SOURCE: Century Aluminum Company

Century Aluminum Company

August 06, 2015 16:00 ET

Century Reports Second Quarter 2015 Financial Results

CHICAGO, IL--(Marketwired - Aug 6, 2015) - Century Aluminum Company (NASDAQ: CENX) reported a net loss of $33.9 million ($0.39 per common share) for the second quarter of 2015. Results include a $30.9 million impairment charge ($0.35 per common share) related to the permanent closure of our Ravenswood smelter and a $25.7 million charge ($0.30 per common share) for lower of cost or market inventory adjustments. Results were also negatively impacted by $11.7 million ($0.13 per common share) in costs related to the labor disruption at our Hawesville smelter. Lastly, results include a $10.3 million ($0.12 per common share) unrealized gain on the fair value of contingent consideration related to the acquisition of the remaining 50.3% interest of Mt. Holly. After consideration of these items, the company reported adjusted net income of $24.1 million and adjusted earnings per share of $0.25.

For the second quarter of 2014, Century reported net income of $20.3 million ($0.21 per common share). Results were negatively impacted by a charge of $0.5 million ($0.01 per common share) for the finalization of a legal settlement. 

Sales for the second quarter of 2015 were $523.5 million compared with $458.3 million for the second quarter of 2014. Shipments of primary aluminum for the second quarter of 2015 were 233,950 tonnes compared with 216,044 tonnes shipped in the second quarter of 2014. 

Net cash used by operating activities in the second quarter of 2015 was $6.0 million compared to net cash provided of $19.3 million in the second quarter of 2014. Cash and cash equivalents decreased $59.0 million during the second quarter of 2015 compared to an increase in cash and cash equivalents of $8.9 million in the second quarter of 2014. During the second quarter of 2015, Century acquired 1.2 million shares of common stock for a total cost of $16.9 million and paid $38.2 million related to the Mt. Holly acquisition, primarily for pension funding obligations per the terms of the acquisition agreement.

For the first half of 2015, Century reported net income of $39.9 million ($0.42 per common share). Results include a $30.9 million impairment charge related to the permanent closure of our Ravenswood smelter and a $25.7 million charge for lower of cost or market inventory adjustments. Results were also negatively impacted by $11.7 million in costs related to the labor disruption at our Hawesville smelter, $1.6 million for signing bonuses related to a new labor agreement in Iceland and $1.0 million related to the separation of a former senior executive. Lastly, results include a $16.8 million unrealized gain on the fair value of contingent consideration related to the acquisition of the remaining 50.3% interest of Mt. Holly.

For the first half of 2014, Century reported net income of $0.2 million ($0.00 per common share). Cost of sales for the first half included a benefit of $5.5 million related to power contract amortization and $1.2 million for lower of cost or market inventory adjustments. Results were negatively impacted by a reserve of $3.6 million for a legal settlement.

Sales for the first half of 2015 were $1,111.4 million compared with $879.2 million for the first half of 2014. Shipments of primary aluminum for the first half of 2015 were 479,208 tonnes compared with 422,829 tonnes shipped for the first half of 2014. 

Net cash provided by operating activities in the first half of 2015 was $110.3 million compared to $8.6 million in the first half of 2014. Cash and cash equivalents increased $4.2 million during the first half of 2015 compared to a decrease in cash and cash equivalents of $22.7 million in the first half of 2014. During the first half of 2015, Century acquired 2.4 million shares of common stock for a total cost of $36.3 million and paid $38.2 million related to the Mt. Holly acquisition, primarily for pension funding obligations per the terms of the acquisition agreement.

"We have witnessed a significant weakening in the commodity price environment during the last several months," commented Michael Bless, President and CEO. "In the primary aluminum sector, demand development remains strong in the U.S. and is improving in Western Europe and certain other key developed markets. However, there has been a meaningful deterioration in supply side conditions, principally in the form of exports from China. This subsidized material, much of which circumvents laws and regulations implemented by the Chinese authorities, is flooding markets in the U.S. and Europe. Aggressive and timely action is required to ensure fairness and an equal footing for all participants in these markets."

