Segment Information

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Segment Information

15. Segment Information

The Company’s Chief Operating Decision Maker allocates resources and evaluates performance at the divisional level. As such, the Company has determined that it has three reportable segments: Olin Brass, Chase and Oster.

Olin Brass is a leading manufacturer and converter of copper and brass sheet, strip and fabricated products. Olin Brass also rerolls and forms other alloys such as stainless, carbon steel and aluminum. Olin Brass’s products are used in five primary end markets: building and housing, munitions, automotive, coinage, and electronics/electrical components.

Chase is a leading manufacturer of brass rod in North America. Chase primarily manufactures brass rod, including round and other shapes, ranging from 1/4 inch to 4.5 inches in diameter. The key attributes of brass rod include its machinability, corrosion resistance and moderate strength, such as valves and fittings. Brass rod is generally manufactured from copper or copper-alloy scrap. Chase produces brass rod used in production applications which can be grouped into four primary end markets: building and housing, transportation, electronics/electrical components and industrial machinery and equipment.

Oster is a processing distributor of copper and copper-alloy sheet, strip and foil. Oster operates six strategically-located service centers in the United States, Puerto Rico and Mexico. Each Oster service center reliably provides a broad range of high quality products at quick lead-times in small quantities. These capabilities, combined with Oster’s operations of precision slitting, hot tinning, traverse winding, cutting, edging and special packaging, provide value to a broad customer base. Oster’s products are used in three primary end markets: building and housing, automotive and electronics/electrical components.

The Chief Operating Decision Maker evaluates performance and determines resource allocations based on a number of factors, the primary performance measure being Segment Adjusted EBITDA.

Segment Adjusted EBITDA is an EBITDA based measure of operating performance, with EBITDA being defined by the Company as net income before depreciation and amortization, interest expense, and income taxes. The Company defines Segment Adjusted EBITDA as EBITDA further adjusted to remove the impacts of inventory values for LIFO and lower of cost or market charges, the cost of terminating certain collateral hedges, unrealized mark to market gains and losses on derivative instruments, non-cash compensation expense, share-based compensation expense, loss on extinguishment of debt and non-cash income accretion related to the Company’s joint venture investment, each of which are excluded because management believes they are not indicative of the ongoing performance of the Company’s core operations. Corporate and Other includes compensation for corporate executives and officers, corporate office and administrative salaries, and professional fees for accounting, tax and legal services. Corporate and Other also includes interest expense, state and Federal income taxes, overhead costs that management has not allocated to our operating segments and the elimination of intercompany balances.

Below is a reconciliation of the Company’s Segment Adjusted EBITDA to income before provision for income taxes and equity income:

			Three Months Ended June 30,						Six Months Ended June 30,
			2013			2012			2013			2012
Net Sales, External Customers
Olin Brass			$	216,500		$	165,803		$	403,065		$	332,090
Chase				164,697			165,922			339,179			354,609
Oster				80,281			85,254			164,196			173,671
Total net sales, external customers			$	461,478		$	416,979		$	906,440		$	860,370
Intersegment Net Sales
Olin Brass			$	14,210		$	12,754		$	28,548		$	25,107
Chase				7			156			7			302
Oster				42			19			108			22
Total intersegment net sales			$	14,259		$	12,929		$	28,663		$	25,431
Segment Adjusted EBITDA
Olin Brass			$	16,233		$	13,062		$	27,683		$	23,751
Chase				18,954			17,251			37,835			37,191
Oster				4,303			5,208			8,853			10,428
Total segment adjusted EBITDA				39,490			35,521			74,371			71,370
Corporate and Other				(8,500	)		(5,550	)		(14,327	)		(9,429	)
Loss on extinguishment of debt				—			(19,612	)		—			(19,612	)
Depreciation and amortization				(2,072	)		(1,681	)		(3,981	)		(3,205	)
Interest expense				(9,959	)		(10,209	)		(19,834	)		(19,958	)
Equity method investment income	(A	)		(327	)		(20	)		(498	)		(113	)
Net income attributable to noncontrolling interest				61			114			159			168
Lower of cost or market adjustment to inventory				(318	)		—			(318	)		—
(Loss) gain on derivative contracts				(41	)		(109	)		(62	)		1,204
Share-based compensation expense				(181	)		—			(181	)		—
Compensation expense—profits interest awards				(29,271	)		(19,517	)		(29,271	)		(19,517	)
(Loss) income before provision for (benefit from) income taxes and equity income			$	(11,118	)	$	(21,063	)	$	6,058		$	908

(A) Excludes accretion income of $181 and $362 in each of the three and six months ended June 30, 2013 and 2012. Equity method investment income is exclusive to Olin Brass.