Noranda Aluminum Holding Corporation Reports Third Quarter 2009 Results
More News related to Press Releases
- Dakota Growers Pasta Company Authorizes Dividend
- Cardtronics to Present at Bank of America Merrill Lynch Credit Conference
- nio(TM) - Your New Gadget Guardian Powered by Bluetooth - Now Available in North America
- La Jolla Pharmaceutical Company Announces the Adjournment of Special Meeting of Stockholders
- Cangold Announces $450,000 Financing
FRANKLIN, Tenn.--(BUSINESS WIRE)-- Noranda Aluminum Holding Corporation ("Noranda", or the "Company") announced its consolidated financial results for third quarter 2009.
Important metrics and events include:
-- Third quarter 2009 revenues were $218.6 million, operating loss was $4.4
million and net income was $4.3 million.
-- Year to date 2009 revenues were $540.6 million, operating loss was $77.2
million, and net income was $36.5 million.
-- Operating cash flows provided $230.4 million of cash through September
2009, including $119.7 million from hedge terminations and $36.7 million
of cash generated from working capital reductions.
-- Adjusted EBITDA was $28.6 million for third quarter 2009 and $69.9
million for the nine months ended September 30, 2009.
-- During third quarter 2009, the Company repurchased $81.1 million
aggregate principal amount of debt for an aggregate price of $52.2
million, plus fees. These repurchases were funded through the hedge
settlement agreement announced in March 2009.
-- The Company ended third quarter 2009 with total debt of $1.0 billion,
$256.5 million in cash and $191.3 million of locked-in value from
offsetting fixed-price aluminum sales and purchase swaps.
-- In July 2009, the Company collected the remaining $52.5 million of its
$67.5 million insurance settlement related to the previously reported
January 2009 pot line freeze at the Company's New Madrid, Missouri
aluminum smelter.
-- On August 31, 2009, the Company became the sole owner of the alumina
refinery in Gramercy, Louisiana and the bauxite mining operation in St.
Ann, Jamaica.
-- In September 2009, the Company announced it was increasing production at
the Gramercy refinery and the St. Ann bauxite mining operation.
Separately, the Company announced it had initiated activities to restart
remaining pot lines at New Madrid and expected to return to full
capacity for first quarter 2010. The New Madrid smelter was operating
above 65% capacity by the end of third quarter 2009.
"Our results for the quarter reflected improvement in LME market pricing and favorable pricing for certain commodity raw materials, such as natural gas," said Layle K. "Kip" Smith, Noranda's President and Chief Executive Officer. "These external circumstances, complemented by our productivity improvements, growth in sales volume and cash management activities, drove our performance for third quarter 2009."
Gramercy and St. Ann Transaction Completed
As previously reported, on August 31, 2009, the Company completed a transaction with Century Aluminum Company (the "JV Transaction") through which the Company became the sole owner of Gramercy Alumina LLC ("Gramercy") and St. Ann Bauxite Limited ("St. Ann").
"Achieving 100% ownership of the Gramercy alumina refinery and the St. Ann bauxite mining operation provides an opportunity for value creation and provides a secure supply of alumina to our New Madrid smelter," said Mr. Smith. "We intend to increase our external sales of these materials as an offset to our input costs of aluminum production. We have already entered into a multi-year contract to sell a substantial portion of the Gramercy smelter grade alumina output in excess of New Madrid's requirements."
The Company's third quarter 2009 financial statements include the consolidated results of Gramercy and St. Ann in its upstream segment since August 31, 2009. The third quarter 2009 financial statements are based on a preliminary determination of the fair values of assets acquired and liabilities assumed in the JV Transaction. Prior to August 31, 2009, the Company's financial statements include the Company's share of Gramercy and St. Ann results under the equity method of accounting for investments. Based on its preliminary valuation of the assets acquired and liabilities assumed, the Company may record a gain on the JV Transaction. However, the Company will not recognize any gain until it finalizes its valuation of the assets acquired and liabilities assumed, which it expects to do in fourth quarter 2009.
