2013-02-20 12:33:46 -
Fourth Quarter 2012 Highlights
· Average realized Midwest transaction price per pound shipped was $1.01,
compared to $1.04 in fourth quarter 2011
· Net cash cost was $0.82 per pound, compared to $0.83 per pound in fourth
quarter 2011
· Diluted EPS was $0.06, compared to $0.36 in fourth quarter 2011; excluding
special items, diluted EPS was a loss of $0.12, compared to income of $0.01
in fourth quarter 2011
· Total segment profit was $30.9 million, compared to $31.1 million in fourth
quarter 2011
· Operating activities provided $33.3 million of cash flow, compared to
$30.3 million in fourth quarter 2011
Full-Year 2012 Highlights
· Average realized Midwest transaction price per pound shipped was $1.01,
compared to $1.17 in 2011
· Net cash cost was $0.81 per pound, compared to net cash cost of $0.75 per
pound in 2011
· Diluted EPS was $0.72, compared to $2.06 in 2011; excluding special items,
diluted EPS was $0.02, compared to $1.05 in 2011
· Total segment profit was $134.7 million, compared to $261.9 million in 2011
· Operating activities generated $18.9 million of cash flow, compared to
$140.6 million in 2011
· Cash and cash equivalents totaled $36.1 million and total liquidity was
$154.7 million at December 31, 2012
Franklin, Tennessee - February 20, 2013 - Noranda Aluminum Holding Corporation
(NYSE: NOR) today reported results for fourth quarter and full-year 2012.
"Our fourth quarter results reflect continued stable demand with somewhat
improved LME aluminum prices," said Layle K. (Kip) Smith, Noranda's President
and Chief Executive Officer. "Although our 2012 results were negatively affected
by LME prices that, in real terms, reached points that were among historical
lows, we experienced throughout the year stable, solid demand in combination
with attractive Midwest and fabrication premiums for our key aluminum products.
During the second half of 2012, we worked through operational challenges,
particularly in our Upstream business that also negatively impacted our results.
We are pleased that all Upstream plants are currently producing at expected
levels."
"During 2012, we took steps to strengthen our company and our liquidity
profile," added Smith. "We are proud to report a 30% improvement in our safety
performance, our first and most important accountability as an employer. We
extended our debt maturities through a February 2012 refinancing of our senior
secured credit facility and added an asset-based revolver. We also paid down a
modest amount of our floating rate notes. We believe these actions complement
our operating strategy by providing the financial capacity to grow and to enable
investment and CORE programs that improve our bottom line. When combined with
more reliable operations, the continuing stable demand that we see, and the
prospects of further modest improvements in both the US economy and LME price
levels, we are encouraged by our opportunities for 2013 and our capability to
pursue them."
Noranda reported fourth quarter 2012 net income of $4.2 million ($0.06 per
diluted share), compared to third quarter 2012 net income of $3.8 million ($0.05
per diluted share) and fourth quarter 2011 net income of $24.4 million
($0.36 per diluted share). Excluding special items, Noranda reported fourth
quarter 2012 net loss of $7.8 million ($0.12 loss per diluted share), compared
to net loss of $10.8 million ($0.16 per diluted share) in third quarter 2012 and
fourth quarter 2011 net income of $0.6 million ($0.01 per diluted share).
Noranda reported full-year 2012 net income of $49.5 million ($0.72 per diluted
share), compared to net income of $140.9 million ($2.06 per diluted share) in
2011. Excluding special items, Noranda reported full-year 2012 net income of
$1.6 million ($0.02 per diluted share), compared to $72.0 million ($1.05 per
diluted share) in 2011.
Fourth Quarter 2012 Results
Sales for fourth quarter 2012 were $332.9 million, compared to $336.8 million in
third quarter 2012 and $338.5 million in fourth quarter 2011.
· Comparing fourth quarter 2012 to third quarter 2012, sales decreased
$3.9 million, as the effects of improved LME-linked prices only partially
offset the impact of seasonally lower Flat-Rolled volumes.
· Comparing fourth quarter 2012 to fourth quarter 2011, sales decreased
$5.6 million. Lower LME-linked prices in all businesses and lower third-
party volumes in Bauxite, Alumina and Primary Aluminum more than offset the
favorable impact from higher Flat-Rolled volumes.
1
--------------------------------------------------------------------------------
Total fourth quarter 2012 segment profit was $30.9 million, compared to
$10.1 million in third quarter 2012 and $31.1 million in fourth quarter 2011.
· Fourth quarter 2012 segment profit increased $20.8 million compared to third
quarter 2012. Approximately $8.4 million of this increase was due to the
effects of improved LME aluminum price, and $13.8 million was due to relief
from summer seasonal peak power costs at the Company's aluminum smelter.
These improvements were partially offset by increased operating costs in the
Bauxite segment and lower revenues.
· Fourth quarter 2012 segment profit decreased by $0.2 million compared to
fourth quarter 2011, as lower natural gas prices partially offset the
negative impact of lower LME aluminum prices.
Excluding special items, the Company reported a fourth quarter 2012 net loss
of $7.8 million, compared to a net loss of $10.8 million in third quarter 2012
and fourth quarter 2011 net income of $0.6 million.
· Relative to third quarter 2012, the improvement in fourth quarter 2012
results was due to the effect of the $20.8 million increase in segment
profit, largely offset by the effect of a $14.6 million unfavorable change
in LIFO-basis inventory adjustments for fourth quarter 2012 compared to
third quarter 2012.
