REAL INDUSTRY, INC., 10-Q filed on 8/8/2017
Quarterly Report
Document and Entity Information
6 Months Ended
Jun. 30, 2017
Aug. 1, 2017
Document Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Jun. 30, 2017 
 
Document Fiscal Year Focus
2017 
 
Document Fiscal Period Focus
Q2 
 
Trading Symbol
RELY 
 
Entity Registrant Name
REAL INDUSTRY, INC. 
 
Entity Central Index Key
0000038984 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
29,800,850 
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Jun. 30, 2017
Dec. 31, 2016
Current assets:
 
 
Cash and cash equivalents
$ 18.4 
$ 27.2 
Trade accounts receivable, net
112.9 
88.4 
Financing receivable
32.5 
28.4 
Inventories
120.1 
118.2 
Prepaid expenses, supplies and other current assets
29.0 
24.6 
Total current assets
312.9 
286.8 
Property, plant and equipment, net
289.8 
289.2 
Equity method investment
5.6 
5.0 
Identifiable intangible assets, net
11.3 
12.5 
Goodwill
42.9 
42.2 
Other noncurrent assets
8.5 
9.8 
TOTAL ASSETS
671.0 
645.5 
Current liabilities:
 
 
Trade payables
124.3 
115.8 
Accrued liabilities
51.4 
46.4 
Long-term debt due within one year
3.1 
2.3 
Total current liabilities
178.8 
164.5 
Accrued pension benefits
45.9 
42.0 
Environmental liabilities
11.6 
11.6 
Long-term debt, net
376.4 
354.2 
Common stock warrant liability
2.1 
4.4 
Deferred income taxes, net
2.5 
2.5 
Other noncurrent liabilities
6.7 
6.9 
TOTAL LIABILITIES
624.0 
586.1 
Redeemable Preferred Stock, Series B; $1,000 liquidation preference per share; 100,000 shares designated; 28,503 shares issued and outstanding as of June 30, 2017 and December 31, 2016
25.4 
24.9 
Stockholders' equity:
 
 
Preferred stock, Series A Junior Participating; $0.001 par value; 665,000 shares authorized; none issued or outstanding
   
   
Common stock; $0.001 par value; 66,500,000 shares authorized; 29,800,687 and 29,386,882 shares issued as of June 30, 2017 and December 31, 2016, respectively; 29,794,778 and 29,386,882 shares outstanding as of June 30, 2017 and December 31, 2016, respectively
Additional paid-in capital
545.9 
546.7 
Accumulated deficit
(524.0)
(506.2)
Treasury stock, at cost; 5,909 and zero shares as of June 30, 2017 and December 31, 2016, respectively
Accumulated other comprehensive loss
(1.4)
(7.1)
Total stockholders' equity—Real Industry, Inc.
20.5 
33.4 
Noncontrolling interest
1.1 
1.1 
TOTAL STOCKHOLDERS' EQUITY
21.6 
34.5 
TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
$ 671.0 
$ 645.5 
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Jun. 30, 2017
Dec. 31, 2016
Common stock, par value
$ 0.001 
$ 0.001 
Common stock, shares authorized
66,500,000 
66,500,000 
Common stock, shares issued
29,800,687 
29,386,882 
Common stock, shares outstanding
29,794,778 
29,386,882 
Treasury Stock, shares
5,909 
Series B Preferred Stock
 
 
Redeemable Preferred Stock, liquidation preference per share
$ 1,000 
$ 1,000 
Redeemable Preferred Stock, shares designated
100,000 
100,000 
Redeemable Preferred Stock, issued
28,503 
28,503 
Redeemable Preferred Stock, outstanding
28,503 
28,503 
Series A Junior Participating Preferred Stock
 
 
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred stock, shares authorized
665,000 
665,000 
Preferred stock, issued
Preferred stock, outstanding
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Income Statement [Abstract]
 
 
 
 
Revenues
$ 350.2 
$ 320.9 
$ 687.3 
$ 630.3 
Cost of sales
332.1 
298.6 
655.8 
591.4 
Gross profit
18.1 
22.3 
31.5 
38.9 
Selling, general and administrative expenses
12.4 
14.6 
26.8 
30.0 
Losses (gains) on derivative financial instruments, net
0.6 
(1.5)
1.7 
(0.3)
Amortization of identifiable intangible assets
0.6 
0.6 
1.2 
1.2 
Other operating expense, net
0.7 
0.5 
1.6 
2.0 
Operating profit
3.8 
8.1 
0.2 
6.0 
Nonoperating expense (income):
 
 
 
 
Interest expense, net
9.6 
9.1 
20.6 
18.3 
Change in fair value of common stock warrant liability
0.2 
(1.3)
(2.3)
(0.7)
Loss (income) from equity method investment
0.5 
(0.6)
Foreign exchange losses (gains) on intercompany loans
(1.4)
1.6 
(2.2)
(1.0)
Other, net
(0.2)
0.3 
(0.2)
Total nonoperating expense, net
8.9 
9.2 
15.8 
16.4 
Loss from continuing operations before income taxes
(5.1)
(1.1)
(15.6)
(10.4)
Income tax expense
1.1 
0.2 
1.9 
0.9 
Loss from continuing operations
(6.2)
(1.3)
(17.5)
(11.3)
Earnings from discontinued operations, net of income taxes
0.1 
0.1 
Net loss
(6.2)
(1.2)
(17.5)
(11.2)
Earnings from continuing operations attributable to noncontrolling interest
0.3 
0.3 
0.4 
0.4 
Net loss attributable to Real Industry, Inc.
(6.5)
(1.5)
(17.9)
(11.6)
LOSS PER SHARE
 
 
 
 
Net loss attributable to Real Industry, Inc.
(6.5)
(1.5)
(17.9)
(11.6)
Dividends on Redeemable Preferred Stock, in-kind
(0.5)
(0.9)
Dividends on Redeemable Preferred Stock, in cash or accrued
(0.5)
(1.1)
Accretion of fair value adjustment to Redeemable Preferred Stock
(0.3)
(0.2)
(0.5)
(0.5)
Net loss available to common stockholders
$ (7.3)
$ (2.2)
$ (19.5)
$ (13.0)
Basic and diluted loss per share:
 
 
 
 
Continuing operations
$ (0.25)
$ (0.08)
$ (0.67)
$ (0.43)
Discontinued operations
$ 0 
$ 0.01 
$ 0 
$ 0 
Basic and diluted loss per share
$ (0.25)
$ (0.07)
$ (0.67)
$ (0.43)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
 
Net loss
$ (6.2)
$ (1.2)
$ (17.5)
$ (11.2)
Other comprehensive income (loss):
 
 
 
 
Currency translation adjustments
5.0 
(1.4)
5.7 
1.3 
Amortization of net actuarial gains
 
 
 
(0.1)
Comprehensive loss
(1.2)
(2.6)
(11.8)
(10.0)
Comprehensive income attributable to noncontrolling interest
0.3 
0.3 
0.4 
0.4 
Comprehensive loss attributable to Real Industry, Inc.
$ (1.5)
$ (2.9)
$ (12.2)
$ (10.4)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Cash flows from operating activities:
 
 
Net loss
$ (17.5)
$ (11.2)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
Earnings from discontinued operations, net of income taxes
(0.1)
Depreciation and amortization
21.6 
25.3 
Deferred income taxes
(0.7)
Change in fair value of common stock warrant liability
(2.3)
(0.7)
Share-based compensation expense
1.4 
1.0 
Unrealized losses (gains) on derivative financial instruments
0.4 
(1.5)
Unrealized foreign exchange gains on intercompany loans
(2.2)
(1.0)
Amortization of debt issuance costs
4.0 
2.4 
Amortization of purchase accounting adjustments
0.9 
Loss (income) from equity method investment
(0.6)
Other
1.5 
1.2 
Changes in operating assets and liabilities
(17.7)
(5.8)
Net cash provided by operating activities of discontinued operations
0.2 
Net cash provided by (used in) operating activities
(11.4)
10.0 
Cash flows from investing activities:
 
 
Purchases of property and equipment
(10.5)
(11.1)
Other
(0.2)
0.1 
Net cash used in investing activities
(10.7)
(11.0)
Cash flows from financing activities:
 
 
Proceeds from revolving credit facilities, net of issuance costs
126.7 
44.0 
Repayments on capital leases, the revolving credit facilities and other debt
(112.2)
(43.1)
Other
(0.9)
0.7 
Net cash provided by financing activities
13.6 
1.6 
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents
0.5 
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents
(8.0)
0.6 
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period
32.7 
43.3 
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period
$ 24.7 
$ 43.9 
Business and Operations
Business and Operations

NOTE 1—BUSINESS AND OPERATIONS

Real Industry, Inc. (“Real Industry,” the “Company,” “we,” “us” or “our”), is a Delaware holding company that operates through its operating subsidiaries. Management expects to grow the Company through acquisitions, as well as through organic efforts within existing operations described below. Our current business strategy seeks to leverage our public company status, $916.0 million of United States (“U.S.”) federal net operating tax loss carryforwards (“NOLs”) and the experience and focus of our executive management team to acquire operating businesses at prices and on terms that we believe will create a sustainably profitable enterprise.

During the first quarter of 2015, the Company underwent a considerable transformation. On January 9, 2015, we completed the sale of North American Breaker Co., LLC (“NABCO”), previously the primary business within our former Industrial Supply segment. On February 27, 2015, we acquired the global recycling and specification alloys business (the “Real Alloy Business”) of Aleris Corporation (“Aleris”) (the “Real Alloy Acquisition”). A portion of the proceeds from the sale of NABCO were used to fund the Real Alloy Acquisition.

The Real Alloy Business, operating as Real Alloy Holding, Inc. (“Real Alloy”), is a global leader in third-party aluminum recycling, which includes the processing of scrap aluminum and by-products and the manufacturing of wrought, cast and specification or foundry alloys. Real Alloy offers a broad range of products and services to wrought alloy processors, automotive original equipment manufacturers, and foundries and casters. Real Alloy’s customers include companies that participate in or sell to the automotive, consumer packaging, aerospace, building and construction, steel, and durable goods industries. Real Alloy processes aluminum scrap and by-products and delivers recycled metal in liquid or solid form according to customer specifications. Real Alloy’s facilities are capable of processing industrial (new) scrap, post-consumer (old/obsolete) scrap, and various aluminum by-products, providing a great degree of flexibility in reclaiming high-quality recycled aluminum. Real Alloy currently operates twenty-seven facilities strategically located throughout North America and Europe. On November 1, 2016, Real Alloy completed the purchase of select assets of Beck Aluminum Alloys Ltd. (“Beck Alloys”), including an investment in an affiliated trading business (“Beck Trading”). The three acquired Beck Alloys facilities primarily produce high-purity foundry alloys from aluminum scrap to supply the automotive, wheel and recreational equipment casting industries.

Our focus is supporting the performance of Real Alloy, as well as evaluating potential acquisition opportunities. We seek to acquire significant ownership interests in businesses with talented and experienced management teams, strong margins, and sustainable competitive advantages. We regularly consider acquisitions of businesses that operate in undervalued industries, as well as businesses that we believe are in transition or are otherwise misunderstood by the marketplace. Post-acquisition, we plan to operate our acquired businesses as autonomous subsidiaries. We anticipate that we will continue to use our common stock, preferred stock and other securities to pursue value-enhancing acquisitions and leverage our considerable tax assets, as well as support the growth needs of our existing operating segments, as necessary.

Financial Statement Presentation and Recent Accounting Updates
Financial Statement Presentation and Recent Accounting Updates

NOTE 2—FINANCIAL STATEMENT PRESENTATION AND RECENT ACCOUNTING UPDATES

The accompanying unaudited condensed consolidated financial statements comprise the accounts of Real Industry and its wholly owned and majority-owned subsidiaries, and have been prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”) for interim financial information, and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments considered necessary for a fair presentation, have been included. The Company evaluates subsequent events through the date of filing with the Securities and Exchange Commission (“SEC”). Operating results for the six months ended June 30, 2017 may not necessarily be indicative of the results that may be expected for the full year ending December 31, 2017. These interim period unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2016, which are included in the Company’s Annual Report on Form 10-K, as filed with the SEC on March 13, 2017 (the “Annual Report”).

Although these unaudited condensed consolidated financial statements include certain assets, liabilities, revenues and expenses related to the former businesses of our subsidiary, SGGH, LLC (“SGGH”), then known as Fremont General Corporation (“Fremont”) and its primary operating subsidiary, Fremont Investment & Loan (“FIL”), which are presented as discontinued operations, during the six months ended June 30, 2017 and 2016, discontinued operations had insignificant revenues and expenses and, as of June 30, 2017 and December 31, 2016, had insignificant assets and liabilities.

During the quarter ended September 30, 2016, with authorization from the Board of Directors, management initiated a process to sell Cosmedicine, LLC (“Cosmedicine”), or liquidate its assets over the next twelve months. Cosmedicine’s major classes of assets held for sale were its inventories and intellectual property, which, as of June 30, 2017, were each written down to an estimated net realizable value of zero. The potential sale or liquidation of Cosmedicine does not represent a major strategic shift in the Company’s operations and will not have a significant effect on the consolidated financial results of Real Industry.

During the quarter ended March 31, 2016, the Company identified and corrected an error in the depreciation expense reported in the December 31, 2015 consolidated financial statements. Each of cost of sales; gross profit; selling, general and administrative (“SG&A”) expenses; operating loss; loss from continuing operations; and net loss were impacted by the correction, with $3.7 million of the adjustment classified in cost of sales and $0.1 million in SG&A expenses presented in the results of operations during the six months ended June 30, 2016. Management concluded that the error correction in 2016 was not material to the full year results of operations.

For equity investments that are not required to be consolidated under the variable or voting interest model, we evaluate the level of influence we are able to exercise over an entity’s operations to determine whether to use the equity method of accounting. We evaluate our relationships with other entities to identify whether such entities are variable interest entities (“VIEs”) and to assess whether we are the primary beneficiary of such entities. In determining the primary beneficiary of a VIE, qualitative and quantitative factors are considered, including, but not limited to: the amount and characteristics of our investment; the obligation or likelihood for us to provide financial support; our ability to control or significantly influence key decisions for the VIE; and material intercompany transactions. Significant judgments related to these determinations include estimates about the future fair values and performance of these VIEs and general market conditions. In the event that we are a primary beneficiary of a VIE, the assets, liabilities, and results of operations of the VIE are included in the consolidated financial statements regardless of the percentage of voting interests owned. As of June 30, 2017, we have one VIE that is treated as an unconsolidated investment, Beck Trading, which has a carrying value of $5.6 million. Including trade accounts receivable due from Beck Trading, our maximum loss exposure is $7.3 million.

Recent Accounting Standards Updates

The following provides information about recent Accounting Standards Updates (“ASU” or “Update”) issued by the Financial Accounting Standards Board (“FASB”) that are relevant to the operations of the Company.

Updates effective in 2017

Statement of Cash Flows: Restricted Cash

In November 2016, the FASB issued ASU 2016-18, which provides that a statement of cash flows explain the change in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents during the period. The effective date for this Update is for fiscal years beginning after December 15, 2017, however early adoption is permitted.

We early adopted the amendments provided in ASU 2016-18 in the period ended December 31, 2016 to provide financial statement users with more transparent disclosure about restricted cash and restricted cash equivalents. Upon adoption, the amendments provided in this Update are applied using a retrospective transition method to each period presented. The following table provides details of the impact the amendments in this Update had on our unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2016:

 

 

Six Months Ended June 30, 2016

 

(In millions)

As Previously Reported

 

 

Impact of Adoption

 

 

As Currently Reported

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

$

10.0

 

 

$

 

 

$

10.0

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sale of NABCO

 

3.9

 

 

 

(3.9

)

 

 

 

Net cash used in investing activities

 

(7.1

)

 

 

(3.9

)

 

 

(11.0

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

1.6

 

 

 

 

 

 

1.6

 

Effect of exchange rate changes on cash, cash equivalents,

   restricted cash and restricted cash equivalents

 

 

 

 

 

 

 

 

Increase in cash, cash equivalents, restricted cash and

   restricted cash equivalents

 

4.5

 

 

 

(3.9

)

 

 

0.6

 

Cash, cash equivalents, restricted cash and restricted cash equivalents,

   beginning of period

 

35.8

 

 

 

7.5

 

 

 

43.3

 

Cash, cash equivalents, restricted cash and restricted cash equivalents,

   end of period

$

40.3

 

 

$

3.6

 

 

$

43.9

 

 

Updates not yet effective

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU 2014-09, which requires recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. Additionally, the Update requires the use of more estimates and judgments than current accounting guidance, as well as additional disclosures. The FASB has issued several updates to the standard that i) defer the original effective date; ii) clarify the application of principal versus agent guidance; iii) clarify the guidance on inconsequential and perfunctory promises and licensing; and iv) clarify the guidance on the derecognition of nonfinancial assets. ASU 2014-09 and the related updates are effective for fiscal years beginning after December 15, 2017.

We have formed a task force to understand and implement the new revenue recognition standard. The task force is currently evaluating the impact this guidance will have on the Company’s consolidated financial statements. Per this evaluation, we have identified that the new standard may require the Company to change the timing of when it records discounts offered. Currently, these are recorded when earned; after the adoption of ASU 2014-09, these amounts may be considered a portion of the contract’s transaction cost. The change may result in an acceleration in the timing of costs that could reduce revenue upon adoption. The ultimate impact to the Company’s consolidated financial statements is still being determined. Additionally, we are developing additional controls and procedures to evaluate contracts and the terms and conditions therein to better ensure awareness of when the transfer of control of goods or services occurs for proper revenue recognition.

