Exhibit 99.1
Noranda Aluminum Holding Corporation Reports Second Quarter 2008 Results
FRANKLIN, Tenn.--(BUSINESS WIRE)--Noranda Aluminum Holding Corporation (“Noranda” or the “Company”) announced its financial results for the second quarter of 2008.
Highlights for the second quarter ended June 30, 2008, include the following:
- Revenues of $347.2 million, operating income of $35.0 million, and net income of $3.5 million for the second quarter
- Revenues of $647.5 million, operating income of $76.9 million, and net income of $20.7 million year-to-date
- Generated $100.6 million in cash provided by operating activities year-to-date 2008
- Adjusted EBITDA of $80.4 million for the second quarter and $165.1 million year-to-date
- Board of Directors approved a $48 million expansion of our New Madrid smelter
- Achieved record production at our New Madrid smelter for the quarter and six months
- Paid down $30.3 million of principal on the Term B Loan on April 14, 2008
Second Quarter Results
Third party sales for the second quarter of 2008 were $347.2 million, down 7.1% from sales of $373.7 million reported for the second quarter of 2007. This decrease primarily resulted from reduced upstream and downstream shipments to external customers, increased intersegment shipments, and lower brokered metal sales from our downstream business.
Sales to external customers in the upstream business for the three months ended June 30, 2008, decreased 1.1% to $181.0 million from the $183.0 million reported for the same period last year. The decrease in sales resulted from the decreased pounds shipped to external customers, partially offset by an increase in the realized Midwest primary aluminum price to $1.37 per pound from $1.30 per pound realized in the second quarter of 2007.
Total upstream metal shipments for the second quarter of 2008 were 142.5 million pounds, up 9.1 million pounds from the 133.4 million pounds shipped during the second quarter last year. Of the total amount shipped, 124.4 million pounds were shipped to external customers, while the remaining 18.1 million pounds were intersegment shipments to our downstream business. External shipments were down 6.4 million pounds as a result of a decline in demand for value-added products utilized in the housing and construction industry. This decline was more than offset by a 15.5 million pound increase in shipments to our downstream operation. Our integrated operations provide us the flexibility to shift a portion of our upstream production to our downstream business and reduce our overall external purchase commitments.
Sales in the downstream business were $166.2 million, down 12.8% from the $190.7 million reported for the second quarter of 2007. The decrease in downstream sales was impacted by a 4.3% decline in volume mainly related to HVAC and the housing and construction industry and a $16.2 million reduction in brokered metal sales during the second quarter of 2008.
Cost of sales decreased from $317.9 million in the second quarter of 2007 to $291.4 million for the second quarter. The decrease was mainly the result of lower sow shipment volumes to external customers, partly offset by higher natural gas costs and the absence of brokered metal sales in 2008.
Selling, general, and administrative costs increased to $20.7 million in the second quarter of 2008 from $17.0 million reported for the same three month period in 2007. The $3.7 million increase primarily is the result of higher consulting and other fees, some of which related to costs associated with the recent SEC filings.
Operating income for the second quarter of 2008 was $35.0 million compared to $38.7 million reported for the second quarter of 2007, a decrease of $3.7 million. This decrease is mainly the result of high energy costs and selling, general, and administrative costs for the quarter.
The Company reported a loss of $10.6 million related to derivative instruments and hedging activities for the three months ended June 30, 2008, compared to a loss of $55.0 million reported for the three months ended June 30, 2007. The loss in 2007 primarily was related to changes in the fair value of a portion of our fixed-price aluminum swaps, which in 2007 did not qualify for hedge accounting.
Interest expense increased $4.7 million to $22.2 million for the three months ended June 30, 2008, compared to $17.5 million for the same three months in 2007. This quarter-over-quarter difference reflects the cost of the financing that was put into place on May 18, 2007, at the time of the purchase of the Company by Apollo.
Income taxes for the quarter were $1.6 million compared with an income tax benefit of $14.6 million in the second quarter of 2007, reflecting in 2007 the tax recovery on the loss on derivative instruments.