· Relative to fourth quarter 2011, fourth quarter 2012 results primarily
reflect the effects of a $3.8 million increase in interest expense following
the Company's February 2012 refinancing, and the effects of a $9.3 million
unfavorable change in LIFO-basis inventory adjustments for fourth quarter
2012 compared to fourth quarter 2011.
Full-Year 2012 Results
Sales for 2012 were $1.4 billion, compared to $1.6 billion in 2011. Lower
realized prices across all businesses had a $160.7 million negative impact on
revenue, as the LME aluminum price averaged $0.92 per pound in 2012, compared to
$1.09 per pound in 2011. Lower shipment volumes decreased revenue $4.2 million
in 2012 compared to 2011.
Total segment profit was $134.7 million in 2012 and $261.9 million in 2011. This
decrease is attributable primarily to the effects of lower average LME aluminum
prices during 2012, which had a combined negative $119.8 million segment profit
impact across all segments.
Segment Information
Three months ended
------------------------------------------
December 31, September 30, December 31,
2012 2012 2011
------------------------------------------
Key Primary Aluminum segment
metrics:
Average realized Midwest
transaction price (per pound) $ 1.01 $ 0.96 $ 1.04
Net Cash Cost (per pound shipped) $ 0.82 $ 0.92 $ 0.83
Total primary aluminum shipments
(pounds, in millions) 145.1 138.8 145.8
Segment profit (loss) (in
millions):
Bauxite $ (4.1 ) $ 0.3 $ (0.7 )
Alumina 5.8 1.8 4.5
Primary Aluminum 24.8 3.1 22.7
Eliminations 1.3 0.2 4.2
------------------------------------------
Total integrated upstream business
segment profit 27.8 5.4 30.7
Flat-Rolled Products 10.3 12.0 6.5
Corporate (7.2 ) (7.3 ) (6.1 )
------------------------------------------
Total segment profit $ 30.9 $ 10.1 $ 31.1
------------------------------------------
Bauxite. The Bauxite segment reported a $4.1 million segment loss in fourth
quarter 2012, compared to a $0.3 million profit in third quarter 2012 and a
$0.7 million loss in fourth quarter 2011. The Bauxite segment reported a
$4.1 million loss in the fourth quarter 2012 due primarily to increased
operating costs, reduced shipping volumes and the impact of an unseasonably long
rainy period which made operating conditions more difficult than usual.
Alumina. The Alumina segment reported a $5.8 million segment profit in fourth
quarter 2012, compared to $1.8 million in third quarter 2012 and $4.5 million in
fourth quarter 2011.
· Compared to third quarter 2012, fourth quarter 2012 Alumina results reflect
the favorable impact of higher LME-indexed internal and external selling
prices, as well as the benefit from lower prices on bauxite purchases,
combined with a smaller impact from production variability during the
recovery from the effects of Hurricane Isaac.
2
--------------------------------------------------------------------------------
· Compared to fourth quarter 2011, fourth quarter 2012 reflects a $7.1 million
benefit from lower natural gas prices, largely offset by the $6.0 million
negative impact from lower LME-indexed selling prices.
Primary Aluminum. Segment profit in fourth quarter 2012 was $24.8 million,
compared to $3.1 million in third quarter 2012 and $22.7 million in fourth
quarter 2011.
· Compared to third quarter 2012, fourth quarter 2012 Primary Aluminum segment
profit increased by $21.7 million, reflecting a $7.4 million benefit from
improved LME aluminum prices, as well as a $13.8 million favorable impact of
relief from seasonal peak power rates.
· Primary Aluminum segment profit in fourth quarter 2012 was relatively stable
compared with fourth quarter 2011, as the benefit from lower alumina costs
and carbon-based product costs was offset by lower LME aluminum prices.
Flat-Rolled Products. Segment profit in fourth quarter 2012 was
$10.3 million, compared to $12.0 million in the third quarter 2012 and
$6.5 million in fourth quarter 2011. Compared to third quarter 2012, fourth
quarter 2012 Flat-Rolled Products segment profit decreased due primarily to
seasonal fourth quarter declines. That seasonal effect was not as severe in
2012 as it was in 2011, which led to higher year-over-year fourth quarter
volumes in 2012 and to an increase in Flat-Rolled fourth quarter 2012 segment
profit compared to fourth quarter 2011.
Liquidity and Capital Resources
At December 31, 2012, the Company had $36.1 million of cash and cash
equivalents. Available borrowing capacity under the Company's asset-based
revolving credit facility was $118.6 million, calculated as of December 31,
2012.
Operating activities provided $33.3 million of cash in fourth quarter 2012,
compared to $4.5 million of cash provided in third quarter 2012 and
$30.3 million provided in fourth quarter 2011. The table below summarizes the
driving factors in the variability of the Company's operating cash flow:
Three months ended
-----------------------------------------
December 31, September 30, December 31,
(in millions) 2012 2012 2011
-----------------------------------------
Segment profit $ 30.9 $ 10.1 $ 31.1
Gas hedges (8.1 ) (9.6 ) (7.5 )
Pension and other (2.8 ) (8.4 ) (10.6 )
Interest (11.7 ) (5.1 ) (8.5 )
Taxes paid 0.1 (7.3 ) (19.0 )
Operating working capital 24.9 24.8 44.8
-----------------------------------------
Cash provided by operating activities $ 33.3 $ 4.5 $ 30.3
-----------------------------------------
The Company has no debt maturities until 2015 aside from the modest 1% per annum
amortization of the Term B Loan. The Company continues to actively evaluate its
capital structure and debt maturities.