We plan to adopt ASU 2014-09 and related updates effective January 1, 2018 using the modified retrospective approach by recognizing the cumulative effect of initially applying the new standard as an adjustment to the opening balance of equity. We also anticipate that the adoption will result in an increase to the revenue disclosures in the Company’s consolidated financial statements.

Leases

In February 2016, the FASB issued ASU 2016-02, which generally requires companies to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet. This guidance will be effective for the Company in fiscal years beginning after December 15, 2018 on a modified retrospective basis and early adoption is permitted. We are currently evaluating the effect this guidance will have on our consolidated financial statements and related disclosures.

Derivatives and Hedging: Contingent Put and Call Options in Debt Instruments

In March 2016, the FASB issued ASU 2016-06, which clarifies what steps are required when assessing whether the economic characteristics and risks of call or put options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is one of the criteria for bifurcating an embedded derivative. Consequently, when an option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise the option is related to interest rates or credit risks. The amendments provided for in this Update are effective for fiscal years beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018. We are currently evaluating the effect this guidance will have on our consolidated financial statements and related disclosures.

Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB issued ASU 2016-15, which provides, among other things, that distributions received from equity method investees be classified using one of two possible methods, a cumulative earnings approach or a nature of distribution approach. This Update is effective for fiscal years beginning after December 15, 2017, however early adoption is permitted. We are currently evaluating the effect this guidance will have on our consolidated financial statements and related disclosures.

Business Combinations: Clarifying the Definition of a Business

In January 2017, the FASB issued ASU 2017-01, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the current implementation guidance in Topic 805, there are three elements of a business—inputs, processes, and outputs. While an integrated set of assets and activities (collectively referred to as a “set”) that is a business usually has outputs, outputs are not required to be present. In addition, all the inputs and processes that a seller uses in operating a set are not required if market participants can acquire the set and continue to produce outputs, for example, by integrating the acquired set with their own inputs and processes.

The amendments in this Update provide a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated.

If the screen is not met, the amendments in this Update (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. The amendments in this Update provide a framework to assist entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs. Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs.

Lastly, the amendments in this Update narrow the definition of the term “output” so that the term is consistent with how outputs are described in Topic 606.

This Update is effective for fiscal years beginning after December 15, 2017, however early adoption is permitted. We are currently evaluating the effect this guidance will have on our consolidated financial statements and related disclosures.

Compensation—Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

In March 2017, the FASB issued ASU 2017-07, which provides that an employer report the service cost component of pension and post-retirement benefit costs in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments in this Update also allow only the service cost component to be eligible for capitalization when applicable (for example, as a cost of internally manufactured inventory or a self-constructed asset).

This Update is effective for fiscal years beginning after December 15, 2017, however early adoption is permitted in the first interim period of any fiscal year presented. The amendments in this Update will be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. The amendments allow a practical expedient that permits an employer to use the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. Disclosure that the practical expedient was used is required on a retrospective basis. We are currently evaluating the effect this guidance will have on our consolidated financial statements and related disclosures.

Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting

In May 2017, the FASB issued ASU 2017-09, which provides guidance about changes to the terms or conditions of a share-based payment award that requires an entity to apply modification accounting in Topic 718. This Update is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The amendments in this Update will be applied prospectively to any awards modified on or after the adoption date. We are currently evaluating the effect this guidance will have on our consolidated financial statements and related disclosures.

Business Combinations
Business Combinations

NOTE 3—BUSINESS COMBINATIONS

On November 1, 2016, Real Alloy, acquired certain assets of Beck Alloys and 49% of the voting interests of Beck Trading from Beck Alloys, Beck Aluminum Corporation and GSB Beck Holdings, Inc. (collectively, the “Beck Sellers”), under an asset and securities purchase agreement. Upon closing, we paid $23.6 million in cash to the Beck Sellers and accounted for the transaction as a business combination (the “Beck Acquisition”), with the purchase price allocated based on the estimated fair values of the assets acquired and liabilities assumed.

The following table provides summary information about the purchase consideration and identifiable assets acquired:

 

(In millions)

 

 

 

Consideration paid at closing

$

23.6

 

Purchase price allocation:

 

 

 

Inventories

$

10.6

 

Property, plant and equipment

 

6.8

 

Equity method investment

 

6.1

 

Prepaid expenses, supplies and other current assets

 

0.1

 

Estimated fair value of assets acquired

$

23.6

 

 

Inventories include the estimated fair value of finished goods, work in process and raw materials. The estimated fair value of finished goods was based on analyses of future selling prices and the profit associated with the manufacturing effort. The estimated fair value of work in process considered costs to complete to finished goods and was based on analyses of future selling prices and the profit associated with the manufacturing effort. The estimated fair value of raw materials was based on replacement cost. The $10.6 million of estimated fair value of inventories includes $0.3 million in fair value adjustments, all of which was amortized as noncash charges in cost of sales during the year ended December 31, 2016. See Note 4—Inventories for additional information about inventories.

Property, plant and equipment includes land and site improvements, buildings and building improvements, and machinery, equipment, furniture and fixtures. The preliminary estimated fair value of property, plant and equipment is based on appraisals and replacement cost analyses. The preliminary fair value estimate of property, plant and equipment acquired is as follows:

 

(In millions)

Estimated Fair Value

 

Land and improvements

$

0.7

 

Buildings and improvements

 

2.6

 

Machinery, equipment, furniture and fixtures

 

3.5

 

Property, plant and equipment acquired

$

6.8

 

 

The fair value of prepaid expenses, supplies and other current assets includes inventory supplies and is based on replacement cost.

The fair value of the equity method investment is based on a discounted cash flow model with various assumptions about growth rates and margins, as well as the cash distribution waterfall, under which Real Alloy receives the first $6.0 million of distributions, thereafter distributions will be based on equity ownership percentages. During the six months ended June 30, 2017, income from the operations of Beck Trading included in the condensed consolidated statement of operations was $0.6 million.

As of June 30, 2017 and December 31, 2016, Real Alloy had trade accounts receivable due from Beck Trading of $1.7 million and $6.8 million, respectively, and trade payables due to Beck Trading of $0.1 million and $0.5 million, respectively. Additionally, as part of the Beck Acquisition, Real Alloy and Beck Trading entered into a Sales Representative and Tolling Agreement whereby, for a defined group of customers, Real Alloy will serve as a sales representative for Beck Trading and will be paid a commission for sales generated. Beck Trading will also serve as a sales representative for Real Alloy, for a defined group of customers, and will be paid a commission for sales generated.

Inventories
Inventories

NOTE 4—INVENTORIES

The following table presents the components of inventories as of June 30, 2017 and December 31, 2016:

 

 

June 30,

 

 

December 31,

 

(In millions)

2017

 

 

2016

 

Finished goods

$

44.6

 

 

$

45.1

 

Raw materials and work in process

 

75.5

 

 

 

73.1

 

Total inventories

$

120.1

 

 

$

118.2

 

 

Debt and Redeemable Preferred Stock
Debt, Other Financing Arrangements and Redeemable Preferred Stock

NOTE 5—DEBT AND REDEEMABLE PREFERRED STOCK

The following table presents the Company’s long-term debt as of June 30, 2017 and December 31, 2016:

 

 

June 30,

 

 

December 31,

 

(In millions)

2017

 

 

2016

 

Senior Secured Notes:

 

 

 

 

 

 

 

Principal amount outstanding

$

305.0

 

 

$

305.0

 

Unamortized original issue discount and debt issuance costs

 

(7.9

)

 

 

(10.1

)

Senior Secured Notes, net

 

297.1

 

 

 

294.9

 

Revolving credit facilities:

 

 

 

 

 

 

 

Principal amount outstanding

 

76.0

 

 

 

57.0

 

Unamortized debt issuance costs

 

(1.0

)

 

 

(1.5

)

Revolving credit facilities, net

 

75.0

 

 

 

55.5

 

Term Loan

 

 

 

 

1.5

 

Capital leases

 

7.4

 

 

 

4.6

 

Current portion of long-term debt

 

(3.1

)

 

 

(2.3

)

Long-term debt, net

$

376.4

 

 

$

354.2

 

 

Long-term debt

Senior Secured Notes

In connection with the Real Alloy Acquisition, Real Alloy issued $305.0 million of senior secured 10.0% notes (the “Senior Secured Notes”) in January 2015. The Senior Secured Notes are due January 15, 2019, with interest payable on January 15 and July 15 of each year through the date of maturity. For the three months ended June 30, 2017 and 2016, interest expense associated with the Senior Secured Notes was $8.7 million and $8.5 million, respectively, including $1.1 million and $1.0 million, respectively, of amortization of debt discount and issuance costs. For the six months ended June 30, 2017 and 2016, interest expense associated with the Senior Secured Notes was $17.5 million and $17.3 million, respectively, including $2.2 million and $2.0 million, respectively, of amortization of debt discount and issuance costs. As of June 30, 2017, Real Alloy was in compliance with all applicable covenants under the Indenture of the Senior Secured Notes.

Revolving credit facilities

On March 14, 2017, Real Alloy entered into a Revolving Credit Agreement with Bank of America, N.A. (“Bank of America”) for a $110.0 million senior secured revolving asset-based credit facility (the “ABL Facility”). A portion of the proceeds of the ABL Facility were used to repay and terminate the previously outstanding Asset-Based Facility with Wells Fargo.

The ABL Facility expires on the earlier of the instrument’s expiration date, March 14, 2022, or 90 days prior to the maturity date of the Senior Secured Notes or the Company’s Redeemable Preferred Stock.

The ABL Facility contains customary affirmative, negative and financial covenants including limitations on the borrower and its subsidiaries with respect to liens, investments, distributions, mergers and acquisitions, disposition of assets, transactions with affiliates and a fixed charge coverage ratio and total leverage ratio.

U.S. dollar denominated revolving loans bear interest, at the Borrowers’ option, either at a LIBOR interest period rate, or the greater of (a) the prime rate announced by Bank of America from time to time, (b) the U.S. Federal Funds Rate plus 0.50%, and (c) the 30-day interest period LIBOR. Canadian dollar denominated loans bear interest, at the Borrowers’ option, either at the CDOR rate for a term comparable to the loan, or floating at the greater of (x) the prime rate announced by Bank of America (Canada) from time to time or (y) the 1-month CDOR plus 1.0%, plus, in each case, a margin based on the amount of the excess availability under the ABL Facility.

In the three months ended June 30, 2017 and 2016, interest expense under the revolving credit facilities was $0.5 million and $0.6 million, respectively, including $0.2 million of scheduled amortization of debt issuance costs in each of the three months ended June 30, 2017 and 2016. In the six months ended June 30, 2017 and 2016, interest expense under the revolving credit facilities was $2.7 million and $1.0 million, respectively, including the write-off of $1.4 million of unamortized debt issuance costs associated with the Asset-Based Facility in the first quarter of 2017 and $0.4 million and $0.4 million of scheduled amortization of debt issuance costs in the six months ended June 30, 2017 and 2016, respectively. As of June 30, 2017, Real Alloy was in compliance with the debt covenants of the ABL Facility.

Capital leases

In the normal course of operations, Real Alloy enters into capital leases to finance office, mobile and other equipment for its operations. As of June 30, 2017, $3.1 million of the $7.4 million in capital lease obligations are due within the next twelve months.

Redeemable Preferred Stock

The Redeemable Preferred Stock was issued to Aleris on February 27, 2015 as a portion of the purchase price for the Real Alloy Acquisition and has a liquidation preference of $28.5 million as of June 30, 2017. The Redeemable Preferred Stock accrued quarterly dividends at a rate of 7% of the liquidation preference for the first eighteen months after the date of issuance, after which, quarterly dividends accrue at a rate of 8% of the liquidation preference through August 27, 2017, and 9% of the liquidation preference thereafter. As of June 30, 2017, dividends are accrued and paid at 8%. Dividends were paid in-kind for the first two years, and thereafter are accrued and payable in cash. As of June 30, 2017, $0.6 million of dividends are accrued. Unpaid dividends accumulate interest at a rate of 8% through August 27, 2017, and 9% thereafter. All accrued and accumulated dividends on the Redeemable Preferred Stock will be prior and in preference to any dividend on any of the Company’s common stock or other junior securities.

The Company may generally redeem the shares of Redeemable Preferred Stock at any time at the liquidation preference, and the holders may require the Company to redeem their shares of Redeemable Preferred Stock at the liquidation preference upon a change of control as defined in the Indenture of the Senior Secured Notes (or any debt facility that replaces or redeems the Senior Secured Notes) to the extent that the change of control does not provide for such redemption at the liquidation preference. A holder of Redeemable Preferred Stock may require the Company to redeem all, but not less than all, of such holder’s Redeemable Preferred Stock sixty-six months after the issuance date. In addition, the Company will redeem shares of Redeemable Preferred Stock to the extent Aleris is required to indemnify the Company under the Real Alloy Purchase Agreement for the Real Alloy Acquisition. The Redeemable Preferred Stock is not transferrable (other than to another subsidiary of Aleris) for eighteen months following issuance or for such longer period in connection with any ongoing indemnity claims under the Real Alloy Purchase Agreement.

The carrying value of Redeemable Preferred Stock is based on the estimated fair value of the instrument as of the issuance date plus dividends paid in-kind and accretion of the fair value adjustment to the Redeemable Preferred Stock. The difference between the liquidation preference and the estimated fair value as of the issuance date is accreted over the period preceding the holder’s right to redeem the instrument, or sixty-six months from the issue date.

The following table presents activity related to the carrying value of Redeemable Preferred Stock during the six months ended June 30, 2017:

 

(In millions)

 

 

 

Balance, December 31, 2016

$

24.9

 

Accretion of fair value adjustment to Redeemable Preferred Stock

 

0.5

 

Balance, June 30, 2017

$

25.4

 

 

Stockholders Equity and Noncontrolling Interest
Stockholders Equity and Noncontrolling Interest

NOTE 6—STOCKHOLDERSEQUITY AND NONCONTROLLING INTEREST

The following table summarizes activity within stockholders’ equity attributable to Real Industry and noncontrolling interest during the six months ended June 30, 2017:

 

(In millions)

Equity Attributable to Real Industry, Inc.

 

 

Noncontrolling Interest

 

 

Total Equity

 

Balance, December 31, 2016

$

33.4

 

 

$

1.1

 

 

$

34.5

 

Net earnings (loss)

 

(17.9

)

 

 

0.4

 

 

 

(17.5

)

Distribution to noncontrolling interest

 

 

 

 

(0.9

)

 

 

(0.9

)

Consolidation of noncontrolling interest

 

(0.5

)

 

 

0.5

 

 

 

 

Share-based compensation expense

 

1.4

 

 

 

 

 

 

1.4

 

Dividends on Redeemable Preferred Stock, in cash or accrued

 

(1.1

)

 

 

 

 

 

(1.1

)

Accretion of fair value adjustment to Redeemable Preferred Stock

 

(0.5

)

 

 

 

 

 

(0.5

)

Change in accumulated other comprehensive loss

 

5.7

 

 

 

 

 

 

5.7

 

Balance, June 30, 2017

$

20.5

 

 

$

1.1

 

 

$

21.6

 

 

The following table reflects changes in the shares of common stock outstanding during the six months ended June 30, 2017:

 

Shares of

Common Stock

Outstanding

 

Balance, December 31, 2016

 

29,386,882

 

Restricted common stock awards granted, net of forfeitures

 

391,668

 

Restricted stock units converted to common stock

 

21,387

 

Common stock options exercised

 

750

 

Common stock acquired

 

(5,909

)

Balance, June 30, 2017

 

29,794,778

 

 

Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss

NOTE 7—ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table summarizes activity within accumulated other comprehensive loss during the six months ended June 30, 2017:

 

(In millions)

Currency Translation Adjustments

 

 

Pension Benefit Adjustments

 

 

Accumulated Other Comprehensive Loss

 

Balance, December 31, 2016

 

(8.2

)

 

 

1.1

 

 

 

(7.1

)

Current period currency translation adjustments

 

5.7

 

 

 

 

 

 

5.7

 

Balance, June 30, 2017

$

(2.5

)

 

$

1.1

 

 

$

(1.4

)

Included in current period currency translation adjustments for the six months ended June 30, 2017 are $3.0 million of currency translation adjustment gains associated with intercompany loans considered long-term in nature and $2.7 million of gains related to the translation adjustments of accounts denominated in foreign currencies.

Income Taxes
Income Taxes

NOTE 8—INCOME TAXES

At the end of each reporting period, Real Industry estimates its annual effective income tax rate. The estimate used for the six months ended June 30, 2017 may change in subsequent periods. The effective tax rate for the six months ended June 30, 2017 differed from the federal statutory rate applied to earnings and losses before income taxes primarily as a result of the mix of earnings, losses, and tax rates between tax jurisdictions, and changes in valuation allowances. Income tax expense for the three months ended June 30, 2017 was $1.1 million, compared to a $0.2 million income tax expense for the three months ended June 30, 2016. Income tax expense for the six months ended June 30, 2017 was $1.9 million, compared to a $0.9 million income tax expense for the six months ended June 30, 2016.

As of December 31, 2016, the Company has estimated U.S. federal NOLs of $916.0 million and non-U.S. NOLs of $30.4 million. The U.S. federal NOLs have a 20-year life and begin to expire after the 2027 tax year. Additionally, the Company has state NOLs in amounts that are comparable to the U.S. federal NOLs. Real Industry has valuation allowances recorded to reduce certain deferred tax assets to amounts that are more likely than not to be realized. Real Industry intends to maintain those valuation allowances until sufficient positive evidence exists to support their realization through achieving profitability.  

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, as well as foreign jurisdictions located in Canada, Mexico, Germany, Norway, and the United Kingdom. With few exceptions, the 2012 through 2016 tax years remain open to examination. In October 2016, the Company was notified by the IRS of its intention to audit Real Industry’s 2014 federal income tax return.