Net income reported for the second quarter of 2008 was $3.5 million compared to the $15.2 million loss reported for the second quarter of 2007 on a restated basis. This improvement is the result of the net effect of the items described above, especially as it relates to the non-cash losses on derivative instruments and hedging activities in 2007, as well as the recognition of a $2.6 million Jamaican tax credit included in our share of the results of St. Ann Bauxite for the second quarter and first half of 2008.
As a result of the items described above, Adjusted EBITDA totaled $80.4 million for the second quarter, essentially the same as the $80.9 million reported for the same period last year.
Year-to-Date Results
Total sales for the first six months of 2008 were $647.5 million, down 9.9% from sales of $718.3 million reported for the first half of 2007. This decrease primarily resulted from reduced upstream and downstream shipments to external customers, increased intersegment shipments, and lower brokered metal sales from our downstream business.
Sales to external customers in the upstream business for the six months ended June 30, 2008, decreased 7.9% to $340.3 million from the $369.4 million reported for the same period last year. The decrease in sales resulted from lower value-added sales and from volume that shifted from external commodity sow sales to intersegment shipments to our downstream business.
Total upstream metal shipments for the first six months of 2008 were 287.4 million pounds, up 9.8 million pounds from the 277.6 million pounds shipped during the first six months of last year. Of the total amount shipped, 246.8 million pounds were shipped to external customers, while the remaining 40.6 million pounds were intersegment shipments to our downstream business. External shipments were down 17.4 million pounds as a result of a decline in demand for value-added products utilized in the housing and construction industry. This decline was more than offset by a 27.2 million pound increase in shipments to our downstream operation. Our integrated operations provide us the flexibility to shift a portion of our upstream production to our downstream business and reduce our overall external purchase commitments.
Sales in the downstream business were $307.2 million, down 12.0% from the $348.9 million reported for the first six months of 2007. The decrease in downstream sales was impacted by a 3.4% decline in volume and a $16.2 million reduction in brokered metal sales during the first half of 2008.
Operating income for the first six months of 2008 was $76.9 million compared to $99.5 million reported for the same period last year, a decrease of $22.6 million. This decrease was the result of higher energy costs, as well as increased selling, general, and administrative costs including higher consulting and other fees, some of which related to costs associated with the recent SEC filings.
The Company reported a loss of $5.0 million related to derivative instruments and hedging activities for the six months ended June 30, 2008, compared to a loss of $56.4 million reported for the six months ended June 30, 2007. The loss in 2007 primarily was related to changes in the fair value of a portion of our fixed-price aluminum swaps, which in 2007 did not qualify for hedge accounting.
Interest expense increased to $46.4 million for the six months ended June 30, 2008, compared to $20.5 million for the same six months in 2007. This year-over-year difference reflects the cost of the financing that was put into place on May 18, 2007, at the time of the purchase of the Company by Apollo.
Income taxes for the first half of the year were $10.3 million compared with $13.9 million reported for the first half of 2007.
Net income reported for the first half of 2008 was $20.7 million compared to the $14.6 million reported for the first half of 2007. This increase was the result of the items described above.
Adjusted EBITDA totaled $165.1 million for the first six months of 2008 compared to $173.4 million reported for the same period last year. The reduction mainly was due to the items mentioned above.
Net cash provided by operating activities totaled $100.6 million for the first six months ended June 30, 2008, compared to $109.5 million for the first six months ended June 30, 2007. Cash at quarter-end was $22.7 million, compared with $75.6 million at December 31, 2007. During the second quarter, a dividend totaling $102.2 million was paid, along with the semi-annual bond interest payments totaling approximately $34 million and bank loan interest of approximately $5 million.
Capital expenditures for the six months were $23.3 million, including $7.1 million invested in the $48 million New Madrid expansion project.
The Company’s $250.0 million revolving credit facility remained undrawn at June 30, 2008. Total debt at the end of the second quarter of 2008 was $1,121.5 million. The Company’s net debt to Adjusted EBITDA ratio at June 30, 2008, was 1.23x, 2.92x, and 3.65x at the Senior Secured Level, Senior Debt, and the Holdco level (as defined in the credit documents and indentures covering the notes), respectively.
