Delaware
(State
of Incorporation)
|
13-3070826
(IRS
Employer Identification No.)
|
2511
Garden Road
Building
A, Suite 200
Monterey,
California
(Address
of principal executive offices)
|
93940
(Zip
Code)
|
September
30, 2006
|
December
31, 2005
|
||||||
ASSETS
|
|||||||
ASSETS:
|
|||||||
Cash
and cash equivalents
|
$
|
50,094
|
$
|
17,752
|
|||
Restricted
cash
|
2,026
|
2,028
|
|||||
Accounts
receivable — net
|
82,388
|
83,016
|
|||||
Due
from affiliates
|
28,200
|
18,638
|
|||||
Inventories
|
145,739
|
111,436
|
|||||
Prepaid
and other current assets
|
25,905
|
23,918
|
|||||
Deferred
taxes — current portion
|
70,831
|
37,705
|
|||||
Total
current assets
|
405,183
|
294,493
|
|||||
Property,
plant and equipment — net
|
1,189,182
|
1,070,158
|
|||||
Intangible
asset — net
|
64,856
|
74,643
|
|||||
Goodwill
|
94,844
|
94,844
|
|||||
Other
assets
|
165,995
|
143,293
|
|||||
TOTAL
|
$
|
1,920,060
|
$
|
1,677,431
|
|||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|||||||
LIABILITIES:
|
|||||||
Accounts
payable — trade
|
$
|
58,820
|
$
|
61,919
|
|||
Due
to affiliates
|
227,004
|
158,682
|
|||||
Accrued
and other current liabilities
|
55,644
|
53,715
|
|||||
Long
term debt — current portion
|
30,099
|
581
|
|||||
Accrued
employee benefits costs — current portion
|
9,333
|
9,333
|
|||||
Convertible
senior notes
|
175,000
|
175,000
|
|||||
Industrial
revenue bonds
|
7,815
|
7,815
|
|||||
Total
current liabilities
|
563,715
|
467,045
|
|||||
Senior
unsecured notes payable
|
250,000
|
250,000
|
|||||
Nordural
debt
|
289,484
|
230,436
|
|||||
Revolving
credit facility
|
--
|
8,069
|
|||||
Accrued
pension benefits costs — less current portion
|
10,953
|
10,350
|
|||||
Accrued
postretirement benefits costs — less current portion
|
107,062
|
96,660
|
|||||
Due
to affiliates — less current portion
|
338,140
|
337,416
|
|||||
Other
liabilities
|
28,395
|
28,010
|
|||||
Deferred
taxes
|
16,890
|
16,890
|
|||||
Total
noncurrent liabilities
|
1,040,924
|
977,831
|
|||||
CONTINGENCIES
AND COMMITMENTS (NOTE 6)
|
|||||||
SHAREHOLDERS’
EQUITY:
|
|||||||
Preferred
stock (one cent par value, 5,000,000 shares authorized, and no shares
outstanding)
|
--
|
--
|
|||||
Common
stock (one cent par value, 100,000,000 shares authorized; 32,456,835
and
32,188,165 shares issued and outstanding at September 30, 2006 and
December
31, 2005, respectively)
|
325
|
322
|
|||||
Additional
paid-in capital
|
431,153
|
419,009
|
|||||
Accumulated
other comprehensive loss
|
(98,867
|
)
|
(91,418
|
)
|
|||
Accumulated
deficit
|
(17,190
|
)
|
(95,358
|
)
|
|||
Total
shareholders’ equity
|
315,421
|
232,555
|
|||||
TOTAL
|
$
|
1,920,060
|
$
|
1,677,431
|
|
|
Three
months ended
September
30,
|
|
Nine
months ended
September
30,
|
|||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
NET
SALES:
|
|||||||||||||
Third-party
customers
|
$
|
312,038
|
$
|
222,811
|
$
|
966,753
|
$
|
713,565
|
|||||
Related
parties
|
69,239
|
48,025
|
167,446
|
125,923
|
|||||||||
381,277
|
270,836
|
1,134,199
|
839,488
|
||||||||||
Cost
of goods sold
|
310,303
|
240,778
|
878,753
|
712,515
|
|||||||||
Gross
profit
|
70,974
|
30,058
|
255,446
|
126,973
|
|||||||||
Selling,
general and administrative expenses
|
8,144
|
8,104
|
28,639
|
24,946
|
|||||||||
Operating
income
|
62,830
|
21,954
|
226,807
|
102,027
|
|||||||||
Interest
expense
|
(10,271
|
)
|
(6,213
|
)
|
(25,822
|
)
|
(19,413
|
)
|
|||||
Interest
income
|
448
|
596
|
797
|
1,088
|
|||||||||
Net
