10-Q 1 a3q1810q.htm 10-Q Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 alerislogoa02a01a01a02a83.jpg
FORM 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2018
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 333-185443
________________________________________________________________________
 Aleris Corporation
(Exact name of registrant as specified in its charter)
________________________________________________________________________
Delaware
 
27-1539594
(State or other jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
25825 Science Park Drive, Suite 400
Cleveland, Ohio 44122-7392
(Address of principal executive offices) (Zip Code)
(216) 910-3400
(Registrant’s telephone number, including area code)
________________________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ¨  No  þ
(Note: Registrant is a voluntary filer of reports required to be filed by certain companies under Sections 13 and 15(d) of the Securities Exchange Act of 1934 and has filed all reports that would have been required during the preceding 12 months, had it been subject to such filing requirements.)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes þ    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨ 
 
Accelerated filer
¨
 
 
 
 
 
Non-accelerated filer
þ
 
Smaller reporting company
¨
 
 
 
 
 
 
 
 
Emerging Growth Company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ
There were 32,223,271 shares of the registrant’s common stock, par value $0.01 per share, outstanding as of September 30, 2018.
 

                    
1


ALERIS CORPORATION
QUARTERLY REPORT ON FORM 10-Q
September 30, 2018
TABLE OF CONTENTS
 
 
 
 
 
 
Page No.
PART I – FINANCIAL INFORMATION
 
 
 
 
Item 1.
Financial Statements:
 
 
Consolidated Balance Sheet (Unaudited) as of September 30, 2018 and December 31, 2017
 
Consolidated Statements of Comprehensive Loss (Unaudited) for the Three and Nine Months Ended September 30, 2018 and 2017
 
Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2018 and 2017
 
Notes to Consolidated Financial Statements (Unaudited)
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
 
 
PART II – OTHER INFORMATION
 
 
 
 
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.
Defaults Upon Senior Securities
Item 4.
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
Signatures
















                    
2


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
ALERIS CORPORATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(in millions, except share and per share data)
ASSETS

September 30, 2018

December 31, 2017
Current Assets






Cash and cash equivalents

$
56.7


$
102.4

Accounts receivable, net

412.1


245.7

Inventories

729.1


631.2

Prepaid expenses and other current assets

30.8


36.1

Total Current Assets

1,228.7


1,015.4

Property, plant and equipment, net

1,396.2


1,470.9

Intangible assets, net

33.1


34.7

Deferred income taxes

69.5


70.7

Other long-term assets

47.7


52.7

Total Assets

$
2,775.2


$
2,644.4






LIABILITIES AND STOCKHOLDERS’ EQUITY




Current Liabilities




Accounts payable

$
365.7


$
299.2

Accrued liabilities

168.9


197.4

Current portion of long-term debt

21.6


9.1

Total Current Liabilities

556.2


505.7

Long-term debt

1,904.0


1,771.4

Deferred revenue
 
68.0

 
17.0

Deferred income taxes

9.3


4.0

Accrued pension benefits

160.3


170.2

Accrued postretirement benefits

33.1


34.3

Other long-term liabilities

45.1


49.1

Total Long-Term Liabilities

2,219.8


2,046.0

Stockholders’ Equity




Common stock; par value $.01; 45,000,000 shares authorized; 32,223,271 and 32,001,318 shares issued at September 30, 2018 and December 31, 2017, respectively

0.3


0.3

Preferred stock; par value $.01; 1,000,000 shares authorized; none issued
 

 

Additional paid-in capital

427.6


436.3

Retained deficit

(269.0
)

(203.4
)
Accumulated other comprehensive loss

(159.7
)

(140.5
)
Total Equity

(0.8
)

92.7

Total Liabilities and Equity

$
2,775.2


$
2,644.4



The accompanying notes are an integral part of these unaudited consolidated financial statements.

                    
3


ALERIS CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
(in millions)
 


For the three months ended

For the nine months ended
 
 
September 30, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
Revenues

$
911.3


$
712.8


$
2,644.2


$
2,163.2

Cost of sales

845.6


674.6


2,414.6


1,953.2

Gross profit

65.7


38.2


229.6


210.0

Selling, general and administrative expenses

53.2


49.2


153.7


152.7

Restructuring charges
 
0.2

 
0.9

 
2.0

 
2.1

(Gains) losses on derivative financial instruments

(6.3
)

14.9


(19.0
)

30.6

Other operating expense, net

0.8


2.0


1.9


4.0

Operating income (loss)

17.8


(28.8
)

91.0


20.6

Interest expense, net

37.5


32.0


106.0


90.4

Debt extinguishment costs
 

 

 
48.9

 

Other expense (income), net

0.9


3.3


(10.2
)

8.4

Loss before income taxes

(20.6
)

(64.1
)

(53.7
)

(78.2
)
Provision for income taxes

5.4


1.6


14.7


25.1

Net loss

$
(26.0
)

$
(65.7
)

$
(68.4
)

$
(103.3
)













Comprehensive loss

$
(35.1
)

$
(40.9
)

$
(87.6
)

$
(29.0
)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

                    
4


ALERIS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in millions)
 
 
 
For the nine months ended
 
 
September 30, 2018
 
September 30, 2017
Operating activities
 



Net loss
 
$
(68.4
)
 
$
(103.3
)
Adjustments to reconcile net loss to net cash used by operating activities:
 



Depreciation and amortization
 
103.8


82.0

Provision for deferred income taxes
 
5.0


13.9

Stock-based compensation expense
 
2.8


1.5

Unrealized (gains) losses on derivative financial instruments
 
(3.2
)

1.5

Amortization of debt issuance costs
 
3.6


2.1

Loss on extinguishment of debt
 
48.9

 

Non-cash gain (see Note 6)
 
(11.1
)
 

Other
 
5.1


9.1

Changes in operating assets and liabilities:
 



Change in accounts receivable
 
(146.0
)

(60.2
)
Change in inventories
 
(135.7
)

(53.0
)
Change in other assets
 
4.7


6.2

Change in accounts payable
 
76.9


35.8

Change in accrued and other liabilities
 
46.2


31.9

Net cash used by operating activities
 
(67.4
)

(32.5
)
Investing activities
 



Payments for property, plant and equipment
 
(76.3
)

(174.9
)
Other
 
(0.6
)

(2.5
)
Net cash used by investing activities
 
(76.9
)

(177.4
)
Financing activities
 



Proceeds from revolving credit facilities
 
220.3

 
401.7

Payments on revolving credit facilities
 
(284.4
)
 
(429.2
)
Proceeds from senior secured debt, net of discounts
 
1,483.0

 
263.8

Payments on senior notes, including premiums
 
(1,289.5
)
 

Net payments on other long-term debt
 
(8.6
)

(5.5
)
Debt issuance costs
 
(20.4
)
 
(2.5
)
Other
 
(0.2
)

(1.5
)
Net cash provided by financing activities
 
100.2


226.8

Effect of exchange rate differences on cash, cash equivalents and restricted cash
 
(1.9
)

3.0

Net (decrease) increase in cash, cash equivalents and restricted cash
 
(46.0
)

19.9

Cash, cash equivalents and restricted cash at beginning of period
 
108.0


55.6

Cash, cash equivalents and restricted cash at end of period
 
$
62.0


$
75.5

 
 
 
 
 
Cash and cash equivalents
 
$
56.7

 
$
71.9

Restricted cash (included in “Prepaid expenses and other current assets”)
 
5.3

 
3.6

Cash, cash equivalents and restricted cash
 
$
62.0

 
$
75.5




The accompanying notes are an integral part of these unaudited consolidated financial statements.