The Company has implemented a hedging strategy that locks in the aluminum price for approximately 50% of forecasted shipments through December 2012. At June 30, 2008, the Company had outstanding aluminum swap contracts to hedge aluminum shipments totaling approximately 1.3 billion pounds. The Company has designated these swaps as cash flow hedges, so that the effective portion of any gain or loss on the derivative is reported as a component of accumulated other comprehensive loss and is reclassified into earnings in the same period or periods during which the hedged transactions affect earnings. At June 30, 2008, total shareholders’ deficiency included accumulated other comprehensive losses totaling $196.5 million, (net of $118,414 tax benefit).
The Company completed the Exchange Offering related to SEC Registration Statement on Form S-4 related to the exchange for $510 million aggregate principal amount of Senior Floating Rate Notes due 2015 and $220 million aggregate principal amount of Senior Floating Rate Notes due 2014.
Subsequent to June 30, 2008, the Company entered into forward swaps for natural gas, effectively fixing its cost for approximately 25% of the Company’s estimated upstream business’ natural gas exposure through 2012 at prices ranging from $9.06 to $9.89/mmbtu.
Kip Smith, the Company’s President and CEO, stated, “Noranda continues to demonstrate the ability to generate strong cash flows during a period of volatile markets for primary aluminum, increasing energy costs and a soft U.S. economy. Our New Madrid smelter continues with another record quarter for production. Our $48 million expansion project at New Madrid to increase production from 571 million lbs/year to 610 million lbs/year is now underway. Our recently initiated cost saving and productivity program, ‘CORE’ (Cost Out, Reliability and Effectiveness) has been communicated throughout our Company and will be our operating methodology for our overall productivity initiative.”
NORANDA ALUMINUM HOLDING CORPORATION Condensed Consolidated Balance Sheets (dollars expressed in thousands) (unaudited) | ||||||
December 31, 2007 | June 30, 2008 | |||||
$ | $ | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | 75,630 | 22,702 | ||||
Accounts receivable, net | 97,169 | 131,574 | ||||
Inventories | 180,250 | 177,345 | ||||
Derivative assets | 21,163 | 6,700 | ||||
Other current assets | 13,173 | 18,430 | ||||
Total current assets | 387,385 | 356,751 | ||||
Investments in affiliates | 198,874 | 204,388 | ||||
Property, plant and equipment, net | 657,811 | 625,631 | ||||
Goodwill | 256,122 | 271,235 | ||||
Other intangible assets, net | 70,136 | 68,256 | ||||
Other assets | 80,216 | 72,288 | ||||
Total assets | 1,650,544 | 1,598,549 | ||||
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY | ||||||
Current Liabilities: | ||||||
Accounts Payable | ||||||
Trade | 32,505 | 76,796 | ||||
Affiliates | 27,571 | 36,429 | ||||
Accrued liabilities | 31,742 | 36,014 | ||||
Accrued interest | 12,182 | 10,262 | ||||
Deferred revenue | 14,181 | 24,946 | ||||
Derivative liabilities | 5,077 | 78,538 | ||||
Deferred tax liabilities | 22,355 | 22,355 | ||||
Current portion of long-term debt due to third party | 30,300 | — | ||||
Total current liabilities | 175,913 | 285,340 | ||||
Long-term debt | 1,121,372 | 1,121,486 | ||||
Long-term derivative liabilities | 65,998 | 292,762 | ||||
Pension and other long-term liabilities | 75,916 | 78,449 | ||||
Deferred tax liabilities | 211,421 | 95,308 | ||||
Common stock subject to redemption (100,000 shares at June 30, 2008) | — | 2,000 | ||||
Shareholders’ deficiency: | ||||||
Common stock (100,000,000 shares authorized; $0.01 par value; 21,749,548 and 21,610,298 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively, including 100,000 shares subject to redemption at June 30, 2008) | 216 | 216 | ||||
