×

Mechel Reports the 2012 Financial Results

Mechel OAO Logo

Revenue amounted to $11.3 billion

Consolidated adjusted EBITDA amounted to $1.3 billion

Net loss attributable to shareholders of Mechel OAO amounted to $1.7 billion

MOSCOW, April 15, 2013 (GLOBE NEWSWIRE) -- Mechel OAO (NYSE:MTL), a leading Russian mining and steel group, today announced financial results for the full year 2012.

Evgeny Mikhel, Mechel OAO's Chief Executive Officer, commented on the 2012 financial results:

"Last year the Group operated as key markets for mining products continued to weaken against a background of general world economic volatility. This is reflected in the worsening of the financial results of our main activities, as well as the need to book reserves and make several significant write-offs. At the same time, with respect to most of our key operational indicators Mechel demonstrated positive dynamics in 2012. Last year we also managed to do much for further improvement going forward. It is important that despite negative pricing trends our efforts at optimizing our sales and product mix as well as working capital management lead to a record operating cash flow of more than $1.3 bn, which allowed to finance our entire CAPEX at the same time repaying some debt.

"In line with the renewed strategy, aimed at deleveraging, we have already sold a large number of those assets that had the most negative impact on our financial results. We continue talks on selling the remainder of our non-strategic assets. We were also successful in improving our debt structure and continue working on it by decreasing the share of short-term debt. We are sure that the steps we are undertaking with a focus on maximizing shareholder value, will have their positive effect very shortly."

Consolidated Results For The Full Year 2012
US$ thousand FY 2012 (1) FY 2011 (1)(4) Change Y-on-Y
Revenue from external customers 11,274,933 12,541,145 -10.1%
Intersegment sales 1,556,687 2,034,643 -23.5%
Operating (loss) / income (897,875) 1,840,104 --
Operating margin -8.0% 14.7% --
Net (loss) / income attributable to shareholders of Mechel OAO (1,664,568) 727,885 --
Adjusted net income (1) (2) 23,044 736,255 -96.9%
Adjusted EBITDA (1) (3) 1,332,055 2,396,673 -44.4%
Adjusted EBITDA, margin (1) 11.8% 19.1% --
(1) See Attachment A.
(2) Adjusted net income is net income adjusted for effects of impairment of long-lived assets and goodwill, loss from discontinued operations and provision for amounts due from related parties (including income tax and amounts attributable to noncontrolling interests effects)
(3) Adjusted EBITDA is EBITDA adjusted for effects of remeasurement of contingent liabilities at fair value, loss from discontinued operations, forex gain/(loss), net result on the disposal of non-current assets, impairment of long-lived assets and goodwill, provision for amounts due from related parties, amounts attributable to noncontrolling interests and interest income.
(4) Adjusted to effect from discontinued operations
US$ thousand 4Q 2012 (1) 3Q 2012 (1)(4) Change Q-on-Q
Revenue from external customers 2,521,449 2,711,398 -7.0%
Intersegment sales 355,978 350,039 1.7%
Operating (loss) / income (933,369) 129,409 --
Operating margin -37.0% 4.8% --
Net (loss) / income attributable to shareholders of Mechel OAO (1,114,473) 54,911 --
Adjusted net income / (loss) (1) (2) (160,860) 134,126 --
Adjusted EBITDA (1) (3) 100,389 375,626 -73.3%
Adjusted EBITDA, margin (1) 4.0% 13.9% --
(1) See Attachment A.
(2) Adjusted net income is net income adjusted for effects of impairment of long-lived assets and goodwill, loss from discontinued operations and provision for amounts due from related parties (including income tax and amounts attributable to noncontrolling interests effects)
(3) Adjusted EBITDA is EBITDA adjusted for effects of remeasurement of contingent liabilities at fair value, loss from discontinued operations, forex gain/(loss), net result on the disposal of non-current assets, impairment of long-lived assets and goodwill, provision for amounts due from related parties, amounts attributable to noncontrolling interests and interest income.
(4) Adjusted to effect from discontinued operations

The net revenue in 2012 decreased by 10.1% and amounted to $11.3 billion compared to $12.5 billion in 2011. The operating loss amounted to $897.9 million or -8% of the net revenue, compared to the operating income of $1,840.1 million or 14.7% of the net revenue in 2011.

In 2012 Mechel's consolidated net loss attributable to shareholders of Mechel OAO comprised $1.7 billion compared to the net income of $727.9 million in 2011. Excluding the effects of impairment of long-lived assets and goodwill, loss from discontinued operations and provision for amounts due from related parties (net of deferred taxes related to non controlling interests) the adjusted net profit amounts to $23.0 million in 2012.

The consolidated adjusted EBITDA in 2012 decreased by 44.4% to $1.3 billion, compared to $2.4 billion in 2011. Depreciation, depletion and amortization in 2012 for the Company were $586.2 million, an increase of 5.4% compared to $556.4 million in 2011.

Mining Segment Results For Full Year 2012
US$ thousand FY 2012 (1) FY 2011 (1)(5) Change Y-on-Y
Revenue from external customers 3,297,560 4,173,799 -21.0%
Intersegment sales 717,495 1,018,229 -29.5%
Operating income 664,278 1,691,385 -61.9%
Net income attributable to shareholders of Mechel OAO 360,770 1,069,892 -66.3%
Adjusted net income (1) (2) 383,438 1,069,892 -64.2%
Adjusted EBITDA(1) (3) 998,285 2,023,827 -50.7%
Adjusted EBITDA, margin (4) 24.9% 39.0% --
(1) See Attachment A.
(2) Adjusted net income is net income adjusted for effects of impairment of long-lived assets and goodwill, loss from discontinued operations and provision for amounts due from related parties (including income tax and amounts attributable to noncontrolling interests effects)
(3) Adjusted EBITDA is EBITDA adjusted for effects of remeasurement of contingent liabilities at fair value, loss from discontinued operations, forex gain/(loss), net result on the disposal of non-current assets, impairment of long-lived assets and goodwill, provision for amounts due from related parties, amounts attributable to noncontrolling interests and interest income
(4) Adjusted EBITDA margin is calculated as a percentage of consolidated revenues of the segment, including intersegment sales.
(5) Adjusted to effect from discontinued operations
US$ thousand 4Q 2012 (1) 3Q 2012 (1)(5) Change Q-on-Q
Revenue from external customers 675,999 780,884 -13.4%
Intersegment sales 143,283 168,284 -14.9%
Operating income / (loss) (24,116) 200,256 --
Net (loss) / income attributable to shareholders of Mechel OAO (67,475) 216,765 --
Adjusted net (loss) / income (1) (2) (67,486) 218,739 --
Adjusted EBITDA(1) (3) 33,108 305,156 -89.2%
Adjusted EBITDA, margin (4) 4.0% 32.2% --
(1) See Attachment A.
(2) Adjusted net income is net income adjusted for effects of impairment of long-lived assets and goodwill, loss from discontinued operations and provision for amounts due from related parties (including income tax and amounts attributable to noncontrolling interests effects)
(3) Adjusted EBITDA is EBITDA adjusted for effects of remeasurement of contingent liabilities at fair value, forex gain/(loss), net result on the disposal of non-current assets, loss from discontinued operations, impairment of long-lived assets and goodwill, provision for amounts due from related parties, amounts attributable to noncontrolling interests and interest income.
(4) Adjusted EBITDA margin is calculated as a percentage of consolidated revenues of the segment, including intersegment sales
(5) Adjusted to effect from discontinued operations

