![]() Post Q1 2011 Investor Meetings |
![]() The following information contains, or may be deemed to contain, "forward-looking statements" (as defined in the U.S. Private Securities Litigation Reform Act of 1995). By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The future results of Noranda may vary from the results expressed in, or implied by, the following forward looking statements, possibly to a material degree. For a discussion of some of the important factors that could cause the Noranda results to differ from those expressed in, or implied by, the following forward-looking statements, please refer to our filings with the SEC, including our annual report on Form 10-K. Forward Looking Statements 2 |
![]() Mr. Mahoney was appointed Chief Financial Officer in May 2009 Mr. Mahoney has over 24 years of cyclical industry experience in senior financial management positions for semiconductor and electrical components companies including Hi-P International Limited and Molex Inc. Mr. Mahoney received a BA in Economics and History from the University of Virginia and an MBA from the University of Michigan President and Chief Executive Officer Robert B. Mahoney Mr. Smith was appointed President, Chief Executive Officer and Director in 2008 Mr. Smith has diverse leadership experience, including various management assignments with The Dow Chemical Company and positions as COO of Resolution Performance Products and CEO of Covalence Specialty Materials Mr. Smith holds a BA in Chemistry and an MBA from Harvard University Layle “Kip” Smith 3 Management Attendees Chief Financial Officer |
![]() • Global economic growth drives positive aluminum fundamentals • Our operating model is leveraged to the aluminum prices – We are fully integrated, from bauxite to aluminum foil – We have cost effective, globally competitive assets – We choose to manage with a focus on productivity – We drive a value-added growth strategy • We have financial capacity and flexibility to support growth – We have a highly flexible capital structure with no near-term maturities, undrawn revolver and no maintenance covenants – Our ratio of net debt to LTM adjusted EBITDA was 1.5x at Q1 2011 Key Investment Messages 4 |
![]() 5 Produced Financial Success in 2010, Continued in Q1 2011 LTM Net Income Excluding Special Items LTM Operating Cash Flow, Excluding Aluminum Hedges LTM Integrated Primary Aluminum Net Cash Cost LTM Adjusted EBITDA |
![]() Key Investment Highlights We are well positioned to take advantage of favorable medium- and long-term fundamentals Integrated, Cost Effective Assets Profitable Growth & Productivity Experienced Management Team Favorable Industry Dynamics Strong Financial Profile and Performance |
![]() • Global aluminum demand is expected to continue to grow – Global economic growth – Higher standards of living and increased demand from emerging markets • Aluminum is highly correlated with GDP growth – Favorable substitution trends – Rapid urbanization – Environmental consciousness *Source: Harbor Intelligence; 5 Al analysts most accurate from 2001 through 2010, as of May 19, 2011. ** Source: CRU Aluminum Quarterly, as of April 26, 2010. Global economic growth drives positive aluminum fundamentals Forecasts of Average Annual LME Beta to Global GDP 7 Regional Global Aluminum Demand Forecast Source: CRU |
![]() World Aluminum Smelter Business Costs for 2010 (1) 8 • Though aluminum inventory levels remain elevated, physical availability is tight, indicating inventories supported by financing arrangements • Rising global smelter costs help to place a natural floor for the aluminum metal price New Madrid smelter is in 2 nd quartile “Cost push” and supply constraints expected to support LME prices (1) CRU Data March 14, 2011. Visible Aluminum Inventories by Region (mmt) |
![]() Key Investment Highlights Exhibited significant ability to create value across the cycle 9 Integrated, Cost Effective Assets Profitable Growth & Productivity Experienced Management Team Favorable Industry Dynamics Strong Financial Profile and Performance |
![]() Downstream Business Downstream Business Annual Capacity: 495mm lbs (2) St. Ann Bauxite Mine New Madrid Aluminum Smelter Newport Rolling Mills Salisbury Rolling Mills East Mill West Mill Huntingdon Rolling Mills Bauxite Discovery Bay, Jamaica 4.5mm Mt Alumina Gramercy, LA 1.2mm Mt Aluminum Primary Metal New Madrid, MO 263k Mt (580mm lbs) (1) Fin stock (HVAC) and Auto, Semi-Rigid Container Stock, Flexible Packaging, Transformer Windings Huntingdon, TN Huntingdon West 235mm lbs (2) Huntingdon East 130mm lbs (2) Newport, AR 35mm lbs (2) Salisbury, NC 95mm lbs (2) Products: Location: Annual Capacity: Upstream Business Upstream Business Annual Capacity: 580mm lbs LTM Q1 2011 Cash Cost was $0.68 Gramercy Refinery Revenue Drivers: Volume & LME Residential construction / remodeling, packaging, U.S. consumer (1) According to CRU’s March 2011 production forecasts, at full capacity New Madrid represents 15% of U.S. primary aluminum production. (2) Maximum capacity, with actual capacity depending upon production mix. Noranda’s Integrated Footprint 10 |
![]() Vertically Integrated Upstream Business Primary Aluminum Alumina Noranda Bauxite Mine Noranda Alumina Refinery New Madrid Primary Aluminum Smelter Bauxite Integration drives leverage to LME, secure supply and expanded cost-cutting opportunities • The integration of our Upstream Business is the lynchpin to our strategy and sustainability • Significant Operating Leverage to LME – Third party sales of excess raw materials (e.g., bauxite and alumina) enhance our leverage to LME • Secure Supply – We have sufficient capacity to provide over 100% of our internal alumina and bauxite requirements • Low Cost & Operating Flexibility – Competitive positions on global business costs curves: Bauxite – second quartile, Alumina – third quartile, Primary Aluminum – second quartile 11 |