                    
5

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)


1. BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS
Basis of Presentation
The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The operating results for interim periods contained herein are not necessarily indicative of the results that may be expected for any other interim period or for the full year. The accompanying Consolidated Financial Statements include the accounts of Aleris Corporation and all of its subsidiaries (collectively, except where the context otherwise requires, referred to as “Aleris,” “we,” “us,” “our,” “Company” or similar terms). Aleris Corporation is a holding company and currently conducts its business and operations through its direct wholly owned subsidiary, Aleris International, Inc. and its consolidated subsidiaries. Aleris International, Inc. is referred to herein as “Aleris International.”
Recent Accounting Pronouncements
In January 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-02, “Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“ASU 2018-02”). This guidance gives entities the option to reclassify to retained earnings tax effects resulting from the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) related to items in accumulated other comprehensive income (“AOCI”) that the FASB refers to as having been stranded in AOCI. The new guidance may be applied retrospectively to each period in which the effect of the Tax Act is recognized, or in the period of adoption. We elected to early adopt ASU 2018-02 in the first quarter of 2018. As we maintain a full valuation allowance against our U.S. deferred tax assets, there was no net impact on retained earnings.
In March 2017, the FASB issued ASU No. 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU 2017-07”). This guidance requires the presentation of all components of net periodic benefit cost, other than service costs, outside of operating income. Upon adoption, only the service cost component of periodic benefit costs are included in operating income and eligible for capitalization in assets. This guidance was adopted in the first quarter of 2018, and $1.7 and $0.9 of pension and postretirement benefit expenses were reclassified from “Cost of sales” and “Selling, general and administrative expenses,” respectively, to “Other expense (income), net” in the Consolidated Statements of Comprehensive Loss for the nine months ended September 30, 2017. The adoption had no impact on reported net income or retained earnings.
In February 2016, the FASB issued ASU No. 2016-02, “Leases” (“ASU 2016-02”). This guidance requires lessees to put most leases on their balance sheets but recognize expense on the income statement in a manner similar to current guidance. The guidance is effective for the Company for fiscal years beginning after December 15, 2018, and a modified retrospective approach is required for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company has developed a project plan to guide the implementation of the standard. The project plan includes analyzing the Company’s purchasing contracts, drafting and updated accounting policy and evaluating new disclosure requirements. In addition, the Company is identifying and implementing appropriate changes to its business processes and controls to support the accounting and disclosure under the new guidance. We continue to evaluate the impact the application of ASU 2016-02 will have on the Company’s Consolidated Financial Statements. In addition, we are evaluating certain practical expedients. We expect that the adoption will result in an increase to our long-term assets and long-term liabilities as a result of substantially all operating leases existing as of the adoption date being capitalized along with the associated obligations.
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09” or “ASC 606”), which was the result of a joint project by the FASB and International Accounting Standards Board to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP and International Financial Reporting Standards. Subsequent accounting standard updates have been issued which amend and/or clarify the application of ASU 2014-09. The Company adopted ASU 2014-09 in the first quarter of 2018. In evaluating the impact of the standard, management has concluded that control has transferred on some of the inventory held on consignment at customer locations or

                    
6

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)

in third-party warehouses. Subsequent to adoption of the standard, revenue has been recognized on such consignment inventory when it is delivered into consignment. We adopted this standard using the modified retrospective approach. The January 1, 2018 adoption of the standard resulted in an increase to accounts receivable, accrued liabilities and deferred income tax liabilities of $28.6, $1.6 and $1.2, respectively, and a decrease in inventory of $23.0. The net impact was recorded as a decrease to retained deficit of $2.8.
The pre-tax impact of the adoption of ASU 2014-09 on our Consolidated Balance Sheet at September 30, 2018 and our Consolidated Statements of Comprehensive Loss for the nine months ended September 30, 2018 is as follows:
    
 
 
Increase (decrease)
Consolidated Balance Sheet
 
 
Accounts receivable
 
$
26.9

Inventories
 
(23.3
)
Accrued liabilities
 
1.6

Consolidated Statements of Comprehensive Loss
 
 
Revenues
 
$
(0.6
)
Cost of goods sold
 
(0.3
)
2. REVENUE FROM CONTRACTS WITH CUSTOMERS
We generate substantially all of our revenue from the manufacture and shipment of aluminum products to our customers. Sales, value add and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Revenue is recognized when obligations under the terms of a contract (as defined by ASC 606) with our customer are satisfied, which occurs at a point in time when control of the product transfers to the customer. Control may transfer to the customer at various points in the delivery process. In North America, most revenue is recognized at the point of shipment. In Europe and China, the timing of revenue recognition varies depending on individual customer arrangements, and may include point of shipment, delivery to port, final delivery to customer or another point in the delivery process.
Certain contractual arrangements, primarily with customers in our automotive and heat exchanger end-uses, allow for inventory to be held at a customer’s location or in a third-party warehouse with direct customer access. Title does not transfer to the customer on such inventory until the customer has removed the product for consumption. Under such arrangements, management has concluded that control has passed to the customer upon delivery to the customer’s location or the third-party warehouse if the customer has unrestricted access to the product and the Company has the right to invoice that customer after a specified period of time regardless of whether or not the product has been removed by the customer for production.
The transaction price for our products includes the value of the aluminum in the product plus a conversion fee, or rolling margin, which is the price charged to the customer for conversion of the aluminum raw material to the finished product. Certain customer contracts include volume rebates applied retrospectively to quantities purchased during a specified period. The resulting variable consideration from volume rebates is estimated using the expected value method.
As all customer contracts (as defined by ASC 606) have an original expected duration of less than twelve months, we have applied the practical expedient to the disclosure of the aggregate amount of the transaction price allocated to remaining performance obligations.
Customer payments are due shortly after completion of the performance obligation, on payment terms that are customary for the industry. As all customer payments are due in less than one year, we have not adjusted revenue for the effects of a significant financing component.
The following table discloses the disaggregated revenue from our contracts with customers by major end-use:

                    
7

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)

 
 
For the three months ended September 30, 2018
 
 
North America
 
Europe
 
Asia Pacific
 
Intra-entity sales
 
Total
Aerospace
 
$

 
$
73.2

 
$
21.5

 
$

 
$
94.7

Automotive
 
77.8

 
97.5

 

 
(4.9
)
 
170.4

Heat exchanger
 

 
69.7

 

 

 
69.7

Building and construction
 
230.5

 

 

 

 
230.5

Truck trailer
 
52.5

 

 

 

 
52.5

Distribution
 
118.0

 

 
12.5

 
(0.4
)
 
130.1

Regional plate and sheet
 

 
94.2

 

 

 
94.2

Other
 
53.6

 
14.2

 
1.5

 
(0.1
)
 
69.2

 
 
$
532.4

 
$
348.8

 
$
35.5

 
$
(5.4
)
 
$
911.3

 
 
For the nine months ended September 30, 2018
 
 
North America
 
Europe
 
Asia Pacific
 
Intra-entity sales
 
Total
Aerospace
 
$

 
$
216.0

 
$
60.3

 
$

 
$
276.3

Automotive
 
136.6

 
305.9

 

 
(20.7
)
 
421.8

Heat exchanger
 

 
208.1

 

 

 
208.1

Building and construction
 
657.4

 

 

 

 
657.4

Truck trailer
 
149.0

 

 

 

 
149.0

Distribution
 
369.9

 

 
46.1

 
(0.8
)
 
415.2

Regional plate and sheet
 

 
312.5

 

 

 
312.5

Other
 
159.0

 
42.2

 
3.0

 
(0.3
)
 
203.9

 
 
$
1,471.9

 
$
1,084.7

 
$
109.4

 
$
(21.8
)
 
$
2,644.2

We occasionally receive advance payments to secure product to be delivered in future periods. These advance payments are recorded as deferred revenue, and revenue is recognized as our performance obligations are satisfied throughout the term of the applicable contract. We may also purchase aluminum on our customer’s behalf, sell the unprocessed aluminum to our customer and then process and ship the material, charging a processing fee at the time of shipment. For these arrangements, a single performance obligation exists, and, as a result, amounts invoiced to our customers for the aluminum purchased on their behalf is recorded as deferred revenue until the aluminum is processed and shipped.
The following table details the deferred revenue for which our performance obligations have not been satisfied:
 
 
Total Deferred Revenue
Deferred revenue at January 1, 2018
 
$
21.4

(a)
Payments received
 
73.1

 
Revenue recognized
 
(14.5
)
 
Adoption of ASC 606
 
1.6

 
Currency and other
 
(0.2
)
 
Deferred revenue at September 30, 2018
 
$
81.4

(a)
(a) Deferred revenue is included in “Deferred revenue” and “Accrued liabilities” in the Consolidated Balance Sheet.