In July 2012, the Company announced an $11 million project to expand harbor
capacity at Port Rhodes in Discovery Bay, Jamaica. The project scope consisted
principally of harbor dredging. On February 20, 2013, the Company announced
plans to extend that project from $11 million to up to $20 million, and to
expand the scope to include improvements in railing infrastructure used in its
bauxite mining operation. The Company expects to substantially complete the
project by the end of 2013.
3
--------------------------------------------------------------------------------
NORANDA ALUMINUM HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions, except per share data and where noted)
(unaudited)
Three months ended Year ended
December 31, December 31,
----------------------------------------------
2012 2011 2012 2011
----------------------------------------------
$ $ $ $
----------------------------------------------
Statements of operations data:
Sales 332.9 338.5 1,394.9 1,559.8
Operating costs and expenses:
Cost of sales 318.3 312.7 1,277.7 1,344.5
Selling, general and
administrative expenses 17.8 21.6 82.6 93.9
----------------------------------------------
Total operating costs and
expenses 336.1 334.3 1,360.3 1,438.4
----------------------------------------------
Operating income (loss) (3.2 ) 4.2 34.6 121.4
----------------------------------------------
Other expenses (income):
Interest expense, net 8.9 5.1 33.1 21.5
Gain on hedging activities, net (18.7 ) (20.8 ) (81.2 ) (86.4 )
Debt refinancing expense - - 8.1 -
----------------------------------------------
Total other income, net (9.8 ) (15.7 ) (40.0 ) (64.9 )
----------------------------------------------
Income before income taxes 6.6 19.9 74.6 186.3
Income tax expense (benefit) 2.4 (4.5 ) 25.1 45.4
----------------------------------------------
Net income 4.2 24.4 49.5 140.9
----------------------------------------------
Net income per common share:
Basic 0.06 0.36 0.73 2.10
Diluted 0.06 0.36 0.72 2.06
Weighted-average common shares
outstanding:
Basic 67.73 67.25 67.55 67.06
Diluted 69.17 68.44 69.12 68.35
Cash dividends declared per
common share 0.04 1.03 1.41 1.03
External sales by segment:
Bauxite 13.6 16.0 50.9 68.0
Alumina 45.9 52.7 208.0 234.9
Primary Aluminum 142.0 146.9 555.1 645.7
Flat-Rolled Products 131.4 122.9 580.9 611.2
----------------------------------------------
Total 332.9 338.5 1,394.9 1,559.8
----------------------------------------------
Segment profit (loss):
Bauxite (4.1 ) (0.7 ) (0.2 ) 18.5
Alumina 5.8 4.5 35.0 78.4
Primary Aluminum 24.8 22.7 76.7 140.3
Flat-Rolled Products 10.3 6.5 51.4 48.3
Corporate (7.2 ) (6.1 ) (29.5 ) (27.9 )
Eliminations 1.3 4.2 1.3 4.3
----------------------------------------------
Total 30.9 31.1 134.7 261.9
----------------------------------------------
Financial and other data:
Average realized Midwest
transaction price (per pound) 1.01 1.04 1.01 1.17
Net Cash Cost (per pound
shipped) 0.82 0.83 0.81 0.75
Shipments:
Third party shipments:
Bauxite (kMts) 629.1 646.0 2,306.0 2,499.9
Alumina (kMts) 138.0 152.9 617.0 635.1
Primary Aluminum (pounds, in
millions) 127.6 130.0 496.7 513.0
Flat-Rolled Products (pounds, in
millions) 86.6 76.3 379.4 362.6
Intersegment shipments:
Bauxite (kMts) 556.4 625.3 2,454.0 2,643.6
Alumina (kMts) 124.0 106.6 493.0 487.5
Primary Aluminum (pounds, in
millions) 17.5 15.8 75.6 68.4
4
--------------------------------------------------------------------------------
NORANDA ALUMINUM HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except par value)
(unaudited)
December 31,
--------------------
2012 2011
--------------------
$ $
--------------------
ASSETS
Current assets:
Cash and cash equivalents 36.1 42.7
Accounts receivable, net 106.6 107.6
Inventories, net 195.8 186.5
Taxes receivable 2.0 -
Prepaid expenses 8.9 13.3
Other current assets 18.9 41.3
--------------------
Total current assets 368.3 391.4
--------------------
Property, plant and equipment, net 694.5 699.8
Goodwill 137.6 137.6
Other intangible assets, net 61.2 67.1
Other assets 96.1 81.6
--------------------
Total assets 1,357.7 1,377.5
--------------------
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable 107.2 95.9
Accrued liabilities 58.8 87.3
Taxes payable - 2.6
Derivative liabilities, net 1.8 40.9
Deferred tax liabilities 16.8 35.9
Current portion of long-term debt 3.3 2.4
--------------------
Total current liabilities 187.9 265.0
--------------------
Long-term debt, net 592.4 426.1
Long-term derivative liabilities, net 0.1 0.1
Pension and other post-retirement benefit ("OPEB")
liabilities 187.2 175.7
Other long-term liabilities 52.3 46.2
Long-term deferred tax liabilities 183.5 202.8
Common stock subject to redemption (0.2 shares at
December 31, 2012 and 2011) 2.0 2.0
Shareholders' equity:
Preferred stock (25.0 shares authorized, $0.01 par value;
no shares issued and outstanding at December 31, 2012 and
2011) - -
Common stock (200.0 shares authorized; $0.01 par value;
67.7 shares issued and outstanding at December 31, 2012;
67.3 shares issued and outstanding at December 31, 2011,
including 0.2 shares subject to redemption at
December 31, 2012 and 2011) 0.7 0.7
Capital in excess of par value 233.4 231.9
Retained earnings 17.9 63.4
