7%
---------------------------------------------------------------------
Hardware 462 184 +19%
---------------------------------------------------------------------
Mechel's steel segment revenues from external customers in the third quarter of 2009 increased by 22.8% compared to the second quarter of 2009 and amounted to $926.5 million, or 59% of consolidated net revenue.
In the third quarter of 2009 the steel segment operating income was $68.0 million, versus operating loss of $73.5 million in the second quarter of 2009. EBITDA in the steel segment in the third quarter of 2009 amounted to $157.6 million, an increase of 98.3% compared to EBITDA of $79.5 million in the second quarter of 2009. The EBITDA margin of the steel segment increased to 16.1% in the third quarter of 2009 compared to 10.1% in the second quarter of 2009. Depreciation, depletion and amortization in steel segment increased by 6.3% from $28.8 million in the second quarter of 2009 to $30.6 million in the third quarter of 2009.
Commenting on the results of the steel segment, Vladimir Polin noted: "Followed by the recovery of production almost to pre-crisis levels of 2008, and some plants are even exceeding those, steel segment continued to improve its financial performance. Significant work took place in terms of optimization of steel distribution system and introduction of new products better demanded by the market. As a result we improved our operating income and decreased accounts receivables. All of the above positively affected operating cash flow in this period. In the third quarter demand continued to grow almost in all major export positions of Mechel steel products both in Middle East and in Southeast Asia and Europe. We are working on modernization of our metallurgical facilities, thus lowering costs and improving our products' quality. All this gives us reason to speak about good perspectives in steel segment in 2010."
Ferroalloy Segment Results
---------------------------------------------------------------------
US$ thousand 9M 2009 9M 2008 Change Y-on-Y
---------------------------------------------------------------------
Revenues from
external customers 250,111 402,213 -37.8%
---------------------------------------------------------------------
Intersegment sales 40,512 140,589 -71.2%
---------------------------------------------------------------------
Operating
income / (loss) (19,169) 76,798 -125.0%
---------------------------------------------------------------------
Net income / (loss) (241,598) (13,133) -1 939.6%
---------------------------------------------------------------------
EBITDA* (132,572) 78,022 -269.9%
---------------------------------------------------------------------
EBITDA, margin** -45.6% 14.4% --
---------------------------------------------------------------------
* See Attachment A.
** EBITDA margin is calculated as a percentage of consolidated
revenues of the segment, including intersegment sales.
---------------------------------------------------------------------
US$ thousand 3Q 2009 2Q 2009 Change Q-on-Q
---------------------------------------------------------------------
Revenues from
external customers 119,123 77,129 54.4%
---------------------------------------------------------------------
Intersegment sales 21,093 12,344 70.9%
---------------------------------------------------------------------
Operating
income / (loss) 11,172 (5,539) 301.7%
---------------------------------------------------------------------
Net income / (loss) (38,989) 126,082 -130.9%
---------------------------------------------------------------------
EBITDA 21,472 153,193 -86.0%
---------------------------------------------------------------------
EBITDA, margin* 15.3% 171.2% --
---------------------------------------------------------------------
* EBITDA margin is calculated as a percentage of consolidated
revenues of the segment, including intersegment sales.
Ferroalloy Segment Output
---------------------------------------------------------------------
Product 9M 2009, 3Q 2009, 3Q 2009 vs.
thousand thousand 2Q 2009
tonnes tonnes
---------------------------------------------------------------------
Nickel 11 4.3 +5%
---------------------------------------------------------------------
Ferrosilicon 63 22 +7%
---------------------------------------------------------------------
Ferrochrome 53 29 +91%
---------------------------------------------------------------------
Ferroalloy segment revenue from external customers for the third quarter of 2009 amounted to $119.1 million, or 8.0% of consolidated net revenue, an increase of 54.4% compared with segment revenue from external customers of $77.1 million in the second quarter of 2009.
Operating income in the ferroalloy segment in the third quarter of 2009 was $11.2 million, versus operating loss of $5.5 million in the previous quarter.
EBITDA in the ferroalloy segment for the third quarter of 2009 decreased by 86.0% and amounted to $21.5 million, compared to segment EBITDA of $153.2 million in the second quarter of 2009.
The EBITDA margin of the ferroalloy segment in the third quarter of 2009 comprised 15.3%. For ferroalloy segment depreciation, depletion and amortization in the third quarter of 2009 was $19.2 million, an increase of 23.9% over $15.5 million in the second quarter of 2009.