Third Quarter 2009 Results
Rising LME prices during third quarter 2009 had a favorable impact on revenues, operating results and net income compared to second quarter 2009. In comparison to third quarter 2008, revenues, operating results and net income for third quarter 2009 reflect the impact of the global economic contraction. In the upstream segment, the average realized Midwest Transaction Price ("MWTP") per pound was $0.86 in third quarter 2009 compared to $0.70 in second quarter 2009 and $1.34 in third quarter 2008. Value-added premiums in the upstream segment and fabrication premiums in the downstream segment were essentially constant for third quarter 2009, second quarter 2009 and third quarter 2008.
For third quarter 2009, the Company reported a $4.4 million operating loss, compared to operating income of $12.4 million in second quarter 2009 and $32.1 million in third quarter 2008.
-- Consolidated sales in third quarter 2009 increased to $218.6 million,
38.6% over second quarter 2009.
o Third quarter 2009 upstream revenues from aluminum sales increased
25.4% over second quarter 2009 on $6.9 million of volume increases and
$8.3 million of favorable pricing impact. Third quarter 2009 upstream
revenues include $29.4 million related to 104 kilometric tons ("kMt")
of alumina shipped to external customers and $4.4 million related to
145 kMt of bauxite shipped to external customers. Alumina sales
include $14.2 million from the resale of alumina inventories in excess
of New Madrid's requirements.
o Third quarter 2009 downstream revenues increased 12.3% from second
quarter 2009 on $5.6 million of volume increases and $6.5 million of
favorable pricing impact.
-- Excluding the $4.7 million impact of purchase accounting for the JV
Transaction, third quarter 2009 operating results for both upstream and
downstream segments reflects $10.9 million of improvements in sales
margin (sales minus cost of sales) compared to second quarter 2009
resulting from improved LME pricing and reduced prices for natural gas
and to a lesser degree other raw materials. This offset the effects of
seasonal peak power rates in New Madrid.
-- Excluding the net impact of insurance settlement proceeds, selling,
general and administrative costs increased $3.8 million in third quarter
2009 compared to second quarter 2009.
-- Third quarter 2009 operating results include $14.3 million of insurance
proceeds, recognized in excess of claim expenses, incurred to date,
related to the January 2009 pot line freeze in New Madrid. Second
quarter 2009 operating income included a $33.3 million favorable impact
from the timing of recognition of insurance recoveries in relationship
to expenses, $4.1 million of which was classified as a reduction of
selling and general administrative expenses.
For third quarter 2009, net income was $4.3 million, compared to a $12.1 million net loss in second quarter 2009, and a $22.4 million net loss for third quarter 2008. In addition to the operating loss factors discussed above, third quarter 2009 net income reflects the following:
-- In third quarter 2009, the Company repurchased $81.1 million aggregate
principal amount of debt for an aggregate price of $52.2 million, plus
fees. The Company recorded a $28.6 million third quarter gain on these
debt repurchases.
-- The Company reported $5.7 million of net gains on derivatives in third
quarter 2009 compared to $53.2 million in second quarter 2009. In third
quarter 2009, the Company reclassified $24.2 million from accumulated
other comprehensive income ("AOCI") to earnings, compared to $69.8
million in second quarter 2009.
-- The provision for income taxes resulted in a 73.8% effective tax rate
for third quarter 2009 compared to a 140.6% effective rate for second
quarter 2009. The second quarter effective tax rate reflected a change
from using the estimated annual effective tax rate in first quarter 2009
to using the actual year-to-date effective tax rate to calculate the
Company's year-to-date tax provision at June 30, 2009. However, for
third quarter 2009, the Company returned to using the estimated annual
effective tax rate.
Year-to-Date 2009 Results
Revenues, operating income and net income through September 2009 reflect the unfavorable impact of the global economic contraction that began in the second half of 2008, as well as the January 2009 New Madrid pot line freeze. In the upstream segment, the average realized MWTP per pound was $0.75 through September 2009 compared to $1.31 through September 2008. Value-added premiums in the upstream segment and fabrication premiums in the downstream segment were slightly higher in year-to-date 2009 than year-to-date 2008, reflecting changes in product mix.
Through September 2009, the Company reported a $77.2 million operating loss, compared to operating income of $109.0 million through September 2008. In addition to the volume and price effects of the global economic contraction and the volume and cost effects of the New Madrid pot line freeze, 2009 operating income was affected by the following:
-- The Company reached settlements totaling $67.5 million with the
insurance carriers for its pot line freeze claim relating to the January
2009 New Madrid smelter outage. $24.0 million of those proceeds were
offset against claim costs and losses incurred through September 30,
2009, with a $43.5 million residual recognized as "Excess insurance
proceeds." The residual insurance recovery is not intended to represent
a gain on the insurance claim, but only a timing difference between
proceeds received and claim-related costs incurred. The Company will
continue to incur costs into the future as it restores production to
full capacity, which may exceed the total insurance settlement.