Mining Segment Output and Sales For The Full Year 2012

Production:
Product name FY 2012,
thousand tonnes*
FY 2011,
thousand tonnes*
FY 2012 vs.
FY 2011, %
Coal (run-of-mine) 27,763 27,625 1%
Product Sales:
Product name FY 2012,
thousand tonnes*
FY 2011,
thousand tonnes*
FY 2012 vs.
FY 2011, %
Coking coal concentrate 11,548 12,511 -8%
Including coking coal concentrate supplied to Mechel enterprises 2,590 2,876 -10%
PCI 2,423 1,969 23%
Anthracites 2,330 2,344 -1%
Including anthracites supplied to Mechel enterprises 201 304 -34%
Steam coal 5,977 6,438 -7%
Including steam coal supplied to Mechel enterprises 1,472 1,102 34%
Iron ore concentrate 4,429 4,404 1%
Including iron ore concentrate supplied to Mechel enterprises 272 1,693 -84%
Coke 3,561 3,457 3%
Including coke supplied to Mechel enterprises 2,448 2,415 1%
* Adjusted to effect from discontinued operations.

The mining segment's revenue from external customers in 2012 totaled $3.3 billion, or 29% of consolidated net revenue, a decrease of 21.0% over the segment's revenue from external customers of $4.2 billion, or 33% of consolidated net revenue in 2011.

Operating income in the mining segment in 2012 decreased by 61.9% to $644.3 million, or 16.1% of the segment's total revenue, compared to an operating income of $1,691.4 million, or 32.6% of total segment revenue for 2011. The 2012 adjusted EBITDA in the mining segment decreased by 50.7% and amounted to $998.3 million compared to segment's adjusted EBITDA of $2.0 billion in 2011. The adjusted EBITDA margin for the mining segment in 2012 was 24.9% compared to 39.0% in 2011. Depreciation, depletion and amortization in the mining segment amounted to $317.0 million which is 3.5% lower than $328.5 million in 2011.

Mechel Mining Management Company OOO's Chief Executive Officer Boris Nikishichev commented on the mining division's results:

"The past year was complicated for the mining division and required maximum mobilization of our resources and making difficult managerial decisions in order to retain positions gained earlier. Unsolved global economic problems continued to have a negative impact on the mining industry, which led to a significant drop in prices on practically all mining products as well as a decrease in demand in our traditional European and CIS markets.

"In these conditions, we concentrated on cost control and re-orienting sales toward alternative markets. The division's enterprises once again proved that they have great resilience and can demonstrate good operational results even in critical conditions. For example, Southern Kuzbass Coal Company managed to compensate the drop in underground mining by an increase in open-pit mining, while Yakutugol increased production by 20% compared to 2011, reaching 10 million tonnes of coal a year, which enabled us to compensate for the temporary stoppage of several assets of our US subsidiary Mechel Bluestone in late 2012, and attain positive production dynamics over the division as a whole.

"Despite a significant decrease in our capital spending program in 2012, we continued investing in our production assets. Southern Kuzbass Coal Company and Korshunov Mining Plant acquired new coal transport equipment. Completed works on boring and reinforcing the vertical shaft as part of constructing Sibirginskaya Mine's second line. At the Elga deposit, last year construction of a seasonal washing plant was completed. Production of coking coal concentrate at this plant directly near the open pit enables the company to test and perfect the technology of washing Elga coals for further use when constructing the regular washing plant. In order to implement the project, we are concluding framework agreements with suppliers of mining equipment. Additionally, we have ensured full access to a major Pacific port which guarantees exports to Asia Pacific. We intend to continue applying all efforts to stage-by-stage development of the Elga coal deposit, creating a firm base for increased production and consolidation of Mechel's position as a leading coking coal exporter in Asia Pacific."

Steel Segment Results For The Full Year 2012
US$ thousand FY 2012 (1) FY 2011 (1) Change Y-on-Y
Revenue from external customers 6,803,413 7,154,417 -4.9%
Intersegment sales 267,908 310,416 -13.7%
Operating (loss) / income (1,364,557) 191,745 --
Net loss attributable to shareholders of Mechel OAO (1,677,326) (232,606) 621.1%
Adjusted net loss (1) (2) (227,013) (232,606) -2.4%
Adjusted EBITDA (1) (3) 290,152 318,875 -9.0%
Adjusted EBITDA, margin (4) 4.1% 4.3% --
(1) See Attachment A.
(2) Adjusted net loss is net loss adjusted for effects of impairment of long-lived assets and goodwill, loss from discontinued operations and provision for amounts due from related parties (including income tax and amounts attributable to noncontrolling interests effects)
(3) Adjusted EBITDA is EBITDA adjusted for effects of remeasurement of contingent liabilities at fair value, forex gain/(loss), net result on the disposal of non-current assets, loss from discontinued operations, impairment of long-lived assets and goodwill, provision for amounts due from related parties, amounts attributable to noncontrolling interests and interest income
(4) Adjusted EBITDA margin is calculated as a percentage of consolidated revenues of the segment, including intersegment sales.
US$ thousand 4Q 2012 (1) 3Q 2012 (1) Change Q-on-Q
Revenue from external customers 1,557,055 1,699,564 -8.4%
Intersegment sales 72,752 49,629 46.6%
Operating loss (861,326) (42,868) 1909.3%
Net loss attributable to shareholders of Mechel OAO (925,496) (110,989) 733.9%
Adjusted net loss (1) (2) (38,824) (35,740) 8.6%
Adjusted EBITDA (1) (3) 75,565 74,747 1.1%
Adjusted EBITDA, margin (4) 4.6% 4.3% --
(1) See Attachment A.
(2) Adjusted net loss is net loss adjusted for effects of impairment of long-lived assets and goodwill, loss from discontinued operations and provision for amounts due from related parties (including income tax and amounts attributable to noncontrolling interests effects)
(3) Adjusted EBITDA is EBITDA adjusted for effects of remeasurement of contingent liabilities at fair value, loss from discontinued operations, forex gain/(loss), net result on the disposal of non-current assets, impairment of long-lived assets and goodwill, provision for amounts due from related parties, amounts attributable to noncontrolling interests and interest income
(4) Adjusted EBITDA margin is calculated as a percentage of consolidated revenues of the segment, including intersegment sales.

