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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
|
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06-1826563
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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475 N. Martingale Road Suite 1050
Schaumburg, IL
|
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60173
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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¨
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Accelerated filer
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x
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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As of
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||||||
(In millions, except share and par value data)
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June 30,
2016 |
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December 31,
2015 |
||||
Assets
|
|
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|
||||
Current assets:
|
|
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|
||||
Cash
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$
|
58.9
|
|
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$
|
83.5
|
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Accounts receivable (net of allowance of $0.5 and $1.2 at June 30, 2016 and December 31, 2015, respectively)
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138.0
|
|
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119.6
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|
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Inventories
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166.5
|
|
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176.3
|
|
||
Prepaid expenses and other current assets
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19.1
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|
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17.4
|
|
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Income tax receivable
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2.9
|
|
|
2.4
|
|
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Total current assets
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385.4
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|
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399.2
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|
||
Property, plant and equipment
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171.1
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|
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158.8
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|
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Less: Accumulated depreciation
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(54.6
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)
|
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(47.7
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)
|
||
Property, plant and equipment, net
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116.5
|
|
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111.1
|
|
||
Goodwill
|
4.4
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|
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4.4
|
|
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Intangible assets, net
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0.5
|
|
|
0.5
|
|
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Deferred income taxes
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36.4
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|
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38.0
|
|
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Other noncurrent assets
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4.4
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|
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4.0
|
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Total assets
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$
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547.6
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|
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$
|
557.2
|
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Liabilities and equity
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|
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|
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Current liabilities:
|
|
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|
||||
Current portion of capital lease obligation
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$
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1.2
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|
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$
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1.1
|
|
Accounts payable
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87.4
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|
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71.0
|
|
||
Accrued liabilities
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34.4
|
|
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53.9
|
|
||
Accrued interest
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2.7
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|
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3.0
|
|
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Income tax payable
|
0.1
|
|
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0.2
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|
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Total current liabilities
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125.8
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|
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129.2
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|
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Noncurrent portion of debt
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303.0
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|
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342.0
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|
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Other noncurrent liabilities
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37.4
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|
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25.3
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|
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Total liabilities
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466.2
|
|
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496.5
|
|
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Commitments and Contingencies (Note 11)
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Global Brass and Copper Holdings, Inc. stockholders’ equity:
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|
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Common stock - $0.01 par value; 80,000,000 shares authorized; 21,671,497 and 21,553,883 shares issued at June 30, 2016 and December 31, 2015, respectively
|
0.2
|
|
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0.2
|
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Additional paid-in capital
|
40.0
|
|
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36.9
|
|
||
Retained earnings
|
41.3
|
|
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22.3
|
|
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Treasury stock - 79,149 and 46,729 shares at June 30, 2016 and December 31, 2015, respectively
|
(1.5
|
)
|
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(0.7
|
)
|
||
Accumulated other comprehensive loss
|
(2.8
|
)
|
|
(2.3
|
)
|
||
Total Global Brass and Copper Holdings, Inc. stockholders’ equity
|
77.2
|
|
|
56.4
|
|
||
Noncontrolling interest
|
4.2
|
|
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4.3
|
|
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Total equity
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81.4
|
|
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60.7
|
|
||
Total liabilities and equity
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$
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547.6
|
|
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$
|
557.2
|
|
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Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In millions, except per share data)
|
2016
|
|
2015
|
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2016
|
|
2015
|
||||||||
Net sales
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$
|
337.9
|
|
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$
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414.9
|
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$
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666.8
|
|
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$
|
815.1
|
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Cost of sales
|
(296.6
|
)
|
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(364.6
|
)
|
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(576.0
|
)
|
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(720.9
|
)
|
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Gross profit
|
41.3
|
|
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50.3
|
|
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90.8
|
|
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94.2
|
|
||||
Selling, general and administrative expenses
|
(19.8
|
)
|
|
(21.9
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)
|
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(39.5
|
)
|
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(43.3
|
)
|
||||
Operating income
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21.5
|
|
|
28.4
|
|
|
51.3
|
|
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50.9
|
|
||||
Interest expense
|
(7.9
|
)
|
|
(9.9
|
)
|
|
(16.3
|
)
|
|
(19.9
|
)
|
||||
Loss on extinguishment of debt
|
(0.4
|
)
|
|
—
|
|
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(3.3
|
)
|
|
—
|
|
||||
Gain on sale of investment in joint venture
|
—
|
|
|
6.3
|
|
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—
|
|
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6.3
|
|
||||
Other income, net
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—
|
|
|
0.2
|
|
|
0.4
|
|
|
0.1
|
|
||||
Income before provision for income taxes and equity income
|
13.2
|
|
|
25.0
|
|
|
32.1
|
|
|
37.4
|
|
||||
Provision for income taxes
|
(4.6
|
)
|
|
(7.9
|
)
|
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(11.3
|
)
|
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(12.4
|
)
|
||||
Income before equity income
|
8.6
|
|
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17.1
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|
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20.8
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|
|
25.0
|
|
||||
Equity income, net of tax
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.3
|
|
||||
Net income
|
8.6
|
|
|
17.2
|
|
|
20.8
|
|
|
25.3
|
|
||||
Net income attributable to noncontrolling interest
|
(0.2
|
)
|
|
(0.1
|
)
|
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(0.2
|
)
|
|
(0.1
|
)
|
||||
Net income attributable to Global Brass and Copper Holdings, Inc.
|
$
|
8.4
|
|
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$
|
17.1
|
|
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$
|
20.6
|
|
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$
|
25.2
|
|
Net income attributable to Global Brass and Copper Holdings, Inc. per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.39
|
|
|
$
|
0.80
|
|
|
$
|
0.97
|
|
|
$
|
1.19
|
|
Diluted
|
$
|
0.39
|
|
|
$
|