-- During first quarter 2009, the Company recorded a $43.0 million
impairment charge for goodwill and other intangible assets in the
downstream segment.
Through September 2009, the Company has reported $36.5 million of net income, compared to a $1.7 million net loss through September 2008. In addition to the operating results discussed above, the comparison of 2009 against 2008 is affected by the following:
-- Interest expense is $22.5 million lower in 2009 than in 2008, reflecting
lower average interest rates and lower average debt balances outstanding
in 2009 due to debt repurchases.
-- Through September 2009, the Company has reported $104.1 million of net
derivative gains compared to $50.5 million of net derivative losses in
2008. Through September 2009, LME prices have been significantly lower
than hedged prices, compared to the same period in 2008 when LME prices
were on average significantly higher than hedged prices. Through
September 2008, the Company's aluminum swaps were designated as
effective cash flow hedges, but hedge accounting was discontinued in
January 2009. During first and second quarters of 2009, the Company
reclassified $78.5 million of hedge gains out of accumulated other
comprehensive income into earnings upon the determination that original
forecasted transactions were probable of not occurring.
-- Through September 2009, net income reflects the after-tax effects of
$80.3 million of impairment charges recorded in first and second quarter
2009 against the Company's investment in joint ventures, related
primarily to the Company's investment in St. Ann.
-- The provision for income taxes resulted in a 63.0% effective tax rate
through September 2009 compared to a 55.2% effective tax rate through
September 2008.
Liquidity
Through September 30, 2009, operating cash flows provided $230.4 million compared to $111.7 million provided during the comparable period in 2008.
-- Operating cash flow for 2009 includes $119.7 million from hedge
terminations and $36.7 million generated through reductions of working
capital.
-- Cash flows from operating activities are also supported by favorable
aluminum hedge positions. Noranda received $75.0 million from regular
monthly settlements of fixed-price aluminum sale swaps through September
2009, as compared to $18.9 million paid during the comparable 2008
period.
At September 30, 2009, the Company had locked in the value of its hedges on approximately 84.7% of its 2010 and 2011 forward aluminum hedges. In March 2009, the Company entered into a hedge settlement agreement with Merrill Lynch. The agreement provides a mechanism for the Company to monetize up to $400.0 million of the favorable net position of its long-term hedges to fund debt repurchases. During the first nine months of 2009, Noranda received $119.7 million in proceeds from hedge terminations under the hedge settlement agreement and used those proceeds to fund the repurchase of $320.8 million aggregate principal amount of debt at a cost of $123.0 million, plus fees.
The Company ended third quarter 2009 with total debt of $1.0 billion and $256.5 million in cash. The Company has no financial maintenance covenants on any of its borrowings. In May 2009, the Company made a permitted election under the indentures governing its notes to pay all interest under the notes that are due on November 15, 2009, entirely in kind. The Company recently made an election to pay the interest due May 15, 2010 entirely in kind.