Vladimir Polin noted: "In the third quarter of 2009 an environment on Mechel's ferroalloys segment key distribution markets stayed stable positive. Considering that ferroalloys plants worked with 100% capacity utilization, the segment demonstrated good financial results and came out with operational profit. We also continued to increase production of chromites ore concentrate at Voskhod Mining Plant, currently not only covering needs of Tikhvin Ferroalloy Plant in those, but starting sales of this high marginal product to the third parties. In fact, we expect that in 2010 the segment will be able to reveal its true potential, and will significantly contribute in overall financial results of Mechel."
Power Segment Results
---------------------------------------------------------------------
US$ thousand 9M 2009 9M 2008 9M 09 vs. 9M 08
---------------------------------------------------------------------
Revenues from
external customers 369,142 520,121 -29.0%
---------------------------------------------------------------------
Intersegment sales 235,775 257,782 -8.5%
---------------------------------------------------------------------
Operating income 16,671 19,057 -12.5%
---------------------------------------------------------------------
Net income / (loss) (8,072) (1,233) -554.7%
---------------------------------------------------------------------
EBITDA* 25,946 38,543 -32.7%
---------------------------------------------------------------------
EBITDA, iaoaea** 4.3% 5.0% --
---------------------------------------------------------------------
* See Attachment A.
** EBITDA margin is calculated as a percentage of consolidated
revenues of the segment, including intersegment sales.
---------------------------------------------------------------------
US$ thousand 3Q 2009 2Q 2009 Change Q-on-Q
---------------------------------------------------------------------
Revenues from
external customers 112,629 118,358 -4.8%
---------------------------------------------------------------------
Intersegment sales 90,270 72,844 23.9%
---------------------------------------------------------------------
Operating income 4,334 213 1 934.8%
---------------------------------------------------------------------
Net income / (loss) (3,761) (4,556) -17.5%
---------------------------------------------------------------------
EBITDA 6,898 5,147 34.0%
---------------------------------------------------------------------
EBITDA, margin* 3.4% 2.7% --
---------------------------------------------------------------------
* EBITDA margin is calculated as a percentage of consolidated
revenues of the segment, including intersegment sales.
Power Segment Output
---------------------------------------------------------------------
Product Units 9M 2009 3Q 2009 3Q 2009 vs.
2Q 2009
---------------------------------------------------------------------
Electric power
generation ths. kWh 2,308,632 735,127 +9%
---------------------------------------------------------------------
Heat power
generation Gcal 3,767,481 699,049 -28%
---------------------------------------------------------------------
Mechel's power segment revenue from external customers for the third quarter of 2009 decreased by 4.8% compared to previous quarter and amounted to $112.6 million, or 7% of consolidated net revenue.
Operating income in the power segment in the third quarter of 2009 was $4.3 million, an increase of 1934.8% compared to operating income of $213 thousand in the second quarter of 2009. EBITDA in the power segment in the third quarter of 2009 increased by 34.0%, totaling $6.9 million, compared to EBITDA of $5.1 million in the second quarter of 2009. The EBITDA margin for the power segment grew from 2.7% to 3.4%. Depreciation, depletion and amortization in power segment in the third quarter of 2009 increased by 20.0%, compared to the second quarter of 2009, from $3.5 million to $4.2 million.
Vladimir Polin noted: "In the third quarter electricity and heat energy consumption increased due to both seasonal factors and overall recovery of Russia's economics. As we simultaneously continued to work on costs reduction and fuel factor decrease, the company's energy sector also showed good results and increased operational profit in the third quarter."
Recent Highlights
* In November 2009 Mechel announced placing of its stock secured non-convertible interest-bearing documentary bonds of BO-01 series with an obligatory centralized care of securities at MICEX Stock Exchange ZAO by providing 1st rate coupon competition. The total number of the placed bonds is 5,000,000 (100% of the stock bonds issue volume), the nominal value of the bonds is 1000 roubles each. * In November 2009 Mechel announced commissioning of the integrated steel processing facility (ladle furnace) # 3 that is the second technological part of the continuous casting machine No.4 complex project at the oxygen-converter shop of its Chelyabinsk Metallurgical Plant (CMP) OAO subsidiary. The ladle furnace #3 is planned to process about 1.2 million tonnes of steel per year that would enable to raise continuous caster efficiency at the continuous casting machine No.4 in the oxygen-converter shop up to 120 thousand tonnes per year. Investments for construction and commissioning of the ladle furnace #3 amounted to 1.05 billion roubles. * In November 2009 Mechel announced completion of several investment projects at Mechel Campia Turzii plant, which is a part of Mechel OAO's East-European Steel Division. Three new production lines launched at the plant include: metal fiber production and packing line, reinforcing wire coils extension, enlargement line and steel wire production shop. Total investments in the projects amounted to 7 million Euro. * In December 2009 Mechel announced agreement with VTB Bank about 3 year prolongation of the 15 billion rubles loan given to Mechel in 2008. Prolongation agreement provides for interest payment during the first 2.5 years only with further monthly repayment of the principal debt. This prolongation is a one more step within a framework of the Agreement on Long-term Mutually Beneficial Cooperation entered into by the companies in April 2008, with a view of implementing Mechel's projects and development plans.
