Century Aluminum Reports Third Quarter 2008 Earnings
MONTEREY, CA. October 21, 2008 -- Century Aluminum Company (NASDAQ:CENX) reported net income of $37.0 million ($0.59 per basic and $0.57 per diluted common share) for the third quarter of 2008. The reported earnings per share data reflect, as prescribed by GAAP, net income allocable to common shareholders without effect for the July 2008 issuance of preferred shares. These results were negatively impacted by a net after-tax charge of $50.4 million for mark-to-market adjustments on forward contracts that do not qualify for cash flow hedge accounting. Quarterly results were positively impacted by a $3.3 million tax benefit related to the release of tax reserves no longer required. For a full reconciliation of earnings per share allocable to common and preferred shareholders, see the attached Exhibit A.
In the third quarter of 2007, the company reported net income of $7.5 million ($0.18 per basic and $0.17 per diluted common share), which included an after-tax charge of $46.2 million for mark-to-market adjustments on forward contracts that do not qualify for cash flow hedge accounting.
Recent highlights included:
· | Operating performance was strong at all primary aluminum facilities. |
· | Direct and toll shipments of primary aluminum totaled a record 203,618 tonnes, up nearly three percent from the previous quarter. |
· | Construction continues at the company’s greenfield smelter project at Helguvik, Iceland. The company is closely monitoring and evaluating the project in light of the disruptions in global financial markets. |
· | In early July, Century settled all of its remaining fixed price aluminum financial sales contracts. The company made the final payment under the deferred settlement amount on October 1. |
Sales in the third quarter of 2008 were $552.2 million, compared with $454.4 million in the third quarter of 2007. Shipments of primary aluminum for the quarter totaled 203,618 tonnes compared with 195,540 tonnes in the year-ago quarter, reflecting the impact of the Grundartangi expansion to 260,000 tonnes, which was completed in the fourth quarter of 2007.
For the first nine months of 2008, the company reported a net loss of $198.2 million ($4.57 per basic and diluted common share). The reported earnings per share data reflect, as prescribed by GAAP, net loss allocable to common shareholders without effect for the July 2008 issuance of preferred shares. These results were negatively impacted by a net after-tax charge of $466.2 million for mark-to-market adjustments on forward contracts that do not qualify for cash flow hedge accounting. Results for the nine month period were positively impacted by net tax benefits of $15.9 million for various non-recurring items. For a full reconciliation of earnings per share allocable to common and preferred shareholders, see the attached Exhibit A.
Net income for the first nine months of 2007 was $11.1 million ($0.31 per basic and $0.29 per diluted common share), which included an after-tax charge of $172.1 million for mark-to-market adjustments on forward contracts that do not qualify for cash flow hedge accounting.
Sales in the first nine months of 2008 were $1,568.6 million compared with $1,366.0 million in the same period of 2007. Shipments of primary aluminum for the first nine months of 2008 were 601,511 tonnes compared with 568,812 tonnes for the comparable 2007 period.
“We had a busy and productive quarter,” commented Logan W. Kruger, President and Chief Executive Officer. “Our operations continue to turn in sound performance, with our plants in Iceland and in the U.S. shipping well above their rated capacities. We made good progress on the new, fifteen-year, market-based power contract for our Hawesville smelter; this process is in its final stages. The team leading the construction at Helguvik has maintained the project on time and on budget.
Mr. Kruger continued, “We are carefully managing the business in this environment of unprecedented dislocations in the global financial markets. We have suspended discretionary spending. The operations at our Grundartangi smelter, which is a primarily dollar based business with little exposure to economic conditions in Iceland, are performing normally. We have stabilized Nordural’s cash management activities, and continue to believe our cash held in Iceland is secure. The performance of our team in Iceland has been exemplary; the quality of our team is one of the many reasons we believe Iceland will continue to be an attractive business environment over the long-term.