Employee Benefit Plans
Employee Benefit Plans

NOTE 9—EMPLOYEE BENEFIT PLANS

The following table presents the components of net periodic benefit expense under the German defined benefit pension plans for the three and six months ended June 30, 2017 and 2016:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In millions)

 

2017

 

 

 

2016

 

 

 

2017

 

 

 

2016

 

Service cost

$

0.2

 

 

$

0.2

 

 

$

0.5

 

 

$

0.4

 

Interest cost

 

0.2

 

 

 

0.3

 

 

 

0.4

 

 

 

0.5

 

Amortization of net actuarial gains

 

 

 

 

 

 

 

 

 

 

(0.1

)

Expected return on plan assets

 

 

 

 

(0.1

)

 

 

 

 

 

(0.1

)

Net periodic benefit expense

$

0.4

 

 

$

0.4

 

 

$

0.9

 

 

$

0.7

 

 

Loss Per Share
Loss Per Share

NOTE 10—LOSS PER SHARE

The Company computes loss per share using the two-class method, as unvested restricted common stock and unvested restricted stock units contain non-forfeitable rights to dividends and meet the criteria of participating securities. Under the two-class method, earnings are allocated between common stock and participating securities. The presentation of basic and diluted earnings per share is required only for each class of common stock and not for participating securities. As such, the Company presents basic and diluted earnings per share for its one class of common stock.

The two-class method includes an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared and undistributed earnings for the period. The Company’s reported net earnings (loss) are reduced by the amount allocated to participating securities to arrive at the earnings allocated to common stockholders for purposes of calculating earnings per share.

Basic loss per share is computed by dividing net loss attributable to Real Industry, Inc., less dividends on and accretion of the fair value adjustment to Redeemable Preferred Stock, by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the calculation of diluted earnings per share, the basic weighted average number of common shares outstanding is increased by the dilutive effect of unvested restricted common stock, common stock options, unvested restricted stock units, and the Warrants (as defined below in Note 11—Derivative and Other Financial Instruments and Fair Value Measurements), determined using the treasury stock method.

The following table sets forth the computation of basic and diluted loss per share for the three and six months ended June 30, 2017 and 2016:

 

(In millions, except share and

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

   per share amounts)

2017

 

 

2016

 

 

2017

 

 

2016

 

Loss from continuing operations

$

(6.2

)

 

$

(1.3

)

 

$

(17.5

)

 

$

(11.3

)

Earnings from discontinued operations, net

   of income taxes

 

 

 

 

0.1

 

 

 

 

 

 

0.1

 

Net loss

 

(6.2

)

 

 

(1.2

)

 

 

(17.5

)

 

 

(11.2

)

Earnings from continuing operations attributable

   to noncontrolling interest

 

0.3

 

 

 

0.3

 

 

 

0.4

 

 

 

0.4

 

Net loss attributable to Real Industry, Inc.

 

(6.5

)

 

 

(1.5

)

 

 

(17.9

)

 

 

(11.6

)

Dividends on Redeemable Preferred Stock, in-kind

 

 

 

 

(0.5

)

 

 

 

 

 

(0.9

)

Dividends on Redeemable Preferred Stock, in cash

   or accrued

 

(0.5

)

 

 

 

 

 

(1.1

)

 

 

 

Accretion of fair value adjustment to Redeemable

   Preferred Stock

 

(0.3

)

 

 

(0.2

)

 

 

(0.5

)

 

 

(0.5

)

Numerator for basic and diluted loss per share—Net

   loss available to common stockholders

$

(7.3

)

 

$

(2.2

)

 

$

(19.5

)

 

$

(13.0

)

Denominator for basic and diluted loss per

   share—Weighted average shares outstanding

 

29,009,854

 

 

 

29,252,343

 

 

 

28,914,533

 

 

 

29,160,245

 

Basic and diluted loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

$

(0.25

)

 

$

(0.08

)

 

$

(0.67

)

 

$

(0.43

)

Discontinued operations

 

 

 

 

0.01

 

 

 

 

 

 

 

Basic and diluted loss per share

$

(0.25

)

 

$

(0.07

)

 

$

(0.67

)

 

$

(0.43

)

 

Unvested restricted common stock, common stock options, unvested restricted stock units, and the Warrants are antidilutive and excluded from the computation of diluted loss per share if the assumed proceeds upon exercise or vesting are greater than the cost to reacquire the same number of shares at the average market price during the period. For the three and six months ended June 30, 2017 and 2016, the impact of all outstanding unvested shares of restricted common stock, common stock options, unvested restricted stock units, and the Warrants are excluded from diluted loss per share as their impact would be antidilutive.

The following tables provide details on the average market price of Real Industry common stock; the outstanding shares of unvested restricted common stock, common stock options, unvested restricted stock units, and Warrants that were potentially dilutive; and summary information about the potentially dilutive common stock equivalents for each of the periods presented:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Average market price of Real Industry common

   stock

$

2.73

 

 

$

8.12

 

 

$

3.82

 

 

$

7.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potentially dilutive common stock equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unvested restricted common stock

 

737,610

 

 

 

491,286

 

 

 

737,610

 

 

 

491,286

 

Outstanding common stock options

 

445,100

 

 

 

775,650

 

 

 

445,100

 

 

 

775,650

 

Unvested restricted stock units

 

519,835

 

 

 

381,823

 

 

 

519,835

 

 

 

381,823

 

Warrants

 

1,448,333

 

 

 

1,448,333

 

 

 

1,448,333

 

 

 

1,448,333

 

Total potentially dilutive common stock

   equivalents

 

3,150,878

 

 

 

3,097,092

 

 

 

3,150,878

 

 

 

3,097,092

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In millions, except exercise prices)

2017

 

 

2016

 

 

2017

 

 

2016

 

Average unamortized share-based compensation

   expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted common stock awards

$

3.6

 

 

$

3.0

 

 

$

3.4

 

 

$

2.6

 

Restricted stock unit awards

 

1.0

 

 

 

2.1

 

 

 

0.8

 

 

 

2.0

 

Range of exercise prices on common stock options

$3.00 - $10.00

 

 

$3.00 - $10.00

 

 

$3.00 - $10.00

 

 

$3.00 - $10.00

 

Weighted average exercise price of the Warrants

$

5.64

 

 

$

5.64

 

 

$

5.64

 

 

$

5.64

 

 

Derivative and Other Financial Instruments and Fair Value Measurements
Derivative and Other Financial Instruments and Fair Value Measurements

NOTE 11—DERIVATIVE AND OTHER FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Derivatives

Real Alloy may use forward contracts and options, as well as contractual price escalators, to reduce the risks associated with its metal, natural gas, and certain currency exposures. Generally, Real Alloy enters into master netting arrangements with its counterparties and offsets net derivative positions with the same counterparties against amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral under those arrangements in our unaudited condensed consolidated balance sheets. For classification purposes, Real Alloy records the net fair value of each type of derivative position expected to settle in less than one year (by counterparty) as a net current asset or liability and each type of long-term position as a net noncurrent asset or liability.

Metal hedging

Primarily in our RAEU segment (as defined below), London Metal Exchange (“LME”) future swaps or forward contracts are sold as metal is purchased to fill fixed-priced customer sales orders. As sales orders are priced, LME future swaps or forward contracts can be purchased, which generally settle within six months. Real Alloy may also buy put option contracts for managing metal price exposures. Option contracts require the payment of a premium, which is recorded as a realized loss upon settlement or expiration of the option contract. Upon settlement of the put option contracts, Real Alloy receives cash and recognizes a related gain if the LME closing price is less than the strike price of the put option. If the put option strike price is less than the LME closing price, no amount is paid and the option expires. As of June 30, 2017, Real Alloy had 26.4 thousand metric tonnes (“kt”) of metal buy and sell derivative contracts outstanding.

Natural gas hedging

To manage the price exposure for natural gas purchases, Real Alloy may fix the future price of a portion of its natural gas requirements by entering into financial hedge agreements. Under these agreements, payments are made or received based on the differential between the monthly closing price on the New York Mercantile Exchange (“NYMEX”) and the contractual hedge price. Natural gas cost can also be managed through the use of cost escalators included in some long-term supply contracts with customers, which limits exposure to natural gas price risk. As of June 30, 2017, Real Alloy had 1.8 trillion British thermal unit forward buy contracts outstanding.

Currency exchange hedging

From time to time, Real Alloy may enter into currency forwards, futures, call options or similar derivative financial instruments to limit its exposure to fluctuations in currency exchange rates. As of June 30, 2017, no currency derivative contracts were outstanding.

Credit risk

Real Alloy is exposed to losses in the event of nonperformance by the counterparties to the derivative financial instruments discussed above; however, management does not anticipate any nonperformance by the counterparties. The counterparties are evaluated for creditworthiness and risk assessment prior to initiating trading activities with the brokers, and periodically thereafter while actively trading. As of June 30, 2017, no cash collateral was posted or held.

The table below presents gross amounts of recognized derivative assets and liabilities, the amounts offset in the unaudited condensed consolidated balance sheets and the net amounts of derivative assets and liabilities presented therein. As of June 30, 2017 and December 31, 2016, there were no amounts subject to an enforceable master netting arrangement or similar agreement that have not been offset in the unaudited condensed consolidated balance sheets.

 

 

June 30, 2017

 

 

December 31, 2016

 

(In millions)

Asset

 

 

Liability

 

 

Asset

 

 

Liability

 

Metal

$

 

 

$

(0.2

)

 

$

 

 

$

(0.4

)

Natural gas

 

 

 

 

 

 

 

0.6

 

 

 

 

Total

 

 

 

 

(0.2

)

 

 

0.6

 

 

 

(0.4

)

Effect of counterparty netting arrangements

 

 

 

 

 

 

 

 

 

 

 

Net derivative assets (liabilities) as

   classified in the condensed

   consolidated balance sheets

$

 

 

$

(0.2

)

 

$

0.6

 

 

$

(0.4

)

The following table presents details of the balance sheet classification of the fair value of Real Alloy’s derivative financial instruments as of June 30, 2017 and December 31, 2016:  

 

 

 

 

June 30,

 

 

December 31,

 

(In millions)

Balance Sheet Classification

 

2017

 

 

2016

 

Derivative assets:

 

 

 

 

 

 

 

 

 

Natural Gas

Prepaid expenses, supplies and other current assets

 

$

 

 

$

0.6

 

Derivative liabilities:

 

 

 

 

 

 

 

 

 

Metal

Accrued liabilities

 

$

(0.2

)

 

$

(0.4

)

Common stock warrant liability

On June 11, 2010, warrants to purchase 1.5 million shares of Real Industry’s common stock were issued (the “Warrants”). The Warrants had an aggregate purchase price of $0.3 million, an original exercise price of $10.30 per share, expire in June 2020, and are 100% vested. The Warrants were issued without registration in reliance on the exemption set forth in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

The Warrants include customary terms that provide for certain adjustments of the exercise price and the number of shares of common stock to be issued upon the exercise of the Warrants in the event of stock splits, stock dividends, pro rata distributions, and certain other fundamental transactions. Additionally, the Warrants are subject to pricing protection provisions, which provide that certain issuances of new shares of common stock at prices below the current exercise price of the Warrants automatically reduce the exercise price of the Warrants to the lowest per share purchase price of common stock issued. In February 2015, the Company issued shares of common stock in the Rights Offering at $5.64 per share, thereby reducing the exercise price of the Warrants to $5.64 per share. During the six months ended June 30, 2017, no Warrants were exercised and, as of June 30, 2017, there were 1,448,333 Warrants outstanding.

The common stock warrant liability is a derivative liability related to the anti-dilution and pricing protection provisions of the Warrants. The fair value of the common stock warrant liability is based on a Monte Carlo simulation that utilizes various assumptions, including estimated volatility of 59.2% and an expected term of 2.9 years as of June 30, 2017, and 47.1% volatility and an expected term of 3.4 years as of December 31, 2016, along with a 60% equity raise probability assumption, and a 25% equity raise price discount assumption in the twelve month periods following each measurement date. The most significant inputs in determining the fair value of the common stock warrant liability are the price of our common stock on the measurement date, which as of June 30, 2017 and December 31, 2016, was $2.90 per share and $6.10 per share, respectively. Significant decreases in the expected term or the equity raise probability and related assumptions would result in a minor decrease in the estimated fair value of the common stock warrant liability, while significant increases in the expected term or the equity raise probability and related assumptions would result in a minor increase in the estimated fair value of the common stock warrant liability. A 10% increase or decrease in any or all of the unobservable inputs would not have a material impact on the estimated fair value of the common stock warrant liability.

The following table presents changes in the fair value of the common stock warrant liability during the three and six months ended June 30, 2017 and 2016:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In millions)

 

2017

 

 

 

2016

 

 

 

2017

 

 

 

2016

 

Balance, beginning of period

$

1.9

 

 

$

7.5

 

 

$

4.4

 

 

$

6.9

 

Warrants exercised

 

 

 

 

(0.1

)

 

 

 

 

 

(0.1

)

Change in fair value of common stock warrant

   liability

 

0.2

 

 

 

(1.3

)

 

 

(2.3

)

 

 

(0.7

)

Balance, end of period

$

2.1

 

 

$

6.1

 

 

$

2.1

 

 

$

6.1

 

Fair values

Derivative contracts are recorded at fair value using quoted market prices and significant other observable inputs. The following table sets forth financial assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2017 and December 31, 2016, and their level in the fair value hierarchy:

 

 

 

 

Estimated Fair Value

 

 

Fair Value

 

June 30,

 

 

December 31,

 

(In millions)

Hierarchy

 

2017

 

 

2016

 

Derivative assets

Level 2

 

$

 

 

$

0.6

 

Derivative liabilities

Level 2

 

 

(0.2

)

 

 

(0.4

)

Net derivative assets (liabilities)

 

 

$

(0.2

)

 

$

0.2

 

Common stock warrant liability

Level 3

 

$

(2.1

)

 

$

(4.4

)

 

Both realized and unrealized gains and losses on derivative financial instruments are included within losses (gains) on derivative financial instruments in the unaudited condensed consolidated statements of operations. The following table presents losses (gains) on derivative financial instruments during the three and six months ended June 30, 2017 and 2016:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In millions)

 

2017

 

 

 

2016

 

 

 

2017

 

 

 

2016

 

Realized losses (gains):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Metal

$

0.6

 

 

$

0.2

 

 

$

1.4

 

 

$

0.4

 

Natural gas

 

(0.1

)

 

 

0.2

 

 

 

(0.1

)

 

 

0.8

 

Total realized losses

 

0.5

 

 

 

0.4

 

 

 

1.3

 

 

 

1.2

 

Unrealized losses (gains):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Metal

 

(0.2

)

 

 

(0.8

)

 

 

(0.2

)

 

 

(0.4

)

Natural gas

 

0.3

 

 

 

(1.1

)

 

 

0.6

 

 

 

(1.1

)

Total unrealized losses (gains)

 

0.1

 

 

 

(1.9

)

 

 

0.4

 

 

 

(1.5

)

Losses (gains) on derivative financial instruments

$

0.6

 

 

$

(1.5

)

 

$

1.7

 

 

$

(0.3

)

Other Financial Instruments

The following tables present the carrying values and estimated fair values of other financial instruments as of June 30, 2017 and December 31, 2016:

 

 

 

 

June 30, 2017

 

(In millions)

Fair Value Hierarchy

 

Carrying Value

 

 

Estimated

Fair Value

 

Assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

Level 1

 

$

18.4

 

 

$

18.4

 

Restricted cash and restricted cash equivalents

Level 1

 

 

6.3

 

 

 

6.3

 

Financing receivable

Level 2

 

 

32.5

 

 

 

32.5

 

Loans receivable, net (other noncurrent assets)

Level 3

 

 

0.7

 

 

 

0.7

 

Liabilities

 

 

 

 

 

 

 

 

 

Long-term debt:

 

 

 

 

 

 

 

 

 

Senior Secured Notes

Level 1

 

$

297.1

 

 

$

296.6

 

ABL Facility

Level 2

 

 

75.0

 

 

 

76.0

 

Redeemable Preferred Stock

Level 3

 

$

25.4

 

 

$

27.0

 

 

 

 

 

December 31, 2016

 

(In millions)

Fair Value Hierarchy

 

Carrying Value

 

 

Estimated

Fair Value

 

Assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

Level 1

 

$

27.2

 

 

$

27.2

 

Restricted cash and restricted cash equivalents

Level 1

 

 

5.5

 

 

 

5.5

 

Financing receivable

Level 2

 

 

28.4

 

 

 

28.4

 

Loans receivable, net (other noncurrent assets)

Level 3

 

 

0.8

 

 

 

0.8

 

Liabilities

 

 

 

 

 

 

 

 

 

Long-term debt:

 

 

 

 

 

 

 

 

 

Senior Secured Notes

Level 1

 

$

294.9

 

 

$

307.5

 

Asset-Based Facility

Level 2

 

 

55.5

 

 

 

57.0

 

Term Loan

Level 2

 

 

1.5

 

 

 

1.5

 

Redeemable Preferred Stock

Level 3

 

$

24.9

 

 

$

26.8

 

 

The Company used the following methods and assumptions to estimate the fair value of each financial instrument as of June 30, 2017 and December 31, 2016:

Cash and cash equivalents and restricted cash and restricted cash equivalents

Cash and cash equivalents and restricted cash and restricted cash equivalents are recorded at historical cost. The carrying value is a reasonable estimate of fair value as these instruments have short-term maturities and market interest rates.

