SOURCE: Century Aluminum Company

Century Aluminum Company

October 27, 2016 16:05 ET

Century Reports Third Quarter 2016 Financial Results

CHICAGO, IL--(Marketwired - Oct 27, 2016) - Century Aluminum Company (NASDAQ: CENX) reported a net loss of $58.3 million ($0.67 per share) for the third quarter of 2016. Results were negatively impacted by a $26.8 million ($0.31 per share) charge related to the closure of the Ravenswood facility, including settlement costs associated with the retiree medical class action lawsuit, and a $2.4 million ($0.03 per share) lower of cost or market inventory adjustment. The third quarter adjusted net loss was $29.1 million ($0.31 per share).

For the third quarter of 2015, Century reported a net loss of $56.1 million ($0.65 per share). Results were negatively impacted by a $5.3 million charge ($0.06 per share) for lower of cost or market inventory adjustments, a $0.4 million charge ($0.01 per share) related to the permanent closure of the Ravenswood facility, a $1.4 million charge ($0.02 per share) related to the labor disruption at Hawesville, a $2.9 million charge ($0.04 per share) related to the partial curtailment of our Hawesville facility, and a $1.2 million charge ($0.01 per share) related to severance primarily associated with cost reductions. Results were positively impacted by a $0.8 million purchase accounting gain ($0.01 per share) related to Mt. Holly.

Sales for the third quarter of 2016 were $333.7 million compared with $454.5 million for the third quarter of 2015. Shipments of primary aluminum for the third quarter of 2016 were 182,429 tonnes compared with 231,040 tonnes shipped in the third quarter of 2015. The decrease in sales and shipment volume was primarily due to curtailment actions taken in the second half of 2015.

Net cash used by operating activities in the third quarter of 2016 was $8.0 million. Our cash position at quarter end was $117.6 million and we had $90.4 million of revolver availability.

For the first nine months of 2016, Century reported a net loss of $84.0 million ($0.96 per share). Results included the negative impact of a $26.8 million ($0.31 per share) charge related to the closure of the Ravenswood facility, including settlement costs associated with the retiree medical class action lawsuit, and a $1.5 million ($0.02 per share) lower of cost or market inventory adjustment.

For the first nine months of 2015, Century reported a net loss of $16.2 million ($0.19 per share). Results included a $31.2 million charge related to the permanent closure of Ravenswood and a $31.0 million charge for lower of cost or market inventory adjustments. Results also included $13.1 million in costs related to the labor disruption at Hawesville, $2.9 million due to the partial curtailment of our Hawesville facility, $1.2 million related to severance, $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 included an $18.3 million unrealized gain on the fair value of contingent consideration related to the Mt. Holly acquisition.

Sales for the first nine months of 2016 were $979.3 million compared with $1,565.9 million for the first nine months of 2015. Shipments of primary aluminum for the first nine months of 2016 were 550,615 tonnes compared with 710,248 tonnes shipped for the first nine months of 2015. The decrease in sales and shipment volume was primarily due to curtailment actions taken in the second half of 2015.

"A cross current of factors is influencing our markets," commented Michael Bless, President and Chief Executive Officer. "The commodity price has firmed and regional delivery premiums are somewhat stronger. Demand remains generally good and supply, excluding in China, continues to be constrained. On the other hand, value-added product premiums, especially in the U.S., are under pressure due to the significant and growing level of imports caused by the excess production in China. Power prices rose during the summer due to the abnormally warm weather and certain markets, like natural gas, remain elevated due to expectations for a cold winter."

"Third quarter financial performance was negatively influenced by elevated power prices in the U.S. Midwest, a result of the historically hot summer weather; delivered prices have now generally reverted to pre-summer levels," Mr. Bless continued. "In addition, rising alumina prices pressured quarterly results. We believe this trend is largely a reaction to the startup of new capacity in China, and we expect it to temper over the coming months. Internally, our operations are performing well and our cost structure, flexibility and product configuration continue to provide protection against weaker pricing environments as well as exposure when the market firms."

"Overcapacity and overproduction continue to subsist in great quantities in China, negatively impacting rational producers and markets in the rest of the world," concluded Mr. Bless. "We firmly believe all major market participants are fully aware of the subsidies, illegal under WTO rules, that allow this overcapacity and overproduction to continue to exist and the distortion to fair trade that this behavior is causing. We applaud the growing list of members of Congress, including Senators Brown, Casey, Gillibrand, McConnell, Merkley, Portman, Schumer, Stabenow and Wyden, who, over the last few weeks, have called on the administration to take immediate action to enforce global trade law and protect this sector and those that depend on it. These constituencies include employees and their families in countless communities as well as U.S. national defense interests."