“We are assessing the status of the Helguvik project across multiple fronts,” concluded Mr. Kruger. “We continue to be confident that the smelter will be world class in terms of construction cost, productivity, conversion cost and environmental performance. In addition, the economic activity the project will create will be beneficial to Iceland during these volatile times. In the current environment, we have ceased making any new capital commitments and are reducing project spending. We believe the potential exists for a prudent way forward over time, but will soberly evaluate the feasibility of all elements of the project during the near term.”
Century Aluminum Company owns primary aluminum capacity in the United States and Iceland, as well as an interest in alumina and bauxite assets in the United States and Jamaica. Century's corporate offices are located in Monterey, California.
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Century Aluminum’s quarterly conference call is scheduled for 5:00 p.m. Eastern time today. To listen to the conference call and to view related presentation materials, go to www.centuryaluminum.com and click on the conference call link on the homepage.
Contacts:
| Mike Dildine (media) | 831-642-9364 |
| Shelly Lair (investors) | 831-642-9357 |
Cautionary Statement
This press release may contain "forward-looking statements" within the meaning of U.S. federal securities laws. The company has based its forward-looking statements on current expectations and projections about the future; however, these statements are subject to risks, uncertainties and assumptions, any of which could cause the company's actual results to differ materially from those expressed in its forward-looking statements. More information about these risks, uncertainties and assumptions can be found in the risk factors and forward-looking statements cautionary language contained in the company's Annual Report on Form 10-K and in other filings made with the Securities and Exchange Commission. The company does not undertake, and specifically disclaims, any obligation to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date such forward-looking statements are made.
Certified Advisors for the First North market of the OMX Nordic Exchange Iceland hf. for Global Depositary Receipts in Iceland:
Helga Gunnarsdottir, Director-Corporate Finance, New Landsbanki Islands hf.
Olafur Finsen, Senior Legal Advisor-Corporate Finance, New Landsbanki Islands hf.
Century Aluminum Company
Consolidated Statements of Operations
(in Thousands, Except Per Share Amounts)
(Unaudited)
| | | Three months ended September 30, | | | Nine Months ended September 30, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| NET SALES: | | | | | | | | | | | | |
| Third-party customers | | $ | 426,771 | | | $ | 360,336 | | | $ | 1,203,696 | | | $ | 1,112,072 | |
| Related parties | | | 125,468 | | | | 94,035 | | | | 364,882 | | | | 253,961 | |
| | | | 552,239 | | | | 454,371 | | | | 1,568,578 | | | | 1,366,033 | |
| | | | | | | | | | | | | | | | | |
| COST OF GOODS SOLD | | | 430,256 | | | | 369,875 | | | | 1,194,376 | | | | 1,062,493 | |
| | | | | | | | | | | | | | | | | |
| GROSS PROFIT | | | 121,983 | | | | 84,496 | | | | 374,202 | | | | 303,540 | |
| | | | | | | | | | | | | | | | | |
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | | | 11,253 | | | | 13,372 | | | | 43,970 | | | | 40,784 | |
| | | | | | | | | | | | | | | | | |
| OPERATING INCOME | | | 110,730 | | | | 71,124 | | | | 330,232 | | | | 262,756 | |
| | | | | | | | | | | | | | | | | |