gain (loss) on forward contracts
|
210,268
|
(53,481
|
)
|
(106,948
|
)
|
(52,480
|
)
|
||||||
Loss
on early extinguishment of debt
|
--
|
--
|
--
|
(835
|
)
|
||||||||
Other
income (expense)
|
3
|
(67
|
)
|
(121
|
)
|
703
|
|||||||
Income
(loss) before income taxes and equity in earnings of joint
ventures
|
263,278
|
(37,211
|
)
|
94,713
|
31,090
|
||||||||
Income
tax benefit (expense)
|
(92,922
|
)
|
15,155
|
(27,675
|
)
|
(7,578
|
)
|
||||||
Income
(loss) before equity in earnings of joint ventures
|
170,356
|
(22,056
|
)
|
67,038
|
23,512
|
||||||||
Equity
in earnings of joint ventures
|
3,583
|
1,985
|
11,130
|
8,891
|
|||||||||
Net
income (loss)
|
$
|
173,939
|
$
|
(20,071
|
)
|
$
|
78,168
|
$
|
32,403
|
||||
EARNINGS
(LOSS) PER COMMON SHARE:
|
|||||||||||||
Basic
|
$
|
5.36
|
$
|
(0.62
|
)
|
$
|
2.41
|
$
|
1.01
|
||||
Diluted
|
$
|
5.26
|
$
|
(0.62
|
)
|
$
|
2.38
|
$
|
1.01
|
||||
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING (000):
|
|||||||||||||
Basic
|
32,438
|
32,162
|
32,374
|
32,120
|
|||||||||
Diluted
|
33,148
|
32,162
|
33,515
|
32,163
|
Nine
months ended September 30,
|
|||||||
2006
|
2005
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
Net
income
|
$
|
78,168
|
$
|
32,403
|
|||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
Unrealized
net loss on forward contracts
|
62,766
|
49,934
|
|||||
Depreciation
and amortization
|
50,090
|
42,306
|
|||||
Deferred
income taxes
|
(26,224
|
)
|
17,606
|
||||
Pension
and other post retirement benefits
|
11,005
|
11,253
|
|||||
Stock-based
compensation
|
4,603
|
--
|
|||||
Excess
tax benefits from share-based compensation
|
(1,244
|
)
|
--
|
||||
(Gain)
loss on disposal of assets
|
43
|
(20
|
)
|
||||
Non-cash
loss on early extinguishment of debt
|
--
|
253
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable - net
|
628
|
(934
|
)
|
||||
Due
from affiliates
|
(9,562
|
)
|
(3,246
|
)
|
|||
Inventories
|
(29,084
|
)
|
5,076
|
||||
Prepaid
and other current assets
|
(4,564
|
)
|
(2,437
|
)
|
|||
Accounts
payable - trade
|
(784
|
)
|
6,668
|
||||
Due
to affiliates
|
3,129
|
2,480
|
|||||
Accrued
and other current liabilities
|
(6,381
|
)
|
(23,209
|
)
|
|||
Other
- net
|
(15,079
|
)
|
(10,909
|
)
|
|||
Net
cash provided by operating activities
|
117,510
|
127,224
|
|||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
Nordural
expansion
|
(155,756
|
)
|
(200,641
|
)
|
|||
Purchase
of other property, plant and equipment
|
(10,610
|
)
|
(9,629
|
)
|
|||
Business
acquisitions, net of cash acquired
|
--
|
(7,000
|
)
|
||||
Restricted
and other cash deposits
|
(3,998
|
)
|
(350
|
)
|
|||
Proceeds
from sale of property, plant and equipment
|
22
|
101
|
|||||
Net
cash used in investing activities
|
(170,342
|
)
|
(217,519
|
)
|
|||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
Borrowings
|
89,000
|
188,937
|
|||||
Repayment
of debt
|
(434
|
)
|
(83,138
|
)
|
|||
Net
repayments under revolving credit facility
|
(8,069
|
)
|
--
|
||||
Financing
fees
|
--
|
(5,132
|
)
|
||||
Excess
tax benefits from shared-based compensation
|
1,244
|
--
|
|||||
Dividends
|
--
|
(16
|
)
|
||||
Issuance
of common stock
|
3,433
|
1,323
|
|||||
Net
cash provided by financing activities
|
85,174
|
101,974
|
|||||
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
32,342
|
11,679
|
|||||
Cash
and cash equivalents at the beginning of the
period
|
17,752
|
44,168
|
|||||
Cash
and cash equivalents at the end of the period
|
$
|
50,094
|
$
|
55,847
|
1.
|
2.