Capital in excess of par value | 11,767 | 13,100 | ||||
Retained deficit | — | (81,538 | ) | |||
Accumulated comprehensive loss | (12,059 | ) | (208,574 | ) | ||
Total shareholders’ deficiency | (76 | ) | (276,796 | ) | ||
Total liabilities and shareholders’ deficiency | 1,650,544 | 1,598,549 |
NORANDA ALUMINUM HOLDING CORPORATION Condensed Consolidated Statement of Operations Data (dollars expressed in thousands) (unaudited) | |||||||||||||||
| Predecessor | Successor | Aggregated Predecessor and Successor | Successor | |||||||||||
Period from | Period from | For the three months ended | For the three months ended | ||||||||||||
Statement of Operations Data: | |||||||||||||||
Sales | $ | 183,054 | $ | 190,635 | $ | 373,689 | $ | 347,216 | |||||||
Operating costs and expenses | |||||||||||||||
Cost of sales | 148,945 | 169,001 | 317,946 | 291,345 | |||||||||||
Selling, general and administrative expenses and other | 8,488 | 8,524 | 17,012 | 20,730 | |||||||||||
Other expenses | (10 | ) | (6 | ) | (16 | ) | 101 | ||||||||
157,423 | 177,519 | 334,942 | 312,176 | ||||||||||||
Operating income | 25,631 | 13,116 | 38,747 | 35,040 | |||||||||||
Other expenses (income) | |||||||||||||||
Interest expense, net | 3,167 | 14,313 | 17,480 | 22,216 | |||||||||||
Loss (gain) on derivative instruments and hedging activities | 55,102 | (117 | ) | 54,985 | 10,598 | ||||||||||
Equity in net income of investments in affiliates | (2,239 | ) | (1,648 | ) | (3,887 | ) | (2,860 | ) | |||||||
Total other expenses | 56,030 | 12,548 | 68,578 | 29,954 | |||||||||||
Income (loss) before income taxes | (30,399 | ) | 568 | (29,831 | ) | 5,086 | |||||||||
Income tax expense (benefit) | (14,859 | ) | 219 | (14,640 | ) | 1,607 | |||||||||
Net income (loss) for the period | $ | (15,540 | ) | $ | 349 | $ | (15,191 | ) | $ | 3,479 | |||||
Sales by segment | |||||||||||||||
Upstream | $ | 88,748 | $ | 94,244 | $ | 182,992 | $ | 180,992 | |||||||
Downstream | 94,306 | 96,391 | 190,697 | 166,224 | |||||||||||
Total | $ | 183,054 | $ | 190,635 | $ | 373,689 | $ | 347,216 | |||||||
Operating income | |||||||||||||||
Upstream | $ | 21,813 | $ | 15,631 | $ | 37,444 |
| $ | 39,162 | ||||||
Downstream | 3,818 | (2,515 | ) | 1,303 | (4,122 | ) | |||||||||
Total | $ | 25,631 | $ | 13,116 | $ | 38,747 |
| $ | 35,040 | ||||||
| |||||||||||||||
Financial and Other Data: | |||||||||||||||
EBITDA | $ | 10,931 | $ | 52,023 | |||||||||||
Adjusted EBITDA | $ | 80,889 | $ | 80,386 | |||||||||||
Average realized Midwest transaction price | $ | 1.30 | $ | 1.37 | |||||||||||
Net cash cost for primary aluminum (per pound shipped) | $ | 0.75 | $ | 0.82 | |||||||||||
Shipments (pounds in millions): | |||||||||||||||
Upstream | |||||||||||||||
External customers | 130.8 | 124.4 | |||||||||||||
Intersegment | 2.6 | 18.1 | |||||||||||||
Total | 133.4 | 142.5 | |||||||||||||
Downstream | 96.8 | 92.6 |
NORANDA ALUMINUM HOLDING CORPORATION Condensed Consolidated Statement of Operations Data (dollars expressed in thousands) (unaudited) | ||||||||||||||||
Predecessor | Successor | Aggregated Predecessor and Successor | Successor | |||||||||||||
Period from | Period from | For the six months ended | For the six months ended | |||||||||||||
Statement of Operations Data: | ||||||||||||||||
Sales | $ | 527,666 | $ | 190,635 | $ | 718,301 | $ | 647,496 | ||||||||
Operating costs and expenses | ||||||||||||||||
Cost of sales | 424,505 | 169,001 | 593,506 | 533,917 | ||||||||||||
Selling, general and administrative expenses and other | 16,816 | 8,518 | 25,334 | 36,686 | ||||||||||||
441,321 | 177,519 | 618,840 | 570,603 | |||||||||||||
Operating income | 86,345 | 13,116 | 99,461 | 76,893 | ||||||||||||