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.

Non-GAAP Financial Measures
Adjusted net income (loss) and adjusted earnings (loss) per share are non-GAAP financial measures that management uses to evaluate Century's financial performance. These non-GAAP financial measures facilitate comparisons of this period's results with prior periods on a consistent basis by excluding items that management does not believe are indicative of Century's ongoing operating performance and ability to generate cash. Management believes these non-GAAP financial measures enhance an overall understanding of Century's performance and our investors' ability to review Century's business from the same perspective as management. 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, Century's reported results prepared in accordance with GAAP. In addition, because not all companies use identical calculations, adjusted net income (loss) and adjusted earnings (loss) 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); the potential outcome or occurrence of any trade claims to address excess capacity or unfair trade practices; our assessment of power pricing and our ability to successfully obtain and/or implement long-term competitive power arrangements for our operations and projects; our ability to procure alumina, carbon products and other raw materials and our assessment of pricing and costs and other terms relating thereto; our relationship with our employees and labor unions; the future operation or potential curtailment of our U.S. assets; the future financial and operating performance of Century, 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 September 30,     Nine months ended September 30,  
    2016     2015     2016     2015  
NET SALES:                                
  Related parties   $ 301,111     $ 428,018     $ 871,771     $ 1,517,428  
  Third-party customers     32,539       26,522       107,487       48,514  
Total net sales     333,650       454,540       979,258       1,565,942  
  Cost of goods sold     351,262       496,963       995,357       1,505,928  
Gross profit (loss)     (17,612 )     (42,423 )     (16,099 )     60,014  
  Selling, general and administrative expenses     9,733       11,566       29,303       33,549  
  Ravenswood charges     26,830       --       26,830       30,850  
  Other operating expense - net     878       1,537       2,337       6,217  
Operating loss     (55,053 )     (55,526 )     (74,569 )     (10,602 )
  Interest expense     (5,531 )     (5,418 )     (16,521 )     (16,542 )
  Interest income     190       45       475       248  
  Net gain on forward and derivative contracts     1,275       285       2,998       1,204  
  Unrealized gain on fair value of contingent consideration     --       1,523       --       18,337  
  Other income (expense) - net     (157 )     114       (462 )     1,261  
Loss before income taxes and equity in earnings of joint ventures     (59,276 )     (58,977 )     (88,079 )     (6,094 )
  Income tax benefit (expense)     848       2,161       3,237       (12,205 )
Loss before equity in earnings of joint ventures     (58,428 )     (56,816 )     (84,842 )     (18,299 )
  Equity in earnings of joint ventures     155       704       891       2,069  
Net loss   $ (58,273 )   $ (56,112 )   $ (83,951 )   $ (16,230 )
                                 
Net loss allocated to common stockholders   $ (58,273 )   $ (56,112 )   $ (83,951 )   $ (16,230 )
LOSS PER COMMON SHARE:                                
  Basic and diluted   $ (0.67 )   $ (0.65 )   $ (0.96 )   $ (0.19 )
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:                                
  Basic and diluted     87,076       86,907       87,059       87,524  
                                 
   
CENTURY ALUMINUM COMPANY  
CONSOLIDATED BALANCE SHEETS  
(in thousands, except share amounts)  
(Unaudited)  
   
    September 30, 2016     December 31, 2015  
ASSETS                
Cash and cash equivalents   $ 117,593     $ 115,393  
Restricted cash     1,046       791  
Accounts receivable - net     11,187       9,475  
Due from affiliates     14,271       17,417  
Inventories     233,288       231,872  
Prepaid and other current assets     31,828       42,412  
Assets held for sale     23,239       30,697  
  Total current assets     432,452       448,057  
Property, plant and equipment - net     1,185,101       1,232,256  
Other assets     71,163       72,155  
  TOTAL   $ 1,688,716     $ 1,752,468  
LIABILITIES AND SHAREHOLDERS' EQUITY                
LIABILITIES:                
Accounts payable, trade   $ 85,314     $ 90,489  
Due to affiliates     13,105       10,045  
Accrued and other current liabilities     59,382       48,822  
Accrued employee benefits costs     9,284       10,148  
Industrial revenue bonds     7,815       7,815  
  Total current liabilities     174,900       167,319  
Senior notes payable     247,590       247,278  
Accrued pension benefits costs - less current portion     42,433       43,999  
Accrued postretirement benefits costs - less current portion     125,490       125,999  
Other liabilities     72,330       53,009  
Deferred taxes     88,449       96,994  
  Total noncurrent liabilities     576,292       567,279  
                 