![]() Noranda chooses to manage costs without directly linking them to the LME Operating Leverage Comparison 15% New Madrid (263k mt) Not Indexed to LME Not Indexed to LME Pure US$ Exposure LTM Q1 2011 Business Summary (1) Represents LTM Q1 2011 actual. (2) Represents LTM Q1 2011 integrated upstream margin on cash cost per pound multiplied by 583 million pounds. LTM Primary aluminum shipments (mm lbs) 583 LTM average LME ($/lb) $ 1.02 LTM MWTP ($/lb) 0.06 LTM average realized Midwest Transaction Price ($/lb) (1) 1.08 0.68 Integrated upstream margin on cash cost (1) ($/lb) $ 0.39 Integrated upstream segment profit ($ mm) (2) $ 230 Rolled products segment profit (1) ($ mm) 52 Corporate expenses (1) ($ mm) (27) Total segment profit (1) ($ mm) $ 255 12 Net integrated cash cost of primary aluminum ($/lb) (1) |
![]() • Foil products • Light gauge sheet Rolling Mill Operations Four Rolling Mills in Three States Huntingdon, TN 2 plants, East and West Started 1967 & 2000 Max. East capacity: 130mm lbs (1) Max. West capacity: 235mm lbs (1) Salisbury, NC Started 1965 Max. Capacity: 95mm lbs (1) Newport, AR Started 1951 Max. Capacity: 35mm lbs (1) Downstream segment completes integration and is a stable free cash flow generator Low Cost, Leading Downstream Business • Low Cost Production – Huntingdon West is the lowest conversion cost foil mill in North America according to CRU – Q1 2011 LTM adjusted EBITDA of $245 million – Maintenance capital expenditures average 25% of adjusted EBITDA • Focused Growth – Gained demand share in 2009 and 2010 Products _______________________ (1) Maximum capacity, with actual capacity depending upon production mix. • HVAC fin stock • Container • Transformer winding 13 • Stable source of free cash flow |
![]() Key Investment Highlights Disciplined cost-cutting & profitable growth drive our sustainability 14 Integrated, Cost Effective Assets Profitable Growth & Productivity Experienced Management Team Favorable Industry Dynamics Strong Financial Profile and Performance |
![]() Multiple Levers for Growth • Noranda has several avenues through which to pursue growth Growth offers new opportunities to drive cost savings and productivity Prudent capital investment Debottlenecking Increase share of demand Strategic acquisitions 15 |
![]() Primary $27 Bauxite $20 Alumina $17 Corporate $2 Flat-Rolled $11 Strong Focus on Productivity 2010 CORE savings $77 million CORE productivity program generating substantial recurring cost savings 16 Primary $25 Flat-Rolled $18 2009 CORE savings $43 million Primary $11 Bauxite $2 Alumina $3 Corporate $2 Flat-Rolled $3 Q1 2011 CORE savings $21 million EBITDA 88% CAPEX 12% Average CORE savings by type • CORE program generates: – EBITDA savings (cost savings, cost avoidance or cash generation) – Capital expenditure savings or avoidance • CORE program is fundamental to our integrated strategy • $140 million CORE savings target during the period from 2009 through 2011 – Exceeded our $140 million target during Q1 2011 – New three year target to be announced in H2 2011 |
![]() Less debt, lower costs, more cash flow and strong liquidity Key Investment Highlights 17 Integrated, Cost Effective Assets Profitable Growth & Productivity Experienced Management Team Favorable Industry Dynamics Strong Financial Profile and Performance |
![]() 18 We Have Created the Financial Flexibility to Grow Debt Balances (gross balances) Net Debt (3) to LTM Adjusted EBITDA LTM Adjusted EBITDA Strong Balance Sheet • Highly flexible capital structure with no near-term maturities, undrawn revolver (1) , $257 million of liquidity (2) and no maintenance covenants • Repositioned during downturn by using hedges to repurchase/repay debt $420 $728 $1,142 $1,230 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 Term B AcquisitionCo HoldCo Revolver (1) As of March 31,2011 (2) $41.5 million of cash plus $215.2 million of available borrowing capacity under Revolver, as of March 31, 2011 (3) Net debt is calculated as debt less cash and cash equivalents |
![]() Key Investment Highlights Deep experience in cyclical and commodity businesses 19 Integrated, Cost Effective Assets Profitable Growth & Productivity Experienced Management Team Favorable Industry Dynamics Strong Financial Profile and Performance |
![]() • Management has created significant shareholder value at Noranda • Our executive team’s 14 members have an average of 24 years of experience in cyclical and commodity industries – Layle “Kip” Smith, President and Chief Executive Officer, has over 26 years of leadership experience, including in various management positions with The Dow Chemical Company, as COO of Resolution Performance Products and as CEO of Covalence Specialty Materials – Robert B. Mahoney, Chief Financial Officer, has over 24 years of cyclical industry experience in senior financial management positions for semiconductor and electrical components companies – Gail E. Lehman, Vice President & General Counsel, has over 20 years of corporate law experience, having held senior roles at industrial companies Honeywell, Covalence Specialty Materials and Hawker Beechcraft – Peter J. Hartland, President of the Upstream Business, most recently served as President of the Coatings & Inks Division for Hexion Specialty Chemicals, Inc. Since 1982, Hartland has held several operational management positions with Hexion and its predecessor, Borden Chemical – Scott Croft, President of Norandal USA, Inc, has 25 years of experience in the rolling mill business – Richard Lapine, Vice President of Sales & Marketing, has 35 years of experience in Chemicals, Plastics and Automotive segments as a former executive at The Dow Chemical Company – Charles Skoda, Vice President of Operations Support, has 10 years of experience in cyclical industries, including as an executive at Capital One, following a decorated career as an aviator in the U.S. Navy – Remaining executive team members bring strong experience and are experts in their functional areas 20 Experienced Management Team |
![]() Noranda Mission Action oriented Ethics and Values Drive for Results Process Management Safety Focus Problem Solving Peer Relationships Priority Setting Managing Through Systems Existing for Customers Caring for Co-workers Respecting Suppliers Enriching Communities Rewarding Investors 21 Two #1 Priorities Sustainable Goals Core Values Get the Results Get the Results Do the Right Things Do the Right Things the Right Way the Right Way |