NORANDA ALUMINUM HOLDING CORPORATION
Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
December 31, 2008 September 30, 2009
$ $
ASSETS
Current assets:
Cash and cash equivalents 184,716 256,516
Accounts receivable, net 74,472 101,846
Inventories 139,019 176,503
Derivative assets, net 81,717 70,481
Taxes receivable 13,125 2,935
Other current assets 3,367 17,035
Total current assets 496,416 625,316
Investments in affiliates 205,657 -
Property, plant and equipment, net 599,623 759,962
Goodwill 242,776 202,576
Other intangible assets, net 66,367 82,780
Long-term derivative assets, net 255,816 115,932
Other assets 69,516 88,552
Total assets 1,936,171 1,875,118
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade 34,816 50,652
Affiliates 34,250 -
Accrued liabilities 32,740 91,750
Accrued interest 2,021 246
Excess purchase price - 127,259
Deferred tax liabilities 24,277 27,742
Current portion of long-term debt 32,300 -
Total current liabilities 160,404 297,649
Long-term debt 1,314,308 1,020,985
Pension and OPEB liabilities 120,859 132,318
Other long-term liabilities 39,582 51,729
Deferred tax liabilities 262,383 341,667
Common stock subject to redemption 2,000 -
(100,000 shares at December 31, 2008)
Shareholders' equity:
Common stock (100,000,000 shares
authorized; $0.01 par value;
21,746,548 and 21,766,789 shares
issued and outstanding at December 217 218
31, 2008 and September 30, 2009,
respectively; including 100,000
shares subject to redemption at
December 31, 2008)
Capital in excess of par value 14,383 17,444
Accumulated deficit (176,280 ) (139,799 )
Accumulated other comprehensive 198,315 149,060
income
Total parent shareholders' equity 36,635 26,923
Noncontrolling interest - 3,847
Total shareholders' equity 36,635 30,770
Total liabilities and shareholders' 1,936,171 1,875,118
equity
NORANDA ALUMINUM HOLDING CORPORATION
Consolidated Statements of Operations Data
(dollars in thousands)
(unaudited)
Three months ended Nine months ended September 30,
September 30,
2008 2009 2008 2009
$ $ $ $
Statements of
Operations
Data:
Sales 357,410 218,559 1,004,906 540,553
Operating
costs and
expenses:
Cost of sales 312,906 218,468 846,823 566,532
Selling,
general and 12,414 18,739 49,100 51,682
administrative
expenses
Goodwill and
other
intangible - - - 43,000
asset
impairment
Excess
insurance - (14,282 ) - (43,467 )
proceeds
325,320 222,925 895,923 617,747
Operating 32,090 (4,366 ) 108,983 (77,194 )
income (loss)
Other (income)
expenses
Interest 19,816 12,577 65,043 42,551
expense, net
(Gain) loss on
hedging 45,496 (5,747 ) 50,497 (104,073 )
activities,
net
Equity in net
(income) loss 1,652 860 (3,862 ) 78,961
of investments
in affiliates
(Gain) loss on
debt - (28,574 ) 1,202 (193,224 )
repurchase
Total other
(income) 66,964 (20,884 ) 112,880 (175,785 )
expenses
Income (loss)
before income (34,874 ) 16,518 (3,897 ) 98,591
taxes
Income tax
(benefit) (12,445 ) 12,190 (2,153 ) 62,110
expense
Net income
(loss) for the (22,429 ) 4,328 (1,744 ) 36,481
period
External sales
by segment:
Upstream 182,548 108,678 522,823 235,592
Downstream 174,862 109,881 482,083 304,961
Total 357,410 218,559 1,004,906 540,553
Operating
income (loss):
Upstream 36,946 (3,044 ) 133,896 (28,574 )
Downstream 1,430 7,917 45 (22,956 )
Corporate (6,286 ) (9,239 ) (24,958 ) (25,664 )
Total 32,090 (4,366 ) 108,983 (77,194 )
Financial and
other data:
Average
realized
Midwest 1.34 0.86 1.31 0.75
transaction
price(1)
Net cash cost
for primary
aluminum (per 0.91 0.76 0.80 0.76
pound shipped)
(2)
Shipments:
Upstream:
External
aluminum 127.7 76.6 374.5 221.9
(pounds, in
millions)
Intersegment
aluminum 20.7 6.8 61.2 34.4
(pounds, in
millions)
Total aluminum
shipments 148.4 83.4 435.7 256.3
(pounds, in
millions)
External - 103.5 - 103.5
alumina (kMts)
External - 145.0 - 145.0
bauxite (kMts)
Downstream
(pounds, in 94.9 84.4 273.3 235.3
millions)
(1) The price for primary aluminum consists of two components: the price quoted for primary aluminum ingot on the London Metal Exchange ("LME") and the Midwest transaction premium, a premium to LME price reflecting domestic market dynamics as well as the cost of shipping and warehousing. As a significant portion of our value-added products are sold at the prior month's MWTP plus a fabrication premium, we calculate a "realized" MWTP which reflects the specific pricing of sale transactions in each period.