| INTEREST EXPENSE – Net | | | (4,434 | ) | | | (2,657 | ) | | | (12,043 | ) | | | (19,126 | ) |
| INTEREST EXPENSE – RELATED PARTIES | | | (998 | ) | | | - | | | | (998 | ) | | | - | |
| NET LOSS ON FORWARD CONTRACTS | | | (79,103 | ) | | | (75,041 | ) | | | (731,195 | ) | | | (279,897 | ) |
| OTHER EXPENSE – Net | | | (1,370 | ) | | | (131 | ) | | | (1,597 | ) | | | (3,426 | ) |
| INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN EARNINGS OF JOINT VENTURES | | | 24,825 | | | | (6,705 | ) | | | (415,601 | ) | | | (39,693 | ) |
| | | | | | | | | | | | | | | | | |
| INCOME TAX BENEFIT | | | 9,641 | | | | 10,438 | | | | 204,971 | | | | 39,396 | |
| | | | | | | | | | | | | | | | | |
| INCOME (LOSS) BEFORE EQUITY IN EARNINGS OF JOINT VENTURES | | | 34,466 | | | | 3,733 | | | | (210,630 | ) | | | (297 | ) |
| | | | | | | | | | | | | | | | | |
| EQUITY IN EARNINGS OF JOINT VENTURES | | | 2,507 | | | | 3,737 | | | | 12,466 | | | | 11,351 | |
| | | | | | | | | | | | | | | | | |
| NET INCOME (LOSS) | | $ | 36,973 | | | $ | 7,470 | | | $ | (198,164) | | | $ | 11,054 | |
| | | | | | | | | | | | | | | | | |
| EARNINGS (LOSS) PER COMMON SHARE | | | | | | | | | | | | | | | | |
| Basic – Net income (loss) | | $ | 0.59 | | | $ | 0.18 | | | $ | (4.57 | ) | | $ | 0.31 | |
| Diluted – Net income (loss) | | $ | 0.57 | | | $ | 0.17 | | | $ | (4.57 | ) | | $ | 0.29 | |
| | | | | | | | | | | | | | | | | |
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | | | | | | | | | | | | | | | | |
| Basic | | | 47,720 | | | | 40,957 | | | | 43,317 | | | | 35,927 | |
| Diluted | | | 49,975 | | | | 43,459 | | | | 43,317 | | | | 38,246 | |
| | | | | | | | | | | | | | | | | |
| Percentage of Net Income (Loss) Allocated to Common Stock Holders | | | 76.73 | % | | | 100 | % | | | 100 | % | | | 100 | % |
Century Aluminum Company
Consolidated Balance Sheets
(Dollars in Thousands)
(Unaudited)
| | | | | | | |
| | | September 30, 2008 | | | December 31, 2007 | |
| ASSETS | | | | | | |
| Current Assets: | | | | | | |
Cash | | $ | 129,055 | | | $ | 60,962 | |
Restricted cash | | | 10,583 | | | | 873 | |
Short-term investments | | | 29,285 | | | | 280,169 | |
Accounts receivable – net | | | 115,854 | | | | 93,451 | |
Due from affiliates | | | 36,463 | | | | 26,693 | |
Inventories | | | 211,255 | | | | 175,101 | |
Prepaid and other current assets | | | 33,275 | | | | 40,091 | |
Deferred taxes - current portion | | | 60,299 | | | | 69,858 | |
Total current assets | | | 626,069 | | | | 747,198 | |
| Property, plant and equipment – net | | | 1,300,932 | | | | 1,260,040 | |
| Intangible asset - net | | | 36,296 | | | | 47,603 | |
| Goodwill | | | 94,844 | | | | 94,844 | |
| Deferred taxes - less current portion | | | 581,405 | | | | 321,068 | |
| Due from affiliates – less current portion | | | 9,353 | | | | - | |
| Other assets | | | 145,918 | | | | 107,518 | |
Total | | $ | 2,794,817 | | | $ | 2,578,271 | |
| | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | |
| Current Liabilities: | | | | | | | | |
Accounts payable, trade | | $ | 106,908 | | | $ | 79,482 | |
Due to affiliates | | | 104,303 | | | | 216,754 | |
Accrued and other current liabilities | | | 86,184 | | | | 60,482 | |
Accrued employee benefits costs - current portion | | | 11,662 | | | | 11,997 | |
Convertible senior notes | | | 175,000 | | | | 175,000 | |
Industrial revenue bonds | | | 7,815 | | | | 7,815 | |
Total current liabilities | | | 491,872 | | | | 551,530 | |
| | | | | | | | | |
| Senior unsecured notes payable | | | 250,000 | | | | 250,000 | |