Igor Zyuzin concluded: "The third quarter showed increase of Mechel's financial and operational results that was a logical outcome of hard-working that the company started from the beginning of the global crisis. Due to realized measures and continuing program of production growth and optimization, widening of distribution areas, restructuring of debt portfolio and financial flows, today the company is able to use the world economics' stabilization to continue increasing its shareholder value and to create background for the further rise."
Financial Position
Capital expenditure on property, plant and equipment and acquisition of mineral licenses for the nine month of 2009 amounted to $345.9 million, of which $187.5 million was invested in the mining segment, $130.3 million was invested in the steel segment, $23.9 million was invested in the ferroalloy segment and $4.3 million was invested in the power segment.
For the nine months of 2009 Mechel spent $15.5 million on acquisitions, including $11.4 million spent on acquisition of minority interest in other subsidiaries.
As of September 30, 2009 total debt was at $5,608.4 million. Cash and cash equivalents amounted to $408.9 million at the end of nine month period of 2009 and net debt amounted to $5,199.5 million (net debt is defined as total debt outstanding less cash and cash equivalents).
The management of Mechel will host a conference call today at 10:00 a.m. New York time (3:00 p.m. London time, 6:00 p.m. Moscow time) to review Mechel's financial results and comment on current operations. The call may be accessed via the Internet at http://www.mechel.com, under the Investor Relations section.
Mechel is one of the leading Russian companies. Its business includes four segments: mining, steel, ferroalloy and power. Mechel unites producers of coal, iron ore concentrate, steel, rolled products, ferroalloys, hardware, heat and electric power. Mechel products are marketed domestically and internationally.
Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of Mechel, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements. We refer you to the documents Mechel files from time to time with the U.S. Securities and Exchange Commission, including our Form 20-F. These documents contain and identify important factors, including those contained in the section captioned "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" in our Form 20-F, that could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, the achievement of anticipated levels of profitability, growth, cost and synergy of our recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of our shares or ADRs, financial risk management and the impact of general business and global economic conditions.
Attachments to the 2009 Nine Months Earnings Press Release
Attachment A
Non-GAAP financial measures. This press release includes financial information prepared in accordance with accounting principles generally accepted in the United States of America, or US GAAP, as well as other financial measures referred to as non-GAAP. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with US GAAP.
Earnings Before Interest, Depreciation and Amortization (EBITDA) and EBITDA margin. EBITDA represents earnings before interest, depreciation and amortization. EBITDA margin is defined as EBITDA as a percentage of our net revenues. Our EBITDA may not be similar to EBITDA measures of other companies; is not a measurement under accounting principles generally accepted in the United States and should be considered in addition to, but not as a substitute for, the information contained in our consolidated statement of operations. We believe that EBITDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, acquisitions and other investments and our ability to incur and service debt. While interest, depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Our EBITDA calculation is commonly used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the metals and mining industry. EBITDA can be reconciled to our consolidated statements of operations as follows:
---------------------------------------------------------------------
US$ thousand 9M 2009 9M 2008
---------------------------------------------------------------------
Net income (339,784) 1,637,474
---------------------------------------------------------------------
Add:
Depreciation, depletion
and amortization 280,018 351,724
Interest expense 371,514 199,970
Income taxes 3,901 674,966
---------------------------------------------------------------------
Consolidated EBITDA 315,649 2,864,134
---------------------------------------------------------------------
Substract:
Forex gain/loss 170,214 183,279