                    
8

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)

3. INVENTORIES
The components of our “Inventories” as of September 30, 2018 and December 31, 2017 are as follows: 
 
 
September 30, 2018
 
December 31, 2017
Raw materials
 
$
247.5

 
$
207.6

Work in process
 
301.7

 
210.8

Finished goods
 
145.6

 
181.6

Supplies
 
34.3

 
31.2

Total inventories
 
$
729.1

 
$
631.2

4. LONG-TERM DEBT
Our debt as of September 30, 2018 and December 31, 2017 is summarized as follows:
 
 
September 30, 2018
 
December 31, 2017
ABL Facility
 
$
251.0

 
$
319.3

First Lien Term Loan due 2023, net of discount and deferred issuance costs of $25.4 at September 30, 2018
 
1,071.9

 

10.75% Senior Secured Junior Priority Notes due 2023, net of discount and deferred issuance costs of $7.7 at September 30, 2018
 
392.3

 

7 7/8% Senior Notes due 2020, net of discount and deferred issuance costs of $3.3 at December 31, 2017
 

 
436.7

9 1/2% Senior Secured Notes due 2021, inclusive of net premiums and deferred issuance costs of $0.8 at December 31, 2017
 

 
800.8

Exchangeable Notes, net of discount of $0.2 and $0.3 at September 30, 2018 and December 31, 2017, respectively
 
44.6

 
44.5

Zhenjiang Term Loans, net of discount of $0.4 and $0.5 at September 30, 2018 and December 31, 2017
 
157.4

 
169.8

Other
 
8.4

 
9.4

Total debt
 
1,925.6

 
1,780.5

Less: Current portion of long-term debt
 
21.6

 
9.1

Total long-term debt
 
$
1,904.0

 
$
1,771.4

Restricted cash
At September 30, 2018 and December 31, 2017, respectively, $5.3 and $5.6 of cash was restricted for payments of the Zhenjiang Term Loans, all of which was included in “Prepaid expenses and other current assets” in the Consolidated Balance Sheet.
Debt refinancing
On June 25, 2018, Aleris International completed debt refinancing transactions, pursuant to which Aleris International (i) raised $1,500.0 in new debt financing (the “New Financing”), consisting of (A) a new senior secured first lien term loan in an aggregate principal amount of $1,100.0 (the “Term Loan Facility”) and (B) $400.0 aggregate principal amount of newly issued 10.75% senior secured junior priority notes due 2023 (the “2023 Junior Priority Notes”), (ii) amended its existing ABL Facility (as defined below) (the “ABL Amendment”), and (iii) used the net proceeds of the New Financing to (A) redeem all of its Existing Senior Notes (as defined below), (B) repay a portion of its outstanding borrowings under the ABL Facility and (C) pay related fees and expenses.
As a result of the debt refinancing transactions, we recorded debt extinguishment costs of $48.9, consisting primarily of the redemption costs for the Existing Senior Notes and expensing the net unamortized discounts and debt issuance costs of the Existing Senior Notes.
Term Loan Facility
The Term Loan Facility consists of a $1,100.0 first lien senior secured term loan facility, which will mature on February 27, 2023. Aleris International’s obligations under the Term Loan Facility are guaranteed by Aleris Corporation and Aleris

                    
9

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)

International’s domestic restricted subsidiaries that guarantee Aleris International’s existing obligations under its asset-based revolving credit facility (the “ABL Facility”) and the 2023 Junior Priority Notes (the “Guarantor Subsidiaries” and, together with Aleris Corporation, the “Guarantors”).
The Term Loan Facility also includes an uncommitted incremental facility, which, subject to certain conditions, provides for additional term loan facilities in an aggregate principal amount not to exceed the sum of (i) $75.0, plus (ii) an amount equal to all voluntary prepayments and loan buybacks of the Term Loan Facility and any other indebtedness that is secured on a pari passu basis with the Term Loan Facility (other than prepayments and buybacks financed with long-term indebtedness (other than revolving indebtedness)), plus (iii) an additional unlimited amount subject to a First Lien Net Leverage Ratio (as defined in the Term Loan Facility) of 3.75 to 1.00.
The Term Loan Facility bears interest on the unpaid principal amount at a rate equal to, at Aleris International’s option, either:
a base rate determined by reference to the highest of (i) the rate which Deutsche Bank AG New York Branch announces as its prime lending rate, (ii) the overnight federal funds rate plus 0.50% and (iii) one-month LIBOR plus 1.00%, in each case plus 3.75%; or
a LIBOR rate determined by reference to the London interbank offered rate for dollars for the relevant interest period, adjusted for statutory reserve requirements, plus 4.75%. The LIBOR rate will be subject to a 0.00% rate floor.  
Amounts borrowed under the Term Loan Facility amortize in equal quarterly installments, in aggregate annual amounts equal to 1.00% of the original principal amount of the Term Loan Facility, with the balance payable on the maturity date of the Term Loan Facility.
The Term Loan Facility requires certain mandatory prepayments of outstanding loans under the Term Loan Facility, subject to certain exceptions, based on (i) a percentage of net cash proceeds of certain asset sales and casualty and condemnation events in excess of certain thresholds (subject to certain reinvestment rights), (ii) net cash proceeds of any issuance of debt, excluding permitted debt issuances and (iii) a percentage of Excess Cash Flow (as defined in the Term Loan Facility) in excess of certain thresholds during a fiscal year.
Aleris International may voluntarily prepay loans outstanding under the Term Loan Facility, in whole or in part, without premium or penalty (except as described below) in minimum amounts, at any time, subject to customary “breakage” costs with respect to LIBOR rate loans. If Aleris International prepays loans in connection with a repricing transaction prior to the date that is twelve months after the closing of the Term Loan Facility, subject to certain exceptions, such prepayment will be subject to a 1.00% prepayment fee.
The Term Loan Facility is secured by (i) a first-priority lien on substantially all of Aleris International’s and the Guarantors’ assets (excluding the ABL Collateral (as defined below)), including, without limitation, all owned and material U.S. real property, equipment, intellectual property and stock of Aleris International and the Guarantors (other than Aleris Corporation) and other subsidiaries (including 100% of the outstanding non-voting stock (if any) and 65% of the outstanding voting stock of certain “first tier” foreign subsidiaries and certain “first tier” foreign subsidiary holding companies), which assets secure the 2023 Junior Priority Notes on a second priority basis and secure the ABL Facility on a third priority basis (the “Term Loan Collateral”) and (ii) a second-priority lien on all of Aleris International’s and the Guarantors’ (other than Aleris Corporation) inventory, accounts receivable, deposit accounts and related assets (subject to certain exceptions), which assets secure the ABL Facility on a first priority basis and secure the 2023 Junior Priority Notes on a third priority basis (the “ABL Collateral” and, together with the Term Loan Collateral, the “Collateral”), in each case excluding certain assets and subject to permitted liens.
The Term Loan Facility contains a number of covenants that, subject to certain exceptions, impose restrictions on Aleris International and certain of its subsidiaries, including, without limitation, restrictions on the ability to, among other things, incur additional debt, grant liens or security interests on assets, merge, consolidate or sell assets, make investments, loans and acquisitions, pay dividends and make restricted payments, modify terms of junior indebtedness or enter into affiliate transactions. The Term Loan Facility also contains certain customary affirmative covenants and events of default. Aleris International was in compliance with all covenants set forth in the Term Loan Facility as of September 30, 2018.

                    
10

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)