|
Stock-Based
Compensation
|
Three
months ended
|
Nine
months ended
|
|||||||||
September
30, 2005
|
September
30, 2005
|
|||||||||
Net
income (loss) applicable to common shareholders
|
As
reported
|
$
|
(20,071
|
)
|
$
|
32,403
|
||||
Add:
Stock-based employee compensation expense included in reported net
income,
net of related tax effects
|
514
|
2,197
|
||||||||
Deduct:
Total stock-based employee compensation expense determined under
fair
value based method for all awards, net of related tax
effects
|
(678
|
)
|
(2,631
|
)
|
||||||
Pro
forma net income (loss)
|
$
|
(20,235
|
)
|
$
|
31,969
|
|||||
Basic
earnings (loss) per share
|
As
reported
|
$
|
(0.62
|
)
|
$
|
1.01
|
||||
Pro
forma
|
$
|
(0.63
|
)
|
$
|
1.00
|
|||||
Diluted
earnings (loss) per share
|
As
reported
|
$
|
(0.62
|
)
|
$
|
1.01
|
||||
Pro
forma
|
$
|
(0.63
|
)
|
$
|
0.99
|
2006
|
2005
|
|
Weighted
average fair value per option granted during the period
|
$27.00
|
$15.19
|
Risk-free
interest rate
|
4.30-4.99%
|
3.98-4.36%
|
Expected
dividend yield
|
$0.00
|
$0.00
|
Expected
volatility
|
60%
|
67%
|
Expected
forfeiture rate
|
5%
|
--
|
Expected
lives (years)
|
4.9
|
5.5
|
Options
|
Number
|
Weighted
Average Exercise
Price
|
|||||
Outstanding
at January
1, 2006
|
453,661
|
$
|
20.93
|
||||
Granted
|
93,000
|
36.93
|
|||||
Exercised
|
(185,122
|
)
|
18.55
|
||||
Forfeited
|
(667
|
)
|
24.32
|
||||
Outstanding
at September 30, 2006
|
360,872
|
$
|
26.27
|
Service-based
stock awards (1)
|
Number
|
|||
Outstanding
at January 1, 2006
|
59,000
|
|||
Granted
|
39,500
|
|||
Vested
(Awarded)
|
(4,500
|
)
|
||
Outstanding
at September 30, 2006
|
94,000
|
(1)
All of our service-based stock awards require the recipients to remain
an
employee for a certain period of time before the award vests. Recipients
receive common stock upon vesting.
|
Options
Outstanding:
|
|||||||||||||
Range
of Exercise
Prices
|
Number
Outstanding
at
9/30/2006
|
Weighted
Avg.
Remaining
Contractual
Life
|
Weighted
Avg.
Exercise
Price
|
Aggregate
Intrinsic
Value
|
|||||||||
$26.70
to $47.61
|
109,834
|
9.4
years
|
$
|
35.47
|
$
|
240
|
|||||||
$23.98
to $24.70
|
182,010
|
9.1
years
|
$
|
24.26
|
1,741
|
||||||||
$7.03
to $23.18
|
69,028
|
6.4
years
|
$
|
16.94
|
1,165
|
||||||||
360,872
|
$
|
3,146
|
Exercisable
Options:
|
|||||||||||||
Range
of Exercise
Prices
|
Number
Exercisable
at
9/30/2006
|
Weighted
Avg.
Remaining
Contractual
Life
|
Weighted
Avg.
Exercise
Price
|
Aggregate
Intrinsic
Value
|
|||||||||
$26.70
to $47.61
|
42,748
|
9.3
years
|
$
|
33.74
|
$
|
3
|
|||||||
$23.98
to $24.70
|
30,262
|
8.7
years
|
$
|
24.46
|
283
|
||||||||
$7.03
to $23.18
|
50,097
|
5.7
years
|
$
|
14.59
|
964
|
||||||||
123,107
|
$
|
1,250
|
Non-vested
Options:
|
Number
|
Weighted
Average Fair Value
|
|||||
Non-vested
options at January 1, 2006
|
205,430
|
$
|
14.59
|
||||
Granted
|
69,002
|
22.33
|
|||||
Vested
|
(36,000
|
)
|
16.63
|
||||
Forfeited
|
(667
|
)
|
14.48
|
||||
Non-vested
options at September 30, 2006
|
237,765
|
$
|
16.53
|
Three
months ended September 30,
|
Nine
months ended
September
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Compensation
expense reported:
|
|||||||||||||
Stock
option grants
|
$
|
563
|
$
|
--
|
$
|
3,485
|
$
|
--
|
|||||
Service-based
stock awards
|
168
|
--
|
1,007
|
--
|
|||||||||
Performance-based
stock grants
|
236
|
803
|
3,003
|
3,433
|
|||||||||
Total
compensation expense before income tax
|
967
|
803
|
7,495
|
3,433
|
|||||||||
Income
tax benefit
|
(344
|
)
|
(289
|
)
|
(2,674
|
)
|
(1,236
|
)
|
|||||
Total
compensation expense, net of income tax benefit
|
$
|
623
|
$
|
514
|
$
|
4,821
|
$
|
2,197
|
Remainder
2006
|
2007
|
2008
|
2009
|
|
Stock-based
compensation expense (pre-tax)
|
$715
|
$2,111
|
$693
|
$56
|
3.