| Accrued pension benefit costs - less current portion | | | 14,876 | | | | 14,427 | |
| Accrued postretirement benefits costs - less current portion | | | 193,536 | | | | 184,853 | |
| Due to affiliates - less current portion | | | - | | | | 913,683 | |
| Other liabilities | | | 52,886 | | | | 39,643 | |
| Deferred taxes | | | 69,561 | | | | 62,931 | |
Total noncurrent liabilities | | | 580,859 | | | | 1,465,537 | |
| | | | | | | | | |
| Shareholders’ Equity: | | | | | | | | |
| Preferred stock (one cent par value, 5,000,000 shares authorized; 155,800 shares outstanding at September 30, 2008 and none at December 31, 2007) | | | 2 | | | | - | |
| Common stock (one cent par value, 100,000,000 shares authorized; 49,048,396 shares outstanding at September 30, 2008 and 40,988,058 at December 31, 2007) | | | 490 | | | | 410 | |
Additional paid-in capital | | | 2,239,005 | | | | 857,787 | |
Accumulated other comprehensive loss | | | (73,785 | ) | | | (51,531 | ) |
Accumulated deficit | | | (443,626 | ) | | | (245,462 | ) |
Total shareholders’ equity | | | 1,722,086 | | | | 561,204 | |
Total | | $ | 2,794,817 | | | $ | 2,578,271 | |
Century Aluminum Company
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
| | | Nine months ended September 30, | |
| | | 2008 | | | 2007 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | |
Net income (loss) | | $ | (198,164 | ) | | $ | 11,054 | |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | | | | | | | | |
Unrealized net loss on forward contracts | | | 605,105 | | | | 201,999 | |
Depreciation and amortization | | | 62,912 | | | | 57,735 | |
Deferred income taxes | | | (198,352 | ) | | | (38,822 | ) |
Pension and other post retirement benefits | | | 11,677 | | | | 6,499 | |
Stock-based compensation | | | 12,034 | | | | 3,765 | |
Excess tax benefits from share based compensation | | | (657 | ) | | | (516 | ) |
(Gain) loss on disposal of assets | | | 248 | | | | (49 | ) |
Non-cash loss on early extinguishment of debt | | | - | | | | 2,461 | |
Purchase of short-term trading securities | | | (97,532 | ) | | | (645,909 | ) |
Sale of short-term trading securities | | | 348,416 | | | | 387,182 | |
Undistributed earnings of joint ventures | | | (12,466 | ) | | | (11,351 | ) |
Change in operating assets and liabilities: | | | | | | | | |
Accounts receivable - net | | | (22,403 | ) | | | 13,244 | |
Due from affiliates | | | (9,771 | ) | | | 9,849 | |
Inventories | | | (36,119 | ) | | | (20,990 | ) |
Prepaid and other current assets | | | (389 | ) | | | (1,988 | ) |
Accounts payable, trade | | | 15,266 | | | | 11,849 | |
Due to affiliates | | | (695,720 | ) | | | 12,018 | |
Accrued and other current liabilities | | | (28,523 | ) | | | (52,289 | ) |
Other - net | | | (5,001 | ) | | | 13,519 | |
Net cash used in operating activities | | | (249,439 | ) | | | (40,740 | ) |
| | | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | |
Purchase of property, plant and equipment | | | (26,738 | ) | | | (13,693 | ) |
Nordural expansion | | | (53,397 | ) | | | (79,560 | ) |
Investments in and advances to joint ventures | | | (36,973 | ) | | | - | |
Proceeds from sale of property, plant and equipment | | | 47 | | | | 543 | |
Restricted cash deposits | | | (9,710 | ) | | | 3,744 | |
Net cash used in investing activities | | | (126,771 | ) | | | (88,966 | ) |
| | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
Borrowings of long-term debt | | | - | | | | 30,000 | |
Repayment of long-term debt | | | - | | | | (349,436 | ) |
Excess tax benefits from share based compensation | | | 657 | | | | 516 | |
