TK Aluminum Ltd. Reports Financial Results for the Fourth Quarter and

CARMAGNOLA, Italy, April 29 /PRNewswire/ -- TK Aluminum Ltd., the indirect parent of Teksid Aluminum Luxembourg S.à.r.l., SCA, today reported its consolidated financial results for the fourth quarter and its consolidated audited financial results for the full year ended December 31, 2004.

- Net Revenues for Q4 and for the year ended December 31, 2004 were EUR221.1 million and EUR899.1 million respectively

- Adjusted EBITDA for Q4 and for the year ended December 31, 2004 were EUR17.0 million and EUR70.3 million respectively

- Capex for Q4 and for the full year ended December 31, 2004 were EUR11.7 million and

- Net Debt at December 31, 2004 was EUR227.8 million

Net Revenues in the fourth quarter 2004 increased by 2.6% compared to same period in 2003 or 6.0% at constant exchange rate. For the full year, Net Revenues increased by 0.7% compared to same period in 2003 or 5.1% at constant exchange rate.

Adjusted EBITDA for the fourth quarter 2004 of EUR17.0 million was 7.7% of Net Revenues, compared to EUR23.2 million and 10.7% of Net Revenues, in the corresponding period of 2003. Adjusted EBITDA of EUR70.3 million for the full year 2004 was 7.8% of Net Revenues, compared to EUR81.9 million and 9.2% of Net Revenues, in the corresponding period of 2003.

Adjusted EBITDA is EBITDA adjusted for certain costs paid subsequent to our acquisition, financing and separation costs which included professional services costs related to audits for historical periods, early retirement expenses associated with special programs partially subsidized by the French government, early retirement programs in Italy, severance expenses and certain unusual maintenance expenses and customer claim expenses related to a quality issue discussed in prior periods and now solved.

For the full year ending December 31, Adjusted EBITDA was positively impacted by increased volumes for EUR29.0 million. This improvement was partially offset by negative sales mix and price reductions for EUR 17.0 million and to tooling profits that were lower by EUR8.5 million. Adjusted EBITDA was also negatively impacted by price dispute with a significant customer in North America now resolved for EUR 8.0 million and by rapid changes in the price of aluminium alloy more dramatic in 2003 and 2004 than those experienced in industry over the past years, not yet passed through to our customers due to lag time in our pass-through pricing mechanisms for a total of EUR5.0 million. Adjusted EBITDA was finally negatively impacted by low production volume inefficiencies for the lost foam business, along with start-up costs for new High Pressure Die Casting products affecting our Alabama facility.

Our net loss for the fourth quarter 2004 was EUR(21.9) million, compared to EUR(4.2) million in the corresponding period of 2003. Net loss for full year 2004 was EUR(53.4) million, compared to EUR(30.4) million in the corresponding period of 2003.

Capital expenditures for the fourth quarter 2004 were EUR11.7 million compared to EUR22.5 million in 2003. Capital expenditures for the full year 2004 were EUR47.7 million compared to EUR58.6 million in 2003, excluding proceeds from sale of property, plant and equipment of EUR1.2 million and EUR2.1 million respectively, EUR4.2 million of capital expenditures in the full year ending December 31, 2004 are related to items for which the Company believes it is entitled to be reimbursed by Teksid S.p.A under the terms of the acquisition agreement relating to our acquisition from Teksid S.p.A in 2002.

Including EUR100.7 million of cash, net debt at December 31, 2004 amounted to EUR227.8 million, a EUR17.8 million decrease from December 31, 2003, primarily due to cash generated from improved working capital management.

As of December 31, 2004, the Company was in compliance with its covenants of its Senior Credit Agreement. The Company has recently amended its senior credit facility to, among other things, delay certain amortization payments, amend certain financial and non-financial covenants and obtain consents to the departure from certain non-financial covenants. Pursuant to the amendment, EUR10.5 million in scheduled amortization payments due in 2006 have been deferred to 2007 provided, however, that to the extent we receive certain indemnification payments from Teksid S.p.A., we will be obligated to make such scheduled amortization payments in 2006 up to the amount received.

On April 27, 2005, our parent received an additional equity investment of EUR20.0 million from certain of its equity investors. We expect to use a portion of the aggregate proceeds received by the Company for an operational restructuring program and the balance for general corporate purposes. In addition, certain advisors who are affiliated with, or shareholders of, our parent's equity investors, have agreed to delay the Company's obligation to pay consulting and advisory fees of EUR2.5 million per year due under our consulting agreement with such advisors until after the discharge of the obligations outstanding under the senior credit facility.

Results included herein are audited and have been presented in accordance with US GAAP.

Further comments on 2004 will be delivered by Jake Hirsch, CEO, and Demetrio Mauro, CFO, during the bondholders and analyst conference call to be held on May 6th, at 16:00 pm, Central European Time, 15:00 pm London Time.

Dial in number will be communicated separately.

About Teksid Aluminum

Teksid Aluminum is a leading independent manufacturer of aluminum engine castings for the automotive industry. Our principal products include cylinder heads, cylinder blocks, transmission cases and suspension components. We operate 15 manufacturing facilities in Europe, North America, South America and Asia. Information about Teksid Aluminum is available on our website at www.teksidaluminum.com.