Other expenses (income) | ||||||||||||||||
Interest expense, net | 6,235 | 14,313 | 20,548 | 46,429 | ||||||||||||
Loss (gain) on derivative instruments and hedging activities | 56,467 | (117 | ) | 56,350 | 5,001 | |||||||||||
Equity in net income of investments in affiliates | (4,269 | ) | (1,648 | ) | (5,917 | ) | (5,514 | ) | ||||||||
Total other expenses | 58,433 | 12,548 | 70,981 | 45,916 | ||||||||||||
Income (loss) before income taxes | 27,912 | 568 | 28,480 | 30,977 | ||||||||||||
Income tax expense (benefit) | 13,655 | 219 | 13,874 | 10,292 | ||||||||||||
Net income (loss) for the period | $ | 14,257 | $ | 349 | $ | 14,606 | $ | 20,685 | ||||||||
Sales by segment | ||||||||||||||||
Upstream | $ | 275,157 | $ | 94,244 | $ | 369,401 | $ | 340,275 | ||||||||
Downstream | 252,509 | 96,391 | 348,900 | 307,221 | ||||||||||||
Total | $ | 527,666 | $ | 190,635 | $ | 718,301 | $ | 647,496 | ||||||||
Operating income | ||||||||||||||||
Upstream | $ | 78,194 | $ | 15,631 | $ | 93,825 | $ | 78,278 | ||||||||
Downstream | 8,151 | (2,515 | ) | 5,636 | (1,385 | ) | ||||||||||
Total | $ | 86,345 | $ | 13,116 | $ | 99,461 | $ | 76,893 | ||||||||
| ||||||||||||||||
Financial and Other Data: | ||||||||||||||||
EBITDA | $ | 91,595 | $ | 126,737 | ||||||||||||
Adjusted EBITDA | $ | 173,379 | $ | 165,069 | ||||||||||||
Average realized Midwest transaction price | $ | 1.30 | $ | 1.30 | ||||||||||||
Net cash cost for primary aluminum (per pound shipped) | $ | 0.75 | $ | 0.77 | ||||||||||||
Shipments (pounds in millions): | ||||||||||||||||
Upstream | ||||||||||||||||
External customers | 264.2 | 246.8 | ||||||||||||||
Intersegment | 13.4 | 40.6 | ||||||||||||||
Total | 277.6 | 287.4 | ||||||||||||||
Downstream | 184.7 | 178.4 |
NORANDA ALUMINUM HOLDING CORPORATION Condensed Consolidated Statements of Cash Flows (amounts expressed in thousands) (unaudited) | |||||||||
Predecessor | Successor | Successor | |||||||
Period from | Period from | For the six months | |||||||
$ | $ | $ | |||||||
OPERATING ACTIVITIES | |||||||||
Net income | 14,257 | 349 | 20,685 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
Depreciation and amortization | 29,637 | 12,930 | 49,331 | ||||||
Non-cash interest | 2,200 | 2,693 | 5,008 | ||||||
(Gain) loss on disposal of property, plant and equipment | (160 | ) | 189 | 1,322 | |||||
(Gain) loss on derivative activities, net of cash settlements | 56,467 | (117 | ) | 1,104 | |||||
Equity in net income of investments in affiliates | (4,269 | ) | (1,648 | ) | (5,514 | ) | |||
Deferred income taxes | (14,828 | ) | 11,058 |
| (6,174 | ) | |||
Stock-based compensation | — | 0 | 1,108 | ||||||
Changes in deferred charges and other assets | 124 | 199 | 3,034 | ||||||
Changes in pension and other liabilities | (4,925 | ) | (2,146 | ) | 2,535 | ||||
Changes in operating assets and liabilities: |
|
| |||||||
Accounts receivable | (8,239 | ) | (15,544 | ) | (34,405 | ) | |||
Inventories | (18,069 | ) | 41,366 | 2,905 | |||||
Other current assets | 16,956 | (1,828 | ) | 963 | |||||
Accounts payable | (239 | ) | 11,824 | 49,924 | |||||
Accrued liabilities and deferred revenue | (27,743 | ) | 9,017 |
| 8,814 | ||||
Cash provided by operating activities | 41,169 | 68,342 | 100,640 | ||||||
INVESTING ACTIVITIES | |||||||||
Capital expenditures | (5,768 | ) | (3,582 | ) | (23,276 | ) | |||
Net increase (decrease) in advances due from parent | 10,925 | — | — | ||||||
Payment for the Apollo acquisition , net of cash acquired | — | (1,161,519 | ) | — | |||||
Proceeds from sale of property, plant and equipment | — | — | 6 | ||||||
Cash used in investing activities | 5,157 | (1,165,101 | ) | (23,270 | ) | ||||
FINANCING ACTIVITIES | |||||||||
Proceeds from issuance of shares | — | 216,130 | 2,225 | ||||||