2023 Junior Priority Notes
On June 25, 2018, Aleris International completed the issuance of $400.0 aggregate principal amount of 2023 Junior Priority Notes and related guarantees in a private offering under Rule 144A and Regulation S of the Securities Act of 1933, as amended. The 2023 Junior Priority Notes were issued under an indenture (as amended and supplemented from time to time, the “2023 Junior Priority Notes Indenture”), dated as of June 25, 2018, among Aleris International, the guarantors named therein and U.S. Bank National Association, as trustee and collateral agent. The 2023 Junior Priority Notes are jointly and severally, irrevocably and unconditionally guaranteed on a senior secured basis, by each of the Guarantors, as primary obligor and not merely as surety.
The 2023 Junior Priority Notes bear interest at an annual rate of 10.75%. Interest is payable semi-annually in arrears on January 15 and July 15 of each year, beginning on January 15, 2019. The 2023 Junior Priority Notes will mature on July 15, 2023.
The 2023 Junior Priority Notes are secured by (i) a second-priority lien on the Term Loan Collateral and (ii) a third-priority lien on the ABL Collateral, in each case excluding certain assets and subject to permitted liens.
Aleris International is not required to make any mandatory redemption or sinking fund payments with respect to the 2023 Junior Priority Notes, but under certain circumstances, it may be required to offer to purchase the 2023 Junior Priority Notes as described below. Aleris International may from time to time acquire 2023 Junior Priority Notes by means other than redemption, whether by tender offer, in open market purchases, through negotiated transactions or otherwise, in accordance with applicable securities laws.
From and after July 15, 2020, Aleris International may redeem the 2023 Junior Priority Notes, in whole or in part, at a redemption price of 104.00% of the principal amount thereof, plus accrued and unpaid interest, declining ratably to 100.00% of the principal amount thereof, plus accrued and unpaid interest, on or after July 15, 2022. Prior to July 15, 2020, Aleris International may redeem up to 40.00% of the aggregate principal amount of the 2023 Junior Priority Notes with funds in an amount equal to all or a portion of the net cash proceeds from certain equity offerings at a redemption price of 110.75%, plus accrued and unpaid interest. Aleris International may make such redemption so long as, immediately after the occurrence of any such redemption, at least 60.00% of the aggregate principal amount of the 2023 Junior Priority Notes remains outstanding and such redemption occurs within 180 days of the closing of the applicable equity offering. Additionally, at any time prior to July 15, 2020, Aleris International may redeem the 2023 Junior Priority Notes, in whole or in part, at a redemption price equal to 100.00% of the principal amount thereof, plus the applicable premium as provided in the 2023 Junior Priority Notes Indenture and accrued and unpaid interest.
If Aleris International or any restricted subsidiary consummates one or more asset sale generating net proceeds in excess of $35.0 in the aggregate at any time (x) on or prior to July 15, 2019, Aleris International may, at its option, redeem all or a portion of the 2023 Junior Priority Notes in an aggregate principal amount not to exceed such net proceeds at a redemption price equal to 102.00% of the principal amount thereof and (y) after July 15, 2019 but on or prior to July 15, 2020, Aleris International may, at its option, redeem all or a portion of the 2023 Junior Priority Notes in an aggregate principal amount not to exceed such net proceeds at a redemption price equal to 103.00% of the principal amount thereof, in each case, plus accrued and unpaid interest.
If Aleris International experiences a “change of control” as specified in the 2023 Junior Priority Notes Indenture (x) on or prior to July 15, 2019, Aleris International may, at its option, redeem all, but not less than all, of the 2023 Junior Priority Notes at a redemption price equal to 102.00% of the principal amount thereof and (y) at any time after July 15, 2019 but on or prior to July 15, 2020, Aleris International may, at its option, redeem all, but not less than all, of the 2023 Junior Priority Notes at a redemption price equal to 103.00% of the principal amount thereof, in each case, plus accrued and unpaid interest.
In addition, if Aleris International experiences a change of control and does not elect to redeem the notes as provided above, Aleris International must offer to purchase all of the 2023 Junior Priority Notes at a price equal to 101.00% of the principal amount thereof, plus accrued and unpaid interest. If Aleris International or its restricted subsidiaries engage in certain asset sales, Aleris International will be required to use 80.00% of the consideration received from such asset sales to permanently reduce certain debt within a specified period of time. Aleris International will be required to use a portion of the

                    
11

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)

remaining proceeds of such asset sales, as well as the proceeds of certain events of loss with respect to the Collateral, as the case may be, to make an offer to purchase a principal amount of the 2023 Junior Priority Notes at a price of 100.00% of the principal amount thereof, plus accrued and unpaid interest, to the extent such proceeds are not invested or used to permanently reduce certain debt within a specified period of time.
The 2023 Junior Priority Notes Indenture contains covenants, subject to certain limitations and exceptions, limiting the ability of Aleris International and its restricted subsidiaries to, among other things: incur additional debt; pay dividends or distributions on Aleris International’s capital stock or redeem, repurchase or retire Aleris International’s capital stock or subordinated debt; issue preferred stock of restricted subsidiaries; make certain investments; create liens on Aleris International’s or its Guarantor Subsidiaries’ assets to secure debt; enter into sale and leaseback transactions; create restrictions on the payment of dividends or other amounts to Aleris International from the restricted subsidiaries that are not guarantors of the 2023 Junior Priority Notes; enter into transactions with affiliates; merge or consolidate with another company; and sell assets, including capital stock of Aleris International’s subsidiaries. The 2023 Junior Priority Notes Indenture also contains customary events of default. Aleris International was in compliance with all covenants set forth in the 2023 Junior Priority Notes Indenture as of September 30, 2018.
ABL Amendment
On June 25, 2018, Aleris International entered into the ABL Amendment, which amended the credit agreement governing its existing asset-based revolving credit facility, dated as of June 15, 2015 (as amended, the “ABL Facility”), among Aleris International, the other borrowers party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent for the lenders (the “ABL Administrative Agent”), and J.P. Morgan Europe Limited, as the European agent for the lenders.
The terms of the ABL Amendment increase the size of the ABL Facility $150.0, thereby increasing its size from $600.0 to $750.0, subject to applicable borrowing bases. The ABL Facility, as amended by the ABL Amendment, also provides for an accordion pursuant to which the available commitments thereunder may be further increased by up to an additional $300.0, subject to applicable borrowing bases.
In addition to increasing the size of the ABL Facility, the terms of the ABL Amendment, among other things, (i) extended the maturity date of the ABL Facility from June 15, 2020 to the earliest of (x) June 25, 2023, (y) the date that is 60 days prior to the scheduled maturity date of the term loans under the Term Loan Facility (currently February 27, 2023) and (z) the date that is 60 days prior to the scheduled maturity date of the 2023 Junior Priority Notes (currently July 15, 2023), (ii) removed a previous borrowing base reserve on Belgian finished goods inventory, (iii) permitted the incurrence of the Term Loan Facility and the 2023 Junior Priority Notes and (iv) amended certain covenants and other provisions consistent with the corresponding terms of the Term Loan Facility and the 2023 Junior Priority Notes.
Concurrently with the effectiveness of the ABL Amendment, the ABL Facility continues to be secured by a first-priority lien over the ABL Collateral and is also secured by a third-priority lien (ranking junior to the lien therein in favor of the Term Loan Facility and the 2023 Junior Priority Notes) over the Term Loan Collateral, in each case excluding certain assets and subject to permitted liens.
Redemption of Senior Notes
As part of the debt refinancing transactions, Aleris International redeemed in full the aggregate principal amount of its former 77/8% senior notes due 2020 (the “2020 Notes”) and 9½% senior secured notes due 2021 (the “2021 Notes” and, together with the 2020 Notes, the “Existing Senior Notes”). The 2020 Notes were redeemed at a redemption price equal to 101.969% of the principal amount thereof, plus accrued and unpaid interest to June 25, 2018, and the 2021 Notes were redeemed at a redemption price equal to 104.750% of the principal amount thereof, plus accrued and unpaid interest to June 25, 2018.
5. COMMITMENTS AND CONTINGENCIES
Environmental Proceedings
Our operations are subject to environmental laws and regulations governing air emissions, wastewater discharges, the handling, storage, disposal and remediation of hazardous substances and wastes and employee health and safety. These laws can

                    
12

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)

impose joint and several liability for releases or threatened releases of hazardous substances upon statutorily defined parties, including us, regardless of fault or the lawfulness of the original activity or disposal. Given the changing nature of environmental legal requirements, we may be required, from time to time, to take environmental control measures at some of our facilities to meet future requirements.
We have been named as a potentially responsible party in certain proceedings initiated pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act and similar state statutes and may be named a potentially responsible party in other similar proceedings in the future. It is not anticipated that the costs incurred in connection with the presently pending proceedings will, individually or in the aggregate, have a material adverse effect on our financial position, results of operations or cash flows.
We are performing operations and maintenance at two Superfund sites for matters arising out of past waste disposal activity associated with closed facilities. We are also under orders to perform environmental remediation by agencies in four states and one non-U.S. country at seven sites.
Our reserves for environmental remediation liabilities totaled $21.2 and $22.1 at September 30, 2018 and December 31, 2017, respectively, and have been classified as “Other long-term liabilities” and “Accrued liabilities” in the Consolidated Balance Sheet. Of the environmental liabilities recorded at September 30, 2018 and December 31, 2017, $9.5 and $10.2, respectively, are subject to indemnification by third parties.
In addition to environmental liabilities, we have recorded asset retirement obligations associated with legal requirements related to the retirement of certain assets. Our total asset retirement obligations were $5.8 and $6.1 at September 30, 2018 and December 31, 2017, respectively. The amounts represent the most probable costs of remedial actions. We estimate the costs related to currently identified remedial actions will be paid out primarily over the next 10 years.
Legal Proceedings
We are party to routine litigation and proceedings as part of the ordinary course of business and do not believe that the outcome of any existing proceedings would have a material adverse effect on our financial position, results of operations or cash flows. We have established accruals for those loss contingencies, including litigation and environmental contingencies, for which it has been determined that a loss is probable; none of such loss contingencies is material. For those loss contingencies, including litigation and environmental contingencies, which have been determined to be reasonably possible, an estimate of the possible loss or range of loss cannot be determined because the claims, amount claimed, facts or legal status are not sufficiently developed or advanced in order to make such a determination. While we cannot estimate the loss or range of loss at this time, we do not believe that the outcome of any of these existing proceedings would be material to our financial position, results of operations or cash flows.
6. STOCKHOLDERS EQUITY
The following table summarizes the activity within stockholders’ equity for the nine months ended September 30, 2018:
 