Accumulated other comprehensive loss, net of tax (105.7 ) (42.4 )
--------------------
Total shareholders' equity 146.3 253.6
Non-controlling interest 6.0 6.0
--------------------
Total equity 152.3 259.6
--------------------
Total liabilities and equity 1,357.7 1,377.5
--------------------
5
--------------------------------------------------------------------------------
NORANDA ALUMINUM HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
Three months ended Year ended
December 31, December 31,
--------------------------------------------
2012 2011 2012 2011
--------------------------------------------
$ $ $ $
--------------------------------------------
OPERATING ACTIVITIES
Net income 4.2 24.4 49.5 140.9
Adjustments to reconcile net
income to cash provided by
operating activities:
Depreciation and amortization 28.3 24.6 98.5 97.7
Non-cash interest expense 0.7 0.7 2.8 11.7
Last in, first out and lower of
cost or market inventory
adjustments 4.6 (4.7 ) (9.7 ) 12.6
(Gain) loss on disposal of assets (3.6 ) 1.5 (5.0 ) 3.3
Gain on hedging activities,
excluding cash settlements (27.9 ) (32.5 ) (127.5 ) (115.6 )
Debt refinancing expense - - 8.1 -
Deferred income taxes (4.4 ) (22.1 ) (2.3 ) (24.4 )
Share-based compensation expense 0.9 0.9 4.8 5.3
Excess tax benefit related to
share-based payment arrangements (0.1 ) - (0.1 ) (0.7 )
Changes in other assets (3.7 ) (1.0 ) (10.3 ) (6.7 )
Changes in pension, other post-
retirement and other long-term
liabilities 6.0 (0.4 ) 4.7 (14.3 )
Changes in current operating
assets and liabilities:
Accounts receivable, net 16.2 32.4 1.0 24.0
Inventories, net 2.8 22.2 (0.7 ) -
Taxes receivable and taxes payable 6.3 (0.1 ) (4.8 ) (1.9 )
Other current assets (2.2 ) 2.1 22.4 (17.9 )
Accounts payable 5.9 (9.8 ) 16.2 7.2
Accrued liabilities (0.7 ) (7.9 ) (28.7 ) 19.4
--------------------------------------------
Cash provided by operating
activities 33.3 30.3 18.9 140.6
--------------------------------------------
INVESTING ACTIVITIES
Capital expenditures (28.1 ) (20.5 ) (87.9 ) (64.6 )
Proceeds from sale of property,
plant and equipment 0.5 - 5.3 2.6
--------------------------------------------
Cash used in investing activities (27.6 ) (20.5 ) (82.6 ) (62.0 )
--------------------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of common
shares, share-based payment
arrangements, net of shares
tendered for taxes 0.1 0.1 0.2 0.7
Dividends paid to shareholders (2.9 ) (69.3 ) (95.1 ) (69.3 )
Distributions paid to share-based
award holders - (1.8 ) (3.1 ) (1.8 )
Repayments of long-term debt (0.8 ) - (155.0 ) -
Borrowings on long-term debt, net - - 322.6 -
Payments of financing costs - - (12.6 ) -
Excess tax benefit related to
share-based payment arrangements 0.1 - 0.1 0.7
--------------------------------------------
Cash (used in) provided by
financing activities (3.5 ) (71.0 ) 57.1 (69.7 )
--------------------------------------------
Change in cash and cash
equivalents 2.2 (61.2 ) (6.6 ) 8.9
Cash and cash equivalents,
beginning of period 33.9 103.9 42.7 33.8
--------------------------------------------
Cash and cash equivalents, end of
period 36.1 42.7 36.1 42.7
--------------------------------------------
6
--------------------------------------------------------------------------------
NORANDA ALUMINUM HOLDING CORPORATION
SEGMENT RESULTS
(in millions)
(unaudited)
Three months ended December 31, 2012
----------------------------------------------------------------------
Flat-
Primary Rolled
Bauxite Alumina Aluminum Products Corporate Eliminations Consolidated
----------------------------------------------------------------------
$ $ $ $ $ $ $
----------------------------------------------------------------------
Sales:
External
customers 13.6 45.9 142.0 131.4 - - 332.9
Intersegment 17.5 34.9 17.3 - - (69.7 ) -
----------------------------------------------------------------------
Total sales 31.1 80.8 159.3 131.4 - (69.7 ) 332.9
----------------------------------------------------------------------
Capital
expenditures 1.1 6.9 15.3 3.9 0.9 - 28.1
Reconciliation of segment profit (loss) to operating (loss) income:
Segment
profit (loss) (4.1 ) 5.8 24.8 10.3 (7.2 ) 1.3 30.9
Depreciation
and
amortization,
net((1)) (2.4 ) (5.3 ) (15.4 ) (4.9 ) (0.3 ) - (28.3 )
Last in,
first out and
lower of cost
or market
inventory
adjustments - - (1.8 ) (3.1 ) - 0.3 (4.6 )
Gain on
disposal of
assets,
net((1)) 0.1 0.1 3.1 0.3 - - 3.6
Non-cash
pension,
accretion and
stock
compensation 0.1 (0.2 ) (1.8 ) (1.2 ) (1.3 ) - (4.4 )
Relocation
and severance - (0.1 ) (0.1 ) (0.1 ) (0.1 ) - (0.4 )
Cash
settlements
on hedging
transactions - - 0.2 0.5 - - 0.7
Other, net (0.2 ) (0.1 ) (0.6 ) (0.5 ) 1.1 (0.4 ) (0.7 )
----------------------------------------------------------------------
Operating
(loss) income (6.5 ) 0.2 8.4 1.3 (7.8 ) 1.2 (3.2 )
----------------------------------------------------------------------
Interest expense, net 8.9
Gain on hedging activities, net (18.7 )
Total other income (9.8 )
-------------
Income before income taxes 6.6
-------------
((1)) During fourth quarter 2012, the Company recorded a reclassification
adjustment related to previous 2012 quarters that increased fourth
quarter depreciation expense by $3.3 million and increased gain on
disposal of assets by the same amount.