|
Inventories
|
September
30, 2006
|
December
31, 2005
|
||||||
Raw
materials
|
$
|
63,623
|
$
|
47,352
|
|||
Work-in-process
|
20,809
|
11,461
|
|||||
Finished
goods
|
5,865
|
5,446
|
|||||
Operating
and other supplies
|
55,442
|
47,177
|
|||||
$
|
145,739
|
$
|
111,436
|
4.
|
Goodwill
and Intangible Asset
|
2007
|
2008
|
2009
|
2010
|
||||||||||
Estimated
Amortization Expense
|
$
|
13,991
|
$
|
15,076
|
$
|
16,149
|
$
|
16,379
|
5.
|
Debt
|
September
30,
|
December
31,
|
||||||
2006
|
2005
|
||||||
Debt
classified as current liabilities:
|
|||||||
1.75%
convertible senior notes due 2024, interest payable semiannually
(1)(2)(3)(4)
|
$
|
175,000
|
$
|
175,000
|
|||
Hancock
County industrial revenue bonds due 2028 (“IRBs”), interest payable
quarterly (variable interest rates (not to exceed 12%))(1)
|
7,815
|
7,815
|
|||||
Long-term
debt - current portion
|
30,099
|
581
|
|||||
Long-term
debt:
|
|||||||
7.5%
senior unsecured notes payable due 2014, interest payable semiannually
(3)(4)(6)
|
250,000
|
250,000
|
|||||
Nordural
senior term loan facility maturing in 2010, variable interest rate,
principal and interest payments due semiannually through 2010, less
current portion (5)
|
281,500
|
222,000
|
|||||
Various
Nordural loans, with interest rates ranging from 2.70% to 6.75% due
2012
to 2020, less current portion
|
7,984
|
8,436
|
|||||
Borrowings
under revolving credit facility (4)
|
--
|
8,069
|
|||||
Total
Debt
|
$
|
752,398
|
$
|
671,901
|
(1) The
convertible notes are classified as current because they are convertible
at any time by the holder. The IRBs are classified as current liabilities
because they are remarketed weekly and could be required to be repaid
upon
demand if there is a failed remarketing. The IRB interest rate at
September
30, 2006 was 4.04%.
|
(2) The
convertible notes are convertible at any time by the holder at an
initial
conversion rate of 32.7430 shares of our common stock per one thousand
dollars of principal amount of convertible notes, subject to adjustments
for certain events. The initial conversion rate is equivalent to
a
conversion price of approximately $30.5409 per share of our common
stock.
Upon conversion, the holder of the convertible note will receive
cash
equal to the principal amount of the convertible note and, at our
election, either cash or our common stock, or a combination thereof,
for
the conversion value in excess of such principal amount, if
any.
|
(3) Our
obligations pursuant to the notes are unconditionally guaranteed,
jointly
and severally, on a senior unsecured basis by all of our existing
domestic
restricted subsidiaries.
|
(4) The
indentures governing our note obligations contain customary covenants,
including limitations on our ability to incur additional indebtedness,
pay
dividends, sell assets or stock of certain subsidiaries and purchase
or
redeem capital stock. Our revolving credit facility contains customary
covenants, including limitations on capital expenditures, additional
indebtedness, affiliate transactions, liens, guarantees, mergers
and
acquisitions, dividends, distributions, capital redemptions and
investments.
|
(5) The
Nordural senior term loan interest rate at September
30, 2006 was 6.88%. Nordural's $365,000 loan facility contains customary
covenants, including limitations on additional indebtedness, investments,
capital expenditures (other than related to the expansion project),
dividends, and hedging agreements. Nordural is also subject to various
financial covenants, including a net worth covenant and certain
maintenance covenants, including minimum interest coverage and debt
service coverage beginning as of December 31, 2006. Nordural's obligations
under the term loan facility are secured by a pledge of all of Nordural's
shares pursuant to a share pledge agreement with the lenders. In
addition,
substantially all of Nordural's assets are pledged as security under
the
loan facility. Nordural is required to make the following minimum
repayments of principal on the facility: $15,500 on February 28,
2007 and
$14,000 on each of August 31, 2007, February 29, 2008, August 31,
2008,
February 28, 2009, August 31, 2009, and all remaining outstanding
principal amount on February 28, 2010.
|
(6) On
or after August 15, 2009, we may redeem any of the senior unsecured
notes,
in whole or in part, at an initial redemption price equal to 103.75%
of
the principal amount, plus accrued and unpaid interest. The redemption
price will decline each year after 2009 and will be 100% of the principle
amount, plus accrued and unpaid interest, beginning on August 15,
2012.