(2) Unit net cash cost for primary aluminum per pound represents our net cash costs of producing commodity grade aluminum as priced on the LME plus the Midwest premium. We have provided unit net cash cost for primary aluminum per pound shipped because we believe it provides investors with additional information to measure our operating performance. Using this metric, investors are able to assess the prevailing LME price plus Midwest premium per pound versus our unit net cash costs per pound shipped. Unit net cash cost per pound is positively or negatively impacted by changes in production and sales volumes, natural gas and oil related costs, seasonality in our 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 in our industry. Unit net cash costs per pound shipped should not be considered in isolation from or as an alternative to any performance measures derived in accordance with U.S. GAAP. 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 our results under U.S. GAAP.
NORANDA ALUMINUM HOLDING CORPORATION
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine months ended September 30,
2008 2009
$ $
OPERATING ACTIVITIES
Net income (loss) (1,744 ) 36,481
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 74,049 66,317
Non-cash interest expense 3,817 25,086
Loss on disposal of property, plant and 2,404 7,260
equipment
Insurance proceeds applied to capital - (11,495 )
expenditures
Goodwill and other intangible asset - 43,000
impairment
(Gain) loss on hedging activities, net of 36,416 (63,100 )
cash settlements
Settlements from hedge terminations, net - 119,722
(Gain) loss on debt repurchase 1,202 (193,224 )
Equity in net (income) loss of investments in (3,862 ) 78,961
affiliates
Deferred income taxes (9,826 ) 78,691
Stock compensation expense 1,507 1,111
Changes in other assets 4,034 (8,380 )
Changes in pension and other long-term (9,564 ) 13,297
liabilities
Changes in operating assets and liabilities:
Accounts receivable, net (26,432 ) (7,066 )
Inventories 17,887 20,614
Taxes receivable (22,516 ) (1,050 )
Other current assets (4,628 ) 18,679
Accounts payable 41,959 2,217
Accrued liabilities (3,662 ) 5,095
Accrued interest 10,644 (1,775 )
Cash provided by operating activities 111,685 230,441
INVESTING ACTIVITIES
Capital expenditures (37,464 ) (32,211 )
Proceeds from insurance related to capital - 11,495
expenditures
Proceeds from sale of property, plant and 484 7
equipment
Cash acquired in business combination - 11,136
Cash used in investing activities (36,980 ) (9,573 )
FINANCING ACTIVITIES
Proceeds from issuance of shares 2,225 41
Distribution to shareholders (102,223 ) -
Repurchase of shares - (90 )
Borrowings on revolving credit facility 250,500 13,000
Repayments on revolving credit facility (25,500 ) (14,500 )
Repayment of long-term debt (30,300 ) (24,500 )
Repurchase of debt - (123,019 )
Cash provided by (used in) financing 94,702 (149,068 )
activities
Change in cash and cash equivalents 169,407 71,800
Cash and cash equivalents, beginning of 75,630 184,716
period
Cash and cash equivalents, end of period 245,037 256,516
Financial Covenant Compliance
Certain covenants contained in the credit agreement governing our senior secured credit facilities and the indentures governing our notes restrict our ability to take certain actions (including incurring additional secured or unsecured debt, expanding borrowings under existing term loan facilities, paying dividends, engaging in mergers, acquisitions and certain other investments, and retaining proceeds from asset sales) if we are unable to meet defined ratios: the Adjusted EBITDA to fixed charges ("fixed-charge coverage ratio")and the net senior secured debt to Adjusted EBITDA ("leverage ratio"). In addition, upon the occurrence of certain events, such as a change of control, we could be required to repay or refinance our indebtedness.
Further, the interest rates we pay under our senior secured credit facilities are determined in part by the Net Senior Secured Leverage Ratio. Furthermore, our ability to take certain actions, including paying dividends and making acquisitions and certain other investments, depends on the amounts available for such actions under the covenants, which amounts accumulate with reference to our Adjusted EBITDA on a quarterly basis. Adjusted EBITDA is computed on a trailing four quarter basis and the minimum or maximum amounts generally required by those covenants and our performance against those minimum or maximum levels are summarized below:
Actual
Threshold December 31, September 30,
2008 2009(1)
HoldCo:
Minimum
Senior Floating Rate Notes fixed 1.75 to 1 2.5 to 1 1.3 to 1
charge coverage ratio(2)
AcquisitionCo:
Minimum
Senior Floating Rate Notes fixed 2.0 to 1 3.2 to 1 1.7 to 1
charge coverage ratio(2)
Maximum
Term B Loan and Revolving Credit 3.0 to 1(4) 1.9 to 1 3.2 to 1
Facility leverage ratio(3)
(1) Pro forma effect is given to adjusted EBITDA for ratio calculation purposes as if the Joint Venture Transaction had occurred at the beginning of the trailing four-quarter period.