7
--------------------------------------------------------------------------------
NORANDA ALUMINUM HOLDING CORPORATION
SEGMENT RESULTS
(in millions)
(unaudited)
Three months ended December 31, 2011
----------------------------------------------------------------------
Flat-
Primary Rolled
Bauxite Alumina Aluminum Products Corporate Eliminations Consolidated
----------------------------------------------------------------------
$ $ $ $ $ $ $
----------------------------------------------------------------------
Sales:
External
customers 16.0 52.7 146.9 122.9 - - 338.5
Intersegment 19.6 33.2 16.1 - - (68.9 ) -
----------------------------------------------------------------------
Total sales 35.6 85.9 163.0 122.9 - (68.9 ) 338.5
----------------------------------------------------------------------
Capital
expenditures 1.5 4.6 11.6 2.7 0.1 - 20.5
Reconciliation of segment profit (loss) to operating income (loss):
Segment
profit
(loss) (0.7 ) 4.5 22.7 6.5 (6.1 ) 4.2 31.1
Depreciation
and
amortization (3.2 ) (5.3 ) (11.2 ) (4.5 ) (0.4 ) - (24.6 )
Last in,
first out
and lower of
cost or
market
inventory
adjustments - - 4.9 (1.1 ) - 0.9 4.7
Loss on
disposal of
assets - - (1.2 ) (0.3 ) - - (1.5 )
Non-cash
pension,
accretion
and stock
compensation - (0.2 ) (0.7 ) (0.7 ) (1.2 ) - (2.8 )
Relocation
and
severance - - (0.4 ) (0.7 ) - - (1.1 )
Consulting
and sponsor
fees - - - (0.1 ) (0.4 ) - (0.5 )
Cash
settlements
on hedging
transactions - - 0.4 2.0 - - 2.4
Other, net (0.1 ) (0.4 ) 0.1 - 0.3 (3.4 ) (3.5 )
----------------------------------------------------------------------
Operating
income
(loss) (4.0 ) (1.4 ) 14.6 1.1 (7.8 ) 1.7 4.2
----------------------------------------------------------------------
Interest expense, net 5.1
Gain on hedging activities, net (20.8 )
-------------
Total other income (15.7 )
-------------
Income before income taxes 19.9
-------------
8
--------------------------------------------------------------------------------
NORANDA ALUMINUM HOLDING CORPORATION
SEGMENT RESULTS
(in millions)
(unaudited)
Year ended December 31, 2012
----------------------------------------------------------------------
Flat-
Primary Rolled
Bauxite Alumina Aluminum Products Corporate Eliminations Consolidated
----------------------------------------------------------------------
$ $ $ $ $ $ $
----------------------------------------------------------------------
Sales:
External
customers 50.9 208.0 555.1 580.9 - - 1,394.9
Intersegment 79.3 141.1 75.5 - - (295.9 ) -
----------------------------------------------------------------------
Total sales 130.2 349.1 630.6 580.9 - (295.9 ) 1,394.9
----------------------------------------------------------------------
Capital
expenditures 7.7 19.7 43.1 14.3 3.1 - 87.9
Reconciliation of segment profit (loss) to operating (loss) income:
Segment
profit (loss) (0.2 ) 35.0 76.7 51.4 (29.5 ) 1.3 134.7
Depreciation
and
amortization,
net (8.7 ) (21.6 ) (48.3 ) (18.6 ) (1.3 ) - (98.5 )
Last in,
first out and
lower of cost
or market
inventory
adjustments - - 5.6 4.1 - - 9.7
Gain on
disposal of
assets, net 0.3 0.1 0.1 4.5 - - 5.0
Non-cash
pension,
accretion and
stock
compensation - (0.8 ) (5.9 ) (4.9 ) (5.9 ) - (17.5 )
Relocation
and severance - (0.1 ) (0.2 ) (0.3 ) (0.3 ) - (0.9 )
Consulting
and sponsor
fees - - - - (0.7 ) - (0.7 )
Cash
settlements
on hedging
transactions - - 0.9 6.8 - - 7.7
Other, net (0.2 ) (0.5 ) (4.1 ) (0.5 ) 0.9 (0.5 ) (4.9 )
----------------------------------------------------------------------
Operating
(loss) income (8.8 ) 12.1 24.8 42.5 (36.8 ) 0.8 34.6
----------------------------------------------------------------------
Interest expense, net 33.1
Gain on hedging activities, net (81.2 )
Debt refinancing expense 8.1
-------------
Total other income (40.0 )
-------------
Income before income taxes 74.6
-------------
9
--------------------------------------------------------------------------------
NORANDA ALUMINUM HOLDING CORPORATION
SEGMENT RESULTS
(in millions)
(unaudited)
Year ended December 31, 2011
----------------------------------------------------------------------
Flat-
Primary Rolled
Bauxite Alumina Aluminum Products Corporate Eliminations Consolidated
----------------------------------------------------------------------
$ $ $ $ $ $ $
----------------------------------------------------------------------
Sales:
External
customers 68.0 234.9 645.7 611.2 - - 1,559.8