Steel Segment Output and Sales to 3rd Parties For The Full Year 2012

Production:
Product name FY 2012,
thousand tonnes
FY 2011,
thousand tonnes
FY 2012 vs.
FY 2011, %
Pig iron 4,161 3,728 12%
Steel 6,532 6,118 7%
Product Sales:
Product name FY 2012,
thousand tonnes
FY 2011,
thousand tonnes
FY 2012 vs.
FY 2011, %
Flat products 710 679 5%
Including those produced by third parties 370 391 -5%
Long products 3,861 3,821 1%
Including those produced by third parties 801 818 -2%
Billets 2,036 2,092 -3%
Including those produced by third parties 674 1,437 -53%
Hardware and welded mesh 962 961 0%
Including those produced by third parties 46 52 -12%
Forgings 55 60 -8%
Stampings 111 117 -5%

Mechel's steel segment's revenue from external customers in 2012 amounted to $6.8 billion, or 60% of the consolidated net revenue, a decrease of 5.5% over the segment's revenue from external customers of $7.2 billion, or 57% of consolidated revenue, in 2011.

In 2012, the steel segment's operating loss totaled $1.4 billion, or -19.3% of the segment's revenue, versus an operating income of $191.7 million, or 2.6% of total segment revenue, in 2011. The adjusted EBITDA in the steel segment in 2012 decreased by 9.0% and amounted to $290.2 million, compared to the adjusted EBITDA of $318.9 million in 2011. The adjusted EBITDA margin of the steel segment was 4.1% in 2012, versus an adjusted EBITDA margin of 4.3% in 2011. Depreciation and amortization in the steel segment increased by 34.6% from $126.0 million in 2011 to $169.6 million in 2012.

Mechel-Steel Management Company OOO's Chief Executive Officer Vladimir Tytsky noted in commenting on the steel segment's results:

"As a whole, last year for the steel division was characterized by growing production and sales volumes on practically all counts. Despite a worsening market situation, this enabled us to minimize the decrease in profit. EBITDA and net loss also worsened marginally compared to 2011. Our electrometallurgical assets abroad had the most negative impact on the segment's results. Their activity was responsible for a significant part of our write-offs that had such an effect on the final financial results. In implementing the group's new strategy for optimizing its asset structure, in the first quarter of this year we sold our Romanian-based steel plants, and their activities will no longer have a negative influence on the division's results. At the same time, Russian enterprises showed stable work with high loads. It is worth noting that along with stable production volumes at our main plants despite weakening markets we managed to notably reduce inventories and optimize working capital benefitting from our sales network, which significantly improved our cash flow. We were successful in controlling production costs, launched production of new types of high value-added products, as well as mastered the technology of smelting rail steels and their out-of-furnace processing as part of preparation for the launch of Chelyabinsk Metallurgical Plant's universal rolling mill. Once the winter season, when demand for steel products is traditionally low, was over, we are seeing a certain stabilization of construction rolls and can forecast its improvement once the construction activity picks up, which will undoubtedly improve the division's results."

Ferroalloys Segment Results For The Full Year 2012
US$ thousand FY 2012 (1) FY 2011 (1) Change Y-on-Y
Revenue from external customers 416,721 475,254 -12.3%
Intersegment sales 87,411 199,191 56.1%
Operating loss (259,896) (44,912) 478.7%
Net loss attributable to shareholders of Mechel OAO (292,070) (71,580) 308.0%
Adjusted net loss (1) (2) (185,138) (71,580) 158.6%
Adjusted EBITDA (1) (3) (48,559) 45,877 --
Adjusted EBITDA, margin (4) -9.6% 6.8% --
(1) See Attachment A.
(2) Adjusted net loss is net loss adjusted for effects of impairment of long-lived assets and goodwill and provision for amounts due from related parties (including income tax and amounts attributable to noncontrolling interests effects)
(3) Adjusted EBITDA is EBITDA adjusted for effects of remeasurement of contingent liabilities at fair value, forex gain/(loss), net result on the disposal of non-current assets, impairment of long-lived assets and goodwill, provision for amounts due from related parties, amounts attributable to noncontrolling interests and interest income
(4) Adjusted EBITDA margin is calculated as a percentage of consolidated revenues of the segment, including intersegment sales.
US$ thousand 4Q 2012 (1) 3Q 2012 (1) Change Q-on-Q
Revenue from external customers 68,607 91,008 -24.6%
Intersegment sales 14,432 23,025 -37.3%
Operating loss (66,304) (24,525) 170.4%
Net loss attributable to shareholders of Mechel OAO (87,288) (41,687) 109.4%
Adjusted net loss (1) (2) (63,354) (41,687) 52.0%
Adjusted EBITDA (1) (2) (30,538) (3,143) 871.6%
Adjusted EBITDA, margin (3) -36.8% -2.8% --
(1) See Attachment A.
(2) Adjusted net loss is net loss adjusted for effects of impairment of long-lived assets and goodwill and provision for amounts due from related parties (including income tax and amounts attributable to noncontrolling interests effects)
(3) Adjusted EBITDA is EBITDA adjusted for effects of remeasurement of contingent liabilities at fair value, forex gain/(loss), net result on the disposal of non-current assets, impairment of long-lived assets and goodwill, provision for amounts due from related parties, amounts attributable to noncontrolling interests and interest income .
(4) Adjusted EBITDA margin is calculated as a percentage of consolidated revenues of the segment, including intersegment sales.

Product Sales:

Product name FY 2012,
thousand tonnes
FY 2011,
thousand tonnes
FY 2012 vs.
FY 2011, %
Nickel 11 16.3 -32%
Including nickel supplied to Mechel enterprises 2 4.9 -67%
Ferrosilicon 78 83.8 -6%
Including ferrosilicon supplied to Mechel enterprises 30 30.3 -2%
Chrome 70 58.4 20%
Including chrome supplied to Mechel enterprises 9 13.5 -37%

The ferroalloy segment's revenue from external customers in 2012 amounted to $416.7 million, or 4% of consolidated net revenue, a decrease of 12.3% compared with the segment's revenue from external customers of $475.3 million or 4% of consolidated net revenue, in 2011.