0.80
|
|
|
$
|
0.96
|
|
|
$
|
1.18
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
21.3
|
|
|
21.3
|
|
|
21.3
|
|
|
21.2
|
|
||||
Diluted
|
21.5
|
|
|
21.4
|
|
|
21.5
|
|
|
21.3
|
|
||||
Dividends declared per common share
|
$
|
0.0375
|
|
|
$
|
0.0375
|
|
|
$
|
0.0750
|
|
|
$
|
0.0750
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(In millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net income
|
$
|
8.6
|
|
|
$
|
17.2
|
|
|
$
|
20.8
|
|
|
$
|
25.3
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustment
|
(0.8
|
)
|
|
(0.3
|
)
|
|
(1.0
|
)
|
|
(0.5
|
)
|
||||
Income tax benefit on foreign currency translation adjustment
|
0.3
|
|
|
0.1
|
|
|
0.4
|
|
|
0.2
|
|
||||
Comprehensive income
|
8.1
|
|
|
17.0
|
|
|
20.2
|
|
|
25.0
|
|
||||
Comprehensive income attributable to noncontrolling interest
|
(0.1
|
)
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
(0.2
|
)
|
||||
Comprehensive income attributable to Global Brass and Copper Holdings, Inc.
|
$
|
8.0
|
|
|
$
|
16.9
|
|
|
$
|
20.1
|
|
|
$
|
24.8
|
|
|
(In millions, except share data)
|
Shares Outstanding
|
|
Common
stock
|
|
Additional
paid-in
capital
|
|
Retained earnings / (accumulated
deficit)
|
|
Treasury
stock
|
|
Accumulated
other
comprehensive
loss
|
|
Total
Global Brass
and Copper
Holdings, Inc.
stockholders’
equity
|
|
Noncontrolling
interest
|
|
Total
equity
|
|||||||||||||||||
Balance at December 31, 2014
|
21,340,207
|
|
|
$
|
0.2
|
|
|
$
|
32.5
|
|
|
$
|
(10.1
|
)
|
|
$
|
(0.4
|
)
|
|
$
|
(0.6
|
)
|
|
$
|
21.6
|
|
|
$
|
4.4
|
|
|
$
|
26.0
|
|
Share-based compensation
|
172,678
|
|
|
—
|
|
|
1.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.9
|
|
|
—
|
|
|
1.9
|
|
||||||||
Exercise of stock options
|
11,743
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
||||||||
Share repurchases
|
(16,694
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|
(0.3
|
)
|
||||||||
Excess tax benefit on share-based compensation
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
||||||||
Dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.6
|
)
|
|
—
|
|
|
—
|
|
|
(1.6
|
)
|
|
—
|
|
|
(1.6
|
)
|
||||||||
Distribution to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
(0.2
|
)
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
25.2
|
|
|
—
|
|
|
—
|
|
|
25.2
|
|
|
0.1
|
|
|
25.3
|
|
||||||||
Other comprehensive (loss) income, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
|
(0.4
|
)
|
|
0.1
|
|
|
(0.3
|
)
|
||||||||
Balance at June 30, 2015
|
21,507,934
|
|
|
$
|
0.2
|
|
|
$
|
34.6
|
|
|
$
|
13.5
|
|
|
$
|
(0.7
|
)
|
|
$
|
(1.0
|
)
|
|
$
|
46.6
|
|
|
$
|
4.4
|
|
|
$
|
51.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Balance at December 31, 2015
|
21,507,154
|
|
|
$
|
0.2
|
|
|
$
|
36.9
|
|
|
$
|
22.3
|
|
|
$
|
(0.7
|
)
|
|
$
|
(2.3
|
)
|
|
$
|
56.4
|
|
|
$
|
4.3
|
|
|
$
|
60.7
|
|
Share-based compensation
|
117,614
|
|
|
—
|
|
|
2.7
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2.7
|
|
|
—
|
|
|
2.7
|
|
||||||||
Share repurchases
|
(32,420
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.8
|
)
|
|
—
|
|
|
(0.8
|
)
|
|
—
|
|
|
(0.8
|
)
|
||||||||
Excess tax benefit on share-based compensation
|
—
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
0.4
|
|
||||||||
Dividends declared
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.6
|
)
|
|
—
|
|
|
—
|
|
|
(1.6
|
)
|
|
—
|
|
|
(1.6
|
)
|
||||||||
Distribution to noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
(0.2
|
)
|
||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
20.6
|
|
|
—
|
|
|
—
|
|
|
20.6
|
|
|
0.2
|
|
|
20.8
|
|
||||||||
Other comprehensive loss, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
|
(0.5
|
)
|
|
(0.1
|
)
|
|
(0.6
|
)
|
||||||||
Balance at June 30, 2016
|
21,592,348
|
|
|
$
|
0.2
|
|
|
$
|
40.0
|
|
|
$
|
41.3
|
|
|
$
|
(1.5
|
)
|
|
$
|
(2.8
|
)
|
|
$
|
77.2
|
|
|
$
|
4.2
|
|
|
$
|
81.4
|
|
|
|
Six Months Ended June 30,
|
||||||
(In millions)
|
2016
|
|
2015
|
||||
Cash flows from operating activities
|
|
|
|
||||
Net income
|
$
|
20.8
|
|
|
$
|
25.3
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Lower of cost or market adjustment to inventory
|
0.1
|
|
|
2.5
|
|
||
Unrealized gain on derivatives
|
(2.6
|
)
|
|
(0.7
|
)
|
||
Depreciation
|
7.3
|
|
|
6.6
|
|
||
Amortization of debt issuance costs
|
1.3
|
|
|
1.4
|
|
||
Loss on extinguishment of debt
|
3.3
|
|
|
—
|
|
||
Share-based compensation expense
|
2.7
|
|
|
1.9
|
|
||
Excess tax benefit from share-based compensation
|
(0.4
|
)
|
|
(0.1
|
)
|
||
Provision for bad debts, net of reductions
|
(0.4
|
)
|
|
0.6
|
|
||
Deferred income taxes
|
2.0
|
|
|
(2.6
|
)
|
||
Loss on disposal of property, plant and equipment
|
—
|
|
|
0.3
|
|
||
Gain on sale of investment in joint venture
|
—
|
|
|
(6.3
|
)
|
||
Equity earnings, net of distributions
|
—
|
|
|
0.1
|
|
||
Change in assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(18.1
|
)
|
|
(13.3
|
)
|
||
Inventories
|
9.1
|
|
|
(9.3
|
)
|
||
Prepaid expenses and other current assets
|
2.6
|
|
|
4.8
|
|
||
Accounts payable
|
17.5
|
|
|
23.1
|
|
||
Accrued liabilities
|
(10.5
|
)
|
|
(6.0
|
)
|
||
Accrued interest
|
(0.3
|
)
|
|
—
|
|
||
Income taxes, net
|
1.1
|
|
|
7.4
|
|
||
Other, net
|
(0.3
|
)
|
|
—
|
|
||
Net cash provided by operating activities
|
35.2
|
|
|
35.7
|
|
||
Cash flows from investing activities
|
|
|
|
||||
Capital expenditures
|
(14.3
|
)
|
|
(7.6
|
)
|
||
Proceeds from sale of investment in joint venture
|
—
|
|
|
8.0
|
|
||
Net cash (used in) provided by investing activities
|
(14.3
|
)
|
|
0.4
|
|
||
Cash flows from financing activities
|
|
|
|
||||
Borrowings on ABL Facility
|
0.6
|
|
|
0.6
|
|
||
Payments on ABL Facility
|
(0.6
|
)
|
|
(0.6
|
)
|
||
Purchases of Senior Secured Notes
|
(40.0
|
)
|
|
—
|
|
||
Premium payment on partial extinguishment of debt
|
(2.5
|
)
|
|
—
|
|
||
Principal payments under capital lease obligation
|
(0.5
|
)
|
|
(0.5
|
)
|
||
Dividends paid
|
(1.6
|
)
|
|
(1.6
|
)
|
||
Distribution to noncontrolling interest owner
|
(0.2
|
)
|
|
(0.2
|
)
|
||
Proceeds from exercise of stock options
|
—
|
|
|
0.1
|
|
||
Excess tax benefit from share-based compensation
|
0.4
|
|
|
0.1
|
|
||
Share repurchases
|
(0.8
|
)
|
|
(0.3
|
)
|
||
Net cash used in financing activities
|
(45.2
|
)
|
|
(2.4
|
)
|
||
Effect of foreign currency exchange rates
|
(0.3
|
)
|
|
0.1
|
|
||
Net (decrease) increase in cash
|
(24.6
|
)
|
|
33.8
|
|
||
Cash at beginning of period
|
83.5
|
|
|
44.6
|
|
||
Cash at end of period
|
$
|
58.9
|
|
|
$
|
78.4
|
|
Noncash investing and financing activities
|
|
|
|
||||
Purchases of property, plant and equipment not yet paid
|
$
|
2.7
|
|
|
$
|
2.7
|
|
1.
|
Basis of Presentation and Principles of Consolidation
|
|
|
|
|
|
|
Global Brass and Copper Holdings, Inc.
Notes to Consolidated Financial Statements (Unaudited)
|
2.
|
Earnings Per Share
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(in millions, except per share data)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Numerator
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Global Brass and Copper Holdings, Inc.
|
$
|
8.4
|
|
|
$
|
17.1
|
|
|
$
|
20.6
|
|
|
$
|
25.2
|
|
Denominator
|
|
|
|
|
|
|
|
||||||||
Weighted-average common shares outstanding
|
21.3
|
|
|
21.3
|
|
|
21.3
|
|
|
21.2
|
|
||||
Effect of potentially dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Stock options and nonvested share awards
|
0.2
|
|
|
0.1
|
|
|
0.2
|
|
|
0.1
|
|
||||
Weighted-average common shares outstanding, assuming dilution
|
21.5
|
|
|
21.4
|
|
|
21.5
|
|
|
21.3
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Anti-dilutive shares excluded from above
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
||||
Net income attributable to Global Brass and Copper Holdings, Inc. per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.39
|
|
|
$
|
0.80
|
|
|
$
|
0.97
|
|
|
$
|
1.19
|
|
Diluted
|
$
|
0.39
|
|
|
$
|
0.80
|
|
|
$
|
0.96
|
|
|
$
|
1.18
|
|
Global Brass and Copper Holdings, Inc.
Notes to Consolidated Financial Statements (Unaudited)
|
3.
|
Segment Information
|
•
|
unrealized gains and losses on derivative contracts in support of our balanced book approach;
|
•
|
unrealized gains and losses associated with derivative contracts related to energy and utility costs;
|
•
|
adjustments due to lower of cost or market adjustments to inventory;
|
•
|
gains and losses due to the depletion of a last-in, first out (“LIFO”) layer of metal inventory;
|
•
|
share-based compensation expense;
|
•
|
loss on extinguishment of debt;
|
•
|
income accretion related to Dowa Olin Metal Corporation (the “Dowa Joint Venture”);
|
•
|
restructuring and other business transformation charges;
|
•
|
specified legal and professional expenses; and
|
•
|
certain other items.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net Sales, External Customers
|
|
|
|
|
|
|
|
||||||||
Olin Brass
|
$
|
137.4
|
|
|
$
|
192.8
|
|
|
$
|
269.0
|
|
|
$
|
362.2
|
|
Chase Brass
|
129.3
|
|
|
141.9
|
|
|
257.4
|
|
|
297.9
|
|
||||
A.J. Oster
|
71.2
|
|
|
80.2
|
|
|
140.4
|
|
|
155.0
|
|
||||
Total net sales, external customers
|
$
|
337.9
|
|
|
$
|
414.9
|
|
|
$
|
666.8
|
|
|
$
|
815.1
|
|
Intersegment Net Sales
|
|
|
|
|
|
|
|
||||||||
Olin Brass
|
$
|
17.6
|
|
|
$
|
15.0
|
|
|
$
|
37.8
|
|
|
$
|
30.3
|
|
Chase Brass
|
0.5
|
|
|
0.8
|
|
|
0.6
|
|
|
1.2
|
|
||||
Total intersegment net sales
|
$
|
18.1
|
|
|
$
|
15.8
|
|
|
$
|
38.4
|
|
|
$
|
31.5
|
|
Adjusted EBITDA
|
|
|
|
|
|
|
|
||||||||
Olin Brass
|
$
|
7.8
|
|
|
$
|
17.7
|
|
|
$
|
21.1
|
|
|
$
|
27.0
|
|
Chase Brass
|
18.0
|
|
|
17.1
|
|
|
37.2
|
|
|
38.5
|
|
||||
A.J. Oster
|
4.6
|
|
|
4.7
|
|
|
9.7
|
|
|
8.2
|
|
||||
Total adjusted EBITDA of segments
|
30.4
|
|
|
39.5
|
|
|
68.0
|
|
|
73.7
|
|
||||
Corporate and other
|
(4.5
|
)
|
|
1.5
|
|
|
(8.4
|
)
|
|
(3.4
|
)
|
||||
Depreciation expense
|
(3.7
|
)
|
|
(3.3
|
)
|
|
(7.3
|
)
|
|
(6.6
|
)
|
||||
Interest expense
|
(7.9
|
)
|
|
(9.9
|
)
|
|
(16.3
|
)
|
|
(19.9
|
)
|
||||
Net income attributable to noncontrolling interest
|
0.2
|
|
|
0.1
|
|
|
0.2
|
|
|
0.1
|
|
||||
Unrealized gain (loss) on derivative contracts (a)
|
0.7
|
|
|
(0.3
|
)
|
|
2.6
|
|
|
0.7
|
|
||||
Loss on extinguishment of debt (b)
|
(0.4
|
)
|
|
—
|
|
|
(3.3
|
)
|
|
—
|
|
||||
Equity method investment income (c)
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
||||
Specified legal/professional expenses (d)
|
(0.2
|
)
|
|
(0.7
|
)
|
|
(0.6
|
)
|
|
(1.8
|
)
|
||||
Lower of cost or market adjustment to inventory (e)
|
0.2
|
|
|
(0.6
|
)
|
|
(0.1
|
)
|
|
(2.5
|
)
|
||||
Share-based compensation expense (f)
|
(1.6
|
)
|
|
(1.2
|
)
|
|
(2.7
|
)
|
|
(1.9
|
)
|
||||
Restructuring and other business transformation charges (g)
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.9
|
)
|
||||
Income before provision for income taxes and equity income
|
$
|
13.2
|
|
|
$
|
25.0
|
|
|
$
|
32.1
|
|
|
$
|
37.4
|
|
(a)
|
Represents unrealized gains / losses on derivative contracts.
|
(b)
|
Represents the loss on extinguishment of debt recognized in connection with the open market purchases of Senior Secured Notes (see
Note 7
, “
Financing
”).
|
(c)
|
Excludes accretion income of
$0.2 million
for the
six
months ended
June 30, 2015
. Equity method investment income is exclusive to Olin Brass. In 2015, we sold our investment in the Dowa Joint Venture.
|
(d)
|
Represents selected professional fees for accounting, tax, legal and consulting services incurred as a public company that exceed our expected long-term requirements.
|
(e)
|
For the
three and six
months ended
June 30, 2015
, represents lower of cost or market charges for the write down of domestic, non-copper metal inventory. For the
three and six
months ended
June 30, 2016
, represents recoveries of previous charges as market prices for certain non-copper metals increased, net of additional lower of cost or market charges for the write down of domestic, non-copper metal inventory.