![]() Appendices |
![]() Non-GAAP Measure: Disclaimer This presentation contains non-GAAP financial measures as defined by SEC rules. We think that these measures are helpful to investors in measuring our financial performance and comparing our performance to our peers. However, our non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures used by other companies. These non-GAAP financial measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for GAAP financial measures. To the extent we discuss any non-GAAP financial measures in the course of this presentation, a reconciliation of each measure to the most directly comparable GAAP measure are available in the appendices that follow and are filed as an Exhibit 99 to our Current Report on Form 8-K furnished to the SEC concurrent with the use of this presentation. |
![]() Non-GAAP Measure: LTM Segment Profit (Loss) Management has provided last twelve months (“LTM”) segment profit because it provides investors with additional information to measure operating performance. Using this metric, investors are able to assess our segment results for a full four quarter operating cycle, current through the most recently completed quarter. LTM segment profit (loss) is positively or negatively impacted by LME pricing and sales volumes, seasonality in electrical contract rates, and increases or decreases in other production related costs. LTM segment profit is not a measure of financial performance under U.S. GAAP and may not be comparable to similarly titled measures used by other companies. LTM segment profit per pound shipped has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of results under U.S. GAAP. The following table reconciles LTM segment profit for the periods presented (in millions): 31-Mar-11 $ Prior full year Segment Profit 216.1 Less: prior year Q1 Segment Profit (42.9) Plus: current year Q1 Segment Profit 82.1 LTM Segment Profit 255.3 |
![]() Non-GAAP Measure: LTM Segment Profit (Loss) (Cont’d) The following tables summarize operating results and assets of our reportable segments and a reconciliation of segment profit (loss) to income before income taxes (in millions): Sales: External customers ..................................... 54.9 222.8 495.9 521.3 — — 1,294.9 Intersegment ............................................... 65.5 142.6 125.4 0.1 — (333.6) — 120.4 365.4 621.3 521.4 — (333.6) 1,294.9 Segment profit (loss) ......................................... 23.8 61.9 112.2 50.0 (26.9) (4.9) 216.1 Depreciation and amortization .......................... 9.6 19.3 48.3 20.5 1.0 — 98.7 Capital expenditures .......................................... 7.7 11.1 26.4 14.3 1.8 — 61.3 Segment profit (loss) ........................................ 23.8 61.9 112.2 50.0 (26.9) (4.9) 216.1 Depreciation and amortization ......................... (9.6) (19.3) (48.3) (20.5) (1.0) — (98.7) LIFO/LCM ....................................................... — — (6.1) 3.7 — 2.8 0.4 Loss on asset disposal....................................... — — (3.3) (0.6) (0.1) — (4.0) Non-cash pension, accretion and stock compensation ............................................ (0.8) (1.1) (3.3) (2.4) (7.3) — (14.9) Restructuring, relocation and severance ........... (3.2) (1.5) (2.0) (1.5) (3.7) — (11.9) Consulting and sponsor fees ............................. — — — — (18.9) — (18.9) Cash settlements on hedging transactions ........ — — 0.1 (2.5) — — (2.4) Other, net ........................................................... 0.1 1.1 (0.1) — 0.7 — 1.8 Operating income (loss) ................................... 10.3 41.1 49.2 26.2 (57.2) (2.1) 67.5 Interest expense, net ......................................... 31.1 Gain on hedging activities, net ......................... (65.6) Loss on debt repurchase ................................... 0.1 Total other income ........................................... 34.4 Income before income taxes ............................. 101.9 Year ended December 31, 2010 Bauxite Alumina refining Primary aluminum products Flat rolled products Corporate Eliminations Consolidated $ $ $ $ $ $ $ Year ended December 31, 2010 Bauxite Alumina refining Primary aluminum products Flat rolled products Corporate Eliminations Consolidated $ $ $ $ $ $ $ |
![]() Non-GAAP Measure: LTM Segment Profit (Loss) (Cont’d) The following tables summarize operating results and assets of our reportable segments and a reconciliation of segment profit (loss) to income before income taxes (in millions): Sales: External customers ................................. 14.9 53.9 106.9 125.8 — — 301.5 Intersegment ........................................... 12.7 37.8 26.5 — — (77.0) — Total sales ............................................... 27.6 91.7 133.4 125.8 — (77.0) 301.5 Segment profit (loss) ...................................... 7.7 6.7 26.4 11.2 (6.4) (2.7) 42.9 Depreciation and amortization ....................... 3.0 5.4 12.3 5.2 0.2 — 26.1 Capital expenditures....................................... 1.5 1.6 7.6 1.8 0.5 — 13.0 Segment profit (loss) ...................................... 7.7 6.7 26.4 11.2 (6.4) (2.7) 42.9 Depreciation and amortization ....................... (3.0) (5.4) (12.3) (5.2) (0.2) — (26.1) Last in, first out and lower of cost or market inventory adjustments ............................... — — 0.3 (1.3) — 1.9 0.9 Loss on disposal of assets .............................. — — (1.1) (0.4) — — (1.5) Non-cash pension, accretion and stock compensation ............................................. (0.2) (0.6) (0.8) (0.5) (1.5) — (3.6) Restructuring, relocation and severance ........ (0.1) (1.6) (1.9) (1.4) — — (5.0) Consulting and sponsor fees .......................... — — — — (1.6) — (1.6) Cash settlements on hedging transactions ...... — — 0.1 (0.5) — — (0.4) Other, net ........................................................ 0.1 2.0 (0.1) — — — 2.0 Operating income (loss) ................................. 