In 2012, the operating loss in the ferroalloys segment decreased by 478.7% and totaled $259.9 million, or -51.6% of total segment revenue, as compared to an operating loss of $44.9 million, or -6.7% of total segment revenue, in 2011. The adjusted EBITDA in the ferroalloys segment in 2012 amounted to negative $48.6 million, compared to segment's adjusted positive EBITDA of $45.9 million in 2011. The adjusted EBITDA margin of the ferroalloys segment was -9.6% in 2012 compared to the adjusted EBITDA margin of 6.8% in 2011. The ferroalloys segment's depreciation, depletion and amortization in 2012 was $89.0 million, a decrease of 1.1% over $90.0 million in 2011.

Mechel-Ferroalloys Management Company OOO's Chief Executive Officer Sergey Zhilyakov noted:

"Last year the division has underwent significant changes in its operations. Due to the continuing weakness of the ferroalloys market we decided to halt Southern Urals Nickel Plant. The plant was making loss for the group for a considerable period as production costs were higher than its product's market price. So the plant's stoppage will have a positive effect on the segment's results. At the same time, other enterprises continued to work stably. Bratsk Ferroalloy Plant's products are in high demand and yield stable revenue for the segment despite a small increase in production costs due to higher power costs. The chrome business has shown a decrease in production costs by the end of the year as well as production growth. At the same time early this year we see a stronger demand for chrome and ferrosilicon from our foreign consumers, which means an increase in prices and allows us to expect better results. Also, in the end of 2012 the modernized furnace №4 reached its full capacity and in the second quarter we started to supply Bratsk Ferroalloy Plant with its own quartzite from the Uvatsk deposit, which will have its own positive effect in 2013."

Power Segment Results for The Full Year 2012
US$ thousand FY 2012 (1) FY 2011 (1)(5) Change Y-on-Y
Revenue from external customers 757,239 737,675 2.7%
Intersegment sales 483,873 506,807 -4.5%
Operating income 34,720 32,199 7.8%
Net (loss) / income attributable to shareholders of Mechel OAO (103,521) (5,808) 1682.4%
Adjusted net income (1) (2) 4,908 2,562 91.5%
Adjusted EBITDA (1) (3) 44,597 40,109 11.2%
Adjusted EBITDA, margin(4) 3.6% 3.2% --
(1) See Attachment A.
(2) Adjusted net (loss) income is net (loss) income adjusted for effects of impairment of long-lived assets, loss from discontinued operations and goodwill and provision for amounts due from related parties (including income tax and amounts attributable to noncontrolling interests effects)
(3) Adjusted EBITDA is EBITDA adjusted for effects of remeasurement of contingent liabilities at fair value, loss from discontinued operations, forex gain/(loss), net result on the disposal of non-current assets, impairment of long-lived assets and goodwill, provision for amounts due from related parties, amounts attributable to noncontrolling interests and interest income .
(4) Adjusted EBITDA margin is calculated as a percentage of consolidated revenues of the segment, including intersegment sales.
(5) Adjusted to effect from discontinued operations
US$ thousand 4Q 2012 (1) 3Q 2012 (1)(5) Change Q-on-Q
Revenue from external customers 219,788 139,943 57.1%
Intersegment sales 125,511 109,101 15.0%
Operating loss 11,566 (8,153) --
Net loss attributable to shareholders of Mechel OAO (41,026) (13,877) 195.6%
Adjusted net loss (1) (2) 2,720 (11,883) --
Adjusted EBITDA (1) (3) 15,441 (5,883) --
Adjusted EBITDA, margin(4) 4.5% -2.3% --
(1) See Attachment A.
(2) Adjusted net income is net income adjusted for effects of impairment of long-lived assets and goodwill, loss from discontinued operations and provision for amounts due from related parties (including income tax and amounts attributable to noncontrolling interests effects)
(3) Adjusted EBITDA is EBITDA adjusted for effects of remeasurement of contingent liabilities at fair value, forex gain/(loss), net result on the disposal of non-current assets, impairment of long-lived assets and goodwill, loss from discontinued operations, provision for amounts due from related parties, amounts attributable to noncontrolling interests and interest income.
(4) Adjusted EBITDA margin is calculated as a percentage of consolidated revenues of the segment, including intersegment sales.
(5) Adjusted to effect from discontinued operations

Power Segment Output and Sales For The Full Year 2012

Product name FY 2012 FY 2011 FY 2012 vs. FY
2011, %
Electric power generation (ths. kWh) 4,272,610 3,915,202 9%
Heat power generation (Gcal) 7,945,674 7,142,197 11%

Mechel's power segment revenue from external customers in 2012 was $757.2 million, or 7% of consolidated net revenue, an increase of 2.6% compared with the segment's revenue from external customers of $737.7 million or 6% of consolidated net revenue in 2011.

The operating income in the power segment in 2012 amounted to $34.7 million, or -2.8% of the segment's revenue in the same period compared to an operating income of $32.2 million, or 2.6% of the total segment revenue, in 2011. The adjusted EBITDA in the power segment in 2012 amounted to negative $44.6 million, compared to the adjusted positive EBITDA of $40.1 million in 2011. The adjusted EBITDA margin for the power segment in 2012 amounted to 3.6% compared to 3.2% in 2011. Depreciation and amortization in power segment in 2012 decreased by 10.1% comparing with the 2011 from $11.9 million to $10.7 million.

Mechel-Energo OOO's Chief Executive Officer Yuri Yampolsky noted:

"The segment's final financial results were notably impacted by accounting losses due to the disposal of our Bulgarian-based Toplofikatsia Rousse power plant. Apart from that, the power division worked well. We increased production volumes, revenue, operational profit and EBITDA. Adjusted net profit, without Toplofikatsia Rousse's write-offs, also came out higher than the previous year. We continue a stage-by-stage modernization of the division's production assets in order to maintain our ability to offer our consumers uninterrupted supplies of electricity and heat."