|
(f)
|
Represents compensation expense resulting from stock compensation awards to certain employees and our Board of Directors.
|
(g)
|
Restructuring and other business transformation charges for the
six months ended June 30, 2015
represent severance charges at Olin Brass.
|
4.
|
Inventories
|
|
As of
|
||||||
(in millions)
|
June 30,
2016 |
|
December 31,
2015 |
||||
Raw materials and supplies
|
$
|
30.7
|
|
|
$
|
31.3
|
|
Work-in-process
|
71.7
|
|
|
69.7
|
|
||
Finished goods
|
64.1
|
|
|
75.3
|
|
||
Total inventories
|
$
|
166.5
|
|
|
$
|
176.3
|
|
|
As of
|
||||||
(in millions)
|
June 30,
2016 |
|
December 31,
2015 |
||||
Market value
|
$
|
211.8
|
|
|
$
|
213.1
|
|
As reported
|
166.5
|
|
|
176.3
|
|
||
Excess of market over reported value
|
$
|
45.3
|
|
|
$
|
36.8
|
|
5.
|
Prepaid Expenses and Other Current Assets
|
|
As of
|
||||||
(in millions)
|
June 30,
2016 |
|
December 31,
2015 |
||||
Workers’ compensation plan deposits
|
$
|
6.9
|
|
|
$
|
6.0
|
|
Prepaid insurance
|
3.0
|
|
|
2.0
|
|
||
Deferred cost of sales - toll customers
|
2.3
|
|
|
4.0
|
|
||
Derivative contract assets
|
2.3
|
|
|
1.8
|
|
||
Prepaid tooling
|
0.1
|
|
|
0.5
|
|
||
Other
|
4.5
|
|
|
3.1
|
|
||
Total prepaid expenses and other current assets
|
$
|
19.1
|
|
|
$
|
17.4
|
|
|
As of
|
||||||
(in millions)
|
June 30,
2016 |
|
December 31,
2015 |
||||
Compensation and benefits
|
$
|
16.1
|
|
|
$
|
23.8
|
|
Workers’ compensation
|
2.7
|
|
|
13.3
|
|
||
Insurance
|
2.6
|
|
|
2.6
|
|
||
Professional fees
|
2.5
|
|
|
2.5
|
|
||
Deferred sales revenue - toll customers
|
2.3
|
|
|
4.0
|
|
||
Utilities
|
1.8
|
|
|
1.6
|
|
||
Taxes
|
1.2
|
|
|
1.3
|
|
||
Tooling
|
—
|
|
|
0.5
|
|
||
Other
|
5.2
|
|
|
4.3
|
|
||
Total accrued liabilities
|
$
|
34.4
|
|
|
$
|
53.9
|
|
7.
|
Financing
|
|
As of
|
||||||
(in millions)
|
June 30,
2016 |
|
December 31,
2015 |
||||
Senior Secured Notes
|
$
|
305.3
|
|
|
$
|
345.3
|
|
Deferred financing fees - Senior Secured Notes
|
(5.4
|
)
|
|
(7.0
|
)
|
||
ABL Facility
|
—
|
|
|
—
|
|
||
Obligations under capital lease
|
4.3
|
|
|
4.8
|
|
||
Total debt
|
304.2
|
|
|
343.1
|
|
||
Less: Current portion of capital lease obligations
|
(1.2
|
)
|
|
(1.1
|
)
|
||
Noncurrent portion of debt
|
$
|
303.0
|
|
|
$
|
342.0
|
|
Global Brass and Copper Holdings, Inc.
Notes to Consolidated Financial Statements (Unaudited)
|
Global Brass and Copper Holdings, Inc.
Notes to Consolidated Financial Statements (Unaudited)
|
8.
|
Income Taxes
|
Global Brass and Copper Holdings, Inc.
Notes to Consolidated Financial Statements (Unaudited)
|
9.
|
Derivative Contracts
|
|
As of
|
||||||||||||
|
June 30, 2016
|
|
December 31, 2015
|
||||||||||
(in millions, except for number of contracts)
|
Net
Notional
Amount
|
|
# of
Contracts
|
|
Net
Notional
Amount
|
|
# of
Contracts
|
||||||
Metal
|
$
|
18.2
|
|
|
941
|
|
|
$
|
18.2
|
|
|
534
|
|
Energy and utilities
|
2.7
|
|
|
53
|
|
|
4.3
|
|
|
114
|
|
||
Total
|
$
|
20.9
|
|
|
994
|
|
|
$
|
22.5
|
|
|
648
|
|
|
As of
|
||||||
(in millions)
|
June 30,
2016 |
|
December 31,
2015 |
||||
Notional amount - long
|
$
|
35.9
|
|
|
$
|
28.5
|
|
Notional amount - (short)
|
(15.0
|
)
|
|
(6.0
|
)
|
||
Net long / (short)
|
$
|
20.9
|
|
|
$
|
22.5
|
|
|
As of June 30, 2016
|
||||||||||
(in millions)
|
Gross Amounts of
Recognized Assets
|
|
Gross Amounts Offset in
Consolidated Balance
Sheet
|
|
Net Amounts of Assets
Presented in Consolidated
Balance Sheet
|
||||||
Metal
|
$
|
2.5
|
|
|
$
|
(0.9
|
)
|
|
$
|
1.6
|
|
Energy and utilities
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|||
Collateral on deposit
|
0.6
|
|
|
—
|
|
|
0.6
|
|
|||
Total
|
$
|
3.2
|
|
|
$
|
(0.9
|
)
|
|
$
|
2.3
|
|
|
|
|
|
|
|
||||||
Consolidated balance sheet location:
|
|
|
|
|
|
||||||
Prepaid expenses and other current assets
|
|
|
|
|
$
|
2.3
|
|
|
As of June 30, 2016
|
||||||||||
(in millions)
|
Gross Amounts of
Recognized Liabilities
|
|
Gross Amounts Offset in
Consolidated Balance
Sheet
|
|
Net Amounts of Liabilities
Presented in Consolidated
Balance Sheet
|
||||||
Metal
|
$
|
0.9
|
|
|
$
|
(0.9
|
)
|
|
$
|
—
|
|
Energy and utilities
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total
|
$
|
0.9
|
|
|
$
|
(0.9
|
)
|
|
$
|
—
|
|
|
As of December 31, 2015
|
||||||||||
(in millions)
|
Gross Amounts of
Recognized Assets
|
|
Gross Amounts Offset in
Consolidated Balance
Sheet
|
|
Net Amounts of Assets
Presented in Consolidated
Balance Sheet
|
||||||
Metal
|
$
|
0.6
|
|
|
$
|
(0.6
|
)
|
|
$
|
—
|
|
Energy and utilities
|
0.1
|
|
|
(0.1
|
)
|
|
—
|
|
|||
Collateral on deposit
|
3.2
|
|
|
(1.4
|
)
|
|
1.8
|
|
|||
Total
|
$
|
3.9
|
|
|
$
|
(2.1
|
)
|
|
$
|
1.8
|
|
|
|
|
|
|
|
||||||
Consolidated balance sheet location:
|
|
|
|
|
|
||||||
Prepaid expenses and other current assets
|
|
|
|
|
$
|
1.8
|
|
|
As of December 31, 2015
|
||||||||||
(in millions)
|
Gross Amounts of
Recognized Liabilities
|
|
Gross Amounts Offset in
Consolidated Balance
Sheet
|
|
Net Amounts of Liabilities
Presented in Consolidated
Balance Sheet
|
||||||
Metal
|
$
|
1.7
|
|
|
$
|
(1.7
|
)
|
|
$
|
—
|
|
Energy and utilities
|
0.4
|
|
|
(0.4
|
)
|
|
—
|
|
|||
Total
|
$
|
2.1
|
|
|
$
|
(2.1
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Losses (gains) in cost of sales for:
|
|
|
|
|
|
|
|
||||||||
Metal
|
$
|
(0.7
|
)
|
|
$
|
0.4
|
|
|
$
|
(2.0
|
)
|
|
$
|
(0.1
|
)
|
Energy and utilities
|
(0.4
|
)
|
|
0.3
|
|
|
0.1
|
|
|
0.4
|
|
||||
Total
|
$
|
(1.1
|
)
|
|
$
|
0.7
|
|
|
$
|
(1.9
|
)
|
|
$
|
0.3
|
|
10.
|
Fair Value Measurements
|
•
|
Level 1
- Quoted prices for identical instruments in active markets.
|
•
|
Level 2
- Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets.
|
•
|
Level 3
- Model-derived valuations in which one or more significant inputs or significant value-drivers are unobservable.
|
11.
|
Commitments and Contingencies
|
Global Brass and Copper Holdings, Inc.