 
Total Equity
Total equity at January 1, 2018
 
$
92.7

Net loss
 
(68.4
)
Other comprehensive loss
 
(19.2
)
Dividends
 
(11.3
)
Stock-based compensation activity
 
2.6

Adoption of ASC 606
 
2.8

Total equity at September 30, 2018
 
$
(0.8
)

                    
13

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)

The following table shows changes in the number of our issued and outstanding shares of common stock:
 
 
Issued and outstanding shares of common stock
Balance at January 1, 2018
 
32,001,318

Issuance associated with vested restricted stock units
 
225,371

Shares cancelled
 
(3,418
)
Balance at September 30, 2018
 
32,223,271

Dividends Paid
In connection with the 2015 sale of our former recycling and specification alloys business, we received shares of Real Industry Inc.’s Series B non-participating preferred stock. In 2017, Real Industry, Inc. filed for Chapter 11 bankruptcy protection, at which time we recorded an impairment charge of $22.8 to reduce the carrying value of the preferred shares to zero. In the second quarter of 2018, the bankruptcy reorganization was finalized, and we received shares of the reorganized company’s common stock with an estimated fair value of $11.1. The receipt of these shares, as well as additional net cash considerations, resulted in a gain of $12.2 that was recorded in “Other expense (income), net” in the Consolidated Statements of Comprehensive Loss. Upon receipt, these shares were distributed pro rata to our stockholders. In addition, dividend equivalent right payments of approximately $0.2 were paid in cash to holders of unvested restricted stock units.
7. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table summarizes the activity within accumulated other comprehensive loss for the nine months ended September 30, 2018:
 
 
Currency translation
 
Pension and other postretirement
 
Total
Balance at January 1, 2018
 
$
(64.2
)
 
$
(76.3
)
 
$
(140.5
)
Current period currency translation adjustments
 
(23.0
)
 
1.2

 
(21.8
)
Amortization of net actuarial losses and prior service costs, net of tax
 

 
2.6

 
2.6

Balance at September 30, 2018
 
$
(87.2
)
 
$
(72.5
)
 
$
(159.7
)
A summary of reclassifications out of accumulated other comprehensive loss for the nine months ended September 30, 2018 is provided below:
Description of reclassifications out of accumulated other comprehensive loss
 
Amount reclassified
Amortization of net actuarial losses and prior service costs (recorded in “Other operating expense, net”)
 
$
(3.3
)
Deferred tax benefit on pension and other postretirement liability adjustments
 
0.7

Losses reclassified into earnings, net of tax
 
$
(2.6
)
8. SEGMENT INFORMATION
We report three operating segments based on the organizational structure that is used by the chief operating decision maker to evaluate performance, make decisions on resource allocation and for which discrete financial information is available. The Company’s operating segments are North America, Europe and Asia Pacific.
Measurement of Segment Income or Loss and Segment Assets
The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies in the Consolidated Financial Statements for the year ended December 31, 2017. Our measure of

                    
14

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)

profitability for our operating segments is referred to as segment income. Segment income includes gross profits, segment specific realized gains and losses on derivative financial instruments, segment specific other income and expense, segment specific selling, general and administrative (“SG&A”) expense and an allocation of certain functional SG&A expenses. Segment income excludes provisions for and benefits from income taxes, restructuring items, interest, depreciation and amortization, unrealized and certain realized gains and losses on derivative financial instruments, corporate general and administrative costs, start-up costs, gains and losses on asset sales, currency exchange gains and losses on debt and certain other gains and losses. Intra-entity sales and transfers are recorded at market value. Consolidated cash, restricted cash, net capitalized debt costs, deferred tax assets and assets related to our headquarters offices are not allocated to the segments.
Reportable Segment Information
The following table shows our revenues and segment income for the periods presented in our Consolidated Statements of Comprehensive Loss:
Three months ended September 30, 2018
 
North America
 
Europe
 
Asia Pacific
 
Intra-entity Revenues
 
Total
Revenues to external customers
 
$
532.4

 
$
343.8

 
$
35.1

 
 
 
$
911.3

Intra-entity revenues
 

 
5.0

 
0.4

 
$
(5.4
)
 

Total revenues
 
$
532.4

 
$
348.8

 
$
35.5

 
$
(5.4
)
 
$
911.3

Segment income
 
$
52.4

 
$
30.4

 
$
7.0

 
 
 
$
89.8

 
 
 
 
 
 
 
 
 
 
 
Three months ended September 30, 2017
 
North America
 
Europe
 
Asia Pacific
 
Intra-entity Revenues
 
Total
Revenues to external customers
 
$
364.4

 
$
318.4

 
$
30.0

 
 
 
$
712.8

Intra-entity revenues
 

 
5.9

 
2.2

 
$
(8.1
)
 

Total revenues
 
$
364.4

 
$
324.3

 
$
32.2

 
$
(8.1
)
 
$
712.8

Segment income
 
$
19.9

 
$
28.4

 
$
4.3

 
 
 
$
52.6

 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2018
 
North America
 
Europe
 
Asia Pacific
 
Intra-entity Revenues
 
Total
Revenues to external customers
 
$
1,471.9

 
$
1,063.8

 
$
108.5

 
 
 
$
2,644.2

Intra-entity revenues
 

 
20.9

 
0.9

 
$
(21.8
)
 

Total revenues
 
$
1,471.9

 
$
1,084.7

 
$
109.4

 
$
(21.8
)
 
$
2,644.2

Segment income
 
$
165.5

 
$
101.0

 
$
16.1

 
 
 
$
282.6

 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2017
 
North America
 
Europe
 
Asia Pacific
 
Intra-entity Revenues
 
Total
Revenues to external customers
 
$
1,129.0

 
$
951.9

 
$
82.3

 
 
 
$
2,163.2

Intra-entity revenues
 

 
17.3

 
4.8

 
$
(22.1
)
 

Total revenues
 
$
1,129.0

 
$
969.2

 
$
87.1

 
$
(22.1
)
 
$
2,163.2

Segment income
 
$
75.2

 
$
101.7

 
$
10.0

 
 
 
$
186.9


                    
15

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)

The following table reconciles total segment income to “Loss before income taxes” as reported in our Consolidated Statements of Comprehensive Loss:
 
 
For the three months ended
 
For the nine months ended
 
 
September 30, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
Total segment income
 
$
89.8

 
$
52.6

 
$
282.6

 
$
186.9

Unallocated amounts:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
(35.0
)
 
(30.5
)
 
(103.8
)
 
(82.0
)
Other corporate general and administrative expenses
 
(15.3
)
 
(8.9
)
 
(37.9
)
 
(32.1
)
Restructuring charges
 
(0.2
)
 
(0.9
)
 
(2.0
)
 
(2.1
)
Interest expense, net
 
(37.5
)
 
(32.0
)
 
(106.0
)
 
(90.4
)
Unallocated (losses) gains on derivative financial instruments
 
(10.5
)
 
(18.4
)
 
3.0

 
(1.0
)
Unallocated currency exchange losses
 
(1.1
)
 
(2.0
)
 
(2.4
)
 
(3.7
)
Start-up costs
 
(9.8
)
 
(22.8
)
 
(48.7
)
 