|
6.
|
Contingencies
and Commitments
|
7.
|
Forward
Delivery Contracts and Financial
Instruments
|
Contract
|
Customer
|
Volume
|
Term
|
Pricing
|
Alcan
Metal Agreement (1)
|
Alcan
|
276
to 324 million pounds per year
|
Through
July 31, 2007
|
Based
on U.S. Midwest market
|
Glencore
Metal Agreement I (2)
|
Glencore
|
50,000
mtpy
|
Through
December 31, 2009
|
LME-based
|
Glencore
Metal Agreement II (3)
|
Glencore
|
20,400
mtpy
|
Through
December 31, 2013
|
Based
on U.S. Midwest market
|
Southwire
Metal Agreement (4)
|
Southwire
|
240
million pounds per year (high purity molten aluminum)
|
Through
March 31, 2011
|
Based
on U.S. Midwest market
|
|
|
60
million pounds per year (standard-grade molten aluminum)
|
Through
December 31, 2010
|
Based
on U.S. Midwest market
|
|
|
48
million pounds per year (standard-grade molten aluminum)
|
Through
December 31, 2007
|
Based
on U.S. Midwest market
|
(1) Following
receipt of a 72 hour notice to strike by the USWA, we commenced
an orderly
shutdown of the Ravenswood facility and on August 2, 2006 delivered
a
force majeure notice to Alcan informing it that deliveries under
the Alcan
Metal Agreement were being reduced. USWA workers approved a new
labor
agreement on August 4, 2006 and full deliveries under the Alcan
Metal
Agreement are expected to resume by December 2006.
|
(2)
We account for the Glencore Metal Agreement I as a derivative instrument
under SFAS No. 133. We have not designated the Glencore Metal Agreement
I
as “normal” because it replaced and substituted for a significant portion
of a sales contract which did not qualify for this designation.
Because
the Glencore Metal Agreement I is variably priced, we do not expect
significant variability in its fair value, other than changes that
might
result from the absence of the U.S. Midwest premium.
|
(3)
We account for the Glencore Metal Agreement II as a derivative
instrument
under SFAS No. 133. Under the Glencore Metal Agreement II, pricing
is
based on then-current market prices, adjusted by a negotiated U.S.
Midwest
premium with a cap and a floor as applied to the current U.S. Midwest
premium. Following receipt of a 72 hour notice to strike by the
USWA, we
commenced an orderly shutdown of the Ravenswood facility and on
August 2,
2006 delivered a force majeure notice to Glencore informing it
that
deliveries under the Glencore Metal Agreement II were being reduced.
USWA
workers approved a new labor agreement on August 4, 2006 and full
deliveries under this agreement are expected to resume by December
2006.
|
(4)
The Southwire Metal Agreement will automatically renew for additional
five-year terms, unless either party provides 12 months notice
that it has
elected not to renew.
|
Contract
|
Customer
|
Volume
|
Term
|
Pricing
|
Billiton
Tolling Agreement (1)
|
BHP
Billiton
|
130,000
mtpy
|
Through
December 31, 2013
|
LME-based
|
Glencore
Toll Agreement I (2)(3)
|
Glencore
|
90,000
mtpy
|
Through
July 2016
|
LME-based
|
Glencore
Toll Agreement II (4)
|
Glencore
|
40,000
mtpy
|
Through
December 31, 2014
|
LME-based
|
(1)
In September 2005, Nordural and BHP Billiton amended the Billiton
Tolling
Agreement to increase the tolling arrangement from 90,000 metric
tons to
130,000 metric tons of the per annum production capacity at Nordural
effective upon the completion of the expansion to 220,000
mtpy.
|
(2)
Nordural entered into a 10-year LME-based alumina tolling agreement
with
Glencore for 90,000 metric tons of the capacity at Nordural. In July
2006,
we began deliveries under the Glencore Tolling
agreement.
|
(3)
In December 2005, Glencore assigned 50% of its tolling rights under
this
agreement to Hydro Aluminum for the period 2007 to 2010.
|
(4)
The term of the Glencore Toll Agreement II will commence upon the
completion of the Nordural expansion to 260,000 mtpy, which is expected
to
be in the fourth quarter of 2007.