Distributions to shareholders | — | (216,130 | ) | (102,223 | ) | ||||
Capital contributions from parent | 101,256 | — | — | ||||||
Distributions to parent | (25,000 | ) | — | — | |||||
Deferred financing costs | — | (39,020 | ) | — | |||||
Borrowings on long-term debt | — | 1,227,800 | — | ||||||
Repayments on long-term debt | (160,000 | ) | (75,000 | ) | (30,300 | ) | |||
Cash provided by financing activities | (83,744 | ) | 1,113,780 | (130,298 | ) | ||||
Net change in cash and cash equivalents | (37,418 | ) | 17,021 | (52,928 | ) | ||||
Cash and cash equivalents, beginning of period | 40,549 | — | 75,630 | ||||||
Cash and cash equivalents, end of period | 3,131 | 17,021 | 22,702 |
The following tables reconcile net income to EBITDA and Adjusted EBITDA for the periods presented, as defined in our credit documents and the indentures governing our notes:
Predecessor | Successor | Aggregated Predecessor and Successor | Successor | Aggregated Predecessor and Successor | Aggregated Predecessor and Successor | |||||||
(in thousands) | For the period from January 1, 2007 to May 17, 2007 | For the period from May 18, 2007 to June 30, 2007 | For the six months ended | For the six months ended June 30, 2008 | Last twelve months ending June 30, 2008 | Year ended December 31, 2007 | ||||||
$ | $ | $ | $ | $ | $ | |||||||
Net income | 14,257 | 349 | 14,606 | 20,685 | 28,503 | 22,424 | ||||||
Income taxes | 13,655 | 219 | 13,874 | 10,292 | 15,210 | 18,792 | ||||||
Interest expense, net | 6,235 | 14,313 | 20,548 | 46,429 | 99,359 | 73,478 | ||||||
Depreciation and amortization | 29,637 | 12,930 | 42,567 | 49,331 | 106,110 | 99,346 | ||||||
EBITDA | 63,784 | 27,811 | 91,595 | 126,737 | 249,182 | 214,040 | ||||||
Joint venture EBITDA (a) | 7,705 | 5,393 | 13,022 | 15,334 | ||||||||
LIFO expense (b) | 8,286 | 31,618 | 17,766 | (5,566) | ||||||||
LCM adjustment (c) | 4,063 | (14,323) | (4,063) | 14,323 | ||||||||
Non-cash derivative gains and losses (d) | 56,350 | 1,104 | (1,284) | 53,962 | ||||||||
Incremental stand-alone costs (e) | (2,700) | — | — | (2,700) | ||||||||
Employee compensation items (f) | 6,545 | 4,249 | 8,065 | 10,361 | ||||||||
Other items, net (g) | 1,535 | 10,291 | 18,346 | 9,590 | ||||||||
Adjusted EBITDA | 173,379 | 165,069 | 301,034 | 309,344 |
Predecessor | Successor | Aggregated Predecessor and Successor | Successor | |||||||
(in thousands) | For the period from April 1, 2007 to May 17, 2007 | For the period from May 18, 2007 to June 30, 2007 | For the three months ended June 30, 2007 | For the three months ended June 30, 2008 | ||||||
$ | $ | $ | $ | |||||||
Net income | (15,540 | ) | 349 | (15,191 | ) | 3,479 | ||||
Income taxes | (14,859 | ) | 219 | (14,640 | ) | 1,607 | ||||
Interest expense, net | 3,167 | 14,313 | 17,480 | 22,216 | ||||||
Depreciation and amortization | 10,352 | 12,930 | 23,282 | 24,721 | ||||||
EBITDA | (16,880 | ) | 27,811 | 10,931 | 52,023 | |||||
Joint venture EBITDA (a) | 3,454 | 1,506 | ||||||||
LIFO expense (b) | 1,035 | 14,002 | ||||||||
LCM adjustment (c) | 4,063 | — | ||||||||
Non-cash derivative gains and losses (d) | 54,985 | 2,901 | ||||||||
Incremental stand-alone costs (e) | (1,090 | ) | — | |||||||
Employee compensation items (f) | 6,545 | 4,185 | ||||||||
Other items, net (g) | 966 | 5,769 | ||||||||
Adjusted EBITDA | 80,889 | �� | 80,386 | |||||||
(a) | Our upstream business is fully integrated from bauxite mined by St. Ann to alumina produced by Gramercy to primary aluminum metal manufactured by our aluminum smelter in New Madrid, Missouri. Our reported EBITDA includes 50% of the net income of Gramercy and St. Ann, based on transfer prices that are generally in excess of the actual costs incurred by the joint venture operations. To reflect the underlying economics of the vertically integrated upstream business, this adjustment eliminates depreciation and amortization, net tax expense and interest income from equity income to reflect 50% of the EBITDA of the joint ventures. | |||||||||