Recent Highlights

  • In December 2012, Mechel announced the disposal of 100% of the shares of Toplofikatsia Rousse EAD (TPP Rousse, Bulgaria). The disposal is valued at approximately 24.8 million dollars.
  • In December 2012, Mechel reported halting production at Southern Urals Nickel Plant OAO considering persistent negative trends on global nickel market and unfavorable forecasts for its recovery in the foreseeable future, in order to minimize the plant's losses.
  • In January 2013, Mechel reported acquiring 55% (73.33% of common shares) of Vanino Sea Trade Port OAO. Later Mechel reported selling a part of its earlier acquired controlling stake in Vanino Sea Trade Port OAO to Russian and foreign investors, retaining some 1.5% of the enterprise's common shares. In January Mechel reported that Mecheltrans OOO acquired 21.64% of Vanino Sea Trade Port OAO's common shares from one of the port's minor shareholders – a subsidiary of the company En+.
  • In January 2013, Mechel reported the resumption of work at several of Mechel Bluestone's mining facilities due to decreased coal inventories. The complexes are due to produce some 135,000 tonnes a month.
  • In February 2013, Mechel reported that it has disposed of its Romanian steel assets - Ductil Steel Mechel, Campia Turzii S.A., Mechel Targoviste S.A., Mechel East Europe Metallurgical Division SRL, Laminorul S.A - to a privately held Romanian group, Romania's Invest Nikarom SRL. The transaction terms will result in Mechel receiving a nominal contribution.
  • In March 2013, Mechel announced that its subsidiary Mechel Carbon (Singapore) Pte. Ltd. has signed a memorandum for supplies of coking coal with Baosteel Resources Int. Co. Ltd. According to the memorandum Mechel Carbon is due to directly supply Baosteel with 960,000 tonnes of coking coal annually.
  • In March 2013, Mechel announced its decision to make an early redemption of its 05 series bonds, placed on October 20, 2009, as well as to pay the accumulated coupon interest for the 14 coupon period.
  • In April 2013, Mechel announced reaching an agreement with an international syndicate of lender banks on getting approval for waivers and amendments to certain major credit facilities.
  • In April Mechel announced signing an agreement with VTB Bank for a 40-billion-ruble (approximately 1.3-billion-dollar*) loan.

Financial Position

Capital expenditure on property, plant and equipment and acquisition of mineral licenses for the FY2012 amounted to $1,028.8 million, of which $612.2 million was invested in the mining segment, $360.6 million was invested in the steel segment, $46.3 million was invested in the ferroalloy segment and $9.7 million was invested in the power segment.

As of December 31, 2012, total debt was $9.4 billion. Cash and cash equivalents amounted to $295 million and net debt amounted to $9.1 billion (net debt is defined as total debt outstanding less cash and cash equivalents) at end of 4Q 2012.

The management of Mechel will host a conference call today at 10:00 a.m. New York time (3:00 p.m. London time, 6:00 p.m. Moscow time) to review Mechel's financial results and comment on current operations. The call may be accessed via the Internet at http://www.mechel.com, under the Investor Relations section.

Mechel is one of the leading Russian companies. Its business includes four segments: mining, steel, ferroalloy and power. Mechel unites producers of coal, iron ore concentrate, steel, rolled products, ferroalloys, hardware, heat and electric power. Mechel products are marketed domestically and internationally.

Some of the information in this press release may contain projections or other forward-looking statements regarding future events or the future financial performance of Mechel, as defined in the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements. We refer you to the documents Mechel files from time to time with the U.S. Securities and Exchange Commission, including our Form 20-F. These documents contain and identify important factors, including those contained in the section captioned "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" in our Form 20-F, that could cause the actual results to differ materially from those contained in our projections or forward-looking statements, including, among others, the achievement of anticipated levels of profitability, growth, cost and synergy of our recent acquisitions, the impact of competitive pricing, the ability to obtain necessary regulatory approvals and licenses, the impact of developments in the Russian economic, political and legal environment, volatility in stock markets or in the price of our shares or ADRs, financial risk management and the impact of general business and global economic conditions.

Attachments to the FY 2012 Earnings Press Release

Attachment A

Non-GAAP financial measures. This press release includes financial information prepared in accordance with accounting principles generally accepted in the United States of America, or US GAAP, as well as other financial measures referred to as non-GAAP. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with US GAAP.

Adjusted EBITDA represents earnings before Depreciation, depletion and amortization, Foreign exchange gain/(loss), Loss from discontinued operations, Gain/(loss) from remeasurement of contingent liabilities at fair value, Interest expense, Interest income, Net result on the disposal of non-current assets, Impairment of long-lived assets and goodwill, Provision for amounts due from related parties, Amount attributable to noncontrolling interests and Income taxes. Adjusted EBITDA margin is defined as adjusted EBITDA as a percentage of our net revenues. Our adjusted EBITDA may not be similar to EBITDA measures of other companies. Adjusted EBITDA is not a measurement under accounting principles generally accepted in the United States and should be considered in addition to, but not as a substitute for, the information contained in our consolidated statement of operations. We believe that our adjusted EBITDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to fund discretionary spending such as capital expenditures, acquisitions and other investments and our ability to incur and service debt. While interest, depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the non-cash current period allocation of costs associated with long-lived assets acquired or constructed in prior periods. Our adjusted EBITDA calculation is commonly used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the metals and mining industry.

Adjusted net income / (loss) represents net income / (loss) before Loss from discontinued operations, Impairment of long-lived assets and goodwill and Provision for the amounts due from related parties, including the effect on income tax and amounts attributable to noncontrolling interests. Our adjusted net income / (loss) may not be similar to adjusted net income / (loss) measures of other companies. Adjusted net income / (loss) is not a measurement under accounting principles generally accepted in the United States and should be considered in addition to, but not as a substitute for, the information contained in our consolidated statement of operations. We believe that our adjusted net income / (loss) provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations. While impairment of long-lived assets and goodwill and provision for the amounts due from related parties are considered operating costs under generally accepted accounting principles, these expenses represent the non-cash current period allocation of costs associated with assets acquired or constructed in prior periods. Our adjusted net income / (loss) calculation is used as one of the bases for investors, analysts and credit rating agencies to evaluate and compare the periodic and future operating performance and value of companies within the metals and mining industry.

Adjusted EBITDA can be reconciled to our consolidated statements of operations as follows:

Consolidated results

US$ thousand FY 2012 FY 2011
Net (loss) / income (1,664,568) 727,885
Add:
Depreciation, depletion and amortization 586,218 556,357
Forex loss / (gain) (88,711) 117,076
Loss from remeasurement of contingent liabilities at fair value 1,906 1,760
Interest expense 669,353 560,548
Interest income (70,509) (16,786)
Net result on the disposal of non-current assets, impairment of long-lived assets and goodwill and provision for amounts due from related parties 1,611,099 5,151
Loss from discontinued operation, net of income tax 108,429 8,370
Amount attributable to non-controlling interests (317) 75,562
Income taxes 179,155 360,750
Adjusted EBITDA 1,332,055 2,396,673
US$ thousand 4Q 2012 3Q 2012
Net (loss) / income (1,114,473) 54,910
Add:
Depreciation, depletion and amortization 135,805 139,605
Forex loss / (gain) (82,884) (126,630)
Loss from remeasurement of contingent liabilities at fair value 493 484
Interest expense 184,880 159,529
Interest income (18,056) (15,883)
Net result on the disposal of non-current assets, impairment of long-lived assets and goodwill and provision for amounts due from related parties 916,462 74,500
Loss from discontinued operation, net of income tax 43,746 1,993
Amount attributable to noncontrolling interests (7,376) 17,730
Income taxes 41,792 69,388
Adjusted EBITDA 100,389 375,626