Until September 2002, Teksid Aluminum was a division of Teksid S.p.A., which was owned by Fiat. Through a series of transactions completed between September 30, 2002 and November 22, 2002, Teksid S.p.A. sold its aluminum foundry business to a consortium of investment funds led by equity investors that include affiliates of each Questor Management Company, LLC, JPMorgan Partners, Private Equity Partners SGR SpA and AIG Global Investment Corp. As a result of the sale, Teksid Aluminum is owned by its equity investors through TK Aluminum Ltd., a Bermuda holding company.

On July 17, 2003, Teksid Aluminum Luxembourg S.a.r.l., SCA issued EUR 240 million aggregate principal amount of senior notes due in 2011. The notes were sold to qualified institutional buyers in the United States pursuant to Rule 144A of the U.S. securities laws and to persons outside United States pursuant to Regulation S of the U.S. securities laws. The proceeds of the sale were used to repay amounts borrowed to finance the acquisition of Teksid Aluminum and pay certain fees and expenses.

For further information please call

Demetrio Mauro, Chief Financial Officer, at +39-011-979-4784 or Domenico Orlandi, Senior Vice President and General Counsel, at +39-011-979-4875 or Massimiliano Chiara, Finance Manager, at +39-011-979-4889

Reconciliation of Net Loss to Adjusted EBITDA

Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with U.S. GAAP. Furthermore, Adjusted EBITDA should not be considered as an alternative to net income (loss) or any other performance measures derived in accordance with U.S. GAAP, or to cash flows from operating activities as a measure of liquidity.

The following is a reconciliation of net loss to EBITDA and to Adjusted EBITDA.

Year ended December 31, (in millions of euro) 2004 2003 Net loss EUR (53.4) EUR (30.4) Depreciation and amortization 57.2 51.9 Interest expenses, including debt issuance costs, net 41.5 44.8 Income tax expense 1.4 1.2 EBITDA 46.7 67.5 Foreign exchange losses 7.0 13.5 Other income (4.1) (8.2) Reported EBITDA (1) 49.6 72.8 Adjustments to EBITDA: Transaction and separation costs (a) - 3.0 Early retirement expenses (b) 6.5 3.3 Severance employees expenses (c) 3.7 - Other expenses (d) 5.7 2.8 Unusual and other non operating items (e) 4.8 - Adjusted EBITDA (f) EUR 70.3 EUR 81.9

(1) "Reported EBITDA" is not presented in 2004 as it is a non-GAAP financial measure used by the Company solely in calculating its Adjusted EBITDA

(a) Adjustment to eliminate (i) severance costs paid subsequent to the acquisition of the Aluminum Division and (ii) acquisition, financing, and separation costs. Acquisition, financing, and separation costs included professional services costs related to the stand-alone audits of historical periods, implementation of corporate treasury and accounting systems and legal expenses.

(b) Adjustment to eliminate expenses associated with early retirement programs partially subsidized by the French government. The voluntary programs have been offered to eligible workers between the ages of 55 and 60. Between 2002 and 2005, we intend to replace workers who elect to participate in the program with lower-wage workers. Teksid S.p.A has agreed to reimburse us for the first EUR8.5 million of payments made by us under the programs. We expect that this will be sufficient to cover our costs under that plan. EUR0.7 million and nil in the year ended December 31, 2004 and 2003, respectively, are associated with early retirement programs activated in Italy during the year ended December 31, 2004.

(c) Adjustment to eliminate the impact of severance expenses related to terminated executives in Italy and France.

(d) Adjustment to eliminate the impact of expenses that are reimbursed by Teksid S.p.A. under the purchase agreement.

(e) Adjustment to eliminate additional accrual made by the Company in the third quarter 2004 in respect of developments in negotiations with an important customer regarding a quality related issue.

(f) "EBITDA" represents earnings before interest, taxes and depreciation and amortization. "Adjusted EBITDA" represents net income as adjusted for those items that are permitted or required to be excluded for purposes of calculating "Consolidated EBITDA" for purposes of the covenants under our senior credit facility. EBITDA and Adjusted EBITDA are supplemental measures of our performance that are not required by, or presented in accordance with U.S. GAAP. Furthermore, EBITDA and Adjusted EBITDA should not be considered as an alternative to net income (loss) or any other performance measures derived in accordance with U.S. GAAP, or to cash flows from operating activities as a measure of liquidity. EBITDA and Adjusted EBITDA are measurement tools for evaluating the actual operating performance of the Company. Management uses Adjusted EBITDA, as its primary measurement tool for evaluating the actual operating performance of the Company as compared to budget and, consequently, in determining management and employee compensation, bonuses and other incentives.

Management believes Adjusted EBITDA, facilitates comparisons of operating performance from period to period and company to company by eliminating potential differences caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or net operating losses) and the age and book depreciation of tangible assets (affecting depreciation expense). The Company presents Adjusted EBITDA as it is the basis against which certain financial tests are measured under our senior credit facility. The Company also presents EBITDA because management believes it is frequently used by securities analysts, investors and other interested parties in evaluating similar companies, the vast majority of which present EBITDA when reporting their results. Nevertheless, both EBITDA and Adjusted EBITDA from continuing operations have limitations as an analytical tool, and you should not consider it in isolation from, or as a substitute for analysis of, our results of operations as reported under U.S. GAAP. Some of these limitations are: such measurements do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; such measurements do not reflect changes in, or cash requirements for, our working capital needs; such measurements do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt; although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, such measurements do not reflect any cash requirements for such replacements; such measurements are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows; and other companies in our industry may calculate such measurements do differently than we do, limiting such measurements' usefulness as a comparative measure.

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business.