Mr. Bless continued, "We are taking regrettable but necessary actions to preserve the competitiveness of our businesses. We have announced layoffs that will impact a significant number of our colleagues. We have deferred or cancelled a substantial number of programs, while maintaining adequate investment in safety, operational reliability, product quality and customer support. We have implemented a variety of other actions aimed at improving cash flow and preserving liquidity. We will continue to analyze and implement additional actions as appropriate."

"With real regret, we announced last week our intent to work toward a permanent closure of our Ravenswood, West Virginia plant," continued Mr. Bless. "We are grateful for the efforts of state officials and West Virginia's congressional representatives, all of whom we are convinced did everything in their power to facilitate a restart of the smelter. The depth of our collective efforts renders this decision all the more difficult. In the final analysis, however, market conditions made the likelihood of a restart simply unrealistic within any reasonable time frame. We will now move to dispose of the plant and the site consistent with the best interests of our shareholders, the local community and the economic development objectives of the state."

Mr. Bless concluded, "We will move forward aggressively to preserve the value of the company during this difficult market environment. We have strong liquidity, low financial leverage and few fixed contractual obligations. We will continue to fund high return and low risk projects aimed at growing our businesses and improving their competitiveness. We are nearing the end of the process to finalize a post-2015 power arrangement for Mt. Holly, and must reach a conclusion within the coming months. We are confident that Century will emerge from this difficult industry environment stronger and more competitive."

About Century Aluminum

Century Aluminum Company owns primary aluminum capacity in the United States and Iceland. Century's corporate offices are located in Chicago, IL. Visit www.centuryaluminum.com for more information.

Certified Advisors for the First North market of the OMX Nordic Exchange Iceland hf. for Global Depositary Receipts in Iceland:

Atli B. Gudmundsson, Senior Manager -- Corporate Finance, Landsbankinn hf.

Steingrimur Helgason, Director -- Corporate Finance, Landsbankinn hf.

Non-GAAP Financial Measures

Adjusted net income and adjusted earnings per share are non-GAAP financial measures that management believes provide additional meaningful information regarding Century's financial performance as these measures generally exclude the effects of items that are considered non-recurring, are difficult to predict or to measure in advance or that are not directly related to the Company's ongoing operations. The table below, under the heading "Reconciliation of Non-GAAP Financial Measures," provides a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported results prepared in accordance with GAAP. In addition, because not all companies use identical calculations, adjusted net income and adjusted earnings per share included in this press release may not be comparable to similarly titled measures of other companies. Investors are encouraged to review the reconciliation in conjunction with the presentation of these non-GAAP financial measures.

Cautionary Statement

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements about future events and are based on our current expectations. These forward-looking statements may be identified by the words "believe," "expect," "hope," "target," "anticipate," "intend," "plan," "seek," "estimate," "potential," "project," "scheduled," "forecast" or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," "might," or "may." Our forward-looking statements include, without limitation, statements with respect to: future global and local financial and economic conditions; our assessment of the aluminum market and aluminum prices (including premiums); our assessment of power pricing and our ability to successfully obtain and/or implement long-term competitive power arrangements for our operations and projects, including at Mt. Holly; our relationship with our employees and labor unions; our plans with respect to the closure of our Ravenswood smelter and the potential curtailment of other domestic assets; the future financial and operating performance of the Company, its subsidiaries and its projects; future earnings, operating results and liquidity; future inventory, production, sales, cash costs and capital expenditures; future impairment charges or restructuring costs; our business objectives, strategies and initiatives, including our ability to achieve productivity improvements or cost reductions.

Where we express an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from future results expressed, projected or implied by those forward-looking statements. Important factors that could cause actual results and events to differ from those described in such forward-looking statements can be found in the risk factors and forward-looking statements cautionary language contained in our Annual Report on Form 10-K, quarterly reports on Form 10-Q and in other filings made with the Securities and Exchange Commission. Although we have attempted to identify those material factors that could cause actual results or events to differ from those described in such forward-looking statements, there may be other factors that could cause results or events to differ from those anticipated, estimated or intended. Many of these factors are beyond our ability to control or predict. Given these uncertainties, the reader is cautioned not to place undue reliance on our forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

   
CENTURY ALUMINUM COMPANY  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(in thousands, except per share amounts)  
(Unaudited)  
   