Notes to Consolidated Financial Statements (Unaudited)
|
•
|
general economic conditions affecting the markets in which our products are sold;
|
•
|
our ability to implement our business strategies, including acquisition activities;
|
•
|
our ability to maintain business relationships with our customers on favorable terms;
|
•
|
our ability to continue implementing our balanced book approach to substantially reduce the impact of fluctuations in metal prices on our earnings and operating margins;
|
•
|
shrinkage from processing operations and metal price fluctuations, particularly copper;
|
•
|
the condition of various markets in which our customers operate, including the housing and commercial construction industries;
|
•
|
the impact of a loss in customer volume or demand or a shift by customers of their manufacturing or sourcing offshore;
|
•
|
our ability to compete effectively with existing and new competitors;
|
•
|
limitations on our ability to purchase raw materials, particularly copper;
|
•
|
fluctuations in commodity, energy and utility prices and costs;
|
•
|
our ability to maintain sufficient liquidity as commodity, energy and utility prices rise;
|
•
|
the effects of industry consolidation or competition in our business lines;
|
•
|
operational factors affecting the ongoing commercial operations of our facilities, including technology failures, catastrophic weather-related damage, regulatory approvals, permit issues, unscheduled blackouts, outages or repairs or unanticipated changes in energy and utility costs;
|
•
|
operational factors affecting the ongoing commercial operations of our facilities resulting from inclement weather conditions;
|
•
|
supply, demand, prices and other market conditions for our products;
|
•
|
our ability to accommodate increases in production to meet demand for our products;
|
•
|
our ability to continue our operations internationally and the risks applicable to international operations;
|
•
|
government regulations relating to our products and services, including new legislation relating to derivatives and the elimination of the dollar bill and EPA regulations regarding the registration and marketing of bactericidal copper products;
|
•
|
our ability to maintain effective internal control over financial reporting;
|
•
|
our ability to realize the planned cost savings and efficiency gains as part of our various initiatives;
|
•
|
our ability to successfully execute acquisitions and joint ventures;
|
•
|
workplace safety issues;
|
•
|
our ability to retain key employees;
|
•
|
adverse developments in our relationship with our employees or the future terms of our collective bargaining agreements;
|
•
|
the impact of our indebtedness, including the effect of our ability to borrow money, fund working capital and operations and make new investments;
|
•
|
rising employee medical costs;
|
•
|
environmental costs and our exposure to environmental claims;
|
•
|
our exposure to product liability claims;
|
•
|
our ability to successfully manage litigation;
|
•
|
our ability to maintain cost-effective insurance policies;
|
•
|
our ability to maintain the confidentiality of our proprietary information, to protect the validity, enforceability or scope of our intellectual property rights and manage litigation regarding our intellectual property rights;
|
•
|
litigation regarding our intellectual property rights could affect us and harm our business;
|
•
|
our limited experience managing and operating as an SEC reporting company;
|
•
|
fluctuations in interest rates; and
|
•
|
restrictive covenants in our indebtedness that may adversely affect our operational flexibility.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
|
QTR Change:
2016 vs. 2015 |
|
YTD Change:
2016 vs. 2015 |
||||||||||||||||||||||
(in millions, except per pound values)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
||||||||||||||
Pounds shipped (a)
|
131.8
|
|
|
132.8
|
|
|
263.1
|
|
|
261.4
|
|
|
(1.0
|
)
|
|
(0.8
|
)%
|
|
1.7
|
|
|
0.7
|
%
|
||||||
Net sales
|
$
|
337.9
|
|
|
$
|
414.9
|
|
|
$
|
666.8
|
|
|
$
|
815.1
|
|
|
$
|
(77.0
|
)
|
|
(18.6
|
)%
|
|
$
|
(148.3
|
)
|
|
(18.2
|
)%
|
Metal component of net sales
|
(201.1
|
)
|
|
(274.3
|
)
|
|
(394.6
|
)
|
|
(539.7
|
)
|
|
73.2
|
|
|
(26.7
|
)%
|
|
145.1
|
|
|
(26.9
|
)%
|
||||||
Adjusted sales
|
$
|
136.8
|
|
|
$
|
140.6
|
|
|
$
|
272.2
|
|
|
$
|
275.4
|
|
|
$
|
(3.8
|
)
|
|
(2.7
|
)%
|
|
$
|
(3.2
|
)
|
|
(1.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net sales per pound
|
$
|
2.56
|
|
|
$
|
3.12
|
|
|
$
|
2.53
|
|
|
$
|
3.12
|
|
|
$
|
(0.56
|
)
|
|
(17.9
|
)%
|
|
$
|
(0.59
|
)
|
|
(18.9
|
)%
|
Metal component of net sales per pound
|
(1.52
|
)
|
|
(2.06
|
)
|
|
(1.50
|
)
|
|
(2.07
|
)
|
|
0.54
|
|
|
(26.2
|
)%
|
|
0.57
|
|
|
(27.5
|
)%
|
||||||
Adjusted sales per pound
|
$
|
1.04
|
|
|
$
|
1.06
|
|
|
$
|
1.03
|
|
|
$
|
1.05
|
|
|
$
|
(0.02
|
)
|
|
(1.9
|
)%
|
|
$
|
(0.02
|
)
|
|
(1.9
|
)%
|
Average copper price per pound (b)
|
$
|
2.13
|
|
|
$
|
2.77
|
|
|
$
|
2.12
|
|
|
$
|
2.72
|
|
|
$
|
(0.64
|
)
|
|
(23.1
|
)%
|
|
$
|
(0.60
|
)
|
|
(22.1
|
)%
|
(a)
|
Amounts exclude quantity of unprocessed metal sold.
|
(b)
|
Copper prices reported by the Commodity Exchange (“COMEX”).
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
QTR Amount change:
|
|
YTD Amount change:
|
|||||||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016 vs. 2015
|
|
2016 vs. 2015
|
||||||||||||
Total gross profit
|
$
|
41.3
|
|
|
$
|
50.3
|
|
|
$
|
90.8
|
|
|
$
|
94.2
|
|
|
$
|
(9.0
|
)
|
|
$
|
(3.4
|
)
|
Unrealized (gain) loss on derivative contracts (a)
|
(0.7
|
)
|
|
0.3
|
|
|
(2.6
|
)
|
|
(0.7
|
)
|
|
(1.0
|
)
|
|
(1.9
|
)
|
||||||
Lower of cost or market adjustment to inventory (b)
|
(0.2
|
)
|
|
0.6
|
|
|
0.1
|
|
|
2.5
|
|
|
(0.8
|
)
|
|
(2.4
|
)
|
||||||
Restructuring and other business transformation charges
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
(0.4
|
)
|
||||||
Depreciation expense
|
3.3
|
|
|
3.0
|
|
|
6.4
|
|
|
5.9
|
|
|
0.3
|
|
|
0.5
|
|
||||||
Adjusted gross profit
|
$
|
43.7
|
|
|
$
|
54.2
|
|
|
$
|
94.7
|
|
|
$
|
102.3
|
|
|
$
|
(10.5
|
)
|
|
$
|
(7.6
|
)
|
(a)
|
We use our balanced book approach, supported, where required, by derivative contracts, to substantially reduce the impact of metal price fluctuations on operating margins. We also use derivative contracts to reduce uncertainty and volatility related to energy and utility costs.
|
(b)
|
For the
three and six
months ended
June 30, 2015
, represents lower of cost or market charges for the write down of domestic, non-copper metal inventory. For the
three and six
months ended
June 30, 2016
, represents recoveries of previous charges as market prices for certain non-copper metals increased, net of additional lower of cost or market charges for the write down of domestic, non-copper metal inventory.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
|
QTR Amount change:
|
|
YTD Amount change:
|
||||||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016 vs. 2015
|
|
2016 vs. 2015
|
||||||||||||
Total selling, general and administrative expenses
|
$
|
19.8
|
|
|
$
|
21.9
|
|
|
$
|
39.5
|
|
|
$
|
43.3
|
|
|
$
|
(2.1
|
)
|
|
$
|
(3.8
|
)
|
Specified legal / professional expenses
|
(0.2
|
)
|
|
(0.7
|
)
|
|
(0.6
|
)
|
|
(1.8
|
)
|
|
0.5
|
|
|
1.2
|
|
||||||
Share-based compensation expense
|
(1.6
|
)
|
|
(1.2
|
)
|
|
(2.7
|
)
|
|
(1.9
|
)
|
|
(0.4
|
)
|
|
(0.8
|
)
|
||||||
Restructuring and other business transformation charges
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
|
—
|
|
|
0.5
|
|
||||||
Depreciation and amortization expense
|
(0.4
|
)
|
|
(0.3
|
)
|
|
(0.9
|
)
|
|
(0.7
|
)
|
|
(0.1
|
)
|
|
(0.2
|
)
|
||||||
Adjusted selling, general and administrative expenses
|
$
|
17.6
|
|
|
$
|
19.7
|
|
|
$
|
35.3
|
|
|
$
|
38.4
|
|
|
$
|
(2.1
|
)
|
|
$
|
(3.1
|
)
|
•
|
unrealized gains and losses on derivative contracts in support of our balanced book approach;
|
•
|
unrealized gains and losses associated with derivative contracts related to energy and utility costs;
|
•
|
adjustments due to lower of cost or market adjustments to inventory;
|
•
|
gains and losses due to the depletion of a last-in, first out (“LIFO”) layer of metal inventory;
|
•
|
share-based compensation expense;
|
•
|
loss on extinguishment of debt;
|
•
|
income accretion related to Dowa Olin Metal Corporation (the “Dowa Joint Venture”)
|
•
|
restructuring and other business transformation charges;
|
•
|
specified legal and professional expenses; and
|
•
|
certain other items.
|
•
|
does not reflect every expenditure, future requirements for capital expenditures or contractual commitments;
|
•
|
does not reflect the significant interest expense or the amounts necessary to service interest or principal payments on our debt;
|
•
|
does not reflect income tax expense and therefore the cost of complying with applicable laws;
|
•
|
is an imperfect substitute for cash flow as it eliminates depreciation and amortization expense but does not include cash expended for capital expenditures required to operate our business;
|
•
|
does not reflect the impact of earnings or charges resulting from matters we consider not to be indicative of our ongoing operations; and
|
•
|
does not reflect limitations on our costs related to transferring earnings from our subsidiaries to us.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
QTR Amount change:
|
|
YTD Amount change:
|
|||||||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016 vs. 2015
|
|
2016 vs. 2015
|
||||||||||||
Net income attributable to Global Brass and Copper Holdings, Inc.
|
$
|
8.4
|
|
|
$
|
17.1
|
|
|
$
|
20.6
|
|
|
$
|
25.2
|
|
|
$
|
(8.7
|
)
|
|
$
|
(4.6
|
)
|
Interest expense
|
7.9
|
|
|
9.9
|
|
|
16.3
|
|
|
19.9
|
|
|
(2.0
|
)
|
|
(3.6
|
)
|
||||||
Provision for income taxes
|
4.6
|
|
|
7.9
|
|
|
11.3
|
|
|
12.4
|
|
|
(3.3
|
)
|
|
(1.1
|
)
|
||||||
Depreciation expense
|
3.7
|
|
|
3.3
|
|
|
7.3
|
|
|
6.6
|
|
|
0.4
|
|
|
0.7
|
|
||||||
Unrealized (gain) loss on derivative contracts (a)
|
(0.7
|
)
|
|
0.3
|
|
|
(2.6
|
)
|
|
(0.7
|
)
|
|
(1.0
|
)
|
|
(1.9
|
)
|
||||||
Loss on extinguishment of debt (b)
|
0.4
|
|
|
—
|
|
|
3.3
|
|
|
—
|
|
|
0.4
|
|
|
3.3
|
|
||||||
Non-cash accretion of income of Dowa Joint Venture (c)
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.2
|
)
|
|
—
|
|
|
0.2
|
|
||||||
Specified legal / professional expenses (d)
|
0.2
|
|
|
0.7
|
|
|
0.6
|
|
|
1.8
|
|
|
(0.5
|
)
|
|
(1.2
|
)
|
||||||
Lower of cost or market adjustment to inventory (e)
|
(0.2
|
)
|
|
0.6
|
|
|
0.1
|
|
|
2.5
|
|
|
(0.8
|
)
|
|
(2.4
|
)
|
||||||
Share-based compensation expense (f)
|
1.6
|
|
|
1.2
|
|
|
2.7
|
|
|
1.9
|
|
|
0.4
|
|
|
0.8
|
|
||||||
Restructuring and other business transformation charges (g)
|
—
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
|
—
|
|
|
(0.9
|
)
|
||||||
Adjusted EBITDA
|
$
|
25.9
|
|
|
$
|
41.0
|
|
|
$
|
59.6
|
|
|
$
|
70.3
|
|
|
$
|
(15.1
|
)
|
|
$
|
(10.7
|
)
|
(a)
|
Represents unrealized gains / losses on derivative contracts.
|
(b)
|
Represents the loss on extinguishment of debt recognized in connection with the open market purchases of our Senior Secured Notes.
|
(c)
|
As a result of the application of purchase accounting in connection with the November 2007 acquisition, no carrying value was initially assigned to our equity investment in our Dowa Joint Venture. This adjustment represents the accretion of equity in our Dowa Joint Venture at the date of the acquisition over a 13-year period (i.e., the estimated useful life of the technology and patents of the joint venture). In 2015, we sold our investment in the Dowa Joint Venture.
|
(d)
|
Represents selected professional fees for accounting, tax, legal and consulting services incurred as a public company that exceed our expected long-term requirements.
|
(e)
|
Represents the impact of lower of cost or market adjustments to domestic, non-copper metal inventory.
|
(f)
|
Represents compensation expense resulting from stock compensation awards to certain employees and our Board of Directors.
|
(g)
|
Restructuring and other business transformation charges in
2015
represent severance charges at Olin Brass.