|
Primary
Aluminum Financial Sales Contracts as of:
|
|||||||||||||||||||
(Metric
Tons)
|
|||||||||||||||||||
September
30, 2006
|
December
31, 2005
|
||||||||||||||||||
Cash
Flow Hedges
|
Derivatives
|
Total
|
Cash
Flow Hedges
|
Derivatives
|
Total
|
||||||||||||||
2006
|
36,500
|
6,300
|
42,800
|
142,750
|
51,000
|
193,750
|
|||||||||||||
2007
|
119,500
|
50,400
|
169,900
|
119,500
|
50,400
|
169,900
|
|||||||||||||
2008
|
9,000
|
100,200
|
109,200
|
9,000
|
100,200
|
109,200
|
|||||||||||||
2009
|
--
|
105,000
|
105,000
|
--
|
105,000
|
105,000
|
|||||||||||||
2010
|
--
|
105,000
|
105,000
|
--
|
105,000
|
105,000
|
|||||||||||||
2011-2015
|
--
|
375,000
|
375,000
|
--
|
375,000
|
375,000
|
|||||||||||||
Total
|
165,000
|
741,900
|
906,900
|
271,250
|
786,600
|
1,057,850
|
Natural
Gas Financial Purchase Contracts as of:
|
|||||||
(Thousands
of DTH)
|
|||||||
September
30, 2006
|
December
31, 2005
|
||||||
2006
|
1,530
|
1,680
|
|||||
2007
|
780
|
780
|
|||||
2008
|
480
|
480
|
|||||
Total
|
2,790
|
2,940
|
8.
|
Supplemental
Cash Flow Information
|
Nine
months ended September 30,
|
|||||||
2006
|
2005
|
||||||
Cash
paid for:
|
|||||||
Interest
|
$
|
36,763
|
$
|
27,098
|
|||
Income
tax
|
56,745
|
12,627
|
|||||
Cash
received for:
|
|||||||
Interest
|
575
|
893
|
|||||
Income
tax refunds
|
577
|
--
|
|||||
Non-cash
investing activities:
|
|||||||
Accrued
Nordural expansion costs
|
$
|
(2,316
|
)
|
$
|
6,311
|
9.
|
Asset
Retirement Obligations
|
For
the nine months ended September 30, 2006
|
For
the year ended
December
31, 2005
|
||||||
Beginning
balance, ARO liability
|
$
|
11,808
|
$
|
17,232
|
|||
Additional
ARO liability incurred
|
1,817
|
1,849
|
|||||
ARO
liabilities settled
|
(2,110
|
)
|
(3,330
|
)
|
|||
Accretion
expense
|
1,176
|
1,370
|
|||||
FIN
47 adoption
|
--
|
(5,313
|
)
|
||||
Ending
balance, ARO liability
|
$
|
12,691
|
$
|
11,808
|
10.
|
Recently
Adopted Accounting
Standards
|
11.
|
New
Accounting Standards
|
12.
|
Comprehensive
Income and Accumulated Other Comprehensive Income
(Loss)
|
Comprehensive
Income:
|
|||||||
Nine
months ended September 30,
|
|||||||
2006
|
2005
|
||||||
Net
income
|
$
|
78,168
|
$
|
32,403
|
|||
Other
comprehensive income (loss):
|
|||||||
Net
unrealized (gain) loss on financial instruments, net of tax of $38,630
and
$93, respectively
|
(68,203
|
)
|
(410
|
)
|
|||
Net
amount reclassified to income, net of tax of $(34,281) and $(11,062),
respectively
|
60,754
|
19,208
|
|||||
Comprehensive
income
|
$
|
70,719
|
$
|
51,201
|
Components
of Accumulated Other Comprehensive Loss:
|
|||||||
September
30, 2006
|
December
31, 2005
|
||||||
Unrealized
loss on financial instruments, net of tax of $54,126 and
$49,776
|
$
|
(95,907
|
)
|
$
|
(88,458
|
)
|
|
Minimum
pension liability adjustment, net of tax of $1,665
|
(2,960
|
)
|
(2,960
|
)
|
|||
Accumulated
other comprehensive loss
|
$
|
(98,867
|
)
|
$
|
(91,418
|
)
|
13.
|
Related
Parties
|
14.