    Three months ended June 30,     Six months ended June 30,  
    2015     2014     2015     2014  
NET SALES:                                
  Related parties   $ 513,681     $ 288,573     $ 1,089,410     $ 574,156  
  Third-party customers     9,810       169,751       21,992       305,015  
Total net sales     523,491       458,324       1,111,402       879,171  
  Cost of goods sold     515,149       419,820       1,008,965       842,425  
Gross profit     8,342       38,504       102,437       36,746  
  Selling, general and administrative expenses     10,012       10,618       21,983       20,680  
  Ravenswood impairment     30,850       -       30,850       -  
  Other operating expense - net     2,601       1,874       4,680       4,288  
Operating income (loss)     (35,121 )     26,012       44,924       11,778  
  Interest expense     (5,573 )     (5,571 )     (11,124 )     (11,048 )
  Interest income     61       34       203       174  
  Net gain (loss) on forward and derivative contracts     566       352       919       (527 )
  Unrealized gain on fair value of contingent consideration     10,287       -       16,814       -  
  Other income - net     93       300       1,147       47  
Income (loss) before income taxes and equity in earnings of joint ventures     (29,687 )     21,127       52,883       424  
  Income tax expense     (5,065 )     (1,654 )     (14,366 )     (560 )
Income (loss) before equity in earnings of joint ventures     (34,752 )     19,473       38,517       (136 )
  Equity in earnings of joint ventures     855       871       1,365       376  
Net income (loss)   $ (33,897 )   $ 20,344     $ 39,882     $ 240  
                                 
Net income (loss) allocated to common stockholders   $ (33,897 )   $ 18,675     $ 36,628     $ 220  
EARNINGS (LOSS) PER COMMON SHARE:                                
  Basic   $ (0.39 )   $ 0.21     $ 0.42     $ 0.00  
  Diluted     (0.39 )     0.21       0.41       0.00  
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                                
  Basic     86,873       88,787       87,838       88,752  
  Diluted     86,873       89,352       88,495       89,292  
                                 
                                 
   
CENTURY ALUMINUM COMPANY  
CONSOLIDATED BALANCE SHEETS  
(in thousands, except share amounts)  
(Unaudited)  
   
    June 30, 2015     December 31, 2014  
ASSETS                
Cash and cash equivalents   $ 167,408     $ 163,242  
Restricted cash     1,083       801  
Accounts receivable - net     9,807       76,165  
Due from affiliates     52,310       31,503  
Inventories     318,422       283,480  
Prepaid and other current assets     36,236       29,768  
Deferred taxes     14,281       14,281  
  Total current assets     599,547       599,240  
Property, plant and equipment - net     1,263,861       1,291,218  
Other assets     125,830       123,577  
  TOTAL   $ 1,989,238     $ 2,014,035  
LIABILITIES AND SHAREHOLDERS' EQUITY                
LIABILITIES:                
Accounts payable, trade   $ 119,334     $ 151,443  
Due to affiliates     63,667       22,261  
Accrued and other current liabilities     67,162       104,646  
Accrued employee benefits costs     9,742       10,159  
Industrial revenue bonds     7,815       7,815  
  Total current liabilities     267,720       296,324  
Senior notes payable     247,079       246,888  
Accrued pension benefits costs - less current portion     56,711       59,906  
Accrued postretirement benefits costs - less current portion     136,020       152,894  
Other liabilities     46,596       53,272  
Deferred taxes     118,572       113,604  
  Total noncurrent liabilities     604,978       626,564  
                 
SHAREHOLDERS' EQUITY:                
Series A Preferred stock (one cent par value, 5,000,000 shares authorized; 160,000 issued and 77,127 outstanding at June 30, 2015; 160,000 issued and 78,141 outstanding at December 31, 2014)     1       1  
Common stock (one cent par value, 195,000,000 shares authorized; 94,087,473 issued and 86,900,952 outstanding at June 30, 2015; 93,851,103 issued and 89,064,582 outstanding at December 31, 2014)     941       939  
Additional paid-in capital     2,512,682       2,510,261  
Treasury stock, at cost     (86,276 )     (49,924 )
Accumulated other comprehensive loss     (98,242 )     (117,682 )
Accumulated deficit     (1,212,566 )     (1,252,448 )
  Total shareholders' equity     1,116,540       1,091,147  
  TOTAL   $ 1,989,238     $ 2,014,035  
                 