4.5 1.1 10.6 1.9 (9.7) (0.8) 7.6 Three months ended March 31, 2010 Bauxite Alumina refining Primary aluminum products Flat rolled products Corporate Eliminations Consolidated $ $ $ $ $ $ $ Three months ended March 31, 2010 Bauxite Alumina refining Primary aluminum products Flat rolled products Corporate Eliminations Consolidated $ $ $ $ $ $ $ Interest expense, net................................................................ ................................ ................................ 9.2 Gain on hedging activities, net................................ ................................................................ (1.7) Loss on debt repurchase................................ ................................ ................................ ................................ 0.1 Total other expense ................................ ................................ ................................ ............................................... 7.6 Income before income taxes................................ ................................ ................................ .................................. — ................. ................................ ........ |
![]() Non-GAAP Measure: LTM Segment Profit (Loss) (Cont’d) The following tables summarize operating results and assets of our reportable segments and a reconciliation of segment profit (loss) to income before income taxes (in millions): Sales: External customers .................................. 16.8 61.1 165.3 151.4 — — 394.6 Intersegment ............................................ 21.3 42.8 15.5 — — (79.6) — Total sales ............................................... 38.1 103.9 180.8 151.4 — (79.6) 394.6 Segment profit (loss) ...................................... 6.4 22.9 47.8 13.5 (6.6) (1.9) 82.1 Depreciation and amortization ....................... 1.6 5.2 11.7 4.8 0.3 — 23.6 Capital expenditures ....................................... 3.1 2.3 6.1 2.0 — — 13.5 Segment profit (loss) ...................................... 6.4 22.9 47.8 13.5 (6.6) (1.9) 82.1 Depreciation and amortization ....................... (1.6) (5.2) (11.7) (4.8) (0.3) — (23.6) Last in, first out and lower of cost or market inventory adjustments ................................ — — (4.8) (5.9) — 0.6 (10.1) Loss on disposal of assets ............................... — — (0.5) (0.6) — — (1.1) Non-cash pension, accretion and stock compensation .............................................. (0.1) (0.1) (0.7) (0.6) (2.2) — (3.7) Restructuring, relocation and severance ......... — (0.1) (0.2) — (0.1) — (0.4) Consulting and sponsor fees ........................... — — — — (0.3) — (0.3) Cash settlements on hedging transactions ...... — — (0.2) (1.0) — — (1.2) Other, net ......................................................... (0.1) (0.2) 0.1 (0.1) — — (0.3) Operating income (loss) ................................. 4.6 17.3 29.8 0.5 (9.5) (1.3) 41.4 Three months ended March 31, 2011 Bauxite Alumina refining Primary aluminum products Flat rolled products Corporate Eliminations Consolidated $ $ $ $ $ $ $ Three months ended March 31, 2011 Bauxite Alumina refining Primary aluminum products Flat rolled products Corporate Eliminations Consolidated $ $ $ $ $ $ $ Interest expense, net ................................ ................................ ................................ ................................ ............... 5.7 Gain on hedging activities, net ................................ ................................ ................................ ................................ (21.8) Total other income................................ ................................ ................................ ................................ ................. (16.1) Income before income taxes ................................ ................................ ................................ ................................... 57.5 |
![]() Non-GAAP Measure: Adjusted EBITDA 31-Mar-09 31-Mar-10 31-Mar-11 $ $ $ Prior full year Adjusted EBITDA 234.9 98.3 226.1 Less: prior year Q1 Adjusted EBITDA (84.7) (7.6) (57.0) Plus: current year Q1 Adjusted EBITDA 7.6 57.0 75.7 LTM Adjusted EBITDA 157.8 147.7 244.8 Last twelve months ended Management uses “Adjusted EBITDA” as a liquidity measure in respect of the fixed-charge coverage ratio and the net senior secured leverage ratio, as defined in our debt agreements. As used herein, Adjusted EBITDA means net income before income taxes, net interest expense and depreciation and amortization, adjusted to eliminate certain non-cash expenses, restructuring charges, related party management fees, certain charges resulting from the use of purchase accounting and other specified items of income or expense. The following table reconciles last twelve months (“LTM”) adjusted EBITDA for the periods presented (in millions): |
![]() Non-GAAP Measure: Adjusted EBITDA (Cont’d) Adjusted EBITDA is not a measure of financial performance under U.S. GAAP, and may not be comparable to similarly titled measures used by other companies in our industry. Adjusted EBITDA has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. For example, Adjusted EBITDA excludes certain tax payments that may represent a reduction in cash available to us; does not reflect any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future; does not reflect capital cash expenditures, future requirements for capital expenditures or contractual commitments; does not reflect changes in, or cash requirements for, our working capital needs; and does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our indebtedness. Adjusted EBITDA also includes incremental stand-alone costs and adds back non-cash hedging gains and losses, and certain other non-cash charges that are deducted in calculating net income. However, these are expenses that may recur, vary greatly and are difficult to predict. In addition, certain of these expenses can represent the reduction of cash that could be used for other corporate purposes. You should not consider our Adjusted EBITDA as an alternative to operating or net income, determined in accordance with U.S. GAAP, as an indicator of our operating performance, or as an alternative to cash flows from operating activities, determined in accordance with U.S. GAAP, as an indicator of our cash flows or as a measure of liquidity. |