SHAREHOLDERS' EQUITY:                
Series A Preferred stock (one cent par value, 5,000,000 shares authorized; 160,000 issued and 76,378 outstanding at September 30, 2016; 160,000 issued and 76,539 outstanding at December 31, 2015)     1       1  
Common stock (one cent par value, 195,000,000 authorized; 94,262,108 issued and 87,075,587 outstanding at September 30, 2016; 94,224,571 issued and 87,038,050 outstanding at December 31, 2015)     942       942  
Additional paid-in capital     2,514,765       2,513,631  
Treasury stock, at cost     (86,276 )     (86,276 )
Accumulated other comprehensive loss     (110,179 )     (112,650 )
Accumulated deficit     (1,381,729 )     (1,297,778 )
  Total shareholders' equity     937,524       1,017,870  
  TOTAL   $ 1,688,716     $ 1,752,468  
                 
                 
   
CENTURY ALUMINUM COMPANY  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
(Unaudited)  
   
    Nine months ended September 30,  
    2016     2015  
CASH FLOWS FROM OPERATING ACTIVITIES:                
  Net loss   $ (83,951 )   $ (16,230 )
  Adjustments to reconcile net loss to net cash provided by operating activities:                
    Unrealized gain on fair value of contingent consideration     --       (18,337 )
    Unrealized gain on E.ON contingent obligation     (1,059 )     (1,059 )
    Lower of cost or market inventory adjustment     1,499       31,013  
    Depreciation and amortization     63,306       55,815  
    Pension and other postretirement benefits     1,682       (298 )
    Deferred income taxes     (8,520 )     1,215  
    Stock-based compensation     1,134       1,381  
    Equity in earnings of joint ventures     (891 )     (2,069 )
    Change in operating assets and liabilities:                
      Accounts receivable - net     (1,712 )     69,055  
      Due from affiliates     3,146       2,406  
      Inventories     (1,265 )     (46,392 )
      Prepaid and other current assets     9,016       3,435  
      Accounts payable, trade     (5,028 )     (43,485 )
      Due to affiliates     4,628       11,395  
      Accrued and other current liabilities     4,769       (8,418 )
      Pension contribution - Mt. Holly     --       (34,595 )
      Ravenswood charges     26,830       30,850  
      Other - net     1,998       (3,173 )
Net cash provided by operating activities     15,582       32,509  
CASH FLOWS FROM INVESTING ACTIVITIES:                
  Purchase of property, plant and equipment     (13,127 )     (47,595 )
  Purchase of remaining interest in Mt. Holly smelter     --       11,313  
  Restricted and other cash deposits     (255 )     (141 )
Net cash used in investing activities     (13,382 )     (36,423 )
CASH FLOWS FROM FINANCING ACTIVITIES:                
  Borrowings under revolving credit facilities     900       1,414  
  Repayments under revolving credit facilities     (900 )     (1,414 )
  Repurchase of common stock     --       (36,352 )
Net cash used in financing activities     --       (36,352 )
CHANGE IN CASH AND CASH EQUIVALENTS     2,200       (40,266 )
Cash and cash equivalents, beginning of period     115,393       163,242  
Cash and cash equivalents, end of period   $ 117,593     $ 122,976  
                 
                 
 
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)
2016                              
3rd Quarter   106,890   $ 201,973   75,539   $ 130,177   --   $ --
2nd Quarter   106,974     204,173   54,968     92,707   23,625     27,944
1st Quarter   105,089     194,826   55,030     92,151   22,500     26,115
Total   318,953   $ 600,972   185,537   $ 315,035   46,125   $ 54,059
                               
                               
2015                              
3rd Quarter   149,187   $ 304,948   60,939   $ 116,919   20,914   $ 26,226
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   475,866   $ 1,097,987   156,962   $ 339,664   77,420   $ 110,701
                               
(1)   Excludes scrap aluminum sales.
     
     
   
CENTURY ALUMINUM COMPANY  
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES  
(in millions, except per share amounts)  
(Unaudited)  
   
    Three months ended  
    September 30, 2016  
    $MM     EPS  
Net loss as reported   $ (58.3 )   $ (0.67 )
                 
Ravenswood closure and retiree medical settlement     26.8       0.31  
Lower of cost or market inventory adjustment     2.4       0.03  
Impact of preferred shares     --       0.02  
Adjusted net loss   $ (29.1 )   $ (0.31 )
                 

Contact Information

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    Peter Trpkovski
    (Investors and media)
    312-696-3112