---------------------------------------------------------------------
EBITDA, FX adjusted 485,863 3,047,413
---------------------------------------------------------------------
EBITDA margin can be reconciled as a percentage to our Revenues as follows:
--------------------------------------------------------------------- US$ thousand 9M 2009 9M 2008 --------------------------------------------------------------------- Revenue, net 4,034,220 8,580,681 --------------------------------------------------------------------- EBITDA 315,649 2,864,134 --------------------------------------------------------------------- EBITDA, margin 7.8% 33.4% ---------------------------------------------------------------------
Consolidated Balance Sheets
(in thousands of U.S. dollars, except share amounts)
Sept. 30,
2009 Dec. 31,
(unaudited) 2008
--------- ---------
ASSETS
Cash and cash equivalents $ 408881 $ 254839
Accounts receivable, net of allowance for
doubtful accounts of $88,981 as of
September 30, 2009 and $110,613 as of
December 31, 2008 458207 406740
Due from related parties 13696 22180
Inventories 920326 1365109
Deferred income taxes 25155 22047
Prepayments and other current assets 490697 606354
Short-term investments in related parties 113422 67908
--------- ---------
Total current assets 2430384 2745177
Long-term investments in related parties 84678 80408
Other long-term investments 26472 472772
Intangible assets, net 6771 6956
Property, plant and equipment, net 4369516 4277841
Mineral licenses, net 3005456 3430642
Other non-current assets 97724 57844
Deferred income taxes 80492 27551
Goodwill 1893426 910444
--------- ---------
Total assets $11994919 $12009634
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings and current portion
of long-term debt (including debt of
$0 with loan covenant violations as of
September 30, 2009 and $4,233,751 as of
Decemer 31, 2008) $ 2140390 $ 5149415
Accounts payable and accrued expenses:
Trade payable to vendors of goods
and services 529393 688702
Advances received 103249 125042
Accrued expenses and other
current liabilities 207261 143587
Taxes and social charges payable 183233 131241
Unrecognized income tax benefits 21354 27176
Due to related parties 3466 1588
Asset retirement obligation,
current portion 6690 6387
Deferred income taxes 19911 17785
Deferred revenue 7955 1776
Pension obligations, current portion 26961 28960
Dividends payable 221318 4919
Finance lease liabilities, current portion 31317 14891
--------- ---------
Total current liabilities 3502498 6341469
Long-term debt, net of current portion 3468051 219816
Asset retirement obligations, net of
current portion 67877 65217
Pension obligations, net of current portion 192445 158070
Deferred income taxes 766127 841214
Finance lease liabilities, net of
current portion 65163 54161
Other long-term liabilities 8225 8026
SHAREHOLDERS' EQUITY
Common shares (10 Russian rubles par value;
497,969,086 shares authorized,
416,270,745 shares issued and outstanding
as of September 30, 2009 and December
31, 2008) 133507 133507
Preferred shares (10 Russian rubles par
value, 138,756,915 shares authorized,
83,254,149 shares issued and outstanding
as of September 30, 2009) 25314 --
Additional paid-in capital 915388 415070
Accumulated other comprehensive (loss)
income (207208) 158937
Retained earnings 2775447 3323298
--------- ---------
Equity attributable to shareholders of
Mechel OAO 3642448 4030812
Equity attributable to non-controlling
interests 282085 290849
Total equity 3924533 4321661
========= =========
Total liabilities and shareholders' equity $11994919 $12009634
========= =========
Consolidated Income Statements
(in thousands of U.S. dollars, except
share and per share amounts)
For 9 months ended
September 30,
----------------------
2009 2008
(unaudited) (unaudited)
--------- ---------
Revenue, net (including related party
amounts of $38,655 and $61,118 during
9 months 2009 and 2008, respectively) $ 4034220 $ 8580681
Cost of goods sold (including related
party amounts of $6,097 and
$10,232 during 9 months 2009 and 2008,
respectively) (2810927) (4233053)
--------- ---------
Gross profit 1223293 4347628
Selling, distribution and operating
expenses:
Selling and distribution expenses (728026) (972662)
Taxes other than income tax (70477) (112934)
Accretion expense (5425) (2491)
Loss on write-off of property, plant
and equipment (3527) --
Recovery of (provision for) doubtful
accounts 19972 (15616)
General, administrative and other
operating expenses (321534) (436390)
--------- ---------
Total selling, distribution and
operating expenses (1109015) (1540093)
--------- ---------
Operating income 114278 2807535
Other income and (expense):