(2) Fixed charges are the sum of consolidated interest expenses and all cash dividend payments except for common stock dividends. Pro forma effect is given to any repayment or issuance of debt as if such transaction occurred at the beginning of the trailing four-quarter period. The table shows higher actual fixed charge coverage ratios for AcquisitionCo than for HoldCo because the calculation for AcquisitionCo does not include HoldCo's interest expenses.
(3) "Net senior secured debt", as used in calculating the leverage ratio, means the amount outstanding under our Term B Loan plus the Revolving Credit Facility, less "unrestricted cash" and "permitted investments" (as defined). At December 31, 2008, senior secured debt was $618.5 million and unrestricted cash and permitted investments amounted to $160.6 million, resulting in net senior secured debt of $457.9 million. At September 30, 2009, senior secured debt was $565.9 million and unrestricted cash and permitted investments aggregated $235.0 million, resulting in net senior secured debt of $330.9 million.
(4) The Maximum ratio changed from 3.0 to 1 at January 1, 2009.
Our debt instruments contain no financial "maintenance" covenants. However, because we do not currently meet the required ratios referenced above we may not currently incur additional debt (other than Revolving Credit Facility borrowings), make acquisitions or certain other investments, pay dividends or retain proceeds from asset sales. These restrictions do not currently interfere with the day-to-day-conduct of our business. Consummation of our recently announced agreement with Century in respect of Gramercy and St. Ann is permissible under our various debt agreements.
Under our debt instruments, "Adjusted EBITDA" means net income before income taxes, net interest expense and depreciation and amortization, adjusted to eliminate related party management fees, certain charges resulting from the use of purchase accounting and specified other non-cash items of income or expense. For covenant compliance calculations, Adjusted EBITDA is computed on a trailing four-quarter basis.
Adjusted EBITDA is not a measure of financial performance under GAAP, and may not be comparable to similarly titled measures used by other companies in our industry. Adjusted EBITDA should not be considered in isolation from or as an alternative to net income, income from continuing operations, operating income or any other performance measures derived in accordance with GAAP. 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 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 GAAP, as an indicator of our operating performance, or as an alternative to cash flows from operating activities, determined in accordance with GAAP, as an indicator of our cash flows or as a measure of liquidity.
The following table reconciles net income to Adjusted EBITDA for the periods presented:
Twelve Last
months twelve Nine Nine Three Three
months months months months
(in ended months ended ended
millions) December ended ended ended
31, September September September September September
30, 30, 2008 30, 2009 30, 2008 30, 2009
2008
2009
$ $ $ $ $ $
Net income
(loss) for (74.1 ) (35.9 ) (1.7 ) 36.5 (22.4 ) 4.3
the period
Income tax
(benefit) (32.9 ) 31.4 (2.2 ) 62.1 (12.4 ) 12.2
expense
Interest 88.0 65.6 65.0 42.6 19.8 12.6
expense, net
Depreciation
and 98.2 83.8 74.0 59.6 24.6 19.1
amortization
Joint
venture 13.2 12.3 9.4 8.5 4.0 1.2
EBITDA(a)
LIFO
adjustment (11.9 ) (17.9 ) 31.2 25.2 (0.4 ) 16.5
(b)
LCM
adjustment 37.0 9.2 (7.6 ) (35.4 ) 6.7 (20.0 )
(c)
(Gain) loss
on debt 1.2 (193.2 ) 1.2 (193.2 ) - (28.6 )
repurchase
New Madrid
power outage - (30.6 ) - (30.6 ) - (13.3 )
(d)
Charges
related to
termination - 17.8 - 17.8 - 6.1
of