(52.6
)
Loss on extinguishment of debt
 

 

 
(48.9
)
 

Other (expense) income, net
 
(1.0
)
 
(1.2
)
 
10.4

 
(1.2
)
Loss before income taxes
 
$
(20.6
)
 
$
(64.1
)
 
$
(53.7
)
 
$
(78.2
)
The following table shows our reportable segment assets as of September 30, 2018 and December 31, 2017:
 
 
September 30, 2018
 
December 31, 2017
Assets
 
 
 
 
North America
 
$
1,472.0

 
$
1,309.9

Europe
 
774.5

 
738.4

Asia Pacific
 
352.3

 
371.4

Unallocated assets
 
176.4

 
224.7

Total consolidated assets
 
$
2,775.2

 
$
2,644.4

9. STOCK-BASED COMPENSATION
On June 1, 2010, the Board of Directors of Aleris Corporation approved the Aleris Corporation 2010 Equity Incentive Plan, which has been amended from time to time (the “2010 Equity Plan”). Stock options, restricted stock units and restricted shares have been granted under the 2010 Equity Plan to certain members of management of the Company and directors. All stock options granted have a life not to exceed ten years and generally vest over a period not to exceed four years. Shares of common stock are issued upon stock option exercises from available shares. The restricted stock units also vest over a period not to exceed four years. A portion of the stock options, as well as a portion of the restricted stock units, may vest upon a change in control event should the event occur prior to full vesting of these awards, depending on the amount of vesting that has already occurred at the time of the event in comparison to the change in our largest stockholders’ overall level of beneficial ownership that results from the event.
During the nine months ended September 30, 2018, no stock options or restricted stock units were granted. We recorded stock-based compensation expense of $2.1 and $2.8 for the three and nine months ended September 30, 2018, respectively, and $0.4 and $1.5 for the three and nine months ended September 30, 2017, respectively.
10. INCOME TAXES
On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act (the “Tax Act”). Pursuant to the guidance we recognized the provisional effects of the enactment of the Tax Act for which measurement could be reasonably estimated. We continue to monitor certain aspects of the Tax Act and may refine our

                    
16

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)

assessment as a result of any further related regulatory guidance that may be issued by the U.S. Treasury. Pursuant to SAB 118, adjustments to the provisional amounts recorded as of December 31, 2017 that are identified within a subsequent measurement period of up to one year from the enactment date will be included as an adjustment to tax expense from continuing operations in the period the amounts are determined. We have recognized no measurement period adjustments during the three and nine months ended September 30, 2018.
The effective tax rates for the three and nine months ended September 30, 2018 and 2017 differed from the federal statutory rate applied to income and losses before income taxes primarily as a result of the mix of income, losses and tax rates between tax jurisdictions and valuation allowances.
We have valuation allowances recorded to reduce certain deferred tax assets to amounts that are more likely than not to be realized. The valuation allowances relate to the potential inability to realize our deferred tax assets associated with amortization and net operating loss carryforwards in the U.S. and net operating loss carryforwards in non-U.S. jurisdictions. We intend to maintain our valuation allowances until sufficient positive evidence exists (such as cumulative positive earnings and estimated future taxable income) to support their reversal.
As of September 30, 2018, we had $4.1 of unrecognized tax benefits. $3.1 of the gross unrecognized tax benefits, if recognized, would affect the annual effective tax rate. We recognize interest and penalties related to uncertain tax positions within “Provision for income taxes” in the Consolidated Statements of Comprehensive Loss. As of September 30, 2018, we had approximately $0.9 of accrued interest related to uncertain tax positions.
The 2009 through 2016 tax years remain open to examination. During the fourth quarter of 2013, a non-U.S. taxing jurisdiction commenced an examination of our tax returns for the tax years ended December 31, 2012, 2011, 2010 and 2009 that is anticipated to be completed within six months of the reporting date. During the third quarter of 2018, the same jurisdiction notified us regarding an examination of our tax returns for the tax years ended December 31, 2016, 2015, 2014 and 2013.
During the second quarter of 2018, a non-U.S. taxing jurisdiction completed an examination of our tax return for tax year ended December 31, 2015, which it commenced during the second quarter of 2017. The results of the examination did not impact the financial position, results of operations or cash flows for the three or nine months ended September 30, 2018.
During the third quarter of 2018, a non-U.S. taxing jurisdiction notified us regarding an examination of our tax returns for the tax years ended December 31, 2016, 2015, 2014 and 2013 that is anticipated to be completed within twelve months of the reporting date.
11. EMPLOYEE BENEFIT PLANS
Defined Benefit Pension Plans
The service cost component of net periodic benefit expense is included in “Operating income,” while all other components of net periodic benefit expense are included in “Other expense (income), net” in the Consolidated Statements of Comprehensive Loss. The components of the net periodic benefit expense are as follows:
 
U.S. pension benefits
 
For the three months ended
 
For the nine months ended
 
September 30, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
Service cost
$
1.1

 
$
1.0

 
$
3.3

 
$
2.9

Interest cost
1.4

 
1.4

 
4.3

 
4.4

Amortization of net actuarial losses
0.5

 
0.5

 
1.4

 
1.4

Amortization of prior service cost
0.1

 
0.1

 
0.2

 
0.2

Expected return on plan assets
(2.6
)
 
(2.6
)
 
(7.7
)
 
(7.7
)
Net periodic benefit expense
$
0.5

 
$
0.4

 
$
1.5

 
$
1.2


                    
17

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)

 
 
Non U.S. pension benefits
 
 
For the three months ended
 
For the nine months ended
 
 
September 30, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
Service cost
 
$
0.6

 
$
0.9

 
$
1.9

 
$
2.7

Interest cost
 
0.5

 
0.4

 
1.5

 
1.3

Amortization of net actuarial losses
 
0.7

 
0.7

 
2.1

 
2.1

Net periodic benefit expense
 
$
1.8

 
$
2.0

 
$
5.5

 
$
6.1

Other Postretirement Benefit Plans
The service cost component of net postretirement benefit expense is included in “Operating income,” while all other components of net postretirement benefit expense are included in “Other expense (income), net” in the Consolidated Statements of Comprehensive Loss. The components of net postretirement benefit expense are as follows:
 
 
For the three months ended
 
For the nine months ended
 
 
September 30, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
Service cost
 
$
0.1

 
$

 
$
0.3

 
$
0.1

Interest cost
 
0.2

 
0.3

 
0.8

 
0.9

Amortization of net actuarial gains
 
(0.2
)
 
(0.1
)
 
(0.6
)
 
(0.4
)
Amortization of prior service cost
 
0.1

 

 
0.2

 

Net postretirement benefit expense
 
$
0.2

 
$
0.2

 
$
0.7

 
$
0.6

12. DERIVATIVE AND OTHER FINANCIAL INSTRUMENTS
We use forward contracts and options, as well as contractual price escalators, to reduce the risks associated with our metal, natural gas and other supply requirements, as well as fuel costs and certain currency and interest rate exposures. Generally, we enter into master netting arrangements with our counterparties and offset net derivative positions with the same counterparties against amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral under those arrangements in our Consolidated Balance Sheet. For classification purposes, we record the net fair value of each type of derivative position that is expected to settle in less than one year with each counterparty as a net current asset or liability and each type of long-term position as a net long-term asset or liability. At September 30, 2018, $0.2 of cash collateral was posted. No cash collateral was posted at December 31, 2017. The amounts shown in the table below represent the gross amounts of recognized assets and liabilities, the amounts offset in the Consolidated Balance Sheet and the net amounts of assets and liabilities presented therein. As of September 30, 2018 and December 31, 2017, there were no amounts subject to an enforceable master netting arrangement or similar agreement that have not been offset in the Consolidated Balance Sheet.
 