![]() Non-GAAP Measure: Adjusted EBITDA (Cont’d) The following table reconciles Adjusted EBITDA to net income (loss) for the periods presented (in millions): Twelve months ended December 31, 2008 2009 2010 $ $ $ Adjusted EBITDA ........................................................................ 234.9 98.3 226.1 LIFO/LCM (a) ............................................................................... (25.0) 17.4 0.4 Loss on disposal of assets ............................................................. (8.5) (7.3) (4.0) Non-cash pension, accretion and stock compensation ................. (9.8) (10.8) (14.9) Restructuring, relocation and severance ....................................... (8.3) (2.8) (11.9) Consulting and sponsor fees ......................................................... (10.2) (5.8) (18.9) Interest rate swaps ........................................................................ (6.0) (11.9) (11.0) Gain (loss) on debt repurchases .................................................... (1.2) 211.2 (0.1) New Madrid power outage (b) ....................................................... — 30.6 — Charges/fees related to early extinguishment of derivatives ........ — (17.9) (9.0) Non-cash derivative gains and losses (c)(d) .................................... (47.0) 86.1 73.2 Goodwill and other intangible asset impairment .......................... (25.5) (108.0) — Joint venture impairment .............................................................. — (80.3) — Gain on business combination ...................................................... — 120.3 — Joint venture EBITDA (e) .............................................................. (13.2) (8.0) — Purchase accounting and other (f) ................................................. (0.9) (11.0) 1.8 Depreciation and amortization ..................................................... (98.3) (86.6) (98.7) Interest expense, net ..................................................................... (88.0) (53.5) (31.1) Income tax expense (benefit) ....................................................... 32.9 (58.6) (35.0) Net income (loss) ......................................................................... (74.1) 101.4 66.9 |
![]() Non-GAAP Measure: Adjusted EBITDA (Cont’d) The following table reconciles Adjusted EBITDA to cash flow from operating activities for the periods presented (in millions): Twelve months ended December 31, 2008 2009 2010 $ $ $ Adjusted EBITDA......................................................................... 234.9 98.3 226.1 Settlements from hedge terminations, net..................................... — 120.8 164.6 Insurance proceeds applied to capital expenditures....................... — (11.5) — Equity in net income of investment in affiliates............................ (7.7) (0.7) — Stock Compensation expense......................................................... 2.4 1.5 5.9 Changes in other assets.................................................................. 7.5 0.9 (10.0) Changes in pension and other long-term liabilities....................... 0.2 (2.9) (0.6) Changes in operating asset and liabilities...................................... 28.3 21.2 (32.6) Income taxes.................................................................................. (40.5) (0.9) (20.2) Interest expense, net...................................................................... (82.9) (12.1) (7.4) LIFO/LCM (a) ................................................................................. (25.0) 17.4 0.4 Non-cash pension, accretion and stock compensation.................. (9.8) (10.8) (14.9) Restructuring, relocation and severance........................................ (8.3) (2.8) (11.9) Consulting and sponsor fees.......................................................... (10.2) (5.8) (18.9) Interest rate swaps......................................................................... (6.0) (11.9) (11.0) New Madrid power outage (b) ......................................................... — 30.6 — disposal of assets.................................................................... — 8.8 — ................................................................ (13.2) (8.0) — ................................................... (4.2) (11.6) 1.4 Cash flow from operating activities.............................................. 65.5 220.5 270.9 Insurance proceeds applied to depreciation expense and loss on Joint venture EBITDA (e) Purchase accounting and other (f) |
![]() Non-GAAP Measure: Adjusted EBITDA (Cont’d) Year ended December 31, 2008 2009 2010 $ $ $ Fixed priced aluminum swaps .......................................................... 5.3 (93.1) (24.2) Variable price aluminum swaps and other ........................................ 8.0 23.8 (2.5) Natural gas swaps ............................................................................. 3.7 31.8 23.3 Interest rate swaps ............................................................................ 6.0 11.9 11.0 Total ................................................................................................. 23.0 (25.6) 7.6 (a) Our New Madrid smelter and our rolling mills use the LIFO method of inventory accounting for financial reporting and tax purposes. This adjustment restates net income to the FIFO method by eliminating LIFO expenses related to inventory held at the New Madrid smelter and the rolling mills. Inventories at Gramercy and St. Ann are stated at lower of weighted-average cost or market, and are not subject to the LIFO adjustment. We also reduce inventory to the lower of cost (adjusted for purchase accounting) or market value. (b) Represents the portion of the insurance settlement used for claim-related capital expenditures. (c) We use derivative financial instruments to mitigate effects of fluctuations in aluminum and natural gas prices. This adjustment eliminates the non-cash gains and losses resulting from fair market value changes of aluminum swaps, but does not affect the following cash settlements (received)/paid (in millions): Year ended December 31, 2008 2009 $ $ Depreciation and amortization ....................................................................................................... 