|
Earnings
Per Share
|
For
the three months ended September 30,
|
|||||||||||||||||||
2006
|
2005
|
||||||||||||||||||
Income
|
Shares
|
Per-Share
|
Income
|
Shares
|
Per-Share
|
||||||||||||||
Net
income (loss)
|
$
|
173,939
|
$
|
(20,071
|
)
|
||||||||||||||
Basic
EPS:
|
|||||||||||||||||||
Income
(loss) applicable to common shareholders
|
173,939
|
32,438
|
$
|
5.36
|
(20,071
|
)
|
32,162
|
$
|
(0.62
|
)
|
|||||||||
Effect
of Dilutive Securities:
Plus:
|
|||||||||||||||||||
Options
|
--
|
60
|
--
|
--
|
|||||||||||||||
Service-based
stock awards
|
--
|
94
|
--
|
--
|
|||||||||||||||
Assumed
conversion of convertible debt
|
490
|
556
|
--
|
--
|
|||||||||||||||
Diluted
EPS:
|
|||||||||||||||||||
Income
(loss) applicable to common shareholders with assumed
conversion
|
$
|
174,429
|
33,148
|
$
|
5.26
|
$
|
(20,071
|
)
|
32,162
|
$
|
(0.62
|
)
|
For
the nine months ended September 30,
|
|||||||||||||||||||
2006
|
2005
|
||||||||||||||||||
Income
|
Shares
|
Per-Share
|
Income
|
Shares
|
Per-Share
|
||||||||||||||
Net
income
|
$
|
78,168
|
$
|
32,403
|
|||||||||||||||
Basic
EPS:
|
|||||||||||||||||||
Income
applicable to common shareholders
|
78,168
|
32,374
|
$
|
2.41
|
32,403
|
32,120
|
$
|
1.01
|
|||||||||||
Effect
of Dilutive Securities:
Plus:
|
|||||||||||||||||||
Options
|
--
|
78
|
--
|
43
|
|||||||||||||||
Service-based
stock awards
|
--
|
88
|
--
|
--
|
|||||||||||||||
Assumed
conversion of convertible debt
|
1,470
|
975
|
--
|
--
|
|||||||||||||||
Diluted
EPS:
|
|||||||||||||||||||
Income
applicable to common shareholders with assumed conversion
|
$
|
79,638
|
33,515
|
$
|
2.38
|
$
|
32,403
|
32,163
|
$
|
1.01
|
15.
|
Components
of Net Periodic Benefit
Cost
|
Pension
Benefits
|
|||||||||||||
Three
months ended September 30,
|
Nine
months ended September 30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Service
cost
|
$
|
722
|
$
|
980
|
$
|
2,782
|
$
|
2,941
|
|||||
Interest
cost
|
1,465
|
1,171
|
3,892
|
3,512
|
|||||||||
Expected
return on plan assets
|
(1,700
|
)
|
(1,475
|
)
|
(5,100
|
)
|
(4,425
|
)
|
|||||
Amortization
of prior service cost
|
202
|
741
|
409
|
2,222
|
|||||||||
Amortization
of net gain
|
431
|
157
|
858
|
471
|
|||||||||
Net
periodic benefit cost
|
$
|
1,120
|
$
|
1,574
|
$
|
2,841
|
$
|
4,721
|
Other
Postretirement Benefits
|
|||||||||||||
Three
months ended September 30,
|
Nine
months ended September 30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Service
cost
|
$
|
1,669
|
$
|
1,258
|
$
|
4,605
|
$
|
3,774
|
|||||
Interest
cost
|
2,956
|
2,219
|
7,795
|
6,658
|
|||||||||
Expected
return on plan assets
|
--
|
--
|
--
|
--
|
|||||||||
Amortization
of prior service cost
|
(925
|
)
|
(219
|
)
|
(1,364
|
)
|
(658
|
)
|
|||||
Amortization
of net gain
|
1,346
|
929
|
3,417
|
2,786
|
|||||||||
Net
periodic benefit cost
|
$
|
5,046
|
$
|
4,187
|
$
|
14,453
|
$
|
12,560
|
16.
|
Other
Assets
|
September
30, 2006
|
December
31, 2005
|
||||||
Other
assets (primarily investment in joint ventures)
|
$
|
88,028
|
$
|
71,640
|
|||
Deferred
tax assets
|
64,323
|
56,053
|
|||||
Deferred
financing fees
|
13,644
|
15,600
|
|||||
Other
assets
|
$
|
165,995
|
$
|
143,293
|
17.
|
Condensed
Consolidating Financial
Information
|
CONDENSED
CONSOLIDATING BALANCE SHEET
|
||||||||||||||||
As
of September 30, 2006
|
||||||||||||||||
Combined
Guarantor Subsidiaries
|
Combined
Non-Guarantor Subsidiaries
|
The
Company
|
Reclassifications
and Eliminations
|
Consolidated
|
||||||||||||
Assets:
|
||||||||||||||||
Cash
and cash equivalents
|
$
|
—
|
$
|
6,874
|
$
|
43,220
|
$
|
—
|
$
|
50,094
|
||||||
Restricted
cash
|
2,026
|
—
|
—
|
—
|
2,026
|
|||||||||||
Accounts