(b) | We use the LIFO method of inventory accounting for financial reporting and tax purposes. To achieve better matching of revenues and expenses, particularly in the downstream business where customer LME pricing terms generally correspond to the timing of primary aluminum purchases, this adjustment restates EBITDA to the FIFO method of inventory accounting by eliminating the LIFO expenses related to inventory held at the smelter and downstream facilities. The adjustment also includes non-cash charges relating to inventories that have been revalued at fair value at the date of the Apollo Acquisition and recorded in cost of sales during the periods presented resulting from the sales of inventories. | |||||||||
(c) | Reflects adjustments to reduce inventory to the lower of cost, adjusted for purchase accounting, to market value. | |||||||||
(d) | We use derivative financial instruments to mitigate effects of fluctuations in aluminum and natural gas prices. We do not enter into derivative financial instruments for trading purposes. This adjustment eliminates the non-cash gains and losses resulting from fair market value changes of aluminum swaps. | |||||||||
(e) | Reflects (i) the incremental insurance, audit and other administrative costs on a stand-alone basis, net of certain corporate overheads allocated by the former parent that we no longer expect to incur on a go-forward basis and (ii) the elimination of income from administrative and treasury services provided to Noranda Aluminum, Inc.’s former parent and its affiliates that are no longer provided. | |||||||||
(f) | Represents stock compensation expense, re-pricing of stock options and bonus payments. | |||||||||
(g) | Represents gains and losses from disposal of assets, non-cash pension expenses and Apollo management fees, as well as incremental registration and consulting fees that we do not expect to incur on a go-forward basis. |
Conference Call Information
Noranda has scheduled an information conference call on August 12, 2008, at 11:00 AM EDT. The call is accessible to the media and general public. To listen to the conference call, dial the appropriate number at least 10 minutes prior to the scheduled start of the call.
U.S. participants: 1-888-562-3356
International participants: 1-973-582-2700
Participant passcode: 59378446
A rebroadcast of the call will be available starting approximately two hours after the conference call ends through midnight EDT, August 31, 2008. U.S. listeners should dial 1-800-642-1687, and international callers should dial 1-706-645-9291. The PIN is 59378446.
About the Company
Noranda Aluminum Holding Corporation is a leading North American integrated producer of value-added primary aluminum products, as well as high quality rolled aluminum coils. The Company has two businesses, an upstream and downstream business. The primary metals, or upstream business, produce approximately 259,000 metric tons of primary aluminum annually. The rolling mills, or downstream business, are one of the largest foil producers in North America and a major producer of light gauge sheet products. Noranda Aluminum Holding Corporation is a private company owned by affiliates of Apollo Management, L.P. The information contained in this release is limited and management encourages interested parties to read the Company’s financial reports and other information available on the Company’s website at www.norandaaluminum.com.
CONTACT:
Noranda Aluminum Holding Corporation
Rick Anderson, Chief Financial Officer, +1-615-771-5752
rick.anderson@noralinc.com