derivatives
Non-cash
hedging 47.0 (69.6 ) 36.4 (80.2 ) 35.3 1.1
gains and
losses(e)
Goodwill and
other
intangible 25.5 68.5 - 43.0 - -
asset
impairment
Joint
Venture - 80.3 - 80.3 - -
impairment
Purchase
accounting - 8.5 - 8.5 - 8.5
(f)
Other items, 43.7 49.0 19.9 25.2 5.4 8.9
net(g)
Adjusted 234.9 79.2 225.6 69.9 60.6 28.6
EBITDA
The following table reconciles cash flow from operating activities to Adjusted EBITDA for the periods presented:
Twelve Last twelve Nine months Nine months
months
(in millions) months ended ended ended
ended September 30, September 30, September 30,
December 31, 2009 2008 2009
2008
$ $ $ $
Cash flow
from 65.5 184.2 111.7 230.4
operating
activities
Loss on
disposal of
property, (5.3 ) (10.2 ) (2.4 ) (7.3 )
plant and
equipment
Gain (loss)
on hedging (47.0 ) 52.5 (36.4 ) 63.1
activities
Settlements
from hedge - (119.7 ) - (119.7 )
terminations,
net
Insurance
proceeds
applied to - 11.5 - 11.5
capital
expenditures
Equity in net
income of 7.7 5.2 3.9 1.4
investments
in affiliates
Stock
compensation (2.4 ) (2.0 ) (1.5 ) (1.1 )
expense
Changes in
deferred (7.5 ) 4.9 (4.0 ) 8.4
charges and
other assets
Changes in
pension and
other (0.2 ) (23.1 ) 9.6 (13.3 )
long-term
liabilities
Changes in
asset and (28.3 ) (51.7 ) (13.3 ) (36.7 )
liabilities,
net
Income tax
expense 40.5 16.2 7.7 (16.6 )
(benefit)
Interest 82.9 39.3 61.2 17.5
expense, net
Joint venture 13.2 12.3 9.4 8.5
EBITDA(a)
LIFO (11.9 ) (17.9 ) 31.2 25.2
adjustment(b)
LCM 37.0 9.2 (7.6 ) (35.4 )
adjustment(c)
New Madrid
power outage - (30.6 ) - (30.6 )
(d)
Non-cash
hedging gains 47.0 (69.6 ) - (80.2 )
and losses(e)
Charges
related to
termination - 17.8 36.4 17.8
of
derivatives
Purchase
accounting 8.5 8.5
(f)
Other items, 43.7 42.4 19.7 18.5
net(g)
Adjusted 234.9 79.2 225.6 69.9
EBITDA
(a) Prior to the Joint Venture Transaction at August 31, 2009 our reported Adjusted 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 the following components of equity income to reflect 50% of the EBITDA of the joint ventures, for the following aggregated periods (in millions):
Last
twelve Last Nine Nine Three Three
twelve months months months months
months months
ended ended ended ended ended ended
December September September September
31, 30, 2009 30, 2008 30, 2009 September September
30, 2008 30, 2009
2008
$ $ $ $ $ $
Depreciation
and 16.0 12.6 12.1 8.7 4.6 1.9
amortization
Net tax (2.7 ) (0.3 ) (2.6 ) (0.2 ) (0.6 ) (0.7 )
expense
Interest (0.1 ) - (0.1 ) - - -
income
Total joint
venture 13.2 12.3 9.4 8.5 4.0 1.2
EBITDA
adjustments
(b) Our New Madrid smelter and downstream facilities 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 downstream facilities. Inventories at St. Ann and Gramercy are stated at lower of weighted average cost or market, and are not subject to the LIFO adjustment.
(c) Reflects adjustments to reduce inventory to the lower of cost (adjusted for purchase accounting) or market value.
(d) Represents the portion of the insurance settlement used for claim-related capital expenditures.
(e) 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):
Last
twelve Last Nine Nine Three Three
twelve months months months months
months months
ended ended ended ended ended ended
December September September September
31, 30, 2009 30, 2008 30, 2009 September September
30, 2008 30, 2009
2008
$ $ $ $ $ $
Aluminum swaps 5.3 (88.6 ) 18.9 (75.0 ) 10.7 (18.9 )
- fixed-price
Aluminum swaps
- 8.0 35.9 (5.7 ) 22.2 (0.8 ) 3.2
variable-price
Natural gas 3.7 27.7 0.3 24.3 0.3 8.9
swaps
Interest rate 6.0 10.1 0.6 4.7 - -
swaps
Total 23.0 (14.9 ) 14.1 (23.8 ) 10.2 (6.8 )
The previous table presents cash settlement amounts net of early terminations of fixed-price aluminum swaps and bond buybacks.
(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.