 
Fair Value of Derivatives as of
 
 
September 30, 2018
 
December 31, 2017
Derivatives by Type
 
Asset
 
Liability
 
Asset
 
Liability
Metal
 
$
12.1

 
$
(7.5
)
 
$
33.5

 
$
(36.0
)
Energy
 
0.6

 

 
0.2

 
(0.1
)
Interest rate
 

 
(0.1
)
 

 

Currency
 
0.1

 
(2.7
)
 
1.6

 
(0.1
)
Total
 
12.8

 
(10.3
)
 
35.3

 
(36.2
)
Effect of counterparty netting
 
(7.0
)
 
7.0

 
(27.2
)
 
27.2

Effect of cash collateral
 

 
0.2

 

 

Net derivatives as classified in the balance sheet
 
$
5.8

 
$
(3.1
)
 
$
8.1

 
$
(9.0
)

                    
18

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)

The fair value of our derivative financial instruments at September 30, 2018 and December 31, 2017 are recorded in the Consolidated Balance Sheet as follows: 
Asset Derivatives
 
Balance Sheet Location
 
September 30, 2018
 
December 31, 2017
Metal
 
Prepaid expenses and other current assets
 
$
4.8

 
$
2.2

 
 
Other long-term assets
 
0.4

 
4.3

Energy
 
Prepaid expenses and other current assets
 
0.6

 
0.1

Currency
 
Prepaid expenses and other current assets
 

 
0.8

 
 
Other long-term assets
 

 
0.7

Total
 
 
 
$
5.8

 
$
8.1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liability Derivatives
 
Balance Sheet Location
 
September 30, 2018
 
December 31, 2017
Metal
 
Accrued liabilities
 
$

 
$
9.0

 
 
Other long-term liabilities
 
0.3

 

Interest Rate
 
Accrued liabilities
 
0.1

 

Currency
 
Accrued liabilities
 
2.1

 

 
 
Other long-term liabilities
 
0.6

 

Total
 
 
 
$
3.1

 
$
9.0

With the exception of the interest rate derivatives (for which, realized gains will be included within “Interest expense, net”), both realized and unrealized gains and losses on derivative financial instruments are included within “(Gains) losses on derivative financial instruments” in the Consolidated Statements of Comprehensive Loss. Realized (gains) and losses on derivative financial instruments totaled the following: 
 
 
For the three months ended
 
For the nine months ended
 
 
September 30, 2018
 
September 30, 2017
 
September 30, 2018
 
September 30, 2017
Metal
 
$
(17.2
)
 
$
(3.6
)
 
$
(15.2
)
 
$
28.2

Energy
 
(0.1
)
 
0.3

 
(0.4
)
 
0.8

Currency
 
0.5

 
(0.6
)
 
(0.3
)
 

Metal Hedging
The selling prices of the majority of the orders for our products are established at the time of order entry or, for certain customers, under long-term contracts. As the related raw materials used to produce these orders can be purchased several months or years after the selling prices are fixed, margins are subject to the risk of changes in the purchase price of the raw materials used for these fixed price sales. In order to manage this transactional exposure, future, swaps or forward purchase contracts are purchased at the time the selling prices are fixed. As metal is purchased to fill these fixed price sales orders, future, swaps or forward contracts are then sold. We also maintain a significant amount of inventory on-hand to meet anticipated and unpriced future sales. In order to preserve the value of this inventory, future or forward contracts are sold at the time inventory is purchased. As sales orders are priced, future or forward contracts are purchased. These derivatives generally settle within three months. We can also use call option contracts, which function in a manner similar to the natural gas call option contracts discussed below, and put option contracts for managing metal price exposures. Option contracts require the payment of a premium which is recorded as a realized loss upon settlement or expiration of the option contract. Upon settlement of a put option contract, we receive cash and recognize a related gain if the closing price is less than the strike price of the put option. If the put option strike price is less than the closing price, no amount is paid and the option expires. As of September 30, 2018 we had 160.0 thousand metric tons and 275.0 thousand metric tons of metal buy and metal sell derivative contracts, respectively. As of December 31, 2017, we had 147.9 thousand metric tons and 249.7 thousand metric tons of metal buy and metal sell derivative contracts, respectively.

                    
19

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)

Energy Hedging
To manage our price exposure for natural gas purchases, we fix the future price of a portion of our natural gas requirements by entering into financial hedge agreements. Under these agreements, payments are made or received based on the differential between the monthly closing price on the New York Mercantile Exchange (“NYMEX”) and the contractual hedge price. We can also use a combination of call option contracts and put option contracts for managing the exposure to increasing natural gas prices while maintaining our ability to benefit from declining prices. Upon settlement of call option contracts, we receive cash and recognize a related gain if the NYMEX closing price exceeds the strike price of the call option. If the call option strike price exceeds the NYMEX closing price, no amount is received and the option expires unexercised. Upon settlement of a put option contract, we pay cash and recognize a related loss if the NYMEX closing price is lower than the strike price of the put option. If the put option strike price is less than the NYMEX closing price, no amount is paid and the option expires unexercised. Option contracts require the payment of a premium which is recorded as a realized loss upon settlement or expiration of the option contract. Natural gas cost can also be managed through the use of cost escalators included in some of our long-term supply contracts with customers, which limits exposure to natural gas price risk. As of September 30, 2018 and December 31, 2017, we had 4.0 trillion and 3.5 trillion of British thermal unit forward buy contracts, respectively.
We use independent freight carriers to deliver our products. As part of the total freight charge, these carriers include a per mile diesel surcharge based on the Department of Energy, Energy Information Administration’s (“DOE”) Weekly Retail Automotive Diesel National Average Price. From time to time we may enter into over-the-counter DOE diesel fuel swaps with financial counterparties to mitigate the impact of the volatility of diesel fuel prices on our freight costs. Under these swap agreements, we pay a fixed price per gallon of diesel fuel determined at the time the agreements were executed and receive a floating rate payment that is determined on a monthly basis based on the average price of the DOE Diesel Fuel Index during the applicable month. The swaps are designed to offset increases or decreases in fuel surcharges that we pay to our carriers. All swaps are financially settled. There is no possibility of physical settlement. As of September 30, 2018 and December 31, 2017, we had 1.1 million gallons and 1.5 million gallons of diesel swap contracts, respectively.
Currency Hedging
Our aerospace and heat exchanger businesses expose the U.S. dollar operating results of our European operations to fluctuations in the euro as the sales contracts are generally in U.S. dollars while the costs of production are in euros. In order to mitigate the risk that fluctuations in the euro may have on our business, we have entered into forward currency contracts. As of September 30, 2018 and December 31, 2017, we had euro forward contracts covering a notional amount of €69.1 million and €100.8 million, respectively.
Interest Rate Risk
As a result of the completion of the New Financing discussed above, we are exposed to variable interest rate risk on the Term Loan Facility. We have entered into interest rate swaps to fix the LIBOR interest rate on $700.0 the Term Loan Facility for the period of October 31, 2018 through June 28, 2019.
Credit Risk
We are exposed to losses in the event of non-performance by the counterparties to the derivative financial instruments discussed above; however, we do not anticipate any non-performance by the counterparties. The counterparties are evaluated for creditworthiness and risk assessment prior to initiating trading activities with the brokers and periodically throughout each year while actively trading.
Recurring Fair Value Measurements
Derivative contracts are recorded at fair value using quoted market prices and significant other observable inputs. Fair value is defined by FASB Accounting Standards Codification 820, “Fair Value Measurements and Disclosures,” as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for

                    
20

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)

identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3—Inputs that are both significant to the fair value measurement and unobservable.
We endeavor to use the best available information in measuring fair value. Where appropriate, valuations are adjusted for various factors such as liquidity, bid/offer spreads, and credit considerations. Such adjustments are generally based on available market evidence and unobservable inputs. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. As of September 30, 2018 and December 31, 2017, all of our derivative assets and liabilities represent Level 2 fair value measurements.
Other Financial Instruments
The carrying amount, fair values and level in the fair value hierarchy of our other financial instruments at September 30, 2018 and December 31, 2017 are as follows: 
 
 
September 30, 2018
 
December 31, 2017
 
 
Carrying
Amount
 
Fair
Value
 
Level in the Fair Value Hierarchy
 
Carrying
Amount
 
Fair
Value
 
Level in the Fair Value Hierarchy
Cash and cash equivalents
 
$
56.7

 
$
56.7

 
Level 1
 
$
102.4

 
$
102.4

 
Level 1
Restricted cash
 
5.3

 
5.3

 
Level 1
 
5.6

 
5.6

 
Level 1
ABL Facility
 
251.0

 
251.0

 
Level 2
 
319.3

 
319.3

 
Level 2
First Lien Term Loan
 
1,071.9

 
1,118.6

 
Level 1
 

 

 
N/A
10.75% Senior Secured Junior Priority Notes
 
392.3

 
426.8

 
Level 1
 

 