16.0 8.7 Net tax expense ............................................................................................................................. (2.7) (0.7) Interest income .............................................................................................................................. (0.1) — Total joint venture EBITDA adjustments ...................................................................................... 13.2 8.0 (f) Represents impact from inventory step-up and other adjustments arising from adjusting assets acquired and liabilities assumed in the Joint Venture Transaction to their fair values as well as other immaterial non-recurring items The previous table presents fixed price aluminum swap cash settlement amounts net of early termination discounts totaling $17.9 million in 2009 and $9.0 million in 2010. (d) During third quarter 2010, we concluded that certain non-cash hedge gains should be excluded for purposes of calculating Adjusted EBITDA under the credit agreement governing our senior secured credit facilities. As such, we excluded from the calculation of Adjusted EBITDA hedge gains totaling $53.6 million for the year ended December 31, 2010. (e) Prior to the consummation of the Joint Venture Transaction on August 31, 2009, our reported Adjusted EBITDA includes 50% of the net income of Gramercy and St. Ann. To reflect the underlying economics of the vertically integrated upstream business, this adjustment eliminates the following components of equity income to reflect 50% of the EBITDA of the joint ventures for the following periods (in millions): |
![]() Non-GAAP Measure: Adjusted EBITDA (Cont’d) The following table reconciles Adjusted EBITDA to net income (loss) for the periods presented (in millions): Three months ended March 31, 2009 March 31, 2010 March 31, 2011 $ $ $ Adjusted EBITDA ................................................. 57.0 75.7 LIFO/LCM (a) ........................................................ 0.9 (10.1) Loss on disposal of assets ..................................... (1.5) (1.1) Non-cash pension, accretion and stock compensation .................................................. (3.6) (3.7) Restructuring, relocation and severance (5.0) (0.4) Consulting and sponsor fees ................................ (1.6) (0.3) Interest rate swaps ............................................. — — Loss on debt repurchases ...................................... (0.1) — New Madrid power outage — — Charges/fees related to early extinguishment of derivatives................................................... (4.1) — Non-cash derivative gains and losses (b)(c) (8.7) 27.0 Goodwill and other intangible asset impairment........................................................ — — Joint venture impairment ..................................... — — Joint venture EBITDA......................................... — — Other, net (d) ........................................................... 2.0 (0.3) Depreciation and amortization .......................... (26.1) (23.6) Interest expense, net .............................................. (9.2) (5.7) Income tax expense .............................................. (0.1) (19.2) Net income (loss) ................................................. (0.1) 38.3 ............ 7.6 4.4 (2.4) (2.3) (0.3) (0.9) — 152.2 0.8 (8.6) 36.9 (43.0) (45.3) (3.7) (1.9) (25.4) (15.9) (7.9) 44.3 |
![]() Non-GAAP Measure: Adjusted EBITDA (Cont’d) The following table reconciles Adjusted EBITDA to cash flow from operating activities for the periods presented (in millions): Three months ended March 31, 2009 March 31, 2010 March 31, 2011 $ $ $ Adjusted EBITDA ...................................................... 7.6 57.0 75.7 Settlements from hedge terminations, net ................ 50.4 58.7 — Equity in net income of affiliates .............................. (1.3) — — Stock compensation expense ..................................... 0.4 0.4 2.0 Changes in other assets .............................................. 6.0 (0.3) (5.8) Changes in pension and other long-term liabilities 9.7 10.5 3.1 Changes in operating asset and liabilities .................. 15.5 (9.1) (25.1) Income taxes .............................................................. 7.5 — (19.0) Interest expense, net ................................................... (15.2) (8.3) (5.0) Non-cash pension, accretion and stock compensation (2.3) (3.6) (3.7) Restructuring, relocation and severance ..................... (0.3) (5.0) (0.4) Consulting and sponsor fees ....................................... (0.9) (1.6) (0.3) Interest rate swaps ....................................................... — — — New Madrid power ou tage ......................................... 0.8 — — Joint Venture EBITDA ................................................. (3.7) — — Purchase accounting and other (d) ............................... 1.0 1.9 (0.4) Cash flow from operating activities ............................ 75.2 100.6 21.1 |