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
|
QTR Amount change:
|
|
YTD Amount change:
|
||||||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016 vs. 2015
|
|
2016 vs. 2015
|
||||||||||||
Diluted net income attributable to Global Brass and Copper Holdings, Inc. per common share
|
$
|
0.39
|
|
|
$
|
0.80
|
|
|
$
|
0.96
|
|
|
$
|
1.18
|
|
|
$
|
(0.41
|
)
|
|
$
|
(0.22
|
)
|
Unrealized (gain) loss on derivative contracts
|
(0.03
|
)
|
|
0.02
|
|
|
(0.12
|
)
|
|
(0.03
|
)
|
|
(0.05
|
)
|
|
(0.09
|
)
|
||||||
Loss on extinguishment of debt
|
0.02
|
|
|
—
|
|
|
0.15
|
|
|
—
|
|
|
0.02
|
|
|
0.15
|
|
||||||
Non-cash accretion of income of Dowa Joint Venture
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.01
|
)
|
|
—
|
|
|
0.01
|
|
||||||
Specified legal / professional expenses
|
0.01
|
|
|
0.03
|
|
|
0.03
|
|
|
0.08
|
|
|
(0.02
|
)
|
|
(0.05
|
)
|
||||||
Lower of cost or market adjustment to inventory
|
(0.01
|
)
|
|
0.03
|
|
|
—
|
|
|
0.12
|
|
|
(0.04
|
)
|
|
(0.12
|
)
|
||||||
Share-based compensation expense
|
0.08
|
|
|
0.06
|
|
|
0.13
|
|
|
0.09
|
|
|
0.02
|
|
|
0.04
|
|
||||||
Restructuring and other business transformation charges
|
—
|
|
|
—
|
|
|
—
|
|
|
0.05
|
|
|
—
|
|
|
(0.05
|
)
|
||||||
Tax impact on above adjustments (a)
|
$
|
(0.03
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.11
|
)
|
|
$
|
0.02
|
|
|
$
|
0.04
|
|
Adjusted diluted earnings per common share
|
$
|
0.43
|
|
|
$
|
0.89
|
|
|
$
|
1.08
|
|
|
$
|
1.37
|
|
|
$
|
(0.46
|
)
|
|
$
|
(0.29
|
)
|
|
Three Months Ended
June 30, |
|
Change:
2016 vs. 2015
|
|||||||||||||||||
(in millions)
|
2016
|
|
% of Net
Sales
|
|
2015
|
|
% of Net
Sales
|
|
Amount
|
|
Percent
|
|||||||||
Net sales
|
$
|
337.9
|
|
|
100.0
|
%
|
|
$
|
414.9
|
|
|
100.0
|
%
|
|
$
|
(77.0
|
)
|
|
(18.6
|
)%
|
Cost of sales
|
(296.6
|
)
|
|
87.8
|
%
|
|
(364.6
|
)
|
|
87.9
|
%
|
|
68.0
|
|
|
(18.7
|
)%
|
|||
Gross profit
|
41.3
|
|
|
12.2
|
%
|
|
50.3
|
|
|
12.1
|
%
|
|
(9.0
|
)
|
|
(17.9
|
)%
|
|||
Selling, general and administrative expenses
|
(19.8
|
)
|
|
5.9
|
%
|
|
(21.9
|
)
|
|
5.3
|
%
|
|
2.1
|
|
|
(9.6
|
)%
|
|||
Operating income
|
21.5
|
|
|
6.4
|
%
|
|
28.4
|
|
|
6.8
|
%
|
|
(6.9
|
)
|
|
(24.3
|
)%
|
|||
Interest expense
|
(7.9
|
)
|
|
2.3
|
%
|
|
(9.9
|
)
|
|
2.4
|
%
|
|
2.0
|
|
|
(20.2
|
)%
|
|||
Loss on extinguishment of debt
|
(0.4
|
)
|
|
0.1
|
%
|
|
—
|
|
|
—
|
%
|
|
(0.4
|
)
|
|
N/A
|
|
|||
Gain on sale of investment in joint venture
|
—
|
|
|
—
|
%
|
|
6.3
|
|
|
1.5
|
%
|
|
(6.3
|
)
|
|
(100.0
|
)%
|
|||
Other income, net
|
—
|
|
|
—
|
%
|
|
0.2
|
|
|
—
|
%
|
|
(0.2
|
)
|
|
(100.0
|
)%
|
|||
Income before provision for income taxes and equity income
|
13.2
|
|
|
3.9
|
%
|
|
25.0
|
|
|
6.0
|
%
|
|
(11.8
|
)
|
|
(47.2
|
)%
|
|||
Provision for income taxes
|
(4.6
|
)
|
|
1.4
|
%
|
|
(7.9
|
)
|
|
1.9
|
%
|
|
3.3
|
|
|
(41.8
|
)%
|
|||
Income before equity income
|
8.6
|
|
|
2.5
|
%
|
|
17.1
|
|
|
4.1
|
%
|
|
(8.5
|
)
|
|
(49.7
|
)%
|
|||
Equity income, net of tax
|
—
|
|
|
—
|
%
|
|
0.1
|
|
|
—
|
%
|
|
(0.1
|
)
|
|
(100.0
|
)%
|
|||
Net income
|
8.6
|
|
|
2.5
|
%
|
|
17.2
|
|
|
4.1
|
%
|
|
(8.6
|
)
|
|
(50.0
|
)%
|
|||
Less: Net income attributable to noncontrolling interest
|
(0.2
|
)
|
|
0.1
|
%
|
|
(0.1
|
)
|
|
—
|
%
|
|
(0.1
|
)
|
|
100.0
|
%
|
|||
Net income attributable to Global Brass and Copper Holdings, Inc.
|
$
|
8.4
|
|
|
2.5
|
%
|
|
$
|
17.1
|
|
|
4.1
|
%
|
|
$
|
(8.7
|
)
|
|
(50.9
|
)%
|
Adjusted EBITDA (a)
|
$
|
25.9
|
|
|
7.7
|
%
|
|
$
|
41.0
|
|
|
9.9
|
%
|
|
$
|
(15.1
|
)
|
|
(36.8
|
)%
|
(a)
|
See “
Management’s View of Performance
—Net income and adjusted EBITDA.”
|
|
Three Months Ended
June 30, |
|
Change:
2016 vs. 2015
|
||||||||
(in millions)
|
2016
|
|
2015
|
|
Amount
|
||||||
Interest on principal
|
$
|
7.4
|
|
|
$
|
9.0
|
|
|
$
|
(1.6
|
)
|
Amortization of debt issuance costs
|
0.6
|
|
|
0.7
|
|
|
(0.1
|
)
|
|||
Capitalized interest
|
(0.3
|
)
|
|
—
|
|
|
(0.3
|
)
|
|||
Other borrowing costs (a)
|
0.2
|
|
|
0.2
|
|
|
—
|
|
|||
Total interest expense
|
$
|
7.9
|
|
|
$
|
9.9
|
|
|
$
|
(2.0
|
)
|
(a)
|
Includes unused line of credit fees.
|
|
Three Months Ended
June 30, |
|
Change:
2016 vs. 2015 |
|||||||||||
(in millions)
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
|||||||
Pounds shipped (a)
|
|
|
|
|
|
|
|
|||||||
Olin Brass
|
62.7
|
|
|
71.0
|
|
|
(8.3
|
)
|
|
(11.7
|
)%
|
|||
Chase Brass
|
58.0
|
|
|
53.8
|
|
|
4.2
|
|
|
7.8
|
%
|
|||
A.J. Oster
|
19.3
|
|
|
19.2
|
|
|
0.1
|
|
|
0.5
|
%
|
|||
Corporate and other (b)
|
(8.2
|
)
|
|
(11.2
|
)
|
|
3.0
|
|
|
26.8
|
%
|
|||
Total
|
131.8
|
|
|
132.8
|
|
|
(1.0
|
)
|
|
(0.8
|
)%
|
|||
Net sales
|
|
|
|
|
|
|
|
|||||||
Olin Brass
|
$
|
155.0
|
|
|
$
|
207.8
|
|
|
$
|
(52.8
|
)
|
|
(25.4
|
)%
|
Chase Brass
|
129.8
|
|
|
142.7
|
|
|
(12.9
|
)
|
|
(9.0
|
)%
|
|||
A.J. Oster
|
71.2
|
|
|
80.2
|
|
|
(9.0
|
)
|
|
(11.2
|
)%
|
|||
Corporate and other (b)
|
(18.1
|
)
|
|
(15.8
|
)
|
|
(2.3
|
)
|
|
(14.6
|
)%
|
|||
Total
|
$
|
337.9
|
|
|
$
|
414.9
|
|
|
$
|
(77.0
|
)
|
|
(18.6
|
)%
|
Adjusted EBITDA
|
|
|
|
|
|
|
|
|||||||
Olin Brass
|
$
|
7.8
|
|
|
$
|
17.7
|
|
|
$
|
(9.9
|
)
|
|
(55.9
|
)%
|
Chase Brass
|
18.0
|
|
|
17.1
|
|
|
0.9
|
|
|
5.3
|
%
|
|||
A.J. Oster
|
4.6
|
|
|
4.7
|
|
|
(0.1
|
)
|
|
(2.1
|
)%
|
|||
Total adjusted EBITDA of operating segments
|
$
|
30.4
|
|
|
$
|
39.5
|
|
|
$
|
(9.1
|
)
|
|
(23.0
|
)%
|
Corporate and other
|
(4.5
|
)
|
|
1.5
|
|
|
(6.0
|
)
|
|
N/M
|
|
|||
Total consolidated adjusted EBITDA
|
$
|
25.9
|
|
|
$
|
41.0
|
|
|
$
|
(15.1
|
)
|
|
(36.8
|
)%
|
(a)
|
Amounts exclude quantity of unprocessed metal sold.