Issuance of common stock - net of issuance costs | | | 443,646 | | | | 417,037 | |
Net cash provided by financing activities | | | 444,303 | | | | 98,117 | |
| | | | | | | | | |
| NET INCREASE (DECREASE) IN CASH | | | 68,093 | | | | (31,589 | ) |
| | | | | | | | | |
| CASH, BEGINNING OF PERIOD | | | 60,962 | | | | 96,365 | |
| | | | | | | | | |
| CASH, END OF PERIOD | | $ | 129,055 | | | $ | 64,776 | |
Century Aluminum Company
Selected Operating Data
(Unaudited)
SHIPMENTS - PRIMARY ALUMINUM | |
| | | Direct (1) | | | Toll | |
| | | Metric Tons | | | (000) Pounds | | | $/Pound | | | Metric Tons | | | (000) Pounds | | | (000) Revenue | |
| 2008 | | | | | | | | | | | | | | | | | | |
3rd Quarter | | | 135,200 | | | | 298,065 | | | $ | 1.36 | | | | 68,418 | | | | 150,835 | | | $ | 148,227 | |
2nd Quarter | | | 131,639 | | | | 290,214 | | | $ | 1.37 | | | | 66,533 | | | | 146,681 | | | $ | 147,128 | |
1st Quarter | | | 133,004 | | | | 293,223 | | | $ | 1.17 | | | | 66,717 | | | | 147,086 | | | $ | 127,177 | |
| 2007 | | | | | | | | | | | | | | | | | | | | | | | | |
3rd Quarter | | | 134,494 | | | | 296,509 | | | $ | 1.13 | | | | 61,046 | | | | 134,583 | | | $ | 120,554 | |
2nd Quarter | | | 132,496 | | | | 292,104 | | | $ | 1.19 | | | | 56,154 | | | | 123,798 | | | $ | 117,667 | |
1st Quarter | | | 131,568 | | | | 290,057 | | | $ | 1.15 | | | | 53,054 | | | | 116,964 | | | $ | 114,383 | |
| (1) | Does not include Toll shipments from Nordural Grundartangi |
EXHIBIT A
Century Aluminum Company
Reconciliation of Earnings Per Share to Adjusted Earnings Per Share
(in Millions, Except Per Share Amounts)
(Unaudited)
| | | Third Quarter 2008 | | | YTD | |
| | | $MM | | | Diluted Shares | | | Diluted EPS | | | $MM | | | Diluted Shares | | | Diluted EPS | |
| Net income (loss) as reported | | $ | 37.0 | | | | 50.0 | | | $ | 0.57 | | | $ | (198.2 | ) | | | 43.3 | | | $ | (4.57 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Adjusted net income calculation: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) allocated to common stockholders | | $ | 28.4 | | | | 50.0 | | | $ | 0.57 | | | $ | (198.2 | ) | | | 43.3 | | | $ | (4.57 | ) |
| Net income (loss) allocated to preferred stockholders | | | 8.6 | | | | 14.5 | | | | | | | | - | | | | 4.8 | | | | - | |
| Net income (loss) | | $ | 37.0 | | | | 64.5 | | | | | | | $ | (198.2 | ) | | | 48.1 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| After tax net loss on forward contracts | | | 50.4 | | | | - | | | | 0.79 | | | | 466.2 | | | | - | | | | 10.76 | |
| Tax changes | | | (3.3 | ) | | | - | | | | (0.05 | ) | | | (15.9 | ) | | | - | | | | (0.37 | ) |
| Dilutive effect | | | - | | | | - | | | | - | | | | - | | | | 2.8 | | | | (0.87 | ) |
| Adjusted net income | | $ | 84.1 | | | | 64.5 | | | $ | 1.31 | | | $ | 252.1 | | | | 50.9 | | | $ | 4.95 | |
| The Company’s management believes the presentation of adjusted net income and associated adjusted earnings per share data are useful measures that help investors evaluate the Company’s earnings per share based on total common stock, common stock equivalents and preferred shares outstanding during the period. The Company’s calculation of adjusted net income and associated adjusted earnings per share may not be comparable to similarly titled measures reported by other companies due to differences in the components used in the calculation. Adjusted net income and associated adjusted earnings per share should not be considered as a substitute for net income and earnings per share as determined in accordance with GAAP. |