Financing receivable

Financing receivable represents the net amount due from the sale and transfer of trade accounts receivable under a €50 million factoring facility (the “Factoring Facility”). The Factoring Facility provides for the transfer and sale of eligible receivables to a counterparty, the settlement of which generally occurs within thirty days of transfer, which are accounted for as true sales, and are included in operating cash flows. During the three and six months ended June 30, 2017, $100.9 million and $188.5 million, respectively, of trade receivables were transferred on a nonrecourse basis, and proceeds of $102.1 million and $183.6 million, respectively, were received. During the three and six months ended June 30, 2016, $83.7 million and $173.5 million, respectively, of trade receivables were transferred and $81.6 million and $170.0 million, respectively, of proceeds were received. Administrative fees and expenses associated with the Factoring Facility were $0.2 million in each of the three months ended June 30, 2017 and 2016 and $0.4 million in each of the six months ended June 30, 2017 and 2016.

The transferred receivables are isolated from the accounts of Real Alloy, which maintains continuing involvement with the transferred receivables through limited servicing obligations, primarily related to recordkeeping. Real Alloy retains no rights to the transferred receivables, or associated collateral, and does not collect a servicing fee. Following transfer, Real Alloy has no further rights to any cash flows or other assets to any party related to the transfer.

The carrying value is a reasonable estimate of fair value as the financing receivable is generally outstanding for no more than thirty days and the counterparty is a large creditworthy financial institution.

Loans receivable, net

Loans receivable, net, consists of a pool of commercial real estate loans. The estimated fair value considers the collateral coverage of assets securing the loans and estimated credit losses, as well as variable interest rates, which approximate market interest rates.

Long-term debt – Senior Secured Notes

The estimated fair value of the Senior Secured Notes is based on observable market prices.

Long-term debt – Revolving credit facilities and Term Loan

The estimated fair values of the Asset-Based and ABL Facilities and the Term Loan is based on their market characteristics, including interest rates and maturity dates generally consistent with market terms.

Redeemable Preferred Stock

The estimated fair value of Redeemable Preferred Stock is determined based on a discounted cash flow analysis using the Hull & White model, with a remaining term of thirty-eight months, assuming either the holder will put or the issuer will call at the redemption date. The cash dividend yield and the Redeemable Preferred Stock, including the payment-in-kind Redeemable Preferred Stock, were discounted at the spot rate plus a 14.8% credit spread adjustment to a zero coupon yield curve as of June 30, 2017, based on similar market instruments.

Segment Information
Segment Information

NOTE 12—SEGMENT INFORMATION

Segment information is prepared on the same basis that our chief operating decision-maker (“CODM”), who is our chief executive officer, manages the segments, evaluates financial results, and makes key operating decisions, and for which discrete financial information is available. As of June 30, 2017, the Company had two reportable segments: Real Alloy North America (“RANA”) and Real Alloy Europe (“RAEU”).

Measurement of segment profitability

Our CODM and management use several measures of performance for our reportable segments, including earnings before interest, taxes, depreciation and amortization and excludes certain other items (“Segment Adjusted EBITDA”). We use Segment Adjusted EBITDA as our primary financial performance metric and believe this measure provides additional information commonly used by holders of our common stock, as well as the holders of the Senior Secured Notes and parties to the revolving credit facilities with respect to the ongoing performance of our underlying business activities. In addition, Segment Adjusted EBITDA is a component of certain covenants under the Indenture governing the Senior Secured Notes.

Our Segment Adjusted EBITDA calculations represent segment earnings (loss) before interest, taxes, depreciation and amortization, unrealized gains and losses on derivative financial instruments, charges and expenses related to acquisitions, and certain other gains and losses. “Segment Adjusted EBITDA,” as we use the term, may not be comparable to similarly titled measures used by other companies. We calculate Segment Adjusted EBITDA by eliminating the impact of a number of items we do not consider indicative of our ongoing operating performance and certain other items. Readers are encouraged to evaluate each adjustment shown in the reconciliation and the reasons we consider it appropriate for supplemental analysis, however, Segment Adjusted EBITDA is not a financial measurement calculated and presented in accordance with GAAP. When analyzing our operating performance, we encourage investors to use Segment Adjusted EBITDA in addition to, and not as an alternative for, net earnings (loss) derived in accordance with GAAP. Segment Adjusted EBITDA has limitations as an analytical tool, and it should not be considered in isolation, or as a substitute for, or superior to, our measures of financial performance prepared in accordance with GAAP.

These limitations include, but are not limited to the following:

 

Segment Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures, asset replacements or contractual commitments;

 

Segment Adjusted EBITDA does not reflect changes in, or cash requirements for, working capital needs;

 

Segment Adjusted EBITDA does not reflect interest expense or cash requirements necessary to service interest and/or principal payments under the Senior Secured Notes or the revolving credit facilities;

 

Segment Adjusted EBITDA does not reflect certain tax payments that may represent a reduction in cash available to us; and

 

Segment Adjusted EBITDA does not reflect the operating results of Corporate and Other.

Other companies, including companies in our industry, may calculate Segment Adjusted EBITDA differently and the degree of their usefulness as a comparative measure correspondingly decreases as the number of differences in computations increase.

In addition, in evaluating Segment Adjusted EBITDA it should be noted that in the future we may incur expenses similar to the adjustments in the below presentation. Our presentation of Segment Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.

Segment assets and liabilities

Certain of the Company’s assets and liabilities have not been allocated to our reportable segments, including Corporate and Other cash and cash equivalents, the common stock warrant liability, deferred income taxes, and long-term debt, none of which our CODM uses to evaluate the performance of our reportable segments. Additionally, certain of the Company’s corporate administrative expenses are not allocated to the reportable segments.

Reportable segment information

The following tables show segment revenues from external customers (there were no intersegment revenues) and Segment Adjusted EBITDA for the three and six months ended June 30, 2017 and 2016, and reconciliations of Segment Adjusted EBITDA to net loss for each period presented. Segment Adjusted EBITDA presents only the financial performance of our segments and does not include the results of operations of Corporate and Other.

 

 

Three Months Ended June 30, 2017

 

(In millions)

RANA

 

 

RAEU

 

 

Corporate and Other

 

 

Total

 

Revenues

$

234.4

 

 

$

115.8

 

 

$

 

 

$

350.2

 

Segment Adjusted EBITDA

$

8.7

 

 

$

8.5

 

 

$

 

 

$

17.2

 

 

 

Three Months Ended June 30, 2016

 

(In millions)

RANA

 

 

RAEU

 

 

Corporate and Other

 

 

Total

 

Revenues

$

212.4

 

 

$

108.4

 

 

$

0.1

 

 

$

320.9

 

Segment Adjusted EBITDA

$

14.3

 

 

$

6.6

 

 

$

 

 

$

20.9

 

 

 

Six Months Ended June 30, 2017

 

(In millions)

RANA

 

 

RAEU

 

 

Corporate and Other

 

 

Total

 

Revenues

$

460.0

 

 

$

227.3

 

 

$

 

 

$

687.3

 

Segment Adjusted EBITDA

$

15.0

 

 

$

14.5

 

 

$

 

 

$

29.5

 

 

 

Six Months Ended June 30, 2016

 

(In millions)

RANA

 

 

RAEU

 

 

Corporate and Other

 

 

Total

 

Revenues

$

413.2

 

 

$

217.0

 

 

$

0.1

 

 

$

630.3

 

Segment Adjusted EBITDA

$

27.5

 

 

$

11.7

 

 

$

 

 

$

39.2

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In millions)

 

2017

 

 

 

2016

 

 

 

2017

 

 

 

2016

 

Segment Adjusted EBITDA

$

17.2

 

 

$

20.9

 

 

$

29.5

 

 

$

39.2

 

Unrealized gains (losses) on derivative financial

   instruments

 

(0.1

)

 

 

1.9

 

 

 

(0.4

)

 

 

1.5

 

Segment depreciation and amortization

 

(10.1

)

 

 

(10.6

)

 

 

(21.6

)

 

 

(25.3

)

Amortization of inventories and supplies purchase

   accounting adjustments

 

 

 

 

(0.3

)

 

 

 

 

 

(0.9

)

Corporate and Other selling, general and

   administrative expenses

 

(2.5

)

 

 

(3.6

)

 

 

(5.7

)

 

 

(6.9

)

Other, net

 

(0.7

)

 

 

(0.2

)

 

 

(1.6

)

 

 

(1.6

)

Operating profit

 

3.8

 

 

 

8.1

 

 

 

0.2

 

 

 

6.0

 

Interest expense, net

 

(9.6

)

 

 

(9.1

)

 

 

(20.6

)

 

 

(18.3

)

Change in fair value of common stock warrant

   liability

 

(0.2

)

 

 

1.3

 

 

 

2.3

 

 

 

0.7

 

Foreign exchange gains (losses) on intercompany

   loans

 

1.4

 

 

 

(1.6

)

 

 

2.2

 

 

 

1.0

 

Income (loss) from equity method investment

 

(0.5

)

 

 

 

 

 

0.6

 

 

 

 

Other nonoperating income (expense), net

 

 

 

 

0.2

 

 

 

(0.3

)

 

 

0.2

 

Income tax expense

 

(1.1

)

 

 

(0.2

)

 

 

(1.9

)

 

 

(0.9

)

Earnings from discontinued operations, net of

   income taxes

 

 

 

 

0.1

 

 

 

 

 

 

0.1

 

Net loss

$

(6.2

)

 

$

(1.2

)

 

$

(17.5

)

 

$

(11.2

)

 

The following tables present summarized balance sheet information for each of our reportable segments and reconciliations to consolidated assets and liabilities as of June 30, 2017 and December 31, 2016:

 

 

June 30, 2017

 

 

December 31, 2016

 

(In millions)

RANA

 

 

RAEU

 

 

RANA

 

 

RAEU

 

Segment Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

8.7

 

 

$

5.3

 

 

$

11.5

 

 

$

5.7

 

Trade accounts receivable, net

 

96.4

 

 

 

16.5

 

 

 

76.2

 

 

 

12.2

 

Financing receivable

 

 

 

 

32.5

 

 

 

 

 

 

28.4

 

Inventories

 

83.1

 

 

 

37.0

 

 

 

79.3

 

 

 

38.9

 

Prepaid expenses, supplies and other

   current assets

 

19.3

 

 

 

7.2

 

 

 

13.7

 

 

 

6.4

 

Total current assets

 

207.5

 

 

 

98.5

 

 

 

180.7

 

 

 

91.6

 

Property, plant and equipment, net

 

187.8

 

 

 

102.0

 

 

 

195.0

 

 

 

94.2

 

Equity method investment

 

5.6

 

 

 

 

 

 

5.0

 

 

 

 

Identifiable intangible assets, net

 

11.3

 

 

 

 

 

 

12.5

 

 

 

 

Goodwill

 

33.6

 

 

 

9.3

 

 

 

33.6

 

 

 

8.6

 

Other noncurrent assets

 

3.8

 

 

 

3.8

 

 

 

5.0

 

 

 

3.5

 

Total segment assets

$

449.6

 

 

$

213.6

 

 

$

431.8

 

 

$

197.9

 

Segment Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade payables

$

80.4

 

 

$

43.9

 

 

$

73.8

 

 

$

41.8

 

Accrued liabilities

 

33.0

 

 

 

15.3

 

 

 

30.0

 

 

 

13.4

 

Total current liabilities

 

113.4

 

 

 

59.2

 

 

 

103.8

 

 

 

55.2

 

Accrued pension benefits

 

 

 

 

45.9

 

 

 

 

 

 

42.0

 

Environmental liabilities

 

11.6

 

 

 

 

 

 

11.6

 

 

 

 

Other noncurrent liabilities

 

4.7

 

 

 

1.9

 

 

 

4.5

 

 

 

1.8

 

Total segment liabilities

$

129.7

 

 

$

107.0

 

 

$

119.9

 

 

$

99.0

 

 

 

June 30,

 

 

December 31,

 

(In millions)

 

2017

 

 

2016

 

Assets:

 

 

 

 

 

 

 

Real Alloy North America

$

449.6

 

 

$

431.8

 

Real Alloy Europe

 

213.6

 

 

 

197.9

 

Cash and cash equivalents—Corporate and Other

 

4.4

 

 

 

9.9

 

Other unallocated assets

 

3.4

 

 

 

5.9

 

Total consolidated assets

$

671.0

 

 

$

645.5

 

Liabilities:

 

 

 

 

 

 

 

Real Alloy North America

$

129.7

 

 

$

119.9

 

Real Alloy Europe

 

107.0

 

 

 

99.0

 

Long-term debt

 

379.5

 

 

 

356.5

 

Common stock warrant liability

 

2.1

 

 

 

4.4

 

Deferred income taxes, net

 

2.5

 

 

 

2.5

 

Other unallocated liabilities

 

3.2

 

 

 

3.8

 

Total consolidated liabilities

$

624.0

 

 

$

586.1

 

 

Supplemental Cash Flow Information
Supplemental Cash Flow Information

NOTE 13—SUPPLEMENTAL CASH FLOW INFORMATION

The following table provides a reconciliation of total cash, cash equivalents, restricted cash and restricted cash equivalents as of June 30, 2017 and 2016:

 

 

June 30,

 

(In millions)

 

2017

 

 

 

2016

 

Cash and cash equivalents—continuing operations

$

18.4

 

 

$

40.2

 

Cash and cash equivalents—discontinued operations

 

 

 

 

0.1

 

Restricted cash and restricted cash equivalents—prepaid expenses,

   supplies and other current assets

 

2.1

 

 

 

 

Restricted cash and restricted cash equivalents—other noncurrent assets

 

4.2

 

 

 

3.6

 

Cash, cash equivalents, restricted cash and restricted cash

   equivalents, end of period

$

24.7

 

 

$

43.9

 

Restricted cash and restricted cash equivalents included in prepaid expenses, supplies and other current assets as of June 30, 2017 represents cash supporting a letter of credit associated with current portion of severance payments due to a former executive and cash deposits held under the ABL Facility. Restricted cash and restricted cash equivalents included in other noncurrent assets as of June 30, 2017 and 2016 generally represents amounts set aside for the remediation of future asset retirement obligations and the noncurrent portion of severance payments.

Commitments and Contingencies
Commitments and Contingencies

NOTE 14—COMMITMENTS AND CONTINGENCIES

Environmental Matters

Real Alloy’s operations are subject to environmental laws and regulations governing air emissions, wastewater discharges, the handling, disposal and remediation of hazardous substances and waste, and employee health and safety. These laws and regulations can impose joint and several liabilities for releases or threatened releases of hazardous substances upon statutorily defined parties, including us, regardless of fault or the lawfulness of the original activity or disposal. Given the changing nature of environmental legal requirements, we may be required, from time to time, to take environmental control measures at some of our facilities to meet future requirements. Real Alloy is under regulatory consent orders or directives to perform environmental remediation by agencies in two states and Norway.

Real Alloy’s reserves for environmental remediation liabilities totaled $15.8 million and $15.6 million as of each of June 30, 2017 and December 31, 2016, respectively. Of the total remediation liability, $4.2 million and $4.0 million is classified in accrued liabilities as of June 30, 2017 and December 31, 2016, respectively, with the remaining portion classified as environmental liabilities.

In addition to environmental liabilities, Real Alloy has asset retirement obligations associated with legal requirements primarily related to the normal operation of its landfills and the retirement of the related assets, which represents the most probable costs of remedial actions. Real Alloy’s total asset retirement obligations were $5.5 million and $5.3 million as of June 30, 2017 and December 31, 2016, respectively, of which $0.8 million and $0.9 million were classified as accrued liabilities, respectively, and $4.7 million and $4.4 million as other noncurrent liabilities, respectively.

Legal Proceedings

Real Industry, Real Alloy and SGGH have been named as a defendant in or as a party to a number of legal actions or proceedings that arose in the ordinary course of business. In some of these actions and proceedings, claims for monetary damages are asserted. In view of the inherent difficulty of predicting the outcome of such legal actions and proceedings, management generally cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual loss related to each pending matter may be, if any.

In accordance with applicable accounting guidance, management establishes an accrued liability for litigation when those matters present loss contingencies that are both probable and reasonably estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. The estimated loss is based upon currently available information and is subject to significant judgment, a variety of assumptions, and known and unknown uncertainties. The matters underlying the estimated loss may change from time to time, and actual results may vary significantly from the current estimate. Therefore, an estimate of loss represents what management believes to be an estimate of loss only for certain matters meeting these criteria. It does not represent the Company’s maximum loss exposure.

Based on management’s current understanding of these pending legal actions and proceedings, it does not believe that judgments or settlements arising from pending or threatened legal matters, individually or in the aggregate, would have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company. However, in light of the inherent uncertainties involved in these matters, some of which are beyond the Company’s control, and the very large or indeterminate damages that may be sought in some of these matters, an adverse outcome in one or more of these matters could be material to the Company’s results of operations or cash flows for any particular reporting period.

See Note 22—Commitments and Contingencies in the Notes to Consolidated Financial Statements included in Part IV, Item 15 of the Company’s Annual Report for additional information on certain legal proceedings and other matters involving the Company.

Financial Statement Presentation and Recent Accounting Updates (Policies)
Recent Accounting Standards Updates

Recent Accounting Standards Updates

The following provides information about recent Accounting Standards Updates (“ASU” or “Update”) issued by the Financial Accounting Standards Board (“FASB”) that are relevant to the operations of the Company.

Updates effective in 2017

Statement of Cash Flows: Restricted Cash

In November 2016, the FASB issued ASU 2016-18, which provides that a statement of cash flows explain the change in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents during the period. The effective date for this Update is for fiscal years beginning after December 15, 2017, however early adoption is permitted.