Adjusted Net income / (loss) can be reconciled as follows:

US$ thousand FY 2012 FY 2011
Net (loss) / income (1,664,567) 727,885
Impairment of long-lived assets and goodwill and provision for amounts due from related parties 1,627,004 --
Amount attributable to noncontrolling interests (27,778) --
Income taxes (20,043) --
Loss from discontinued operation, net of income tax 108,429 8,370
Adjusted net income 23,044 736,255
US$ thousand 4Q 2012 3Q 2012
Net (loss) / income (1,114,473) 54,911
Impairment of long-lived assets and goodwill and provision for amounts due from related parties 909,868 77,222
Loss from discontinued operation, net of income tax 43,746 1,993
Adjusted net (loss) / income (160,860) 134,126

Adjusted EBITDA margin can be reconciled as a percentage to our Revenues as follows:

US$ thousand FY 2012 FY 2011
Revenue, net 11,274,933 12,541,145
Adjusted EBITDA 1,332,055 2,396,673
Adjusted EBITDA, margin 11.81% 19.11%
US$ thousand 4Q 2012 3Q 2012
Revenue, net 2,521,449 2,711,398
Adjusted EBITDA 100,389 375,627
Adjusted EBITDA, margin 3.98% 13.85%

Mining Segment

US$ thousand FY 2012 FY 2011
Net income 360,770 1,069,892
Add:
Depreciation, depletion and amortization 317,005 328,521
Forex loss / (gain) (65,795) 60,718
Loss from remeasurement of contingent liabilities at fair value 1,906 1,760
Interest expense 280,787 310,318
Interest income (101,495) (138,960)
Net result on the disposal of non-current assets 5,636 8,609
Amount attributable to noncontrolling interests 45,976 80,050
Income taxes 153,495 302,919
Adjusted EBITDA 998,285 2,023,827
US$ thousand 4Q 2012 3Q 2012
Net income (67,475) 216,765
Add:
Depreciation, depletion and amortization 73,994 76,515
Forex loss / (gain) (67,635) (93,695)
Loss from remeasurement of contingent liabilities at fair value 493 484
Interest expense 75,358 64,605
Interest income (17,478) (29,389)
Net result on the disposal of non-current assets 6,441 (2,388)
Amount attributable to noncontrolling interests 7,402 10,394
Income taxes 22,008 61,866
Adjusted EBITDA 33,108 305,157

Adjusted Net income/loss can be reconciled as follows:

US$ thousand FY 2012 FY 2011
Net income 360,770 1,069,892
Provision for amounts due from related parties 22,668 --
Adjusted net income 383,438 1,069,892
US$ thousand 4Q 2012 3Q 2012
Net (loss) / income (67,475) 216,765
Provision for amounts due from related parties (11) 1,974
Adjusted net (loss) / income (67,486) 218,739

Adjusted EBITDA margin can be reconciled as a percentage to our Revenues as follows:

US$ thousand FY 2012 FY 2011
Revenue (including intersegment sales) 4,015,055 5,192,028
Adjusted EBITDA 998,285 2,023,827
Adjusted EBITDA, margin 24,86% 38.98%
US$ thousand 4Q 2012 3Q 2012
Revenue (including intersegment sales) 819,282 949,168
Adjusted EBITDA 33,108 305,156
Adjusted EBITDA, margin 4.04% 32.15%

Steel Segment

US$ thousand FY 2012 FY 2011
Net loss (1,677,326) (232,606)
Add:
Depreciation, depletion and amortization 169,582 125,987
Forex loss (46,071) 80,739
Interest expense 383,184 318,956
Interest income (21,927) (13,377)
Net result on the disposal of non-current assets, impairment of long-lived assets and goodwill and provision for amounts due from related parties 1,482,809 271
Amount attributable to noncontrolling interests (25,350) (9,708)
Income taxes 25,251 48,613
Adjusted EBITDA 290,152 318,875
US$ thousand 4Q 2012 3Q 2012
Net loss (925,496) (110,989)
Add:
Depreciation, depletion and amortization 44,925 39,762
Forex loss / (gain) (22,973) (48,171)
Interest expense 105,030 96,128
Interest income (16,197) 155
Net result on the disposal of non-current assets, impairment of long-lived assets and goodwill and provision for amounts due from related parties 887,103 76,726
Amount attributable to noncontrolling interests (11,129) 8,470
Income taxes 14,301 12,666
Adjusted EBITDA 75,564 74,747

Adjusted Net income / (loss) can be reconciled as follows:

US$ thousand FY 2012 FY 2011
Net loss (1,677,326) (232,606)
Impairment of long-lived assets and goodwill and provision for amounts due from related parties 1,480,430 --
Amount attributable to noncontrolling interests (15,320) --
Income taxes (14,797) --
Adjusted net loss (227,013) (232,606)
US$ thousand 4Q 2012 3Q 2012
Net loss (925,496) (110,989)
Impairment of long-lived assets and goodwill and provision for amounts due from related parties 886,672 75,249
Adjusted net loss (38,824) (35,740)

Adjusted EBITDA margin can be reconciled as a percentage to our Revenues as follows:

US$ thousand FY 2012 FY 2011
Revenue (including intersegment sales) 7,071,321 7,464,833
Adjusted EBITDA 290,152 318,875
Adjusted EBITDA, margin 4.10% 4.27%
US$ thousand 4Q 2012 3Q 2012
Revenue (including intersegment sales) 1,629,807 1,749,193
Adjusted EBITDA 75,565 74,747
Adjusted EBITDA, margin 4.64% 4.27%

Ferroalloys Segment

US$ thousand FY 2012 FY 2011
Net loss (292,070) (71,580)
Add:
Depreciation, depletion and amortization 88,969 89,986
Forex loss / (gain) 23,153 (24,211)
Interest expense 34,018 51,568
Interest income (59) (2,117)
Net result on the disposal of non-current assets, impairment of long-lived assets and goodwill 124,107 1,174
Amount attributable to noncontrolling interests (23,828) (690)
Income taxes (2,849) 1,747
Adjusted EBITDA (48,559) 45,877
US$ thousand 4Q 2012 3Q 2012
Net loss (87,288) (41,687)
Add:
Depreciation, depletion and amortization 14,194 20,856
Forex (gain) / loss 7,711 15,236
Interest expense 11,836 6,729
Interest income (3) 253
Net result on the disposal of non-current assets, impairment of long-lived assets and goodwill 22,915 142
Amount attributable to noncontrolling interests (4,668) (1,032)
Income taxes 4,765 (3,640)
Adjusted EBITDA (30,538) (3,143)