                 
   
CENTURY ALUMINUM COMPANY  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
(Unaudited)  
   
    Six months ended June 30,  
    2015     2014  
CASH FLOWS FROM OPERATING ACTIVITIES:                
  Net income   $ 39,882     $ 240  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Unrealized gain on fair value of contingent consideration     (16,814 )     -  
    Unrealized gain on E.ON contingent obligation     (706 )     (706 )
    Accrued and other plant curtailment costs - net     2,149       2,181  
    Lower of cost or market inventory adjustment     25,689       (1,247 )
    Depreciation     36,409       35,143  
    Ravenswood impairment     30,850       -  
    Sebree power contract amortization     -       (5,534 )
    Debt discount amortization     191       177  
    Pension and other postretirement benefits     (262 )     2,368  
    Deferred income taxes     4,984       2,731  
    Stock-based compensation     894       533  
    Equity in earnings of joint ventures, net of dividends     (1,365 )     (376 )
    Change in operating assets and liabilities:                
      Accounts receivable - net     66,359       3,931  
      Due from affiliates     (20,807 )     (10,508 )
      Inventories     (60,631 )     (2,786 )
      Prepaid and other current assets     3,819       6,816  
      Accounts payable, trade     (34,087 )     (8,413 )
      Due to affiliates     41,406       (1,226 )
      Accrued and other current liabilities     1,288       (12,200 )
      Other - net     (8,932 )     (2,496 )
Net cash provided by operating activities     110,316       8,628  
CASH FLOWS FROM INVESTING ACTIVITIES:                
  Purchase of property, plant and equipment     (26,587 )     (16,758 )
  Nordural expansion - Helguvik     (175 )     (186 )
  Purchase of carbon anode assets and improvements     (4,606 )     (7,226 )
  Purchase of remaining interest in Mt. Holly smelter     (38,162 )     -  
  Proceeds from sale of property, plant and equipment     14       46  
  Restricted and other cash deposits     (282 )     (1,334 )
  Net cash used in investing activities     (69,798 )     (25,458 )
CASH FLOWS FROM FINANCING ACTIVITIES:                
  Borrowings under revolving credit facilities     1,010       86,646  
  Repayments under revolving credit facilities     (1,010 )     (92,646 )
  Repurchase of common stock     (36,352 )     -  
  Issuance of common stock     -       126  
  Net cash used in financing activities     (36,352 )     (5,874 )
CHANGE IN CASH AND CASH EQUIVALENTS     4,166       (22,704 )
Cash and cash equivalents, beginning of period     163,242       84,088  
Cash and cash equivalents, end of period   $ 167,408     $ 61,384  
                 
                 
 
CENTURY ALUMINUM COMPANY
SELECTED OPERATING DATA
(Unaudited)
 
SHIPMENTS - PRIMARY ALUMINUM        
             
    Direct (1)   Toll
    United States   Iceland   Iceland
    Tonnes   Sales $ (000)   Tonnes   Sales $ (000)   Tonnes   Sales $ (000)
2015                              
2nd Quarter   157,373   $ 371,898   50,056   $ 110,083   26,521   $ 37,858
1st Quarter   169,306     421,141   45,967     112,662   29,985     46,617
Total   326,679   $ 793,039   96,023   $ 222,745   56,506   $ 84,475
2014                              
2nd Quarter   143,439   $ 325,650   39,593   $ 82,328   33,012   $ 48,441
1st Quarter   136,532     296,889   36,764     74,370   33,489     47,185
Total   279,971   $ 622,539   76,357   $ 156,698   66,501   $ 95,626
                               
(1)   Excludes scrap aluminum sales.
     
     
   
CENTURY ALUMINUM COMPANY  
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES  
(in millions, except per share amounts)  
(Unaudited)  
   
    Q215     EPS  
Net income (loss) as reported   $ (33.9 )   $ (0.39 )
                 
Ravenswood impairment     30.9       0.35  
Hawesville labor disruption     11.7       0.13  
Mt. Holly purchase accounting     (10.3 )     (0.12 )
LCM inventory adjustment     25.7       0.30  
Impact of preferred shares     -       (0.02 )
                 
Adjusted net income   $ 24.1     $ 0.25  
                 

Contact Information

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