 
N/A
7 7/8% Senior Notes
 

 

 
N/A
 
436.7

 
438.1

 
Level 1
9 ½ % Senior Secured Notes
 

 

 
N/A
 
800.8

 
847.3

 
Level 1
Exchangeable Notes
 
44.6

 
60.7

 
Level 3
 
44.5

 
45.4

 
Level 3
Zhenjiang Term Loans
 
157.4

 
157.8

 
Level 3
 
169.8

 
170.3

 
Level 3
The principal amount of the ABL Facility approximates fair value because the interest rate paid is variable and there have been no significant changes in the credit risk of Aleris International subsequent to the borrowings. The fair values of the First Lien Term Loan and the 2023 Junior Priority Notes were estimated using market quotations. The fair value of Aleris International’s Exchangeable Notes was estimated using a binomial lattice pricing model based on the fair value of our common stock, a risk-free interest rate of 2.7% and 1.9% as of September 30, 2018 and December 31, 2017, respectively and expected equity volatility of 70% and 60% as of September 30, 2018 and December 31, 2017. Expected equity volatility was determined based on historical stock prices and implied and stated volatilities of our peer companies. The principal amount of the Zhenjiang Term Loans approximates fair value because the interest rate paid is variable, is set for periods of six months or less and there have been no significant changes in the credit risk of Aleris Zhenjiang subsequent to the inception of the Zhenjiang Term Loans.
13. POTENTIAL ACQUISITION OF ALERIS CORPORATION
On July 26, 2018, we announced that we entered into a definitive agreement to be acquired by Novelis Inc., a subsidiary of Hindalco Industries Limited, for approximately $2,600.0, including the assumption of the Company’s outstanding indebtedness (the “Merger”). The Merger is expected to close nine to fifteen months from the date of the definitive agreement,

                    
21

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)

subject to customary regulatory approvals and closing conditions. There can be no assurance that the Merger will be consummated on the expected timing or at all.
14. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Aleris Corporation, the direct parent of Aleris International, and the Guarantor Subsidiaries are guarantors of the indebtedness under the 2023 Junior Priority Notes. Aleris Corporation and each of the Guarantor Subsidiaries have fully and unconditionally guaranteed (subject, in the case of the Guarantor Subsidiaries, to customary release provisions as described below), on a joint and several basis, to pay principal and interest related to the 2023 Junior Priority Notes and Aleris International and each of the Guarantor Subsidiaries are directly or indirectly 100% owned subsidiaries of Aleris Corporation. For purposes of complying with the reporting requirements of Aleris International and the Guarantor Subsidiaries, presented below are condensed consolidating financial statements of Aleris Corporation, Aleris International, the Guarantor Subsidiaries, and those other subsidiaries of Aleris Corporation that are not guaranteeing the indebtedness under the 2023 Junior Priority Notes (the “Non-Guarantor Subsidiaries”). Aleris Corporation and the Guarantor Subsidiaries are also guarantors under the Term Loan Facility. The condensed consolidating balance sheets are presented as of September 30, 2018 and December 31, 2017. The condensed consolidating statements of comprehensive (loss) income are presented for the three and nine months ended September 30, 2018 and 2017. The condensed consolidating statements of cash flows are presented for the nine months ended September 30, 2018 and 2017.
The guarantee of a Guarantor Subsidiary will be automatically and unconditionally released and discharged in the event of:
any sale of the Guarantor Subsidiary or of all or substantially all of its assets;
a Guarantor Subsidiary being designated as an “unrestricted subsidiary” in accordance with the indenture governing the 2023 Junior Priority Notes;
the release or discharge of a Guarantor Subsidiary from its guarantee under the Term Loan Facility, the ABL Facility or other indebtedness that resulted in the obligation of the Guarantor Subsidiary under the indenture governing the 2023 Junior Priority Notes; and
the requirements for legal defeasance or covenant defeasance or discharge of the indenture governing the 2023 Junior Priority Notes having been satisfied.

                    
22

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)

 
 
As of September 30, 2018
 
 
Aleris Corporation (Parent)
 
Aleris International, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
 
Current Assets
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$

 
$
4.2

 
$

 
$
54.8

 
$
(2.3
)
 
$
56.7

Accounts receivable, net
 

 

 
198.4

 
213.7

 

 
412.1

Inventories
 

 

 
377.2

 
351.9

 

 
729.1

Prepaid expenses and other current assets
 

 
4.3

 
7.1

 
19.4

 

 
30.8

Intercompany receivables
 

 
433.8

 
234.5

 
8.1

 
(676.4
)
 

Total Current Assets
 

 
442.3


817.2

 
647.9

 
(678.7
)
 
1,228.7

Property, plant and equipment, net
 

 
0.4

 
863.6

 
532.2

 

 
1,396.2

Intangible assets, net
 

 

 
17.2

 
15.9

 

 
33.1

Deferred income taxes
 

 

 

 
69.5

 

 
69.5

Other long-term assets
 

 
8.2

 
4.8

 
34.7

 

 
47.7

Investments in subsidiaries
 
29.0

 
1,490.8

 
4.1

 

 
(1,523.9
)
 

Total Assets
 
$
29.0

 
$
1,941.7

 
$
1,706.9

 
$
1,300.2

 
$
(2,202.6
)
 
$
2,775.2

 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$

 
$
5.1

 
$
212.8

 
$
150.1

 
$
(2.3
)
 
$
365.7

Accrued liabilities
 


 
33.5

 
58.9

 
76.5

 

 
168.9

Current portion of long-term debt
 

 
11.0

 
1.0

 
9.6

 

 
21.6

Intercompany payables
 
29.8

 
226.6

 
396.4

 
23.6

 
(676.4
)
 

Total Current Liabilities
 
29.8

 
276.2

 
669.1

 
259.8

 
(678.7
)
 
556.2

Long-term debt
 

 
1,632.9

 
0.7

 
270.4

 

 
1,904.0

Deferred revenue
 

 

 
68.0

 

 

 
68.0

Deferred income taxes
 

 

 

 
9.3

 

 
9.3

Accrued pension benefits
 

 

 
38.9

 
121.4

 

 
160.3

Accrued postretirement benefits
 

 

 
33.1

 

 

 
33.1

Other long-term liabilities
 

 
3.6

 
13.7

 
27.8

 

 
45.1

Total Long-Term Liabilities
 

 
1,636.5

 
154.4

 
428.9

 

 
2,219.8

Total equity
 
(0.8
)
 
29.0

 
883.4

 
611.5

 
(1,523.9
)
 
(0.8
)
Total Liabilities and Equity
 
$
29.0

 
$
1,941.7

 
$
1,706.9

 
$
1,300.2

 
$
(2,202.6
)
 
$
2,775.2


                    
23

ALERIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in millions)

 
 
As of December 31, 2017
 
 
Aleris Corporation (Parent)
 
Aleris International, Inc.
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
 
Current Assets
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$

 
$
40.3

 
$

 
$
64.2

 
$
(2.1
)
 
$
102.4

Accounts receivable, net
 

 
0.2

 
83.0

 
162.5

 

 
245.7

Inventories
 

 

 
286.6

 
344.6

 

 
631.2

Prepaid expenses and other current assets
 

 
3.4

 
10.0

 
22.7

 

 
36.1

Intercompany receivables
 

 
134.6

 
46.0

 
32.4

 
(213.0
)
 

Total Current Assets
 

 
178.5

 
425.6

 
626.4

 
(215.1
)
 
1,015.4

Property, plant and equipment, net
 

 

 
903.7

 
567.2

 

 
1,470.9

Intangible assets, net
 

 

 
18.8

 
15.9

 

 
34.7

Deferred income taxes
 

 

 

 
70.7

 

 
70.7

Other long-term assets
 

 
3.4

 
8.0

 
41.3

 

 
52.7

Investments in subsidiaries
 
96.3

 
1,514.4

 
4.5

 

 
(1,615.2
)
 

Total Assets
 
$
96.3

 
$
1,696.3

 
$
1,360.6

 
$
1,321.5

 
$
(1,830.3
)
 
$
2,644.4

 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$

 
$
4.3

 
$
140.7

 
$
156.3

 
$
(2.1
)
 
$
299.2

Accrued liabilities
 

 
43.9

 
75.8

 
77.7

 

 
197.4

Current portion of long-term debt
 

 

 
1.0

 
8.1