Intersegment 83.0 168.2 78.4 - - (329.6 ) -
----------------------------------------------------------------------
Total sales 151.0 403.1 724.1 611.2 - (329.6 ) 1,559.8
----------------------------------------------------------------------
Capital
expenditures 8.2 14.0 30.3 11.1 1.0 - 64.6
Reconciliation of segment profit (loss) to operating income (loss):
Segment
profit
(loss) 18.5 78.4 140.3 48.3 (27.9 ) 4.3 261.9
Depreciation
and
amortization (10.8 ) (21.0 ) (46.0 ) (18.6 ) (1.3 ) - (97.7 )
Last in,
first out
and lower of
cost or
market
inventory
adjustments - - (5.5 ) (8.7 ) - 1.6 (12.6 )
Gain (loss)
on disposal
of assets 0.7 - (2.8 ) (1.2 ) - - (3.3 )
Non-cash
pension,
accretion
and stock
compensation (0.4 ) (0.6 ) (2.9 ) (2.5 ) (6.0 ) - (12.4 )
Relocation
and
severance - (0.2 ) (1.2 ) (0.9 ) (0.6 ) - (2.9 )
Consulting
and sponsor
fees - - - (0.1 ) (2.2 ) - (2.3 )
Cash
settlements
on hedging
transactions - - 0.3 (0.4 ) - - (0.1 )
Other, net - (0.7 ) - - (3.4 ) (5.1 ) (9.2 )
----------------------------------------------------------------------
Operating
income
(loss) 8.0 55.9 82.2 15.9 (41.4 ) 0.8 121.4
----------------------------------------------------------------------
Interest expense, net 21.5
Gain on hedging activities, net (86.4 )
-------------
Total other income (64.9 )
-------------
Income before income taxes 186.3
-------------
10
--------------------------------------------------------------------------------
ADJUSTED EBITDA
(in millions)
(unaudited)
Management uses "Adjusted EBITDA" as a liquidity measure in respect of the
ratios disclosed below, as defined in the Company's debt agreements. As used
herein, Adjusted EBITDA means net income before income taxes, net interest
expense, depreciation and amortization, adjusted to eliminate certain non-cash
expenses and other specified items of income or expense as outlined below (in
millions):
Three months ended Year ended
December 31, December 31,
--------------------------------------------
2012 2011 2012 2011
--------------------------------------------
$ $ $ $
--------------------------------------------
Adjusted EBITDA 22.8 23.6 96.9 235.8
Last in, first out and lower of
cost or market inventory
adjustments ((a)) (4.6 ) 4.7 9.7 (12.6 )
Gain (loss) on disposal of assets 3.6 (1.5 ) 5.0 (3.3 )
Non-cash pension, accretion and
stock compensation (4.4 ) (2.8 ) (17.5 ) (12.4 )
Relocation and severance (0.4 ) (1.1 ) (0.9 ) (2.9 )
Consulting and sponsor fees - (0.5 ) (0.7 ) (2.3 )
Interest rate swaps - (2.3 ) - (4.6 )
Debt refinancing expense - - (8.1 ) -
Non-cash derivative gains ((b)) 27.6 33.1 126.7 117.0
Other (0.8 ) (3.6 ) (4.9 ) (9.2 )
Depreciation and amortization (28.3 ) (24.6 ) (98.5 ) (97.7 )
Interest expense, net (8.9 ) (5.1 ) (33.1 ) (21.5 )
Income tax expense (2.4 ) 4.5 (25.1 ) (45.4 )
--------------------------------------------
Net income 4.2 24.4 49.5 140.9
--------------------------------------------
((a)) The Company's New Madrid smelter and the Company's 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 inventories held at the New Madrid
smelter and the rolling mills. Product inventories at Gramercy and
St. Ann and supplies inventories at New Madrid are stated at lower of
weighted-average cost or market, and are not subject to the LIFO
adjustment. The Company also reduces inventories to the lower of cost
(adjusted for purchase accounting) or market value.
((b)) The Company uses 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.
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 the Company's 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 U.S. GAAP. Adjusted EBITDA has limitations as an analytical tool
and you should not consider it in isolation or as a substitute for analysis of
the Company's 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,
the Company's working capital needs; and does not reflect the interest expense,
or the cash requirements necessary to service interest or principal payments on
the Company's 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 the Company's Adjusted
EBITDA as an alternative to operating income or net income, determined in
accordance with U.S. GAAP, as an indicator of the Company's operating
performance, or as an alternative to cash flows from operating activities,
determined in accordance with U.S. GAAP, as an indicator of the Company's cash
flows or as a measure of liquidity.