![]() Non-GAAP Measure: Adjusted EBITDA (Cont’d) (a) Our New Madrid smelter and our rolling mills use the LIFO method of inventory accounting for financial reporting and tax purposes. This adjustment restates net income to the FIF O method by eliminating LIFO expenses related to inventory held at the NewMadrid smelter and the rolling mills. Inventories at Gramercy and St. Ann are stated at lower of weighted - average cost or market, and are not subject to the LIFO adjustment. We also reduce inventory to the lower of cost (adjusted for purchase accounting) or market value. (b) We use derivative financial instruments to mitigate effects of fluctuations in aluminum and natural gas prices. This adjustment eliminates the non-cash losses resulting from fair market value changes of aluminum swaps, but does not affect the following cash settlements (received)/paid (in millions): Three months ended March 31, 2009 March 31, 2010 March 31, 2011 $ $ $ Fixed priced aluminum swaps .................................. (26.2) (14.0) — Variable price aluminum swaps and other................... 11.3 (0.5) 1.2 Natural gas swaps ...................................................... 6.7 4.0 (6.4) Interest rate swaps ................................ ..................... __ Total ................................ .......................................... (8.2) (10.5) (5.2) The previous table presents fixed price aluminum swap cash settlement amounts net of early termination discounts totaling $4. 1 million in the three months __ __ ended March 31, 2010 and $9.0 million in the twelve months ended December 31, 2010. (c) During third quarter 2010, we concluded that certain non-cash hedge gains should be excluded for purposes of calculating Adjusted EBITDA under the credit agreement governing our senior secured credit facilities. As such, we excluded from the calculation of Adjusted EBITDA hedge gains totaling $53.6 the twelve months ended December 31, 2010. (d) Represents impact from inventory step-up and other adjustments arising from adjusting assets acquired and liabilities assumed in the Joint Venture Transaction to their fair values as well as other immaterial non-recurring items. As discussed in our 2010 Annual Report on Form 10-K, the Joint Venture Transaction closed on August 31, 2009, whereby we became the sole owner of Gramercy and St. Ann. gains and million for |
![]() Non-GAAP Measure: Net Cash Cost of Primary Aluminum Unit net cash cost for primary aluminum per pound represents the costs of producing commodity grade aluminum net of value-added and Midwest premiums on primary aluminum sales, and alumina and bauxite sales to external customers. The Company has provided unit net cash cost per pound of aluminum shipped because it provides investors with additional information to measure operating performance. Using this metric, investors are able to assess the prevailing LME price plus Midwest premium per pound versus unit net costs per pound shipped. Unit net cash cost per pound is positively or negatively impacted by changes in primary aluminum, alumina and bauxite production and sales volumes, natural gas and oil related costs, seasonality in electrical contract rates, and increases or decreases in other production related costs. Unit net cash costs is not a measure of financial performance under U.S. GAAP and may not be comparable to similarly titled measures used by other companies. Unit net cash costs per pound shipped has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of results under U.S. GAAP. |
![]() Non-GAAP Measure: Net Cash Cost of Primary Aluminum (Cont’d) The following table reconciles last twelve months (“LTM”) net cash costs for the periods presented: 31-Mar-09 31-Mar-10 31-Mar-11 $ $ $ Cash Cost: Prior full year cash costs (in millions) $ 482.5 $ 271.6 $ 391.2 Less: prior year Q1 cash costs (100.6) (75.3) (87.3) Plus: current year Q1 cash costs 75.3 87.3 93.8 LTM cash costs $ 457.2 $ 283.6 $ 397.7 Shipments: Prior full year shipments (in millions) 589.9 351.6 560.5 Less: prior year Q1 shipments (144.8) (88.9) (120.8) Plus: current year Q1 shipments 88.9 120.8 143.0 LTM shipments 534.0 383.5 582.7 Net cash cost of primary aluminum ($/lb) $ 0.86 $ 0.74 $ 0.68 Last twelve months ended |
![]() Non-GAAP Measure: Net Cash Cost of Primary Aluminum (Cont’d) The following table reconciles net cash costs for the periods presented: Year ended December 31, 2008 2009 2010 Total primary aluminum cash cost (in millions) (a) ........................................................ $ 482.5 $ 271.6 $ 391.2 Total shipments (pounds in millions) .............................................................................. 589.9 351.6 560.5 Net primary aluminum cash cost per pound of primary aluminum ........................... $ 0.82 $ 0.77 $ 0.70 (a) Total primary aluminum cash cost is calculated below (in millions): Total primary aluminum revenue .................................................................. $ 758.5 $ 340.3 $ 621.3 Less fabrication premiums and other revenue ............................................. (45.9) (55.8) (37.1) Realized Midwest transaction price revenue ............................................... 712.6 284.5 584.2 Primary aluminum products segment profit ............................................... 222.7 4.9 112.2 Alumina refining segment profit (loss) ........................................................ — (2.3) 61.9 Bauxite segment profit .................................................................................. — 12.3 23.8 Profit eliminations ........................................................................................ 7.4 (2.0) (4.9) Total ............................................................................................................... 230.1 12.9 193.0 Total primary aluminum cash cost (in millions) ........................................ $ 482.5 $ 271.6 $391.2 (b) During 2009, we refined our cash cost calculation methodologies to reflect an adjusted EBITDA based calculation (see the “Covenant Compliance” section for a full description and reconciliation of adjusted EBITDA). As a result, 2008 figures may not tie to cash costs as presented in 2008 filings. (b) |