|
(b)
|
Amounts represent intercompany eliminations.
|
|
Six Months Ended
June 30, |
|
Change:
2016 vs. 2015 |
|||||||||||||||||
(in millions)
|
2016
|
|
% of Net
Sales
|
|
2015
|
|
% of Net
Sales |
|
Amount
|
|
Percent
|
|||||||||
Net sales
|
$
|
666.8
|
|
|
100.0
|
%
|
|
$
|
815.1
|
|
|
100.0
|
%
|
|
$
|
(148.3
|
)
|
|
(18.2
|
)%
|
Cost of sales
|
(576.0
|
)
|
|
86.4
|
%
|
|
(720.9
|
)
|
|
88.4
|
%
|
|
144.9
|
|
|
(20.1
|
)%
|
|||
Gross profit
|
90.8
|
|
|
13.6
|
%
|
|
94.2
|
|
|
11.6
|
%
|
|
(3.4
|
)
|
|
(3.6
|
)%
|
|||
Selling, general and administrative expenses
|
(39.5
|
)
|
|
5.9
|
%
|
|
(43.3
|
)
|
|
5.3
|
%
|
|
3.8
|
|
|
(8.8
|
)%
|
|||
Operating income
|
51.3
|
|
|
7.7
|
%
|
|
50.9
|
|
|
6.2
|
%
|
|
0.4
|
|
|
0.8
|
%
|
|||
Interest expense
|
(16.3
|
)
|
|
2.4
|
%
|
|
(19.9
|
)
|
|
2.4
|
%
|
|
3.6
|
|
|
(18.1
|
)%
|
|||
Loss on extinguishment of debt
|
(3.3
|
)
|
|
0.5
|
%
|
|
—
|
|
|
—
|
%
|
|
(3.3
|
)
|
|
N/A
|
|
|||
Gain on sale of investment in joint venture
|
—
|
|
|
—
|
%
|
|
6.3
|
|
|
0.8
|
%
|
|
(6.3
|
)
|
|
(100.0
|
)%
|
|||
Other income, net
|
0.4
|
|
|
0.1
|
%
|
|
0.1
|
|
|
—
|
%
|
|
0.3
|
|
|
N/M
|
|
|||
Income before provision for income taxes and equity income
|
32.1
|
|
|
4.8
|
%
|
|
37.4
|
|
|
4.6
|
%
|
|
(5.3
|
)
|
|
(14.2
|
)%
|
|||
Provision for income taxes
|
(11.3
|
)
|
|
1.7
|
%
|
|
(12.4
|
)
|
|
1.5
|
%
|
|
1.1
|
|
|
(8.9
|
)%
|
|||
Income before equity income
|
20.8
|
|
|
3.1
|
%
|
|
25.0
|
|
|
3.1
|
%
|
|
(4.2
|
)
|
|
(16.8
|
)%
|
|||
Equity income, net of tax
|
—
|
|
|
—
|
%
|
|
0.3
|
|
|
—
|
%
|
|
(0.3
|
)
|
|
(100.0
|
)%
|
|||
Net income
|
20.8
|
|
|
3.1
|
%
|
|
25.3
|
|
|
3.1
|
%
|
|
(4.5
|
)
|
|
(17.8
|
)%
|
|||
Net income attributable to noncontrolling interest
|
(0.2
|
)
|
|
—
|
%
|
|
(0.1
|
)
|
|
—
|
%
|
|
(0.1
|
)
|
|
100.0
|
%
|
|||
Net income attributable to Global Brass and Copper Holdings, Inc.
|
$
|
20.6
|
|
|
3.1
|
%
|
|
$
|
25.2
|
|
|
3.1
|
%
|
|
$
|
(4.6
|
)
|
|
(18.3
|
)%
|
Adjusted EBITDA (a)
|
$
|
59.6
|
|
|
8.9
|
%
|
|
$
|
70.3
|
|
|
8.6
|
%
|
|
$
|
(10.7
|
)
|
|
(15.2
|
)%
|
(a)
|
See “
Management’s View of Performance
—Net income and adjusted EBITDA.”
|
|
Six Months Ended
June 30, |
|
Amount change:
|
||||||||
(in millions)
|
2016
|
|
2015
|
|
2016 vs. 2015
|
||||||
Interest on principal
|
$
|
15.1
|
|
|
$
|
18.0
|
|
|
$
|
(2.9
|
)
|
Amortization of debt issuance costs
|
1.3
|
|
|
1.4
|
|
|
(0.1
|
)
|
|||
Capitalized interest
|
(0.6
|
)
|
|
—
|
|
|
(0.6
|
)
|
|||
Other borrowing costs (a)
|
0.5
|
|
|
0.5
|
|
|
—
|
|
|||
Total interest expense
|
$
|
16.3
|
|
|
$
|
19.9
|
|
|
$
|
(3.6
|
)
|
(a)
|
Includes fees related to letters of credit and unused line of credit fees.
|
|
Six Months Ended
June 30, |
|
Change:
2016 vs. 2015 |
|||||||||||
(in millions)
|
2016
|
|
2015
|
|
Amount
|
|
Percent
|
|||||||
Pounds shipped (a)
|
|
|
|
|
|
|
|
|||||||
Olin Brass
|
126.2
|
|
|
130.9
|
|
|
(4.7
|
)
|
|
(3.6
|
)%
|
|||
Chase Brass
|
117.3
|
|
|
115.2
|
|
|
2.1
|
|
|
1.8
|
%
|
|||
A.J. Oster
|
38.2
|
|
|
37.3
|
|
|
0.9
|
|
|
2.4
|
%
|
|||
Corporate and other (b)
|
(18.6
|
)
|
|
(22.0
|
)
|
|
3.4
|
|
|
15.5
|
%
|
|||
Total
|
263.1
|
|
|
261.4
|
|
|
1.7
|
|
|
0.7
|
%
|
|||
Net sales
|
|
|
|
|
|
|
|
|||||||
Olin Brass
|
$
|
306.8
|
|
|
$
|
392.5
|
|
|
$
|
(85.7
|
)
|
|
(21.8
|
)%
|
Chase Brass
|
258.0
|
|
|
299.1
|
|
|
(41.1
|
)
|
|
(13.7
|
)%
|
|||
A.J. Oster
|
140.4
|
|
|
155.0
|
|
|
(14.6
|
)
|
|
(9.4
|
)%
|
|||
Corporate and other (b)
|
(38.4
|
)
|
|
(31.5
|
)
|
|
(6.9
|
)
|
|
(21.9
|
)%
|
|||
Total
|
$
|
666.8
|
|
|
$
|
815.1
|
|
|
$
|
(148.3
|
)
|
|
(18.2
|
)%
|
Adjusted EBITDA
|
|
|
|
|
|
|
|
|||||||
Olin Brass
|
$
|
21.1
|
|
|
$
|
27.0
|
|
|
$
|
(5.9
|
)
|
|
(21.9
|
)%
|
Chase Brass
|
37.2
|
|
|
38.5
|
|
|
(1.3
|
)
|
|
(3.4
|
)%
|
|||
A.J. Oster
|
9.7
|
|
|
8.2
|
|
|
1.5
|
|
|
18.3
|
%
|
|||
Total adjusted EBITDA of operating segments
|
$
|
68.0
|
|
|
$
|
73.7
|
|
|
$
|
(5.7
|
)
|
|
(7.7
|
)%
|
Corporate and other
|
(8.4
|
)
|
|
(3.4
|
)
|
|
(5.0
|
)
|
|
N/M
|
|
|||
Total consolidated adjusted EBITDA
|
$
|
59.6
|
|
|
$
|
70.3
|
|
|
$
|
(10.7
|
)
|
|
(15.2
|
)%
|
(a)
|
Amounts exclude quantity of unprocessed metal sold.
|
(b)
|
Amounts represent intercompany eliminations.
|
Cash Flow Analysis
|
Six Months Ended
June 30, |
|
Change:
2016 vs. 2015
|
||||||||
(in millions)
|
2016
|
|
2015
|
|
Amount
|
||||||
Cash flows provided by operating activities
|
$
|
35.2
|
|
|
$
|
35.7
|
|
|
$
|
(0.5
|
)
|
Cash flows (used in) provided by investing activities
|
$
|
(14.3
|
)
|
|
$
|
0.4
|
|
|
$
|
(14.7
|
)
|
Cash flows used in financing activities
|
$
|
(45.2
|
)
|
|
$
|
(2.4
|
)
|
|
$
|
(42.8
|
)
|
|
Issuer Purchases of Equity Securities
|
|||||||||
Period
|
Total Number of
Shares
Purchased (1)
|
|
Average
Price
Paid per
Share
|
|
Total Number of Shares Purchased As
Part of Publicly
Announced
Plans or Programs
|
|
Maximum Number of
Shares That May Yet
Be Purchased Under
the Plans or Programs
|
|||
April 1, 2016 through April 30, 2016
|
9,820
|
|
|
$
|
25.20
|
|
|
*
|
|
*
|
May 1, 2016 through May 31, 2016
|
5,091
|
|
|
$
|
26.66
|
|
|
*
|
|
*
|
June 1, 2016 through June 30, 2016
|
—
|
|
|
$
|
—
|
|
|
*
|
|
*
|
Total
|
14,911
|
|
|
$
|
25.70
|
|
|
*
|
|
*
|
*
|
These amounts are not applicable as we do not have a share repurchase program in effect.
|
(1)
|
Common stock purchased during the
three months ended June 30, 2016
represented shares which were surrendered to the Company by participants under share-based compensation plans to satisfy tax withholding obligations relating to the vesting of equity awards.
|
Exhibit
Number
|
|
Description
|
|
|
|
10.1
|
|
Form of Performance Share Award Agreement under the Global Brass and Copper Holdings, Inc. 2013 Omnibus Equity Incentive Plan, as amended*
|
|
|
|
10.2
|
|
Severance Agreement, by and among Christopher J. Kodosky, Global Brass and Copper Holdings, Inc., and Global Brass and Copper, Inc., dated July 11, 2016*
|
|
|
|
10.3
|
|
ABL Credit Agreement, dated as of July 18, 2016, among the Company, Global Brass and Copper, Inc., as Borrower, the loan guarantors party thereto, the lenders party thereto, Bank of America, N.A. and Wells Fargo Bank, National Association, as Co-Syndication Agents, and JPMorgan Chase Bank, N.A., as Administrative Agent.***
|
|
|
|
10.4
|
|
Term Loan B Credit Agreement, dated as of July 18, 2016, among the Company, Global Brass and Copper, Inc., as Borrower, the loan guarantors party thereto, the lenders party thereto, Bank of America, N.A. Wells Fargo Bank, National Association, and Deutsche Bank Securities Inc., as Co-Syndication Agents, Branch Banking and Trust Company, Keybank National Association and William Blair & Company, L.L.C. as Co-Documentation Agents, and JPMorgan Chase Bank, N.A., as Administrative Agent.***
|
|
|
|
31.1
|
|
Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002*
|
|
|
|
31.2
|
|
Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002*
|
|
|
|
32.1
|
|
Certification of Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002**
|
|
|
|
101.INS
|
|
XBRL Instance Document.