We early adopted the amendments provided in ASU 2016-18 in the period ended December 31, 2016 to provide financial statement users with more transparent disclosure about restricted cash and restricted cash equivalents. Upon adoption, the amendments provided in this Update are applied using a retrospective transition method to each period presented. The following table provides details of the impact the amendments in this Update had on our unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2016:

 

 

Six Months Ended June 30, 2016

 

(In millions)

As Previously Reported

 

 

Impact of Adoption

 

 

As Currently Reported

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

$

10.0

 

 

$

 

 

$

10.0

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sale of NABCO

 

3.9

 

 

 

(3.9

)

 

 

 

Net cash used in investing activities

 

(7.1

)

 

 

(3.9

)

 

 

(11.0

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

1.6

 

 

 

 

 

 

1.6

 

Effect of exchange rate changes on cash, cash equivalents,

   restricted cash and restricted cash equivalents

 

 

 

 

 

 

 

 

Increase in cash, cash equivalents, restricted cash and

   restricted cash equivalents

 

4.5

 

 

 

(3.9

)

 

 

0.6

 

Cash, cash equivalents, restricted cash and restricted cash equivalents,

   beginning of period

 

35.8

 

 

 

7.5

 

 

 

43.3

 

Cash, cash equivalents, restricted cash and restricted cash equivalents,

   end of period

$

40.3

 

 

$

3.6

 

 

$

43.9

 

 

Updates not yet effective

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU 2014-09, which requires recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. Additionally, the Update requires the use of more estimates and judgments than current accounting guidance, as well as additional disclosures. The FASB has issued several updates to the standard that i) defer the original effective date; ii) clarify the application of principal versus agent guidance; iii) clarify the guidance on inconsequential and perfunctory promises and licensing; and iv) clarify the guidance on the derecognition of nonfinancial assets. ASU 2014-09 and the related updates are effective for fiscal years beginning after December 15, 2017.

We have formed a task force to understand and implement the new revenue recognition standard. The task force is currently evaluating the impact this guidance will have on the Company’s consolidated financial statements. Per this evaluation, we have identified that the new standard may require the Company to change the timing of when it records discounts offered. Currently, these are recorded when earned; after the adoption of ASU 2014-09, these amounts may be considered a portion of the contract’s transaction cost. The change may result in an acceleration in the timing of costs that could reduce revenue upon adoption. The ultimate impact to the Company’s consolidated financial statements is still being determined. Additionally, we are developing additional controls and procedures to evaluate contracts and the terms and conditions therein to better ensure awareness of when the transfer of control of goods or services occurs for proper revenue recognition.

We plan to adopt ASU 2014-09 and related updates effective January 1, 2018 using the modified retrospective approach by recognizing the cumulative effect of initially applying the new standard as an adjustment to the opening balance of equity. We also anticipate that the adoption will result in an increase to the revenue disclosures in the Company’s consolidated financial statements.

Leases

In February 2016, the FASB issued ASU 2016-02, which generally requires companies to recognize operating and financing lease liabilities and corresponding right-of-use assets on the balance sheet. This guidance will be effective for the Company in fiscal years beginning after December 15, 2018 on a modified retrospective basis and early adoption is permitted. We are currently evaluating the effect this guidance will have on our consolidated financial statements and related disclosures.

Derivatives and Hedging: Contingent Put and Call Options in Debt Instruments

In March 2016, the FASB issued ASU 2016-06, which clarifies what steps are required when assessing whether the economic characteristics and risks of call or put options are clearly and closely related to the economic characteristics and risks of their debt hosts, which is one of the criteria for bifurcating an embedded derivative. Consequently, when an option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise the option is related to interest rates or credit risks. The amendments provided for in this Update are effective for fiscal years beginning after December 15, 2017, and interim periods within fiscal years beginning after December 15, 2018. We are currently evaluating the effect this guidance will have on our consolidated financial statements and related disclosures.

Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB issued ASU 2016-15, which provides, among other things, that distributions received from equity method investees be classified using one of two possible methods, a cumulative earnings approach or a nature of distribution approach. This Update is effective for fiscal years beginning after December 15, 2017, however early adoption is permitted. We are currently evaluating the effect this guidance will have on our consolidated financial statements and related disclosures.

Business Combinations: Clarifying the Definition of a Business

In January 2017, the FASB issued ASU 2017-01, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the current implementation guidance in Topic 805, there are three elements of a business—inputs, processes, and outputs. While an integrated set of assets and activities (collectively referred to as a “set”) that is a business usually has outputs, outputs are not required to be present. In addition, all the inputs and processes that a seller uses in operating a set are not required if market participants can acquire the set and continue to produce outputs, for example, by integrating the acquired set with their own inputs and processes.

The amendments in this Update provide a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated.

If the screen is not met, the amendments in this Update (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. The amendments in this Update provide a framework to assist entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs. Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs.

Lastly, the amendments in this Update narrow the definition of the term “output” so that the term is consistent with how outputs are described in Topic 606.

This Update is effective for fiscal years beginning after December 15, 2017, however early adoption is permitted. We are currently evaluating the effect this guidance will have on our consolidated financial statements and related disclosures.

Compensation—Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

In March 2017, the FASB issued ASU 2017-07, which provides that an employer report the service cost component of pension and post-retirement benefit costs in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described. If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed. The amendments in this Update also allow only the service cost component to be eligible for capitalization when applicable (for example, as a cost of internally manufactured inventory or a self-constructed asset).

This Update is effective for fiscal years beginning after December 15, 2017, however early adoption is permitted in the first interim period of any fiscal year presented. The amendments in this Update will be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. The amendments allow a practical expedient that permits an employer to use the amounts disclosed in its pension and other postretirement benefit plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements. Disclosure that the practical expedient was used is required on a retrospective basis. We are currently evaluating the effect this guidance will have on our consolidated financial statements and related disclosures.

Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting

In May 2017, the FASB issued ASU 2017-09, which provides guidance about changes to the terms or conditions of a share-based payment award that requires an entity to apply modification accounting in Topic 718. This Update is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The amendments in this Update will be applied prospectively to any awards modified on or after the adoption date. We are currently evaluating the effect this guidance will have on our consolidated financial statements and related disclosures.

Financial Statement Presentation and Recent Accounting Updates (Tables)
Impact on Unaudited Consolidated Statements of Cash Flows Due to Adoption of Amendments in Accounting Updates

The following table provides details of the impact the amendments in this Update had on our unaudited condensed consolidated statements of cash flows for the six months ended June 30, 2016:

 

 

Six Months Ended June 30, 2016

 

(In millions)

As Previously Reported

 

 

Impact of Adoption

 

 

As Currently Reported

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

$

10.0

 

 

$

 

 

$

10.0

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sale of NABCO

 

3.9

 

 

 

(3.9

)

 

 

 

Net cash used in investing activities

 

(7.1

)

 

 

(3.9

)

 

 

(11.0

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by financing activities

 

1.6

 

 

 

 

 

 

1.6

 

Effect of exchange rate changes on cash, cash equivalents,

   restricted cash and restricted cash equivalents

 

 

 

 

 

 

 

 

Increase in cash, cash equivalents, restricted cash and

   restricted cash equivalents

 

4.5

 

 

 

(3.9

)

 

 

0.6

 

Cash, cash equivalents, restricted cash and restricted cash equivalents,

   beginning of period

 

35.8

 

 

 

7.5

 

 

 

43.3

 

Cash, cash equivalents, restricted cash and restricted cash equivalents,

   end of period

$

40.3

 

 

$

3.6

 

 

$

43.9

 

 

Business Combinations (Tables) (Beck Trading)

The following table provides summary information about the purchase consideration and identifiable assets acquired:

 

(In millions)

 

 

 

Consideration paid at closing

$

23.6

 

Purchase price allocation:

 

 

 

Inventories

$

10.6

 

Property, plant and equipment

 

6.8

 

Equity method investment

 

6.1

 

Prepaid expenses, supplies and other current assets

 

0.1

 

Estimated fair value of assets acquired

$

23.6

 

 

The preliminary fair value estimate of property, plant and equipment acquired is as follows:

 

(In millions)

Estimated Fair Value

 

Land and improvements

$

0.7

 

Buildings and improvements

 

2.6

 

Machinery, equipment, furniture and fixtures

 

3.5

 

Property, plant and equipment acquired

$

6.8

 

 

Inventories (Tables)
Inventories

The following table presents the components of inventories as of June 30, 2017 and December 31, 2016:

 

 

June 30,

 

 

December 31,

 

(In millions)

2017

 

 

2016

 

Finished goods

$

44.6

 

 

$

45.1

 

Raw materials and work in process

 

75.5

 

 

 

73.1

 

Total inventories

$

120.1

 

 

$

118.2

 

 

Debt and Redeemable Preferred Stock (Tables)

The following table presents the Company’s long-term debt as of June 30, 2017 and December 31, 2016:

 

 

June 30,

 

 

December 31,

 

(In millions)

2017

 

 

2016

 

Senior Secured Notes:

 

 

 

 

 

 

 

Principal amount outstanding

$

305.0

 

 

$

305.0

 

Unamortized original issue discount and debt issuance costs

 

(7.9

)

 

 

(10.1

)

Senior Secured Notes, net

 

297.1

 

 

 

294.9

 

Revolving credit facilities:

 

 

 

 

 

 

 

Principal amount outstanding

 

76.0

 

 

 

57.0

 

Unamortized debt issuance costs

 

(1.0

)

 

 

(1.5

)

Revolving credit facilities, net

 

75.0

 

 

 

55.5

 

Term Loan

 

 

 

 

1.5

 

Capital leases

 

7.4

 

 

 

4.6

 

Current portion of long-term debt

 

(3.1

)

 

 

(2.3

)

Long-term debt, net

$

376.4

 

 

$

354.2

 

 

The following table presents activity related to the carrying value of Redeemable Preferred Stock during the six months ended June 30, 2017:

 

(In millions)

 

 

 

Balance, December 31, 2016

$

24.9

 

Accretion of fair value adjustment to Redeemable Preferred Stock

 

0.5

 

Balance, June 30, 2017

$

25.4

 

 

Stockholders Equity and Noncontrolling Interest (Tables)

The following table summarizes activity within stockholders’ equity attributable to Real Industry and noncontrolling interest during the six months ended June 30, 2017:

 

(In millions)

Equity Attributable to Real Industry, Inc.

 

 

Noncontrolling Interest

 

 

Total Equity

 

Balance, December 31, 2016

$

33.4

 

 

$

1.1

 

 

$

34.5

 

Net earnings (loss)

 

(17.9

)

 

 

0.4

 

 

 

(17.5

)

Distribution to noncontrolling interest

 

 

 

 

(0.9

)

 

 

(0.9

)

Consolidation of noncontrolling interest

 

(0.5

)

 

 

0.5

 

 

 

 

Share-based compensation expense

 

1.4

 

 

 

 

 

 

1.4

 

Dividends on Redeemable Preferred Stock, in cash or accrued

 

(1.1

)

 

 

 

 

 

(1.1

)

Accretion of fair value adjustment to Redeemable Preferred Stock

 

(0.5

)

 

 

 

 

 

(0.5

)

Change in accumulated other comprehensive loss

 

5.7

 

 

 

 

 

 

5.7

 

Balance, June 30, 2017

$

20.5

 

 

$

1.1

 

 

$

21.6

 

 

The following table reflects changes in the shares of common stock outstanding during the six months ended June 30, 2017:

 

Shares of

Common Stock

Outstanding

 

Balance, December 31, 2016

 

29,386,882

 

Restricted common stock awards granted, net of forfeitures

 

391,668

 

Restricted stock units converted to common stock

 

21,387

 

Common stock options exercised

 

750

 

Common stock acquired

 

(5,909

)

Balance, June 30, 2017

 

29,794,778

 

 

Accumulated Other Comprehensive Loss (Tables)
Schedule of Accumulated Other Comprehensive Loss

The following table summarizes activity within accumulated other comprehensive loss during the six months ended June 30, 2017:

 

(In millions)

Currency Translation Adjustments

 

 

Pension Benefit Adjustments

 

 

Accumulated Other Comprehensive Loss

 

Balance, December 31, 2016

 

(8.2

)

 

 

1.1

 

 

 

(7.1

)

Current period currency translation adjustments

 

5.7

 

 

 

 

 

 

5.7

 

Balance, June 30, 2017

$

(2.5

)

 

$

1.1

 

 

$

(1.4

)

 

Employee Benefit Plans (Tables)
Components of Net Periodic Benefit Expense

The following table presents the components of net periodic benefit expense under the German defined benefit pension plans for the three and six months ended June 30, 2017 and 2016:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In millions)

 

2017

 

 

 

2016

 

 

 

2017

 

 

 

2016

 

Service cost

$

0.2

 

 

$

0.2

 

 

$

0.5

 

 

$

0.4

 

Interest cost

 

0.2

 

 

 

0.3

 

 

 

0.4

 

 

 

0.5

 

Amortization of net actuarial gains

 

 

 

 

 

 

 

 

 

 

(0.1

)

Expected return on plan assets

 

 

 

 

(0.1

)

 

 

 

 

 

(0.1

)

Net periodic benefit expense

$

0.4

 

 

$

0.4

 

 

$

0.9

 

 

$

0.7

 

 

Loss Per Share (Tables)

The following table sets forth the computation of basic and diluted loss per share for the three and six months ended June 30, 2017 and 2016:

 

(In millions, except share and

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

   per share amounts)

2017

 

 

2016

 

 

2017

 

 

2016

 

Loss from continuing operations

$

(6.2

)

 

$

(1.3

)

 

$

(17.5

)

 

$

(11.3

)

Earnings from discontinued operations, net

   of income taxes

 

 

 

 

0.1

 

 

 

 

 

 

0.1

 

Net loss

 

(6.2

)

 

 

(1.2

)

 

 

(17.5

)

 

 

(11.2

)

Earnings from continuing operations attributable

   to noncontrolling interest

 

0.3

 

 

 

0.3

 

 

 

0.4

 

 

 

0.4

 

Net loss attributable to Real Industry, Inc.

 

(6.5

)

 

 

(1.5

)

 

 

(17.9

)

 

 

(11.6

)

Dividends on Redeemable Preferred Stock, in-kind

 

 

 

 

(0.5

)

 

 

 

 

 

(0.9

)

Dividends on Redeemable Preferred Stock, in cash

   or accrued

 

(0.5

)

 

 

 

 

 

(1.1

)

 

 

 

Accretion of fair value adjustment to Redeemable

   Preferred Stock

 

(0.3

)

 

 

(0.2

)

 

 

(0.5

)

 

 

(0.5

)

Numerator for basic and diluted loss per share—Net

   loss available to common stockholders

$

(7.3

)

 

$

(2.2

)

 

$

(19.5

)

 

$

(13.0

)

Denominator for basic and diluted loss per

   share—Weighted average shares outstanding

 

29,009,854

 

 

 

29,252,343

 

 

 

28,914,533

 

 

 

29,160,245

 

Basic and diluted loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

$

(0.25

)

 

$

(0.08

)

 

$

(0.67

)

 

$

(0.43

)

Discontinued operations

 

 

 

 

0.01

 

 

 

 

 

 

 

Basic and diluted loss per share

$

(0.25

)

 

$

(0.07

)

 

$

(0.67

)

 

$

(0.43

)

 

The following tables provide details on the average market price of Real Industry common stock; the outstanding shares of unvested restricted common stock, common stock options, unvested restricted stock units, and Warrants that were potentially dilutive; and summary information about the potentially dilutive common stock equivalents for each of the periods presented:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Average market price of Real Industry common

   stock

$

2.73

 

 

$

8.12

 

 

$

3.82

 

 

$

7.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potentially dilutive common stock equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unvested restricted common stock

 

737,610

 

 

 

491,286

 

 

 

737,610

 

 

 

491,286

 

Outstanding common stock options

 

445,100

 

 

 

775,650

 

 

 

445,100

 

 

 

775,650

 

Unvested restricted stock units

 

519,835

 

 

 

381,823

 

 

 

519,835

 

 

 

381,823

 

Warrants

 

1,448,333

 

 

 

1,448,333

 

 

 

1,448,333

 

 

 

1,448,333

 

Total potentially dilutive common stock

   equivalents

 

3,150,878

 

 

 

3,097,092

 

 

 

3,150,878

 

 

 

3,097,092

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In millions, except exercise prices)

2017

 

 

2016

 

 

2017

 

 

2016

 

Average unamortized share-based compensation

   expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted common stock awards

$

3.6

 

 

$

3.0

 

 

$

3.4

 

 

$

2.6

 

Restricted stock unit awards

 

1.0

 

 

 

2.1

 

 

 

0.8

 

 

 

2.0

 

Range of exercise prices on common stock options

$3.00 - $10.00

 

 

$3.00 - $10.00

 

 

$3.00 - $10.00

 

 

$3.00 - $10.00

 

Weighted average exercise price of the Warrants

$

5.64

 

 

$

5.64

 

 

$

5.64

 

 

$

5.64

 

 

Derivative and Other Financial Instruments and Fair Value Measurements (Tables)

The table below presents gross amounts of recognized derivative assets and liabilities, the amounts offset in the unaudited condensed consolidated balance sheets and the net amounts of derivative assets and liabilities presented therein. As of June 30, 2017 and December 31, 2016, there were no amounts subject to an enforceable master netting arrangement or similar agreement that have not been offset in the unaudited condensed consolidated balance sheets.