11
--------------------------------------------------------------------------------
The following table reconciles Adjusted EBITDA to cash flow from operating
activities for the periods presented (in millions):
Three months ended Twelve months ended
December 31, December 31,
-----------------------------------------------------
2012 2011 2012 2011
-----------------------------------------------------
$ $ $ $
-----------------------------------------------------
Adjusted EBITDA 22.8 23.6 96.9 235.8
Stock compensation
expense 0.9 0.9 4.8 5.3
Changes in other assets (3.7 ) (1.0 ) (10.3 ) (6.7 )
Changes in pension, other
post-retirement
liabilities and other
long-term liabilities 6.0 (0.4 ) 4.7 (14.3 )
Changes in current
operating asset and
liabilities 28.3 38.9 5.4 30.8
Changes in current income
taxes (6.9 ) (17.6 ) (27.5 ) (70.5 )
Changes in accrued
interest (8.2 ) (4.4 ) (30.3 ) (9.8 )
Non-cash pension,
accretion and stock
compensation (4.4 ) (2.8 ) (17.5 ) (12.4 )
Relocation and severance (0.4 ) (1.1 ) (0.9 ) (2.9 )
Consulting and sponsor
fees - (0.5 ) (0.7 ) (2.3 )
Interest rate swaps - (2.3 ) - (4.6 )
Other (1.1 ) (3.0 ) (5.7 ) (7.8 )
-----------------------------------------------------
Cash flow from operating
activities 33.3 30.3 18.9 140.6
-----------------------------------------------------
Covenant Compliance and Financial Ratios
The Company's debt agreements do not require it to achieve any financial
performance metric or ratio in order to avoid a default (subject, in the case of
our senior secured revolving credit facility, to our maintaining minimum
availability thereunder). However, certain covenants contained in the Company's
debt agreements governing the senior secured credit facilities and the
indentures governing the Company's Notes restrict its ability to take certain
actions if it is unable to meet certain ratios including, among others:(i) the
ratio of Adjusted EBITDA, calculated on a trailing four-quarter basis, to fixed
charges (the "Fixed-Charge Coverage Ratio") or (ii) the ratio of Adjusted
EBITDA, calculated on a trailing four-quarter basis and subtracting certain cash
payments, including certain taxes, capital expenditures and dividends, to fixed
charges (the "Revolver Fixed-Charge Coverage Ratio") or (iii) the ratio of
senior first-lien secured net debt to Adjusted EBITDA, calculated on a trailing
four-quarter basis (the "Net Senior Secured Leverage Ratio"). The actions which
could be restricted include 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. Furthermore, the Company's 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
applicable covenants, which amounts accumulate with reference to Adjusted
EBITDA, or Consolidated Net Income (each as defined in the Company's debt
agreements), on a quarterly basis.
12
--------------------------------------------------------------------------------
Certain of the minimum or maximum ratio levels set forth in the Company's
covenants as conditions to its undertaking certain actions and its actual
performance are summarized below:
Actual as of
----------------------------------
December 31, December 31,
Requirements 2012 2011
-------------------------------------------------------------------------------
Fixed-Charge
AcquisitionCo Coverage Minimum
Notes ((1)) Ratio 2.0 to 1.0 2.8 to 1.0 8.9 to 1.0
Revolver
Fixed-Charge
2012 Revolver Coverage Minimum
((2)) Ratio 1.0 to 1.0 -- 3.6 to 1.0
Total Net
Senior First
2012 Term B Loan Lien Secured
and 2012 Revolver Leverage Maximum
((3)) Ratio 2.25 to 1.0 2.9 to 1.0 0.9 to 1.0
((1)) For Noranda Aluminum Acquisition Corp, fixed charges on a pro forma
basis (giving effect to debt repayments) for the year ended
December 31, 2012 and the year ended December 31, 2011 were $35.2
million and $26.5 million, respectively.
((2)) As defined in the credit agreement governing 2012 Revolver, fixed
charges for the year ended December 31, 2012 and the year ended
December 31, 2011 were $33.6 million and $34.7 million, respectively.
For the year ended December 31, 2012, the Revolver Fixed-Charge
Coverage Ratio was less than 1.0 to 1.0.
((3)) As used in calculating this ratio, "senior first-lien secured net debt"
means the amount outstanding under the 2012 Term B Loan and 2012
Revolver immediately following the 2012 Refinancing (for the actual
ratio as of December 31, 2011) or outstanding as of December 31, 2012
(for the actual ratio as of December 31, 2012) and any debt secured by
a first priority lien on assets of Noranda Aluminum Acquisition Corp
and/or any of its subsidiaries, less "unrestricted cash" and
"permitted
investments" (as defined under the Company's 2012 Senior Secured Credit
Facilities) up to a cap of $100.0 million. The ratios presented are
assuming the 2012 Refinancing had been in place at December 31, 2011.
Under this assumption, at December 31, 2012 and December 31, 2011,
senior first lien secured debt was $322.6 million and $325.0 million,
respectively, and unrestricted cash and permitted investments were
$35.8 million and $100.0 million (including the approximate
$73.0 million increase in cash immediately following the 2012
Refinancing and 2012 Tender Offer), respectively, resulting in senior
first lien secured net debt of $286.8 million and $225.0 million,
respectively.