Income (loss) from equity investments 659 (3606)
Interest income 8233 8949
Interest expense (371514) (199970)
Other income (expenses), net 82855 2530
Foreign exchange (loss) gain (170214) (183279)
--------- ---------
Total other income and (expense), net (449981) (375376)
--------- ---------
(Loss) income before income tax,
non-controlling interest (335703) 2432159
Income tax benefit (expense) (3901) (674966)
--------- ---------
Loss (Income) from continuing operations (339604) 1757193
--------- ---------
Less: Net loss (income) attributable to
non-controlling interests (179) (119719)
========= =========
Net (loss) income attributable to
shareholders of Mechel OAO $ (339784) $ 1637474
========= =========
Currency translation adjustment (358423) (140334)
Change in pension benefit obligation (3538) (746)
Adjustment of available-for-sale securities (4183) (6989)
========= =========
Comprehensive (loss) income (705928) 1489405
========= =========
Consolidated Statements of Cash Flows
(in thousands of U.S. dollars)
For 9 months ended
September 30,
----------------------
2009 2008
(unaudited) (unaudited)
--------- ---------
Cash Flows from Operating Activities
Net (loss) income $ (339784) $ 1637474
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 225897 266781
Depletion and amortization 54121 84944
Foreign exchange loss (gain) 170214 183279
Deferred income taxes (50480) (7020)
(Release of) provision for
doubtful accounts (19972) 15616
Inventory write-down (189169) 2793
Accretion expense 1016 2491
Loss on write-off of property, plant
and equipment 3527 --
Non-controlling interest 179 119719
Change in undistributed earnings of
equity investments (659) 3606
Non-cash interest on long-term tax and
pension liabilities 12141 16290
Loss on sale of property, plant
and equipment 2478 9132
Gain on sale of investments (105) (4493)
Gain on accounts payable with expired
legal term (2693) (3588)
Gain on forgiveness of fines and penalties (1241) --
Amortization of loan origination fee 29459 18637
Gain resulting from remeasurement of
the transferred preferred stock (60801) --
Pension service cost and amortization of
prior period service cost 7477 7480
--------- ---------
Net change before changes in
working capital (158395) 2353141
--------- ---------
Changes in working capital items, net of
effects from acquisition of
new subsidiaries:
Accounts receivable (27493) (281465)
Inventories 596444 (677342)
Trade payable to vendors of goods
and services (75873) 382902
Advances received (21306) (20018)
Accrued taxes and other liabilities 116092 293727
Settlements with related parties (16062) (69682)
Deferred revenue and cost of inventory
in transit, net 12189 (11043)
Other current assets 91230 (45066)
Prepayments to non-state pension funds (9672) --
Unrecognized income tax benefits (4965) (706)
--------- ---------
Net cash provided by operating activities 502189 1924448
--------- ---------
Cash Flows from Investing Activities
Acquisition of Oriel, less cash acquired -- (1432990)
Acquisition of Ductil Steel S.A.,
less cash acquired -- (197621)
Acquisition of HBL, less cash acquired (8387) (14245)
Acquisition of the BCG Companies,
less cash acquired 9812 --
Acquisition of other investments,
less cash acquired (5519) --
Advances paid for investments -- (423959)
Acquisition of non-controlling
in subsidiaries (11389) (118032)
Investments in assets trust management
by affiliates (30788) (271)
Proceeds from disposal of investments
in affiliates 2069 --
Proceeds from disposal of non-marketable
equity securities 6913 4612
Proceeds from other long-term investment (136902) --
Repayments of short-term loans issued 106897 227
Proceeds from disposals of property,
plant and equipment 809 7152
Purchases of mineral licenses (1164) (2450)
Purchases of property, plant and equipment (344773) (967073)
--------- ---------
Net cash used in investing activities (412422) (3144650)
--------- ---------
Cash Flows from Financing Activities
Proceeds from short-term borrowings 985611 6562835
Repayment of short-term borrowings (3367699) (5325864)
Proceeds from long-term debt 2537477 152685
Repayment of long-term debt (49041) (14603)
Repayment of obligations under
finance lease (15949) (19166)
Dividends paid -- (235943)
--------- ---------
Net cash provided by (used in)
financing activities 90399 1119944
--------- ---------
Effect of exchange rate changes on cash
and cash equivalents (26123) 882
--------- ---------
Net increase (decrease) in cash and
cash equivalents 154043 (99376)
--------- ---------
Cash and cash equivalents at beginning
of period 254838 236779
--------- ---------
Cash and cash equivalents at end of period $ 408881 $ 137403
========= =========