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema.
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase.
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase.
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase.
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase.
|
*
|
Filed herewith
|
**
|
Furnished herewith
|
***
|
Filed on Form 8-K of Global Brass and Copper Holdings, Inc. on July 22, 2016 and incorporated by reference herein.
|
GLOBAL BRASS AND COPPER HOLDINGS, INC
|
||
|
|
|
By:
|
|
/s/ Christopher J. Kodosky
|
|
|
Christopher J. Kodosky
|
|
|
Chief Financial Officer
|
7.
|
Miscellaneous.
|
1.01
|
At Will Employment
. The Executive shall be and continue as an at will employee of the Company and GBCH. The Executive shall be entitled to receive such compensation and benefits as the Board of Directors of GBCH (the “Board”) and management of the Company shall determine appropriate from time to time, subject to the rights that may be created in the Executive under the definition of Good Reason below. This Agreement is not a contract of employment and shall not be interpreted to change the Executive’s status as an employee at will of the Company. The purpose of this Agreement is to provide for payment of severance amounts in the event the Executive’s employment with the Company terminates under the specific terms and conditions set forth herein.
|
1.02
|
Severance
. In the event of the occurrence of any Triggering Event (as hereinafter defined), and subject to the Executive’s execution, delivery and nonrevocation of the general waiver and release of claims substantially in the form attached as Exhibit A hereto within fifty-five (55) calendar days following a Triggering Event (the “Release Condition”), (A) the Company shall provide to the Executive a lump sum severance payment (the “Severance Payment”) in immediately available funds in an amount equal to the sum of (i) one year of base pay at the highest rate of base salary payable to the Executive during the one year period immediately prior to the Triggering Event and (ii) the higher of (x) the target annual bonus amount established for the Executive under any annual bonus plan, such as the Executive Officers 2016 Annual Incentive Plan or any similar or successor plan providing annual or short-term incentive payments to the Executive (the “Bonus Plan”), for the year preceding the Triggering Event, and (y) the average of the annual bonuses earned and paid to the Executive for the three years immediately prior to the year in which the Triggering Event occurs, and (B) the Company will cause to be provided to the Executive coverage under or equal in value to the Company’s health plan, dental plan and life insurance plan and coverage to each dependent of the Executive covered under the health plan and dental plans covering or available to the Executive immediately prior to the Triggering Event on the same terms and conditions as the Company provides such coverages to active employees and dependents
|
1.03
|
Accrued Payments
. In addition to the Severance Payment and benefits provided under Section 1.02 above, the Executive shall be entitled to receive as soon as practicable, and in all events within thirty (30) calendar days following the date of the Triggering Event, (i) payment of any accrued but unpaid base salary and any accrued and unreimbursed business expenses in accordance with Company policy, in each case accrued or incurred through the date of the Triggering Event, (ii) any payments, benefits or entitlements that are vested, fully and unconditionally earned pursuant to any Company or GBCH plan, policy, program or arrangement, or other agreement, other than those providing for severance, separation pay or salary and benefits continuation, (iii) earned but unpaid vacation pay, and (iv) any bonus earned under the Bonus Plan for a completed year prior to the year in which the Triggering Event occurs but unpaid as of the Triggering Event (collectively, the “Accrued Payments”).
|
1.04
|
Triggering Event
. A Triggering Event shall be deemed to occur if the Company terminates the Executive’s employment with the Company without Cause or the Executive resigns for Good Reason.
|
1.05
|
Termination by the Company for Cause
. For purposes of this Agreement, “Cause” shall mean (i) willful failure or refusal to perform the Executive’s duties as Chief Financial Officer of the Company and GBCH after written notice from the Board; (ii) willful misconduct or gross negligence in the performance of the Executive’s duties to Company or GBCH that has an adverse effect on the Company or GBCH after receipt of at least one warning from the Company or GBCH; (iii) intentional breach of a written covenant with or written policy of the Company or GBCH relating to the use and preservation of intellectual property and/or confidentiality; (iv) being impaired by or under the influence of alcohol, illegal drugs or controlled substances while working or while on the property of the Company or GBCH or any of their affiliated entities; (v) conviction of or plea of nolo contendre to a felony; or (vi) dishonest, disloyal or illegal conduct or gross misconduct which materially and adversely affects the Executive’s performance or the reputation or business of the Company or GBCH (it being agreed that a petty offense or a violation of the motor vehicle code shall not constitute Cause)
provided
,
however
, that prior to the determination that “Cause” under clauses (i), (ii), (iii), (iv) or (vi) of this Section 1.05 has occurred, the Board shall (x) provide to the Executive in writing, in reasonable detail, the reasons for the determination that such “Cause” exists, (y) afford the Executive a thirty (30) calendar day opportunity to remedy any such breach, if such breach is capable of being remedied during such 30 calendar day period, and (z) provide the Executive an opportunity to be heard prior to the final decision to terminate
|
1.06
|
Resignation by the Executive for Good Reason
. For purposes of this Agreement, “Good Reason shall mean any of the following without the Executive’s prior written consent: (i) the Company’s failure to continue Executive in the position of Chief Financial Officer of the Company and GBCH, (ii) the requirement that Executive report to any individual or body other than the Chief Executive Officer of the Company or the Board; (iii) assignment of duties materially and adversely inconsistent with the Executive’s position; (iv) material diminution in the Executive’s position with the Company or the authority, duties or responsibilities associated with such position; or (v) any material reduction in Executive’s base salary, target annual bonus opportunity under the Bonus Plan, benefits, and annual equity incentive awards in the aggregate, excluding any reduction in Executive’s annual equity incentive awards that (A) is applicable to all similarly situated executives or (B) is twenty percent (20%) or less and results from adjustments to the allocation of a fixed pool among similarly situated executives; or (vi) Executive’s principal place of employment is other than the principal executive office of the Company or there is a change in Executive’s principal place of employment that increases the distance between the Executive’s residence as of the date of this Agreement to his principal place of employment by more than fifty (50) miles; provided, however, that in each case the Company or GBCH, as applicable, has failed to cure the applicable circumstance within thirty (30) calendar days following written notice from the Executive; and provided, further, that the Executive must provide written notice of events claimed to constitute Good Reason within sixty (60) calendar days of the initial occurrence of such events. The Executive shall not be entitled to terminate his employment for Good Reason with respect to specified events unless the Executive tenders resignation for Good Reason within thirty (30) calendar days of the Company’s failure to cure.
|
1.07
|
Resignation from Other Positions on Termination
. The Executive acknowledges and agrees that effective as of the date of the Triggering Event, the Executive shall be deemed to have resigned from any and all titles, positions and appointments the Executive holds in the Company, GBCH, or any of their parents, subsidiaries or affiliates, whether as an officer, director, or employee, consultant, independent contract or otherwise. The Executive agrees to execute such documents as the Company or GBCH, in its sole discretion, shall reasonably deem necessary to effect such resignations.
|
2.01
|
Confidentiality
. During the term of this Agreement and during the five year period subsequent to the expiration or termination of this Agreement, the Executive shall maintain in the strictest confidence any and all information regarding the Company, and its affiliated organizations, regarding their methods of operations; contracts and agreements; financial information and financial statements; vendor, customer and marketing information and lists; policies and procedures; personnel, employment practices and conditions; marketing and strategic plans and initiatives; customer and supplier relationships; prices and contracts; price structure; cost structure; and any and all other information obtained directly or indirectly by the Executive deemed by the Company or its affiliated organizations to be confidential (all of the foregoing shall be identified hereinafter as “Confidential Information”). The Executive shall not disclose any portion of Confidential Information without the prior written consent of the Company. The Executive shall limit his use of Confidential Information to the performance of his duties, responsibilities, and obligations pursuant to this Agreement and for no other purpose. Upon the termination of the Executive’s employment with the Company, the Executive shall promptly deliver to the Company all Confidential Information and correspondence, drawings, blueprints, manuals, letters, notes, notebooks, reports, flow-charts, programs, proposals and any other written documents obtaining Confidential Information.
|
2.02
|
Loyalty
. During the term of Executive’s employment with the Company, the Executive shall act with diligence and fidelity to the best of the Executive’s ability in furtherance of the best interests of the Company and its affiliated organizations, including GBCH. During the term of the Executive’s employment with the Company, or its affiliated organizations, including all extensions and renewals, and for a period of twenty-four (24) months thereafter, the Executive shall not directly or indirectly recruit, persuade, or encourage employees, vendors, customers, or any other parties maintaining relationships with the Company or its affiliated organizations to terminate or modify their relationship in any way that would be detrimental to the Company or its affiliated organizations.
|
2.03
|
Noncompetition
. During the term of the Executive’s employment with the Company, or its affiliated organizations, and for a period of twelve (12) months thereafter, the Executive shall not provide services, directly or indirectly, as an executive, employee, principal, partner, contractor, consultant, director, officer, or shareholder, except for services provided to the Company and its affiliates, related to executive management, financial management, strategic planning, sales and marketing, and other senior executive functions, for any company or enterprise engaged in the business of the manufacturing, converting or distribution of copper and brass sheet, strip and fabricated products, and for any company or enterprise engaged in the rerolling or formation of stainless steel, aluminum and related alloys. The prohibitions set forth in this Section 2.03 shall apply in the following geographic areas: (i) the continental United States, (ii) each individual state within the continental United States, (iii) within 150 miles of each location where the Company or its affiliates conducts business in the continental United States, and iv) within 150 miles of any office of the Company or any of its affiliates.