 

June 30, 2017

 

 

December 31, 2016

 

(In millions)

Asset

 

 

Liability

 

 

Asset

 

 

Liability

 

Metal

$

 

 

$

(0.2

)

 

$

 

 

$

(0.4

)

Natural gas

 

 

 

 

 

 

 

0.6

 

 

 

 

Total

 

 

 

 

(0.2

)

 

 

0.6

 

 

 

(0.4

)

Effect of counterparty netting arrangements

 

 

 

 

 

 

 

 

 

 

 

Net derivative assets (liabilities) as

   classified in the condensed

   consolidated balance sheets

$

 

 

$

(0.2

)

 

$

0.6

 

 

$

(0.4

)

 

The following table presents details of the balance sheet classification of the fair value of Real Alloy’s derivative financial instruments as of June 30, 2017 and December 31, 2016:  

 

 

 

 

June 30,

 

 

December 31,

 

(In millions)

Balance Sheet Classification

 

2017

 

 

2016

 

Derivative assets:

 

 

 

 

 

 

 

 

 

Natural Gas

Prepaid expenses, supplies and other current assets

 

$

 

 

$

0.6

 

Derivative liabilities:

 

 

 

 

 

 

 

 

 

Metal

Accrued liabilities

 

$

(0.2

)

 

$

(0.4

)

 

The following table presents changes in the fair value of the common stock warrant liability during the three and six months ended June 30, 2017 and 2016:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In millions)

 

2017

 

 

 

2016

 

 

 

2017

 

 

 

2016

 

Balance, beginning of period

$

1.9

 

 

$

7.5

 

 

$

4.4

 

 

$

6.9

 

Warrants exercised

 

 

 

 

(0.1

)

 

 

 

 

 

(0.1

)

Change in fair value of common stock warrant

   liability

 

0.2

 

 

 

(1.3

)

 

 

(2.3

)

 

 

(0.7

)

Balance, end of period

$

2.1

 

 

$

6.1

 

 

$

2.1

 

 

$

6.1

 

 

The following table sets forth financial assets and liabilities that are accounted for at fair value on a recurring basis as of June 30, 2017 and December 31, 2016, and their level in the fair value hierarchy:

 

 

 

Estimated Fair Value

 

 

Fair Value

 

June 30,

 

 

December 31,

 

(In millions)

Hierarchy

 

2017

 

 

2016

 

Derivative assets

Level 2

 

$

 

 

$

0.6

 

Derivative liabilities

Level 2

 

 

(0.2

)

 

 

(0.4

)

Net derivative assets (liabilities)

 

 

$

(0.2

)

 

$

0.2

 

Common stock warrant liability

Level 3

 

$

(2.1

)

 

$

(4.4

)

 

The following table presents losses (gains) on derivative financial instruments during the three and six months ended June 30, 2017 and 2016:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In millions)

 

2017

 

 

 

2016

 

 

 

2017

 

 

 

2016

 

Realized losses (gains):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Metal

$

0.6

 

 

$

0.2

 

 

$

1.4

 

 

$

0.4

 

Natural gas

 

(0.1

)

 

 

0.2

 

 

 

(0.1

)

 

 

0.8

 

Total realized losses

 

0.5

 

 

 

0.4

 

 

 

1.3

 

 

 

1.2

 

Unrealized losses (gains):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Metal

 

(0.2

)

 

 

(0.8

)

 

 

(0.2

)

 

 

(0.4

)

Natural gas

 

0.3

 

 

 

(1.1

)

 

 

0.6

 

 

 

(1.1

)

Total unrealized losses (gains)

 

0.1

 

 

 

(1.9

)

 

 

0.4

 

 

 

(1.5

)

Losses (gains) on derivative financial instruments

$

0.6

 

 

$

(1.5

)

 

$

1.7

 

 

$

(0.3

)

 

The following tables present the carrying values and estimated fair values of other financial instruments as of June 30, 2017 and December 31, 2016:

 

 

 

 

June 30, 2017

 

(In millions)

Fair Value Hierarchy

 

Carrying Value

 

 

Estimated

Fair Value

 

Assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

Level 1

 

$

18.4

 

 

$

18.4

 

Restricted cash and restricted cash equivalents

Level 1

 

 

6.3

 

 

 

6.3

 

Financing receivable

Level 2

 

 

32.5

 

 

 

32.5

 

Loans receivable, net (other noncurrent assets)

Level 3

 

 

0.7

 

 

 

0.7

 

Liabilities

 

 

 

 

 

 

 

 

 

Long-term debt:

 

 

 

 

 

 

 

 

 

Senior Secured Notes

Level 1

 

$

297.1

 

 

$

296.6

 

ABL Facility

Level 2

 

 

75.0

 

 

 

76.0

 

Redeemable Preferred Stock

Level 3

 

$

25.4

 

 

$

27.0

 

 

 

 

 

December 31, 2016

 

(In millions)

Fair Value Hierarchy

 

Carrying Value

 

 

Estimated

Fair Value

 

Assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

Level 1

 

$

27.2

 

 

$

27.2

 

Restricted cash and restricted cash equivalents

Level 1

 

 

5.5

 

 

 

5.5

 

Financing receivable

Level 2

 

 

28.4

 

 

 

28.4

 

Loans receivable, net (other noncurrent assets)

Level 3

 

 

0.8

 

 

 

0.8

 

Liabilities

 

 

 

 

 

 

 

 

 

Long-term debt:

 

 

 

 

 

 

 

 

 

Senior Secured Notes

Level 1

 

$

294.9

 

 

$

307.5

 

Asset-Based Facility

Level 2

 

 

55.5

 

 

 

57.0

 

Term Loan

Level 2

 

 

1.5

 

 

 

1.5

 

Redeemable Preferred Stock

Level 3

 

$

24.9

 

 

$

26.8

 

 

Segment Information (Tables)

The following tables show segment revenues from external customers (there were no intersegment revenues) and Segment Adjusted EBITDA for the three and six months ended June 30, 2017 and 2016, and reconciliations of Segment Adjusted EBITDA to net loss for each period presented. Segment Adjusted EBITDA presents only the financial performance of our segments and does not include the results of operations of Corporate and Other.

 

 

Three Months Ended June 30, 2017

 

(In millions)

RANA

 

 

RAEU

 

 

Corporate and Other

 

 

Total

 

Revenues

$

234.4

 

 

$

115.8

 

 

$

 

 

$

350.2

 

Segment Adjusted EBITDA

$

8.7

 

 

$

8.5

 

 

$

 

 

$

17.2

 

 

 

Three Months Ended June 30, 2016

 

(In millions)

RANA

 

 

RAEU

 

 

Corporate and Other

 

 

Total

 

Revenues

$

212.4

 

 

$

108.4

 

 

$

0.1

 

 

$

320.9

 

Segment Adjusted EBITDA

$

14.3

 

 

$

6.6

 

 

$

 

 

$

20.9

 

 

 

Six Months Ended June 30, 2017

 

(In millions)

RANA

 

 

RAEU

 

 

Corporate and Other

 

 

Total

 

Revenues

$

460.0

 

 

$

227.3

 

 

$

 

 

$

687.3

 

Segment Adjusted EBITDA

$

15.0

 

 

$

14.5

 

 

$

 

 

$

29.5

 

 

 

Six Months Ended June 30, 2016

 

(In millions)

RANA

 

 

RAEU

 

 

Corporate and Other

 

 

Total

 

Revenues

$

413.2

 

 

$

217.0

 

 

$

0.1

 

 

$

630.3

 

Segment Adjusted EBITDA

$

27.5

 

 

$

11.7

 

 

$

 

 

$

39.2

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

(In millions)

 

2017

 

 

 

2016

 

 

 

2017

 

 

 

2016

 

Segment Adjusted EBITDA

$

17.2

 

 

$

20.9

 

 

$

29.5

 

 

$

39.2

 

Unrealized gains (losses) on derivative financial

   instruments

 

(0.1

)

 

 

1.9

 

 

 

(0.4

)

 

 

1.5

 

Segment depreciation and amortization

 

(10.1

)

 

 

(10.6

)

 

 

(21.6

)

 

 

(25.3

)

Amortization of inventories and supplies purchase

   accounting adjustments

 

 

 

 

(0.3

)

 

 

 

 

 

(0.9

)

Corporate and Other selling, general and

   administrative expenses

 

(2.5

)

 

 

(3.6

)

 

 

(5.7

)

 

 

(6.9

)

Other, net

 

(0.7

)

 

 

(0.2

)

 

 

(1.6

)

 

 

(1.6

)

Operating profit

 

3.8

 

 

 

8.1

 

 

 

0.2

 

 

 

6.0

 

Interest expense, net

 

(9.6

)

 

 

(9.1

)

 

 

(20.6

)

 

 

(18.3

)

Change in fair value of common stock warrant

   liability

 

(0.2

)

 

 

1.3

 

 

 

2.3

 

 

 

0.7

 

Foreign exchange gains (losses) on intercompany

   loans

 

1.4

 

 

 

(1.6

)

 

 

2.2

 

 

 

1.0

 

Income (loss) from equity method investment

 

(0.5

)

 

 

 

 

 

0.6

 

 

 

 

Other nonoperating income (expense), net

 

 

 

 

0.2

 

 

 

(0.3

)

 

 

0.2

 

Income tax expense

 

(1.1

)

 

 

(0.2

)

 

 

(1.9

)

 

 

(0.9

)

Earnings from discontinued operations, net of

   income taxes

 

 

 

 

0.1

 

 

 

 

 

 

0.1

 

Net loss

$

(6.2

)

 

$

(1.2

)

 

$

(17.5

)

 

$

(11.2

)

 

The following tables present summarized balance sheet information for each of our reportable segments and reconciliations to consolidated assets and liabilities as of June 30, 2017 and December 31, 2016:

 

 

June 30, 2017

 

 

December 31, 2016

 

(In millions)

RANA

 

 

RAEU

 

 

RANA

 

 

RAEU

 

Segment Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

8.7

 

 

$

5.3

 

 

$

11.5

 

 

$

5.7

 

Trade accounts receivable, net

 

96.4

 

 

 

16.5

 

 

 

76.2

 

 

 

12.2

 

Financing receivable

 

 

 

 

32.5

 

 

 

 

 

 

28.4

 

Inventories

 

83.1

 

 

 

37.0

 

 

 

79.3

 

 

 

38.9

 

Prepaid expenses, supplies and other

   current assets

 

19.3

 

 

 

7.2

 

 

 

13.7

 

 

 

6.4

 

Total current assets

 

207.5

 

 

 

98.5

 

 

 

180.7

 

 

 

91.6

 

Property, plant and equipment, net

 

187.8

 

 

 

102.0

 

 

 

195.0

 

 

 

94.2

 

Equity method investment

 

5.6

 

 

 

 

 

 

5.0

 

 

 

 

Identifiable intangible assets, net

 

11.3

 

 

 

 

 

 

12.5

 

 

 

 

Goodwill

 

33.6

 

 

 

9.3

 

 

 

33.6

 

 

 

8.6

 

Other noncurrent assets

 

3.8

 

 

 

3.8

 

 

 

5.0

 

 

 

3.5

 

Total segment assets

$

449.6

 

 

$

213.6

 

 

$

431.8

 

 

$

197.9

 

Segment Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade payables

$

80.4

 

 

$

43.9

 

 

$

73.8

 

 

$

41.8

 

Accrued liabilities

 

33.0

 

 

 

15.3

 

 

 

30.0

 

 

 

13.4

 

Total current liabilities

 

113.4

 

 

 

59.2

 

 

 

103.8

 

 

 

55.2

 

Accrued pension benefits

 

 

 

 

45.9

 

 

 

 

 

 

42.0

 

Environmental liabilities

 

11.6

 

 

 

 

 

 

11.6

 

 

 

 

Other noncurrent liabilities

 

4.7

 

 

 

1.9

 

 

 

4.5

 

 

 

1.8

 

Total segment liabilities

$

129.7

 

 

$

107.0

 

 

$

119.9

 

 

$

99.0

 

 

 

June 30,

 

 

December 31,

 

(In millions)

 

2017

 

 

2016

 

Assets:

 

 

 

 

 

 

 

Real Alloy North America

$

449.6

 

 

$

431.8

 

Real Alloy Europe

 

213.6

 

 

 

197.9

 

Cash and cash equivalents—Corporate and Other

 

4.4

 

 

 

9.9

 

Other unallocated assets

 

3.4

 

 

 

5.9

 

Total consolidated assets

$

671.0

 

 

$

645.5

 

Liabilities:

 

 

 

 

 

 

 

Real Alloy North America

$

129.7

 

 

$

119.9

 

Real Alloy Europe

 

107.0

 

 

 

99.0

 

Long-term debt

 

379.5

 

 

 

356.5

 

Common stock warrant liability

 

2.1

 

 

 

4.4

 

Deferred income taxes, net

 

2.5

 

 

 

2.5

 

Other unallocated liabilities

 

3.2

 

 

 

3.8

 

Total consolidated liabilities

$

624.0

 

 

$

586.1

 

 

Supplemental Cash Flow Information (Tables)
Reconciliation of Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents

The following table provides a reconciliation of total cash, cash equivalents, restricted cash and restricted cash equivalents as of June 30, 2017 and 2016:

 

 

June 30,

 

(In millions)

 

2017

 

 

 

2016

 

Cash and cash equivalents—continuing operations

$

18.4

 

 

$

40.2

 

Cash and cash equivalents—discontinued operations

 

 

 

 

0.1

 

Restricted cash and restricted cash equivalents—prepaid expenses,

   supplies and other current assets

 

2.1

 

 

 

 

Restricted cash and restricted cash equivalents—other noncurrent assets

 

4.2

 

 

 

3.6

 

Cash, cash equivalents, restricted cash and restricted cash

   equivalents, end of period

$

24.7

 

 

$

43.9

 

 

Business and Operations - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2017
Facility
Dec. 31, 2016
U.S. Federal NOLs
Organization And Business Activities [Line Items]
 
 
Net operating loss carry forwards
 
$ 916.0 
Facilities
27 
 
Financial Statement Presentation and Significant Accounting Policies - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2017
Entity
Jun. 30, 2016
Jun. 30, 2017
Entity
Jun. 30, 2016
Dec. 31, 2016
Schedule Of Significant Accounting Policies [Line Items]
 
 
 
 
 
Inventory estimated net realizable value
$ 120.1 
 
$ 120.1 
 
$ 118.2 
Intellectual property estimated net realizable value
11.3 
 
11.3 
 
12.5 
Cost of sales
332.1 
298.6 
655.8 
591.4 
 
Selling, general and administrative expenses
12.4 
14.6 
26.8 
30.0 
 
Immaterial error correction
 
 
Management concluded that the error correction in 2016 was not material to the full year results of operations. 
 
 
Number of VIE treated as unconsolidated equity method investment
 
 
 
Equity method investment
5.6 
 
5.6 
 
5.0 
Beck Trading
 
 
 
 
 
Schedule Of Significant Accounting Policies [Line Items]
 
 
 
 
 
Equity method investment
5.6 
 
5.6 
 
 
Maximum loss exposure amount
7.3 
 
7.3 
 
 
Adjustment To Correct Depreciation Expense Error
 
 
 
 
 
Schedule Of Significant Accounting Policies [Line Items]
 
 
 
 
 
Cost of sales
 
 
 
3.7 
 
Selling, general and administrative expenses
 
 
 
0.1 
 
Cosmedicine |
Disposal Group, Held-for-sale or Disposed of by Sale, Not Discontinued Operations
 
 
 
 
 
Schedule Of Significant Accounting Policies [Line Items]
 
 
 
 
 
Inventory estimated net realizable value
 
 
 
Cosmedicine |
Disposal Group, Held-for-sale or Disposed of by Sale, Not Discontinued Operations |
Intellectual Property
 
 
 
 
 
Schedule Of Significant Accounting Policies [Line Items]
 
 
 
 
 
Intellectual property estimated net realizable value
$ 0 
 
$ 0 
 
 
Financial Statement Presentation and Significant Accounting Policies - Impact on Unaudited Consolidated Statements of Cash Flows Due to Adoption of Amendments in Accounting Updates (Detail) (USD $)
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Cash flows from operating activities:
 
 
Net cash provided by operating activities
$ (11.4)
$ 10.0 
Cash flows from investing activities:
 
 
Proceeds from sale of NABCO
 
Net cash used in investing activities
(10.7)
(11.0)
Cash flows from financing activities:
 
 
Net cash provided by financing activities
13.6 
1.6 
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents
0.5 
Increase in cash, cash equivalents, restricted cash and restricted cash equivalents
(8.0)
0.6 
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period
32.7 
43.3 
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period
24.7 
43.9 
As Previously Reported
 
 
Cash flows from operating activities:
 
 
Net cash provided by operating activities
 
10.0 
Cash flows from investing activities:
 
 
Proceeds from sale of NABCO
 
3.9 
Net cash used in investing activities
 
(7.1)
Cash flows from financing activities:
 
 
Net cash provided by financing activities
 
1.6 
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents
 
Increase in cash, cash equivalents, restricted cash and restricted cash equivalents
 
4.5 
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period
 
35.8 
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period
 
40.3 
Impact of Adoption
 
 
Cash flows from operating activities:
 
 
Net cash provided by operating activities
 
Cash flows from investing activities:
 
 
Proceeds from sale of NABCO
 
(3.9)
Net cash used in investing activities
 
(3.9)
Cash flows from financing activities:
 
 
Net cash provided by financing activities
 
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents
 
Increase in cash, cash equivalents, restricted cash and restricted cash equivalents
 
(3.9)
Cash, cash equivalents, restricted cash and restricted cash equivalents, beginning of period
 
7.5 
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period
 
$ 3.6 
Business combinations - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Nov. 1, 2016
Beck Trading
Jun. 30, 2017
Beck Trading
Jun. 30, 2017
Beck Trading
Real Alloy
Accounts Receivable
Dec. 31, 2016
Beck Trading
Real Alloy
Accounts Receivable
Jun. 30, 2017
Beck Trading
Real Alloy
Trade Payables
Dec. 31, 2016
Beck Trading
Real Alloy
Trade Payables
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
 
 
Percentage of voting interests acquired
 
 
 
 
49.00% 
 
 
 
 
 
Cash paid at closing
 
 
 
 
$ 23.6 
 
 
 
 
 
Inventories
 
 
 
 
10.6 
 
 
 
 
 