![]() Non-GAAP Measure: Net Cash Cost of Primary Aluminum (Cont’d) The following table reconciles net cash costs for the periods presented: Three months ended March 31, 2009 March 31, 2010 March 31, 2011 Total primary aluminum cash cost (in millions) (a) ............................ . $ 75.3 $ 87.3 $ 93.8 Total shipments (pounds in millions)................................................ 88.9 120.8 143.0 Net cash cost for primary aluminum products (per pound shipped).. $ 0.85 $ 0.72 $ 0.66 (a) Total primary aluminum cash cost is calculated below (in millions): Total primary aluminum product sales ............................................................. $ 75.3 $ 133.4 $ 180. 8 Less fabrication premiums and other revenue ................................................ (13.5 ) (8.0) (11.8) Realized Midwest transaction price revenue .................................................. 61.8 125.4 169.0 Primary aluminum products segment profit .................................................... (13.5) 26.4 47.8 Alumina refining segment profit ........................................................................ - 6.7 22.9 Bauxite segment profit ........................................................................................ - 7.7 6.4 Profit eliminations ................................................................................................ - (2.7) (1.9) Total ....................................................................................................................... (13.5) 38.1 75.2 Total primary aluminum cash cost ..................................................................... $ 75.3 $ 87.3 $ 93.8 |
![]() Non-GAAP Measure: Net Income (Loss), Excluding Special Items 31-Mar-09 31-Mar-10 31-Mar-11 $ $ $ Prior full year net income (loss) (74.1) 101.4 66.9 Less: prior year Q1 net income (loss) (17.2) (44.3) 0.1 Plus: current year Q1 net income (loss) 44.3 (0.1) 38.3 LTM net income (loss) (47.0) 57.0 105.3 Less: impact of special items (24.7) (140.2) (38.3) LTM net income (loss) excluding special items (71.7) (83.2) 67.0 Last twelve months ended “Net income (loss), excluding special items” means net income adjusted to eliminate the impact of certain transactions and events referred to as “special items,” as listed herein. Management has provided net income (loss), excluding special items because the measure provides investors with additional information with which to measure operating results. Using these metrics, investors are able to assess the impact of certain transactions and events on earnings and to compare net income (loss) from period to period with the impact of those transactions and events removed from all periods. Management believes this metric is a valuable tool in assisting investors to compare financial results from period to period. Net income (loss), excluding special items may not be comparable to similarly titled measures used by other companies. Net income (loss), excluding special items should not be considered in isolation from or as an alternative to net income or any other performance measures derived in accordance with U.S. GAAP. Net income (loss), excluding special items has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of results as reported under U.S. GAAP. The following table reconciles last twelve months (“LTM”) net income (loss), excluding special items for the periods presented (in millions): |
![]() Non-GAAP Measure: Net Income (Loss), Excluding Special Items (Cont’d) 31-Mar-09 31-Mar-10 31-Mar-11 $ $ $ Prior full year special items (68.3) 239.0 21.7 Less: prior year Q1 special items (3.7) (96.7) 2.1 Plus: current year Q1 special items 96.7 (2.1) 14.5 LTM special items 24.7 140.2 38.3 Last twelve months ended The following table presents the impact of special items for the periods presented (in millions): 2009 2010 2011 First quarter Second quarter Third quarter Fourth quarter First quarter Second quarter Third quarter Fourth quarter First quarter $ $ $ $ $ $ $ $ $ Pre - tax impact of specific transactions: Insurance recoveries in excess of losses .............................................. — 29.2 14.3 — — — — — — Management agreement termination ..... — — — — — (12.5) — — — Modification of stock options ................. — — — — — (3.2) — — — Transaction related legal costs ................ — — — — (0.3) (5.2) — — — Restructuring ........................................... — — — — (4.4) (3.2) — — — Executive separation agreement ............. — — — — — — — (3.3) — Goodwill and other intangible asset impairment .................................... (43.0) — — (65.0) — — — — — Gain on hedging activities ....................... 45.1 53.2 5.9 7.6 1.7 20.6 21. 7 21.6 21. 8 Joint venture impairment ........................ (45.3) (35.0) — — — — — — — Gain (loss) on debt repurchase ................ 152.2 12.4 28.6 18.0 (0.1) (2.5) 3.5 (1.0) — Gain on business combination ............... — — 120.3 — — — — — — Income tax impact of special items ...... (12.3 ) (19.8) (41.7 ) 14.3 1.0 2.0 (8.8) (5.9) (7.3) Impact of special items on net income (loss)........................................................... 96.7 40.0 127.4 (2 5.1 ) (2.1) (4.0) 16 .4 11. 4 14.5 |
![]() Non-GAAP Measure: Operating Cash Flow, Excluding Aluminum Hedges 31-Mar-09 31-Mar-10 31-Mar-11 $ $ $ Prior full year operating cash flow 65.5 220.5 270.9 Less: prior year Q1 operating cash flow (78.6) (75.2) (100.6) Plus: current year Q1 operating cash flow 75.2 100.6 21.1 LTM operating cash flow 62.1 245.9 191.4 Less: Aluminum hedge settlements (67.9) (210.1) (116.1) LTM Operating cash flow, excluding aluminum hedges (5.8) 35.8 75.3 Last twelve months ended “Operating cash flow, excluding aluminum hedges” means operating cash flow adjusted to eliminate the impact of cash settlements related to aluminum hedges. Management has provided operating cash flow, excluding aluminum hedges because the measure provides investors with additional information with which to measure our operating results. Using these metrics, investors are able to assess our cash flows from operations from period to period with the impact of aluminum hedge settlements removed from all periods. Management believes this metric is a valuable tool in assisting investors to compare financial results from period to period. Operating cash flow, excluding aluminum hedges may not be comparable to similarly titled measures used by other companies and should not be considered in isolation from or as an alternative to cash flow from operating activities or any other performance measures derived in accordance with U.S. GAAP. Operating cash flow, excluding aluminum hedges has limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of results as reported under U.S. GAAP. The following table reconciles last twelve months (“LTM”) operating cash flow, excluding aluminum hedges for the periods presented (in millions): |
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