|
2.04
|
Consideration and Acknowledgements
. The Executive agrees that this Article II has been negotiated on an arms-length basis between the parties and represents material consideration relative to this Agreement. The Executive acknowledges that the Executive has entered into this Agreement knowingly and voluntarily after being given the opportunity to consult with independent counsel and has given careful consideration to the restraints imposed upon the Executive by this Agreement, and is necessary for the protection of the Confidential Information, business strategies, employee and customer relationships and goodwill of the Company, GBCH and their respective subsidiaries and affiliates now existing or to be developed in the future. The
|
2.05
|
Nondisparagement
. The Executive shall not, whether in writing or orally, malign, denigrate or disparage the Company, GBCH or their respective subsidiaries, affiliates, predecessors or successors, or any of the current or former directors, officers, employees, shareholders, partners, members, agents or representatives of any of the foregoing, with respect to any of their respective past or present activities, or otherwise publish (whether in writing or orally) statements that tend to portray any of the aforementioned parties in an unfavorable light. Nothing in this Section 2.05 shall or shall be deemed to prevent or impair the Executive from pleading or testifying, to the extent that he reasonably believes his pleadings or testimony to be true, in any legal or administrative proceeding if such testimony is compelled or requested, or from otherwise complying with legal requirements.
|
3.01
|
Severability
. If any term or provision of this Agreement or the application hereof to any person or circumstance shall to any extent be held invalid or unenforceable, the remainder of this Agreement or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each term and provision of this Agreement shall, notwithstanding said invalidity, remain valid and enforceable to the fullest extent permitted by law.
|
3.02
|
Entire Agreement/Amendment
. This Agreement represents the entire agreement of the parties and supersedes all prior agreements and understandings, whether verbal or written, concerning severance compensation to be paid on or after the Executive’s termination of employment. This Agreement may be amended only by a written agreement signed by both parties.
|
3.03
|
Company’s Remedies upon Breach
. The Executive acknowledges that the Company’s remedy at law for a breach by the Executive of the provisions of the Agreement, including, but not limited to Article II hereof, will be inadequate. Accordingly, in the event of the breach or threatened breach by the Executive of the provisions of this Agreement, including, but not limited to Article II hereof, the Company shall be entitled to injunctive relief in addition to any other remedy it may have.
|
3.04
|
Release and Waiver
. Notwithstanding any other provision of this Agreement to the contrary, the Executive acknowledges and agrees that any and all payments and benefits, other than the Accrued Payments, are conditioned upon and subject to the Executive’s satisfaction of the Release Condition.
|
3.05
|
Compensation Recovery Policy
. Notwithstanding any provision in this Agreement to the contrary, Severance Payment will be subject to any compensation recovery policy, including but not limited to the Global Brass and Copper Holdings, Inc. Incentive Compensation Recoupment Policy, established by the Company or GBCH as in effect on the date hereof and as may be amended from time to time.
|
3.06
|
Governing Law
. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois. The parties hereto submit to the in personam jurisdiction of the federal and state courts in the District or county, respectively, in which Schaumburg, Illinois is situate and agree that such courts shall be the sole and exclusive forum for the resolution of any disputes between them.
|
3.07
|
Assignability
. This Agreement is personal to the parties and may not be assigned by either of the parties without the prior written consent of the other party hereto.
|
3.08
|
Agreement Binding; Joint and Several Payment Obligations
. This Agreement shall be binding upon and inure to the benefit of the Executive’s heirs, executors, legal representatives, and permitted assigns and the successors and assigns of the Company and GBCH, respectively. The obligations to make payments under the circumstances described in Article I shall be the joint and several obligations of the Company and GBCH and its and their affiliated organizations.
|
3.09
|
Headings
. The headings of this Agreement are for convenience of reference only and shall not affect the construction or interpretation of any of the provision hereof.
|
3.10
|
Waiver
. No failure by either party to exercise any of such party’s rights or remedies hereunder and no custom or practice at variance with the terms hereof shall constitute a waiver or right to demand strict compliance with the terms of this Agreement at any time.
|
3.11
|
Notices
. Any notice provided for or concerning this Agreement shall be in writing and shall be deemed to have been duly given when delivered in person or by United States Certified Mail - Return Receipt Requested and postage prepaid, addressed as follows:
|
3.12
|
Section 409A
.
|
(a)
|
For purposes of this Agreement, “
Section 409A
” means Section 409A of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder (and such other Treasury or Internal Revenue Service guidance) as in effect from time to time. The parties intend that any amounts payable hereunder that could constitute “deferred compensation” within the meaning of Section 409A will be compliant with Section 409A. Notwithstanding the foregoing, the Executive shall be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on or for the account of the Executive in connection with this Agreement (including any taxes and penalties under Section 409A), and neither the Company nor any of its subsidiaries or
|
(b)
|
Notwithstanding anything in this Agreement to the contrary, in the event that the Executive is deemed to be a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) and the Executive is not “disabled” within the meaning of Section 409A(a)(2)(C), no payments hereunder that are “deferred compensation” subject to Section 409A shall be made to the Executive prior to the date that is six (6) months after the date of the Executive’s “separation from service” (as defined in Section 409A) or, if earlier, the Executive’s date of death. Following any applicable six (6) month delay, all such delayed payments will be paid in a single lump sum on the earliest date permitted under Section 409A that is also a business day. For purposes of Section 409A, each of the payments that may be made under Section 1.02
is designated as separate payments for purposes of Section 409A.
|
(c)
|
For purposes of this Agreement, with respect to payments of any amounts that are considered to be “deferred compensation” subject to Section 409A, references to “termination of employment” (and substantially similar phrases) shall be interpreted and applied in a manner that is consistent with the requirements of Section 409A.
|
(d)
|
To the extent that any reimbursements pursuant to this Agreement are taxable to the Executive, any such reimbursement payment due to the Executive shall be paid to the Executive as promptly as practicable consistent with Company practice following the Executive’s appropriate itemization and substantiation of expenses incurred, and in all events on or before the last day of the Executive’s taxable year following the taxable year in which the related expense was incurred. The reimbursements pursuant to this Agreement are not subject to liquidation or exchange for another benefit and the amount of such benefits and reimbursements that the Executive receives in one taxable year shall not affect the amount of such benefits or reimbursements that the Executive receives in any other taxable year.
|
3.13
|
Withholding; Taxes.
The Company may deduct and withhold from any amounts payable under this Agreement such federal, state, local, non-U.S. or other taxes as are required or permitted to be withheld pursuant to any applicable law or regulation.
|
3.14
|
Section 280G
. Notwithstanding anything in this Agreement to the contrary, in the event that it is determined by an independent accounting firm chosen by the Company (the “Accounting Firm”) that any economic benefit, payment or distribution by the Company to or for the benefit of Executive, whether paid, payable, distributed or distributable pursuant to the terms of this Agreement, the plans or programs referred to herein, or otherwise (a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Code (such excise tax referred to in this Agreement as the “Excise Tax”), then the value of any such Payments (the “Agreement Payments”) which constitute “parachute payments” under Section 280G(b)(2) of the Code, as determined by the Accounting Firm, will be reduced so that the present value of all Payments (calculated in accordance with Section 280G of the Code and the regulations thereunder), in the aggregate, is equal to 2.99 times Executive’s “base amount,” within the meaning of Section 280G(b)(3) of the Code (the “Reduced Amount”). Notwithstanding the foregoing, the Agreement Payments shall be reduced to the Reduced Amount only if the Accounting Firm determines that Executive would have a greater “Net After-Tax Receipt” of aggregate Payments if the Executive’s Agreement Payments were reduced to the Reduced Amount. If such Accounting Firm determines that the
|
(a)
|
As used in this Waiver and Release of Claims (this “Agreement”), the term “claims” shall include all claims, covenants, warranties, promises, undertakings, actions, suits, causes of action, obligations, debts, accounts, attorneys' fees, judgments, losses and liabilities, of whatsoever kind or nature, both known and unknown, in law, equity or otherwise.
|
(b)
|
For and in consideration of the payments described in Section 1.02 of the Severance Agreement, the Executive, for and on behalf of the Executive and the Executive’s heirs, administrators, executors, and assigns, effective the Effective Date (as defined below), does fully and forever waive and release, remise and discharge the Company, GBCH, their direct and indirect parents, subsidiaries and affiliates, their predecessors and successors and assigns, together with the respective officers, directors, partners, shareholders, employees, members, and agents of the foregoing (collectively, the “Group”) from any and all claims which the Executive had, may have had, or now has against the Company, GBCH, the Group, collectively or any member of the Group individually, for or by reason of any matter, cause or thing whatsoever, including but not limited to any claim arising out of or attributable to the Executive’s employment or the termination of the Executive’s employment with the Company, and also including but not limited to claims of breach of contract, wrongful termination, unjust dismissal, defamation, libel or slander, or under any federal, state or local law dealing with discrimination based on age, race, sex, national origin, handicap, religion, disability or sexual preference. This release of claims includes, but is not limited to, all claims arising under the Age Discrimination in Employment Act of 1967, Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Civil Rights Act of 1991, the Family Medical Leave Act, the Equal Pay Act, the Illinois or Ohio human relations act and all other federal, state and local labor and anti-discrimination laws, the common law and any other purported restriction on an employer's right to terminate the employment of employees.
|
(c)
|
The Executive specifically releases all claims against the Group and each member thereof under the Age Discrimination in Employment Act of 1967 (the “ADEA”) relating to the Executive’s employment and its termination.
|
(d)
|
The Executive represents that the Executive has not filed or permitted to be filed against the Group, any member of the Group individually or the Group collectively, any lawsuit, complaint, charge, proceeding or the like, before any local, state or federal agency, court or other body (each, a “Proceeding”), and the Executive covenants and agrees that the Executive will not do so at any time hereafter with respect to the subject matter of this Agreement and claims released pursuant to this Agreement (including, without limitation, any claims relating to the termination of the Executive’s employment), except (i) as may be necessary to enforce this Agreement or the Executive’s rights to indemnification under that certain Indemnification Agreement dated December 11, 2014 between the Company and the Executive, (ii) to obtain benefits described in or granted under this Agreement or the Severance Agreement, (iii) to
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Global Brass and Copper Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstance under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly represent in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ John J. Wasz
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John J. Wasz
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Chief Executive Officer
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1.
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I have reviewed this quarterly report on Form 10-Q of Global Brass and Copper Holdings, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstance under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly represent in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Christopher J. Kodosky
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Christopher J. Kodosky
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Chief Financial Officer
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1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ John J. Wasz
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John J. Wasz
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Chief Executive Officer
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/s/ Christopher J. Kodosky
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Christopher J. Kodosky
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Chief Financial Officer
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