Fair value adjustment to inventory
 
 
 
 
0.3 
 
 
 
 
 
Distributions received
 
 
 
 
 
6.0 
 
 
 
 
Operating income (loss)
3.8 
8.1 
0.2 
6.0 
 
0.6 
 
 
 
 
Due from (to) related party
 
 
 
 
 
 
$ 1.7 
$ 6.8 
$ (0.1)
$ (0.5)
Business combinations - Schedule of Purchase Price Allocation (Detail) (Beck Trading, USD $)
In Millions, unless otherwise specified
0 Months Ended
Nov. 1, 2016
Beck Trading
 
Business Acquisition [Line Items]
 
Consideration paid at closing
$ 23.6 
Purchase price allocation:
 
Inventories
10.6 
Property, plant and equipment
6.8 
Equity method investment
6.1 
Prepaid expenses, supplies and other current assets
0.1 
Estimated fair value of assets acquired
$ 23.6 
Business combinations - Summary of Preliminary Estimated Fair Value of Property Plant and Equipment (Detail) (Beck Trading, USD $)
In Millions, unless otherwise specified
Nov. 1, 2016
Business Acquisition [Line Items]
 
Preliminary estimated fair value
$ 6.8 
Land and improvements
 
Business Acquisition [Line Items]
 
Preliminary estimated fair value
0.7 
Buildings and improvements
 
Business Acquisition [Line Items]
 
Preliminary estimated fair value
2.6 
Machinery, equipment, furniture and fixtures
 
Business Acquisition [Line Items]
 
Preliminary estimated fair value
$ 3.5 
Inventories (Detail) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2017
Dec. 31, 2016
Inventory Disclosure [Abstract]
 
 
Finished goods
$ 44.6 
$ 45.1 
Raw materials and work in process
75.5 
73.1 
Total inventories
$ 120.1 
$ 118.2 
Schedule of long-term Debt (Detail) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2017
Dec. 31, 2016
Jan. 31, 2015
Debt Instrument [Line Items]
 
 
 
Capital leases
$ 7.4 
$ 4.6 
 
Current portion of long-term debt
(3.1)
(2.3)
 
Long-term debt, net
376.4 
354.2 
 
Senior Secured Notes
 
 
 
Debt Instrument [Line Items]
 
 
 
Principal amount outstanding
305.0 
305.0 
305.0 
Unamortized original issue discount and debt issuance costs
(7.9)
(10.1)
 
Senior Secured Notes, net
297.1 
294.9 
 
Term Loan
 
 
 
Debt Instrument [Line Items]
 
 
 
Term Loan
 
1.5 
 
Revolving Credit Facilities
 
 
 
Debt Instrument [Line Items]
 
 
 
Principal amount outstanding
76.0 
57.0 
 
Unamortized original issue discount and debt issuance costs
(1.0)
(1.5)
 
Revolving credit facilities, net
$ 75.0 
$ 55.5 
 
Debt and Redeemable Preferred Stock - Additional Information (Detail) (USD $)
6 Months Ended 0 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Dec. 31, 2016
Feb. 27, 2015
Redeemable Preferred Stock
Jun. 30, 2017
Redeemable Preferred Stock
Feb. 27, 2015
Redeemable Preferred Stock
First Eighteen Months
Feb. 27, 2015
Redeemable Preferred Stock
Following Twelve Months
Jun. 30, 2017
Redeemable Preferred Stock
Following Twelve Months
Feb. 27, 2015
Redeemable Preferred Stock
Thereafter
Jun. 30, 2017
Redeemable Preferred Stock
Thereafter
Jun. 30, 2017
Revolving Credit Facilities
Jun. 30, 2016
Revolving Credit Facilities
Jun. 30, 2017
Revolving Credit Facilities
Jun. 30, 2016
Revolving Credit Facilities
Jun. 30, 2017
Revolving Credit Facilities
UNITED STATES
Jun. 30, 2017
Revolving Credit Facilities
UNITED STATES
Federal Funds Rate
Jun. 30, 2017
Revolving Credit Facilities
Canada Sub-facility
Jun. 30, 2017
Revolving Credit Facilities
Canada Sub-facility
CDOR
Jun. 30, 2017
Senior Secured Notes
Jun. 30, 2016
Senior Secured Notes
Jun. 30, 2017
Senior Secured Notes
Jun. 30, 2016
Senior Secured Notes
Dec. 31, 2016
Senior Secured Notes
Jan. 31, 2015
Senior Secured Notes
Mar. 14, 2017
ABL Facility
Revolving Credit Facilities
Debt and Temporary Equity [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Senior secured notes issued
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 305,000,000 
 
$ 305,000,000 
 
$ 305,000,000 
$ 305,000,000 
 
Debt instrument interest rate, stated percentage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.00% 
 
Debt, interest expense
 
 
 
 
 
 
 
 
 
 
500,000 
600,000 
2,700,000 
1,000,000 
 
 
 
 
8,700,000 
8,500,000 
17,500,000 
17,300,000 
 
 
 
Debt, due date
 
 
 
 
 
 
 
 
 
 
 
 
Mar. 14, 2022 
 
 
 
 
 
 
 
Jan. 15, 2019 
 
 
 
 
Amortization of debt issuance costs
4,000,000 
2,400,000 
 
 
 
 
 
 
 
 
200,000 
200,000 
400,000 
400,000 
 
 
 
 
1,100,000 
1,000,000 
2,200,000 
2,000,000 
 
 
 
Credit facility amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
110,000,000 
Debt, maturity date description
 
 
 
 
 
 
 
 
 
 
 
 
The ABL Facility expires on the earlier of the instrument’s expiration date, March 14, 2022, or 90 days prior to the maturity date of the Senior Secured Notes or the Company’s Redeemable Preferred Stock. 
 
 
 
 
 
 
 
 
 
 
 
 
Debt, expires prior to current maturity date
 
 
 
 
 
 
 
 
 
 
 
 
90 days 
 
 
 
 
 
 
 
 
 
 
 
 
Line of Credit Facility, interest rate description
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. dollar denominated revolving loans bear interest, at the Borrowers’ option, either at a LIBOR interest period rate, or the greater of (a) the prime rate announced by Bank of America from time to time, (b) the U.S. Federal Funds Rate plus 0.50%, and (c) the 30-day interest period LIBOR. 
 
Canadian dollar denominated loans bear interest, at the Borrowers’ option, either at the CDOR rate for a term comparable to the loan, or floating at the greater of (x) the prime rate announced by Bank of America (Canada) from time to time or (y) the 1-month CDOR plus 1.0%, plus, in each case, a margin based on the amount of the excess availability under the ABL Facility. 
 
 
 
 
 
 
 
 
Debt instrument, variable interest rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.50% 
 
1.00% 
 
 
 
 
 
 
 
Write-off unamortized debt issuance cost
 
 
 
 
 
 
 
 
 
 
1,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital leases due within next twelve months
3,100,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital leases
7,400,000 
 
4,600,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Temporary equity, dividends rate
 
 
 
 
 
7.00% 
8.00% 
 
9.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Temporary equity accrued dividends payment percentage on liquidation preference
 
 
 
 
8.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Temporary equity, dividend payment terms
 
 
 
 
Dividends were paid in-kind for the first two years, and thereafter are accrued and payable in cash. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liquidation preference value
 
 
 
 
28,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Temporary equity, accrued dividends
 
 
 
 
$ 600,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Temporary equity, accumulate interest rate on unpaid dividends
 
 
 
 
 
 
 
8.00% 
 
9.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Temporary equity redemption period
 
 
 
66 months 
38 months 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summary of Activity within Stockholders Equity Attributable to Real Industry and Noncontrolling Interest (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Class Of Stock [Line Items]
 
 
 
 
Beginning balance
 
 
$ 34.5 
 
Net earnings (loss)
(6.2)
(1.2)
(17.5)
(11.2)
Distribution to noncontrolling interest
 
 
(0.9)
 
Share-based compensation expense
 
 
1.4 
 
Dividends on Redeemable Preferred Stock, in cash or accrued
(0.5)
(1.1)
Accretion of fair value adjustment to Redeemable Preferred Stock
(0.3)
(0.2)
(0.5)
(0.5)
Change in accumulated other comprehensive loss
 
 
5.7 
 
Ending balance
21.6 
 
21.6 
 
Equity Attributable to Real Industry, Inc.
 
 
 
 
Class Of Stock [Line Items]
 
 
 
 
Beginning balance
 
 
33.4 
 
Net earnings (loss)
 
 
(17.9)
 
Consolidation of noncontrolling interest
 
 
(0.5)
 
Share-based compensation expense
 
 
1.4 
 
Dividends on Redeemable Preferred Stock, in cash or accrued
 
 
(1.1)
 
Accretion of fair value adjustment to Redeemable Preferred Stock
 
 
(0.5)
 
Change in accumulated other comprehensive loss
 
 
5.7 
 
Ending balance
20.5 
 
20.5 
 
Noncontrolling Interest
 
 
 
 
Class Of Stock [Line Items]
 
 
 
 
Beginning balance
 
 
1.1 
 
Net earnings (loss)
 
 
0.4 
 
Distribution to noncontrolling interest
 
 
(0.9)
 
Consolidation of noncontrolling interest
 
 
0.5 
 
Ending balance
$ 1.1 
 
$ 1.1 
 
Changes in the Shares of Common Stock Outstanding (Detail)
6 Months Ended
Jun. 30, 2017
Stockholders Equity Note [Abstract]
 
Beginning balance
29,386,882 
Restricted common stock awards granted, net of forfeitures
391,668 
Restricted stock units converted to common stock
21,387 
Common stock options exercised
750 
Common stock acquired
(5,909)
Ending balance
29,794,778 
Schedule of Accumulated Other Comprehensive Loss (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Accumulated Other Comprehensive Income Loss [Line Items]
 
 
 
 
Balance, beginning of period
 
 
$ (7.1)
 
Current period currency translation adjustments
5.0 
(1.4)
5.7 
1.3 
Balance, end of period
(1.4)
 
(1.4)
 
Currency Translation Adjustments
 
 
 
 
Accumulated Other Comprehensive Income Loss [Line Items]
 
 
 
 
Balance, beginning of period
 
 
(8.2)
 
Current period currency translation adjustments
 
 
5.7 
 
Balance, end of period
(2.5)
 
(2.5)
 
Pension Benefit Adjustments
 
 
 
 
Accumulated Other Comprehensive Income Loss [Line Items]
 
 
 
 
Balance, beginning of period
 
 
1.1 
 
Current period currency translation adjustments
 
 
 
Balance, end of period
$ 1.1 
 
$ 1.1 
 
Accumulated Other Comprehensive Loss - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
6 Months Ended
Jun. 30, 2017
Long-Term Intercompany Loans [Member]
 
Accumulated Other Comprehensive Income Loss [Line Items]
 
Currency translation adjustments
$ 3.0 
Accounts denominated in foreign currencies [Member]
 
Accumulated Other Comprehensive Income Loss [Line Items]
 
Currency translation adjustments
$ 2.7 
Income Taxes - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Dec. 31, 2016
U.S. Federal NOLs
Dec. 31, 2016
Non-U.S. NOLs
Income Taxes [Line Items]
 
 
 
 
 
 
Income tax expense
$ 1.1 
$ 0.2 
$ 1.9 
$ 0.9 
 
 
Net operating loss carry forwards
 
 
 
 
$ 916.0 
$ 30.4 
Net operating loss expiration period
 
 
 
 
20 years 
 
Net operating loss carry forwards expiration year
 
 
 
 
Dec. 31, 2027 
 
Employee Benefit Plans - Components of Net Periodic Benefit Expense (Details) (German, Defined Benefit Pension Plan, USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
German |
Defined Benefit Pension Plan
 
 
 
 
Defined Benefit Plan Disclosure [Line Items]
 
 
 
 
Service cost
$ 0.2 
$ 0.2 
$ 0.5 
$ 0.4 
Interest cost
0.2 
0.3 
0.4 
0.5 
Amortization of net actuarial gains
 
 
 
(0.1)
Expected return on plan assets
 
(0.1)
 
(0.1)
Net periodic benefit expense
$ 0.4 
$ 0.4 
$ 0.9 
$ 0.7 
Computation of Basic and Diluted loss Per Share (Detail) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Earnings Per Share [Abstract]
 
 
 
 
Loss from continuing operations
$ (6.2)
$ (1.3)
$ (17.5)
$ (11.3)
Earnings from discontinued operations, net of income taxes
0.1 
0.1 
Net loss
(6.2)
(1.2)
(17.5)
(11.2)
Earnings from continuing operations attributable to noncontrolling interest
0.3 
0.3 
0.4 
0.4 
Net loss attributable to Real Industry, Inc.
(6.5)
(1.5)
(17.9)
(11.6)
Dividends on Redeemable Preferred Stock, in-kind
(0.5)
(0.9)
Dividends on Redeemable Preferred Stock, in cash or accrued
(0.5)
(1.1)
Accretion of fair value adjustment to Redeemable Preferred Stock
(0.3)
(0.2)
(0.5)
(0.5)
Net loss available to common stockholders
$ (7.3)
$ (2.2)
$ (19.5)
$ (13.0)
Denominator for basic and diluted loss per share—Weighted average shares outstanding
29,009,854 
29,252,343 
28,914,533 
29,160,245 
Basic and diluted loss per share:
 
 
 
 
Continuing operations
$ (0.25)
$ (0.08)
$ (0.67)
$ (0.43)
Discontinued operations
$ 0 
$ 0.01 
$ 0 
$ 0 
Basic and diluted loss per share
$ (0.25)
$ (0.07)
$ (0.67)
$ (0.43)
Average Market Price of Common Stock and the Incremental Shares that were Dilutive or Potentially Dilutive (Detail) (USD $)
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
 
 
 
 
Average market price of Real Industry common stock
$ 2.73 
$ 8.12 
$ 3.82 
$ 7.51 
Potentially dilutive common stock equivalents:
 
 
 
 
Total potentially dilutive common stock equivalents
3,150,878 
3,097,092 
3,150,878 
3,097,092 
Unvested Restricted Common Stock
 
 
 
 
Potentially dilutive common stock equivalents:
 
 
 
 
Total potentially dilutive common stock equivalents
737,610 
491,286 
737,610 
491,286 
Outstanding Common Stock Options
 
 
 
 
Potentially dilutive common stock equivalents:
 
 
 
 
Total potentially dilutive common stock equivalents
445,100 
775,650 
445,100 
775,650 
Unvested Restricted Stock Units
 
 
 
 
Potentially dilutive common stock equivalents:
 
 
 
 
Total potentially dilutive common stock equivalents
519,835 
381,823 
519,835 
381,823 
Warrants
 
 
 
 
Potentially dilutive common stock equivalents:
 
 
 
 
Total potentially dilutive common stock equivalents
1,448,333 
1,448,333 
1,448,333 
1,448,333 
Summary of Potentially Dilutive Common Stock Equivalents (Detail) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Average unamortized share-based compensation expense:
 
 
 
 
Exercise prices on common stock options, lower range
$ 3.00 
$ 3.00 
$ 3.00 
$ 3.00 
Exercise prices on common stock options, upper range
$ 10.00 
$ 10.00 
$ 10.00 
$ 10.00 
Weighted average exercise price of the Warrants
$ 5.64 
$ 5.64 
$ 5.64 
$ 5.64 
Restricted Common Stock Awards
 
 
 
 
Average unamortized share-based compensation expense:
 
 
 
 
Average unamortized share-based compensation expense
$ 3.6 
$ 3.0 
$ 3.4 
$ 2.6 
Restricted Stock Unit Awards
 
 
 
 
Average unamortized share-based compensation expense:
 
 
 
 
Average unamortized share-based compensation expense
$ 1.0 
$ 2.1 
$ 0.8 
$ 2.0 
Derivative and Other Financial Instruments and Fair Value Measurements - Additional Information (Detail)
0 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended 6 Months Ended 12 Months Ended 6 Months Ended
Jun. 11, 2010
USD ($)
Jun. 30, 2017
USD ($)
kt
Dec. 31, 2016
USD ($)
Feb. 28, 2015
USD ($)
Feb. 27, 2015
Redeemable Preferred Stock
Jun. 30, 2017
Redeemable Preferred Stock
Jun. 30, 2017
Maximum
Jun. 30, 2017
Factoring Facility
USD ($)
Jun. 30, 2016
Factoring Facility
USD ($)
Jun. 30, 2017
Factoring Facility
USD ($)
Jun. 30, 2016
Factoring Facility
USD ($)
Sep. 30, 2016
Factoring Facility
EUR (€)
Jun. 30, 2017
Common Stock Warrant Liability
USD ($)
Dec. 31, 2016
Common Stock Warrant Liability
USD ($)
Jun. 30, 2017
Currency Exchange Hedging
USD ($)
Jun. 30, 2017
Natural Gas
Swap Contract One
Long
Btu
Derivative [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative contracts outstanding
 
26,400 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Forward buy contracts outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,800,000,000,000 
Currency derivative contracts outstanding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0 
 
Cash collateral posted or held
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount subject to enforceable master netting arrangement not offset
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrant issued to purchase common stock
1,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate purchase price of common stock warrant
300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercise price of warrants
$ 10.30 
 
 
$ 5.64 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock warrants percentage vested
100.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock warrants expiration date
 
2020-06 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Price per share of common stock issued
 
 
 
$ 5.64 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants exercised
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants outstanding
 
1,448,333 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Valuation technique
 
 
 
 
 
 
 
 
 
 
 
 
Monte Carlo simulation 
 
 
 
Volatility
 
 
 
 
 
 
 
 
 
 
 
 
52.10% 
47.10% 
 
 
Expected term
 
 
 
 
 
 
 
 
 
 
 