(g) Other items, net, consist of the following (in millions):
Last Last Nine Nine Three Three
twelve twelve months months months months
months months
ended ended ended ended ended ended
September September
December September 30, 2008 30, 2009 September September
31, 2008 30, 2009 30, 2008 30, 2009
$ $ $ $ $ $
Sponsor fees 2.0 2.0 1.5 1.5 0.5 0.5
Pension expense - 3.8 9.1 0.7 6.0 0.5 2.3
non-cash portion
Employee compensation 5.4 2.4 4.4 1.4 0.4 0.4
items
Loss on disposal of
property, plant and 8.6 11.3 2.5 5.2 1.1 3.5
equipment
Interest rate swap 6.0 10.1 0.6 4.7 - -
Consulting and 9.3 4.7 8.3 3.7 1.6 1.0
non-recurring fees
Restructuring-project 7.4 7.4 - - - -
renewal
Other 1.2 2.0 1.9 2.7 1.3 1.2
Total 43.7 49.0 19.9 25.2 5.4 8.9
Debt balances
The following table presents the carrying values of our debt outstanding as of December 31, 2008 and September 30, 2009 (in thousands):
December 31, 2008 September 30, 2009
$ $
Noranda:
Senior Floating Rate Notes due 2014
(unamortized discount of $1,842 and 218,158 67,996
$538 at December 31, 2008 and
September 30, 2009, respectively)
AcquisitionCo:
Term B Loan due 2014 393,450 349,012
Senior Floating Rate Notes due 2015 510,000 387,047
Revolving credit facility 225,000 216,930
Total debt 1,346,608 1,020,985
Less: current portion (32,300 ) -
Long-term debt 1,314,308 1,020,985
Aluminum Hedge Positions
As of September 30, 2009, the Company had outstanding fixed-price aluminum sale and purchase swaps that were entered into to hedge aluminum shipments:
Average hedged Pounds hedged
Year price per pound annually
$ (in thousands)
2009 1.09 72,268
2010 1.06 290,541
2011 1.20 272,570
635,379
Average hedged Pounds hedged
Year price per pound annually
$ (in thousands)
2010 0.70 245,264
2011 0.76 231,838
477,102
The net asset for the 477,102 pounds of sale swaps offset by purchase swaps is $191.3 million.
Forward looking Statements
This press release may contain "forward-looking statements" which involve risks and uncertainties. You can identify forward-looking statements because they contain words such as "believes," "expects," "may," "should," "seeks," "approximately," "intends," "plans," "estimates," or "anticipates" or similar expressions that relate to Noranda's strategy, plans or intentions. All statements Noranda makes relating to its estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results or to the Company's expectations regarding future industry trends are forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made and which reflect management's current estimates, projections, expectations or beliefs and which are subject to risks and uncertainties that may cause actual results to differ materially. Noranda undertakes no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.
Noranda's actual results or performance may differ materially from those suggested, expressed or implied by forward-looking statements due to a wide range of factors including, without limitation, the general business environment, fluctuating commodity prices and the Company's ability to return its New Madrid smelter to full capacity. For a discussion of additional risks and uncertainties that may affect the future results of Noranda, please see the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K.
Conference Call Information
The conference call on November 6, 2009, at 10:00 AM EST 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
Conference ID #: 39350106
The Company has filed a handout to accompany management's conference call presentation. That presentation is included in the Form 8-K furnishing this press release to the Securities and Exchange Commission's EDGAR system.
The conference call also will be webcast at the following URL: http://w.on24.com/r.htm?e=176151&s=1&k=2B119C1D8C919D81C6E5E9F17AA9205A.
Plan to begin the registration process at least 10 minutes before the live call is scheduled to start.
A replay of the conference call will be available two hours after the completion of the call until midnight EST on November 13, 2009. U.S. listeners should dial 1-800-642-1687. International callers should dial 1-706-645-9291. The Conference ID # for the replay is 39350106.
A replay of the webcast also will be available two hours after the completion of the call until midnight EST on November 11, 2009.
The replay URL is: http://w.on24.com/r.htm?e=176151&s=1&k=2B119C1D8C919D81C6E5E9F17AA9205A.
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. Noranda is a private company owned by affiliates of Apollo Management, L.P.
Source: Noranda Aluminum Holding Corporation
Stocks Mentioned
Related Entities
Sign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