Because the Revolver Fixed-Charge Coverage Ratio (as defined above) was
less than 1.00 to 1.00 as of December 31, 2012, the Company must maintain at
least $20.0 million of available borrowing capacity under its 2012 Revolver. Net
of the impact of reducing availability by $20.0 million, the Company's available
borrowing capacity under the 2012 Revolver was $118.6 million, calculated as of
December 31, 2012. The Company's debt agreements do not otherwise require it to
maintain any financial performance metric or ratio in order to avoid a default.
13
--------------------------------------------------------------------------------
NORANDA ALUMINUM HOLDING CORPORATION
NET CASH COST OF PRIMARY ALUMINUM
(unaudited)
Net cash cost of primary aluminum per pound represents the costs of producing
commodity grade aluminum net of value-added premiums on primary aluminum sales.
The Company has provided 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. 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. Net cash cost per pound is not a measure of
financial performance under U.S. GAAP and may not be comparable to similarly
titled measures used by other companies. Net cash cost 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. The following table shows the
calculation of net cash cost of primary aluminum:
Three months ended Year ended
December 31, December 31,
------------------------------------------
2012 2011 2012 2011
------------------------------------------
Total primary aluminum cash cost (in
millions)((a)) $ 119.1 $ 121.3 $ 465.2 $ 436.0
Total shipments (pounds in millions) 145.1 145.8 572.3 581.4
------------------------------------------
Net Cash Cost (per pound shipped) $ 0.82 $ 0.83 $ 0.81 $ 0.75
------------------------------------------
((a) )Total primary aluminum cash
cost is calculated below (in
millions):
Total primary aluminum revenue $ 159.3 $ 163.0 $ 630.6 $ 724.1
Less fabrication premiums and other
revenue (12.4 ) (11.0 ) (52.6 ) (46.6 )
------------------------------------------
Realized Midwest transaction price
revenue 146.9 152.0 578.0 677.5
------------------------------------------
------------------------------------------
Primary Aluminum segment profit 24.8 22.7 76.7 140.3
Alumina segment profit 5.8 4.5 35.0 78.4
Bauxite segment profit (4.1 ) (0.7 ) (0.2 ) 18.5
Profit Eliminations 1.3 4.2 1.3 4.3
------------------------------------------
Total 27.8 30.7 112.8 241.5
------------------------------------------
Total primary aluminum cash cost (in
millions) $ 119.1 $ 121.3 $ 465.2 $ 436.0
------------------------------------------
14
--------------------------------------------------------------------------------
NORANDA ALUMINUM HOLDING CORPORATION
CALCULATION OF DILUTED EARNINGS (LOSS) PER SHARE,
EXCLUDING SPECIAL ITEMS
(in millions, except per share information)
(unaudited)
"Net income (loss), excluding special items" means net income (loss) adjusted to
eliminate the impact of certain transactions and events referred to as "special
items," as listed herein. "Diluted earnings (loss) per share, excluding special
items" refers to net income (loss) excluding special items, divided by the
number of diluted weighted-average common shares outstanding. Management has
provided net income (loss), excluding special items and diluted earnings (loss)
per share, 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 (loss) 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.
Special items and diluted earnings (loss) per share, excluding special items are
outlined below (in millions):
Three months ended
December 31, Year ended December 31,
----------------------------------------------------
2012 2011 2012 2011
----------------------------------------------------
$ $ $ $
----------------------------------------------------
Increase (decrease) to Increase (decrease) to
net income net income
----------------------------------------------------
Special items:
Transaction costs ((1)) - - (8.6 ) -
Modification of stock
options ((2)) 0.2 - (0.8 ) -
Release of indemnification
receivables related to
uncertain tax
positions((3)) - (1.1 ) - (4.5 )
Early retirement
benefits((4)) - (0.7 ) - (0.7 )
Gain on sale of idle mill
equipment - - 4.5 -
Gain on hedging activities 18.7 20.8 81.2 86.4
Labor negotiation
contingency cost ((5)) (0.6 ) - (4.1 ) -
----------------------------------------------------
Total special items (pre-
tax) 18.3 19.0 72.2 81.2
----------------------------------------------------
Diluted earnings per
share, excluding special
items:
Pre-tax income 6.6 19.9 74.6 186.3
Pre-tax impact of special
items (18.3 ) (19.0 ) (72.2 ) (81.2 )
----------------------------------------------------
Pre-tax income (loss),
excluding special items (11.7 ) 0.9 2.4 105.1
Income taxes, excluding
special items ((6)) (3.9 ) 0.3 0.8 33.1
----------------------------------------------------
Net income (loss),
excluding special items (7.8 ) 0.6 1.6 72.0
Weighted-average common
shares outstanding,
diluted (shares, in
millions) ((7)) 67.73 68.44 69.12 68.35
----------------------------------------------------
Diluted earnings (loss)
per share, excluding
special items (0.12 ) 0.01 0.02 1.05
----------------------------------------------------
((1)) Includes $8.1 million of costs related to the 2012 refinancing and the
related tender offer, including creditor and third-party fees as well
as the write-off of deferred financing fees. This amount also includes
$0.5 million of costs related to the public secondary offering of 10
million shares of common stock by Apollo.
((2)) During first quarter 2012, holders of stock options, service-vesting
restricted stock and restricted stock units were paid cash for the
$1.25 per share supplemental dividend. The Company accelerated $1.2
million of share-based payment compensation expense in connection with
this award modification. Share-based payment compensation cost related
to the modified aw