 
2 years 10 months 24 days 
3 years 4 months 24 days 
 
 
Equity raise probability
 
 
 
 
 
 
 
 
 
 
 
 
60.00% 
60.00% 
 
 
Equity raise price discount assumption
 
 
 
 
 
 
 
 
 
 
 
 
25.00% 
25.00% 
 
 
Common stock price on measurement date
 
 
 
 
 
 
 
 
 
 
 
 
$ 2.85 
$ 6.10 
 
 
Percentage of increase decrease in unobservable inputs on estimated fair value of common stock warrant liability
 
 
 
 
 
 
 
 
 
 
 
 
10.00% 
 
 
 
Maximum financing amount
 
 
 
 
 
 
 
 
 
 
 
50,000,000 
 
 
 
 
Sales of trade accounts receivable
 
 
 
 
 
 
 
100,900,000 
83,700,000 
188,500,000 
173,500,000 
 
 
 
 
 
Proceeds from sales of trade accounts receivable
 
 
 
 
 
 
 
102,100,000 
81,600,000 
183,600,000 
170,000,000 
 
 
 
 
 
Administrative fees and expenses associated with Factoring Facility
 
 
 
 
 
 
 
$ 200,000 
$ 200,000 
$ 400,000 
$ 400,000 
 
 
 
 
 
Number of days financing receivable is estimated to be outstanding
 
 
 
 
 
 
30 days 
 
 
 
 
 
 
 
 
 
Temporary equity redemption period
 
 
 
 
66 months 
38 months 
 
 
 
 
 
 
 
 
 
 
Credit spread adjustment percentage
 
 
 
 
 
13.10% 
 
 
 
 
 
 
 
 
 
 
Gross Amounts of Recognized Assets and Liabilities (Detail) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2017
Dec. 31, 2016
Asset
 
 
Derivative assets as classified in the unaudited consolidated balance sheet
$ 0 
$ 0.6 
Derivative assets, effect of counterparty netting arrangements
Net derivative assets (liabilities) as classified in the condensed consolidated balance sheets
0.6 
Liability
 
 
Derivative liabilities as classified in the unaudited condensed consolidated balance sheet
(0.2)
(0.4)
Derivative liabilities, effect of counterparty netting arrangements
Net derivative assets (liabilities) as classified in the condensed consolidated balance sheets
(0.2)
(0.4)
Metal
 
 
Asset
 
 
Derivative assets as classified in the unaudited consolidated balance sheet
Liability
 
 
Derivative liabilities as classified in the unaudited condensed consolidated balance sheet
(0.2)
(0.4)
Natural Gas
 
 
Asset
 
 
Derivative assets as classified in the unaudited consolidated balance sheet
0.6 
Liability
 
 
Derivative liabilities as classified in the unaudited condensed consolidated balance sheet
$ 0 
$ 0 
Fair Value of Derivative Financial Instruments (Detail) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2017
Dec. 31, 2016
Derivative Instruments And Hedging Activities Disclosures [Line Items]
 
 
Fair value of derivative assets
$ 0 
$ 0.6 
Fair value of derivative liabilities
(0.2)
(0.4)
Prepaid Expenses, Supplies, and Other Current Assets |
Natural Gas
 
 
Derivative Instruments And Hedging Activities Disclosures [Line Items]
 
 
Fair value of derivative assets
0.6 
Accrued Liabilities |
Metal
 
 
Derivative Instruments And Hedging Activities Disclosures [Line Items]
 
 
Fair value of derivative liabilities
$ (0.2)
$ (0.4)
Changes in Fair Value of Common Stock Warrant Liability (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Warrants And Rights Note Disclosure [Abstract]
 
 
 
 
Common stock warrant liability, beginning balance
$ 1.9 
$ 7.5 
$ 4.4 
$ 6.9 
Warrants exercised
(0.1)
(0.1)
Change in fair value of common stock warrant liability
0.2 
(1.3)
(2.3)
(0.7)
Common stock warrant liability, ending balance
$ 2.1 
$ 6.1 
$ 2.1 
$ 6.1 
Assets and Liabilities Measured at Fair Value on Recurring Basis Based on Fair Value Hierarchy (Detail) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2015
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
 
 
 
 
Derivative assets
$ 0 
 
$ 0.6 
 
 
 
Derivative liabilities as classified in the unaudited condensed consolidated balance sheet
(0.2)
 
(0.4)
 
 
 
Common stock warrant liability, estimated fair value
(2.1)
(1.9)
(4.4)
(6.1)
(7.5)
(6.9)
Fair Value, Recurring
 
 
 
 
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
 
 
 
 
Net derivative assets (liabilities)
(0.2)
 
0.2 
 
 
 
Fair Value, Recurring |
Level 2
 
 
 
 
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
 
 
 
 
Derivative assets
 
0.6 
 
 
 
Derivative liabilities as classified in the unaudited condensed consolidated balance sheet
(0.2)
 
(0.4)
 
 
 
Fair Value, Recurring |
Level 3
 
 
 
 
 
 
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
 
 
 
 
 
 
Common stock warrant liability, estimated fair value
$ (2.1)
 
$ (4.4)
 
 
 
Schedule of Losses (Gains) on Derivative Financial Instruments (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Derivative Instruments Gain Loss [Line Items]
 
 
 
 
Realized losses (gain) on derivative financial instruments
$ 0.5 
$ 0.4 
$ 1.3 
$ 1.2 
Unrealized losses (gains) on derivative financial instruments
0.1 
(1.9)
0.4 
(1.5)
Losses (gains) on derivative financial instruments
0.6 
(1.5)
1.7 
(0.3)
Metal
 
 
 
 
Derivative Instruments Gain Loss [Line Items]
 
 
 
 
Realized losses (gain) on derivative financial instruments
0.6 
0.2 
1.4 
0.4 
Unrealized losses (gains) on derivative financial instruments
(0.2)
(0.8)
(0.2)
(0.4)
Natural Gas
 
 
 
 
Derivative Instruments Gain Loss [Line Items]
 
 
 
 
Realized losses (gain) on derivative financial instruments
(0.1)
0.2 
(0.1)
0.8 
Unrealized losses (gains) on derivative financial instruments
$ 0.3 
$ (1.1)
$ 0.6 
$ (1.1)
Carrying Value and Estimated Fair Value of Financial Instruments (Detail) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2017
Dec. 31, 2016
Term Loan
 
 
Long-term Debt, Excluding Current Maturities
 
 
Term Loan
 
$ 1.5 
Carrying Value |
Level 1
 
 
Assets
 
 
Cash and cash equivalents
18.4 
27.2 
Restricted cash and restricted cash equivalents
6.3 
5.5 
Carrying Value |
Significant Other Observable Inputs (Level 2)
 
 
Assets
 
 
Financing receivable
32.5 
28.4 
Carrying Value |
Level 3
 
 
Long-term Debt, Excluding Current Maturities
 
 
Redeemable Preferred Stock
25.4 
24.9 
Carrying Value |
Level 3 |
Other Noncurrent Assets
 
 
Assets
 
 
Loans receivable, net, carrying amount
0.7 
0.8 
Carrying Value |
Senior Secured Notes |
Level 1
 
 
Long-term Debt, Excluding Current Maturities
 
 
Senior Secured Notes
297.1 
294.9 
Carrying Value |
ABL Facility |
Significant Other Observable Inputs (Level 2)
 
 
Long-term Debt, Excluding Current Maturities
 
 
Asset-Based Facility
75.0 
 
Carrying Value |
Asset-Based Facility |
Significant Other Observable Inputs (Level 2)
 
 
Long-term Debt, Excluding Current Maturities
 
 
Asset-Based Facility
 
55.5 
Carrying Value |
Term Loan |
Significant Other Observable Inputs (Level 2)
 
 
Long-term Debt, Excluding Current Maturities
 
 
Term Loan
 
1.5 
Estimated Fair Value |
Level 1
 
 
Assets
 
 
Cash and cash equivalents
18.4 
27.2 
Restricted cash and restricted cash equivalents
6.3 
5.5 
Estimated Fair Value |
Significant Other Observable Inputs (Level 2)
 
 
Assets
 
 
Financing receivable
32.5 
28.4 
Estimated Fair Value |
Level 3
 
 
Long-term Debt, Excluding Current Maturities
 
 
Redeemable Preferred Stock
27.0 
26.8 
Estimated Fair Value |
Level 3 |
Other Noncurrent Assets
 
 
Assets
 
 
Loans receivable, net, carrying amount
0.7 
0.8 
Estimated Fair Value |
Senior Secured Notes |
Level 1
 
 
Long-term Debt, Excluding Current Maturities
 
 
Senior Secured Notes
296.6 
307.5 
Estimated Fair Value |
ABL Facility |
Significant Other Observable Inputs (Level 2)
 
 
Long-term Debt, Excluding Current Maturities
 
 
Asset-Based Facility
76.0 
 
Estimated Fair Value |
Asset-Based Facility |
Significant Other Observable Inputs (Level 2)
 
 
Long-term Debt, Excluding Current Maturities
 
 
Asset-Based Facility
 
57.0 
Estimated Fair Value |
Term Loan |
Significant Other Observable Inputs (Level 2)
 
 
Long-term Debt, Excluding Current Maturities
 
 
Term Loan
 
$ 1.5 
Segment Information - Additional Information (Detail)
6 Months Ended
Jun. 30, 2017
Segment
Segment Reporting [Abstract]
 
Number of Reportable Segments
Operating Results of Segments and Reconciliations to Loss Before Income taxes (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 6 Months Ended
Jun. 30, 2017
Jun. 30, 2016
Jun. 30, 2017
Jun. 30, 2016
Segment Reporting Information [Line Items]
 
 
 
 
Revenues
$ 350.2 
$ 320.9 
$ 687.3 
$ 630.3 
Segment Adjusted EBITDA
17.2 
20.9 
29.5 
39.2 
Unrealized gains (losses) on derivative financial instruments
(0.1)
1.9 
(0.4)
1.5 
Segment depreciation and amortization
 
 
(21.6)
(25.3)
Selling, general and administrative expenses
(12.4)
(14.6)
(26.8)
(30.0)
Other, net
(0.7)
(0.2)
(1.6)
(1.6)
Operating profit
3.8 
8.1 
0.2 
6.0 
Interest expense, net
(9.6)
(9.1)
(20.6)
(18.3)
Change in fair value of common stock warrant liability
(0.2)
1.3 
2.3 
0.7 
Foreign exchange gains (losses) on intercompany loans
1.4 
(1.6)
2.2 
1.0 
Income (loss) from equity method investment
(0.5)
0.6 
Other nonoperating income (expense), net
0.2 
(0.3)
0.2 
Income tax expense
(1.1)
(0.2)
(1.9)
(0.9)
Earnings from discontinued operations, net of income taxes
0.1 
0.1 
Net loss
(6.2)
(1.2)
(17.5)
(11.2)
Operating Segments
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Segment Adjusted EBITDA
17.2 
20.9 
29.5 
39.2 
Unrealized gains (losses) on derivative financial instruments
(0.1)
1.9 
(0.4)
1.5 
Segment depreciation and amortization
(10.1)
(10.6)
(21.6)
(25.3)
Amortization of inventories and supplies purchase accounting adjustments
(0.3)
(0.9)
RANA |
Operating Segments
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Revenues
234.4 
212.4 
460.0 
413.2 
Segment Adjusted EBITDA
8.7 
14.3 
15.0 
27.5 
RAEU |
Operating Segments
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Revenues
115.8 
108.4 
227.3 
217.0 
Segment Adjusted EBITDA
8.5 
6.6 
14.5 
11.7 
Corporate and Other
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
Revenues
0.1 
0.1 
Segment Adjusted EBITDA
Selling, general and administrative expenses
$ (2.5)
$ (3.6)
$ (5.7)
$ (6.9)
Summarized Balance Sheet Information of Reportable Segments (Detail) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2017
Dec. 31, 2016
Jun. 30, 2016
Current assets:
 
 
 
Cash and cash equivalents
$ 18.4 
$ 27.2 
$ 40.2 
Trade accounts receivable, net
112.9 
88.4 
 
Inventories
120.1 
118.2 
 
Prepaid expenses, supplies and other current assets
29.0 
24.6 
 
Total current assets
312.9 
286.8 
 
Property, plant and equipment, net
289.8 
289.2 
 
Equity method investment
5.6 
5.0 
 
Identifiable intangible assets, net
11.3 
12.5 
 
Goodwill
42.9 
42.2 
 
Other noncurrent assets
8.5 
9.8 
 
TOTAL ASSETS
671.0 
645.5 
 
Current liabilities:
 
 
 
Trade payables
124.3 
115.8 
 
Accrued liabilities
51.4 
46.4 
 
Total current liabilities
178.8 
164.5 
 
Accrued pension benefits
45.9 
42.0 
 
Environmental liabilities
11.6 
11.6 
 
Other noncurrent liabilities
6.7 
6.9 
 
TOTAL LIABILITIES
624.0 
586.1 
 
Operating Segments |
RANA
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
8.7 
11.5 
 
Trade accounts receivable, net
96.4 
76.2 
 
Financing receivable
 
Inventories
83.1 
79.3 
 
Prepaid expenses, supplies and other current assets
19.3 
13.7 
 
Total current assets
207.5 
180.7 
 
Property, plant and equipment, net
187.8 
195.0 
 
Equity method investment
5.6 
5.0 
 
Identifiable intangible assets, net
11.3 
12.5 
 
Goodwill
33.6 
33.6 
 
Other noncurrent assets
3.8 
5.0 
 
TOTAL ASSETS
449.6 
431.8 
 
Current liabilities:
 
 
 
Trade payables
80.4 
73.8 
 
Accrued liabilities
33.0 
30.0 
 
Total current liabilities
113.4 
103.8 
 
Accrued pension benefits
 
Environmental liabilities
11.6 
11.6 
 
Other noncurrent liabilities
4.7 
4.5 
 
TOTAL LIABILITIES
129.7 
119.9 
 
Operating Segments |
RAEU
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
5.3 
5.7 
 
Trade accounts receivable, net
16.5 
12.2 
 
Financing receivable
32.5 
28.4 
 
Inventories
37.0 
38.9 
 
Prepaid expenses, supplies and other current assets
7.2 
6.4 
 
Total current assets
98.5 
91.6 
 
Property, plant and equipment, net
102.0 
94.2 
 
Equity method investment
 
Identifiable intangible assets, net
 
Goodwill
9.3 
8.6 
 
Other noncurrent assets
3.8 
3.5 
 
TOTAL ASSETS
213.6 
197.9 
 
Current liabilities:
 
 
 
Trade payables
43.9 
41.8 
 
Accrued liabilities
15.3 
13.4 
 
Total current liabilities
59.2 
55.2 
 
Accrued pension benefits
45.9 
42.0 
 
Environmental liabilities
 
Other noncurrent liabilities
1.9 
1.8 
 
TOTAL LIABILITIES
$ 107.0 
$ 99.0 
 
Summarized Balance Sheet Information of Reportable Segments and Consolidated (Detail) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2016
Jun. 30, 2016
Mar. 31, 2016
Dec. 31, 2015
ASSETS
 
 
 
 
 
 
Assets
$ 671.0 
 
$ 645.5 
 
 
 
Cash and cash equivalents
18.4 
 
27.2 
40.2 
 
 
Other unallocated assets
3.4 
 
5.9 
 
 
 
LIABILITIES
 
 
 
 
 
 
liabilities
624.0 
 
586.1 
 
 
 
Long-term debt
379.5 
 
356.5 
 
 
 
Common stock warrant liability
2.1 
1.9 
4.4 
6.1 
7.5 
6.9 
Deferred income taxes, net
2.5 
 
2.5 
 
 
 
Other unallocated liabilities
3.2 
 
3.8 
 
 
 
Corporate and Other
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
4.4 
 
9.9 
 
 
 
Operating Segments |
RANA
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
Assets
449.6 
 
431.8 
 
 
 
Cash and cash equivalents
8.7 
 
11.5 
 
 
 
LIABILITIES
 
 
 
 
 
 
liabilities
129.7 
 
119.9 
 
 
 
Operating Segments |
RAEU
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
Assets
213.6 
 
197.9 
 
 
 
Cash and cash equivalents
5.3 
 
5.7 
 
 
 
LIABILITIES
 
 
 
 
 
 
liabilities
$ 107.0 
 
$ 99.0 
 
 
 
Supplemental Cash Flow Information - Reconciliation of Total Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents (Detail) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2017
Dec. 31, 2016
Jun. 30, 2016
Dec. 31, 2015
Condensed Cash Flow Statements Captions [Line Items]
 
 
 
 
Cash and cash equivalents
$ 18.4 
$ 27.2 
$ 40.2 
 
Cash and cash equivalents—discontinued operations
 
 
0.1 
 
Cash, cash equivalents, restricted cash and restricted cash equivalents, end of period
24.7 
32.7 
43.9 
43.3 
Prepaid Expenses, Supplies, and Other Current Assets
 
 
 
 
Condensed Cash Flow Statements Captions [Line Items]
 
 
 
 
Restricted cash and restricted cash equivalents
2.1 
 
 
 
Other Noncurrent Assets
 
 
 
 
Condensed Cash Flow Statements Captions [Line Items]
 
 
 
 
Restricted cash and restricted cash equivalents
$ 4.2 
 
$ 3.6 
 
Commitments and Contingencies - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
Jun. 30, 2017
Dec. 31, 2016
Commitments And Contingencies Disclosure [Abstract]
 
 
Reserves for environmental remediation liabilities
$ 15.8 
$ 15.6 
Accounts payable and accrued liabilities of environmental remediation reserves
4.2 
4.0 
Asset retirement obligations
5.5 
5.3 
Asset Retirement Obligation, current
0.8 
0.9 
Asset Retirement Obligation, non-current
$ 4.7 
$ 4.4