Adjusted Net income/loss can be reconciled as follows:

US$ thousand FY 2012 FY 2011
Net loss (292,070) (71,580)
Impairment of long-lived assets and goodwill 123,906 --
Amount attributable to noncontrolling interests (12,458) --
Income taxes (4,516) --
Adjusted net loss (185,138) (71,580)
US$ thousand 4Q 2012 3Q 2012
Net loss (87,288) (41,687)
Impairment of long-lived assets and goodwill 23,205 --
Income taxes 729 --
Adjusted net loss (63,354) (41,687)

Adjusted EBITDA margin can be reconciled as a percentage to our Revenues as follows:

US$ thousand FY 2012 FY 2011
Revenue (including intersegment sales) 504,133 674,445
Adjusted EBITDA (48,559) 45,877
Adjusted EBITDA, margin -9.63% 6.80%
US$ thousand 4Q 2012 3Q 2012
Revenue (including intersegment sales) 83,038 114,033
Adjusted EBITDA (30,538) (3,143)
Adjusted EBITDA, margin -36.77% -2.76%

Power Segment

US$ thousand FY 2012 FY 2011
Net loss (103,521) (5,808)
Add:
Depreciation, depletion and amortization 10,662 11,863
Forex (gain) / loss 1 (169)
Interest expense 24,372 17,580
Interest income (38) (205)
Net result on the disposal of non-current assets, impairment of long-lived assets and goodwill (1,452) (4,903)
Loss from discontinued operation, net of income tax 108,429 8,370
Amount attributable to noncontrolling interests 2,885 5,910
Income taxes 3,258 7,471
Adjusted EBITDA 44,597 40,109
US$ thousand 4Q 2012 3Q 2012
Net loss (41,026) (13,877)
Add:
Depreciation, depletion and amortization 2,691 2,471
Forex loss / (gain) 12 1
Interest expense 8,299 5,166
Interest income (21) (1)
Net result on the disposal of non-current assets, impairment of long-lived assets and goodwill 3 19
Loss from discontinued operation, net of income tax 43,746 1,993
Amount attributable to noncontrolling interests 1,019 (102)
Income taxes 718 (1,503)
Adjusted EBITDA 15,441 (5,833)

Adjusted Net income/loss can be reconciled as follows:

US$ thousand FY 2012 FY 2011
Net loss (103,521) (5,808)
Loss from discontinued operation, net of income tax 108,429 8,370
Adjusted net income 4,908 2,562
US$ thousand 4Q 2012 3Q 2012
Net loss (41,026) (13,877)
Impairment of goodwill -- --
Income taxes -- --
Loss from discontinued operation, net of income tax 43,746 1,994
Adjusted net (loss) / income 2,720 (11,883)

Adjusted EBITDA margin can be reconciled as a percentage to our Revenues as follows:

US$ thousand FY 2012 FY 2011
Revenue (including intersegment sales) 1,241,112 1,244,482
Adjusted EBITDA 44,597 40,109
Adjusted EBITDA, margin 3.59% 3.22%
US$ thousand 4Q 2012 3Q 2012
Revenue (including intersegment sales) 345,299 249,044
Adjusted EBITDA 15,441 (5,833)
Adjusted EBITDA, margin 4.47% -2.348%
Consolidated Balance Sheets
(in thousands of U.S. dollars)
December 31
2012
December 31
2011
ASSETS
Cash and cash equivalents $ 294,958 $ 642,648
Accounts receivable, net of allowance for doubtful accounts of $84,367 in 2012 and $46,062 in 2011 705,462 816,446
Due from related parties, net of allowance of $919,113 in 2012 451,377 1,315,288
Inventories 2,073,189 2,592,896
Deferred income taxes 31,629 35,719
Current assets of discontinued operations 59,223 16,209
Prepayments and other current assets 561,789 653,461
Total current assets 4,177,627 6,072,667
Long-term investments in related parties 7,853 8,150
Other long-term investments 14,671 13,997
Property, plant and equipment, net 7,798,839 7,049,625
Mineral licenses, net 4,658,657 4,733,676
Other non-current assets 183,566 203,745
Deferred income taxes 55,243 27,817
Goodwill 798,847 1,049,514
Non-current assets of discontinued operations -- 150,608
Total assets $ 17,695,303 $ 19,309,799
LIABILITIES AND EQUITY
Short-term borrowings and current portion of long-term debt $ 1,460,750 $ 2,651,357
Accounts payable and accrued expenses:
Trade payable to vendors of goods and services 1,053,344 972,920
Advances received 154,881 205,994
Accrued expenses and other current liabilities 337,433 280,935
Taxes and social charges payable 314,283 276,580
Unrecognized income tax benefits 20,202 2,190
Due to related parties 199,097 179,672
Asset retirement obligation, current portion 5,023 3,648
Deferred income taxes 38,485 41,822
Current liabilities of discontinued operations 17,801 5,183
Pension obligations, current portion 20,044 22,005
Dividends payable 3,086 4
Finance lease liabilities, current portion 132,090 96,907
Total current liabilities 3,756,519 $ 4,739,217
Long-term debt, net of current portion 7,929,489 6,732,029
Asset retirement obligations, net of current portion 44,831 39,593
Pension obligations, net of current portion 177,218 143,673
Deferred income taxes 1,499,990 1,514,864
Finance lease liabilities, net of current portion 347,768 375,249
Due to related parties 16,862 --
Long-term liabilities of discontinued operations -- 17,337
Other long-term liabilities 382,969 382,511
EQUITY
Common shares (10 Russian rubles par value; 497,969,086 shares authorized, 416,270,745 shares issued and outstanding
as of December 31, 2012 and 2011)
133,507 133,507
Preferred shares (10 Russian rubles par value; 138,756,915 shares authorized, 83,254,149 shares issued and outstanding
as of December 31, 2012 and 2011)
25,314 25,314
Additional paid-in capital 845,215 845,994
Accumulated other comprehensive loss (326,933) (356,580)
Retained earnings 2,500,278 4,345,754
Equity attributable to shareholders of Mechel OAO 3,177,381 4,993,989
Noncontrolling interests 362,276 371,337
Total equity 3,539,657 5,365,326
Total liabilities and equity $ 17,695,303 $ 19,309,799
Consolidated Statements of Income and Comprehensive Income (Loss)
(in thousands of U.S. dollars)
Year ended December 31,
2012 2011
Revenue, net (including related party amounts of $759,577 and $904,876 during 2012 and 2011, respectively) $ 11,274,933 $ 12,541,145
Cost of goods sold (including related party amounts of $844,214 and $1,612,001 during 2012 and 2011, respectively) (8,024,210) (8,236,807)
Gross profit 3,250,723 4,304,338
Selling, distribution and operating expenses:
Selling and distribution expenses (1,761,961) (1,736,265)
Taxes other than income tax (127,147) (102,788)
Accretion expense (5,021) (6,659)
Loss on write-off of property, plant and equipment (11,429) (11,006)
Impairment of goodwill and long-lived assets (707,891) --
Provision for amounts due from related parties (919,113) --
Provision (recovery of provision) for doubtful accounts (28,344) 1,331
General, administrative and other operating expenses, net (587,692) (608,847)
Total selling, distribution and operating expenses (4,148,598) (2,464,234)
Operating (loss) income (897,875) 1,840,104
Other income and (expense):
Income from equity investments 475 304
Interest income 70,509 16,785
Interest expense (669,353) (560,548)
Foreign exchange gain (loss) 88,711 (117,076)
Other income (expenses), net 30,232 (7,002)
Total other income and (expense), net (479,426) (667,537)
(Loss) income from continuing operations, before income tax and discontinued operations (1,377,301) 1,172,567
Income tax expense (179,155) (360,750)
(Loss) income from continuing operations (1,556,456) 811,817
Net loss from discontinued operations, net of income tax (108,429) (8,370)
Net (loss) income (1,664,885) 803,447
Less: Net loss (income) attributable to noncontrolling interests 317 (75,562)
Net (loss) income attributable to shareholders of Mechel OAO $ (1,664,568) $ 727,885
Less: Dividends on preferred shares (79,056) (78,281)
Net (loss) income attributable to common shareholders of Mechel OAO (1,743,624) 649,604
Net (loss) income (1,664,885) 803,447
Currency translation adjustment 70,893 (170,794)
Change in pension benefit obligation (17,778) (7,160)
Adjustment of available-for-sale securities (300) (2,245)
Comprehensive (loss) income $ (1,612,070) $ 623,248
Comprehensive income attributable to noncontrolling interests (22,851) (50,527)
Comprehensive (loss) income attributable to shareholders of Mechel OAO (1,634,921) 572,721
Consolidated Statements of Cash Flows
(in thousands of U.S. dollars)
Year ended December 31,
2012 2011
Cash Flows from Operating Activities
Net (loss) income from continuing operations attributable to shareholders of Mechel OAO (1,556,139) 736,255
Net loss (income) from continuing operations attributable to non-controlling interests (317) 75,562
Net (loss) income from continuing operations $ (1,556,456) $ 811,817
Adjustments to reconcile net (loss) income from continuing operations to net cash provided by operating activities:
Depreciation 438,661 372,558
Depletion and amortization 147,557 183,799
Foreign exchange (gain) loss (88,711) 117,076
Deferred income taxes (66,035) 7,782
Provision (recovery of provision) for doubtful accounts 28,344 (1,331)
Change in inventory reserves 41,035 18,276
Accretion expense 5,021 6,659
Change in asset retirement obligations (4,998) (6,823)
Loss on write-off of property, plant and equipment 11,429 11,006
Impairment of goodwill and long-lived assets 707,891 --
Provision for amounts due from related parties 919,113 --
Income from equity investments (475) (304)
Non-cash interest on pension liabilities 12,159 13,583
Gain on sale of property, plant and equipment (7,477) (7,422)
Gain on accounts payable with expired legal term (4,057) (5,390)
Gain on forgiveness of fines and penalties (2,777) (47)
Amortization of loan origination fee 54,718 53,352
Loss resulting from accretion and remeasurement of contingent obligation 1,906 1,760
Pension benefit plan curtailment gain (1,691) (38,711)
Pension service cost, amortization of prior service cost and actuarial (gain) loss, other expenses 4,725 5,165
Changes in working capital items, net of effects from acquisition of new subsidiaries:
Accounts receivable 66,310 (318,039)
Inventories 634,527 (763,371)
Trade payable to vendors of goods and services 72,954 257,599
Advances received (56,418) (145,604)
Accrued taxes and other liabilities 59,416 13,938
Settlements with related parties (241,908) 390,940
Other current assets 99,748 (80,961)
Net operation cash flows of discontinued operations (6,737) (12,484)
Dividends received 25,956 --
Unrecognized income tax losses (benefits) 17,598 (2,285)
Net cash provided by operating activities 1,311,328 882,538
Cash Flows from Investing Activities
Acquisition of DEMP, less cash acquired (32,810) (70,044)
Acquisition of Cognor, less cash acquired (24,172) --
Acquisition of Lomprom Rostov, less cash acquired (24) --
Advance payment received in association with sale of TPP Rousse shares 2,640 --
Acquisition of other subsidiaries, less cash acquired -- (5,643)
Capital contribution in affiliates -- (571)
Proceeds from disposal of investments in affiliates 2,998 6
Short-term loans issued and other investments (including related party amounts of $nil in 2012 and $944,530 in 2011) (4,451) (1,089,850)
Proceeds from short-term loans issued 217,810 353,624
Proceeds from disposals of property, plant and equipment 23,498 20,469
Prepayment for the participation in auction -- (7,869)
Purchases of mineral licenses (6,079) (23,088)
Cash flows from discontinued operations 4,174 8,642
Purchases of property, plant and equipment (1,022,721) (1,803,908)
Net cash used in investing activities (839,137) (2,618,232)
Cash Flows from Financing Activities
Proceeds from borrowings 3,977,809 5,938,730
Repayment of borrowings (4,405,881) (3,583,229)
Dividends paid (186,443) (210,233)
Dividends paid to noncontrolling interest (29,054) --
Acquisition of noncontrolling interest in subsidiaries (632) (283)
Repayment of obligations under finance lease (149,471) (99,372)
Cash flows from discontinued operations (1,477) (1,628)
Sale leaseback proceeds 3,143 35,049
Net cash (used in) provided by financing activities (792,006) 2,079,034
Effect of exchange rate changes on cash and cash equivalents (27,875) (41,117)
Net (decrease) increase in cash and cash equivalents (347,690) 302,223
Cash and cash equivalents at beginning of period 642,648 340,425
Cash and cash equivalents at end of period $ 294,958 $ 642,648

CONTACT: Mechel OAO Vladislav Zlenko Director of Investor Relations Mechel OAO Phone: 7-495-221-88-88 Fax: 7-495-221-88-00 vladislav.zlenko@mechel.com

Source:Mechel OAO