receivable — net
|
76,133
|
6,255
|
—
|
—
|
82,388
|
|||||||||||
Due
from affiliates
|
221,931
|
5,481
|
798,531
|
(997,743
|
)
|
28,200
|
||||||||||
Inventories
|
115,145
|
30,998
|
—
|
(404
|
)
|
145,739
|
||||||||||
Prepaid
and other assets
|
7,332
|
13,916
|
4,657
|
—
|
25,905
|
|||||||||||
Deferred
taxes — current portion
|
59,824
|
—
|
11,007
|
—
|
70,831
|
|||||||||||
Total
current assets
|
482,391
|
63,524
|
857,415
|
(998,147
|
)
|
405,183
|
||||||||||
Investment
in subsidiaries
|
19,997
|
—
|
212,172
|
(232,169
|
)
|
—
|
||||||||||
Property,
plant and equipment — net
|
436,394
|
752,259
|
529
|
—
|
1,189,182
|
|||||||||||
Intangible
asset — net
|
64,856
|
—
|
—
|
—
|
64,856
|
|||||||||||
Goodwill
|
—
|
94,844
|
—
|
—
|
94,844
|
|||||||||||
Other
assets
|
60,979
|
13,944
|
236,069
|
(144,997
|
)
|
165,995
|
||||||||||
Total
assets
|
$
|
1,064,617
|
$
|
924,571
|
$
|
1,306,185
|
$
|
(1,375,313
|
)
|
$
|
1,920,060
|
|||||
Liabilities
and shareholders’ equity:
|
||||||||||||||||
Accounts
payable -
trade
|
$
|
29,802
|
$
|
28,995
|
$
|
23
|
$
|
—
|
$
|
58,820
|
||||||
Due
to affiliates
|
358,960
|
55,649
|
214,524
|
(402,129
|
)
|
227,004
|
||||||||||
Industrial
revenue bonds
|
7,815
|
—
|
—
|
—
|
7,815
|
|||||||||||
Long
term debt — current portion
|
—
|
30,099
|
—
|
—
|
30,099
|
|||||||||||
Accrued
and other current liabilities
|
22,250
|
4,241
|
29,153
|
—
|
55,644
|
|||||||||||
Accrued
employee benefits costs — current portion
|
8,139
|
—
|
1,194
|
—
|
9,333
|
|||||||||||
Convertible
senior notes
|
—
|
—
|
175,000
|
—
|
175,000
|
|||||||||||
Total
current liabilities
|
426,966
|
118,984
|
419,894
|
(402,129
|
)
|
563,715
|
||||||||||
Senior
unsecured notes payable
|
—
|
—
|
250,000
|
—
|
250,000
|
|||||||||||
Nordural
debt
|
—
|
289,484
|
—
|
—
|
289,484
|
|||||||||||
Accrued
pension benefit costs — less current portion
|
—
|
—
|
10,953
|
—
|
10,953
|
|||||||||||
Accrued
postretirement benefit costs — less current portion
|
106,012
|
—
|
1,050
|
—
|
107,062
|
|||||||||||
Other
liabilities/intercompany loan
|
271,301
|
346,996
|
—
|
(589,902
|
)
|
28,395
|
||||||||||
Due
to affiliates — less current portion
|
29,273
|
—
|
308,867
|
—
|
338,140
|
|||||||||||
Deferred
taxes
|
154,764
|
13,239
|
—
|
(151,113
|
)
|
16,890
|
||||||||||
Total
noncurrent liabilities
|
561,350
|
649,719
|
570,870
|
(741,015
|
)
|
1,040,924
|
||||||||||
Shareholders’
equity:
|
||||||||||||||||
Common
stock
|
60
|
12
|
325
|
(72
|
)
|
325
|
||||||||||
Additional
paid-in capital
|
259,148
|
85,190
|
431,153
|
(344,338
|
)
|
431,153
|
||||||||||
Accumulated
other comprehensive income (loss)
|
(98,942
|
)
|
617
|
(98,867
|
)
|
98,325
|
(98,867
|
)
|
||||||||
Retained
earnings (accumulated deficit)
|
(83,965
|
)
|
70,049
|
(17,190
|
)
|
13,916
|
(17,190
|
)
|
||||||||
Total
shareholders’ equity
|
76,301
|
155,868
|
315,421
|
(232,169
|
)
|
315,421
|
||||||||||
Total
liabilities and shareholders’ equity
|
$
|
1,064,617
|
$
|
924,571
|
$
|
1,306,185
|
$
|
(1,375,313
|
)
|
$
|
1,920,060
|
CONDENSED
CONSOLIDATING BALANCE SHEET
|
||||||||||||||||
As
of December 31, 2005
|
||||||||||||||||
Combined
Guarantor Subsidiaries
|
Combined
Non-Guarantor Subsidiaries
|
The
Company
|
Reclassifications
and
Eliminations
|
Consolidated
|
||||||||||||
Assets:
|
||||||||||||||||
Cash
and cash equivalents
|
$
|
—
|
$
|
19,005
|
$
|
(1,253
|
)
|
$
|
—
|
$
|
17,752
|
|||||
Restricted
cash
|
2,028
|
—
|
—
|
—
|
2,028
|
|||||||||||
Accounts
receivable — net
|
73,540
|
9,476
|
—
|
—
|
83,016
|
|||||||||||
Due
from affiliates
|
60,246
|
—
|
703,995
|
(745,603
|
)
|
18,638
|
||||||||||
Inventories
|
96,347
|
15,372
|
—
|
(283
|
)
|
111,436
|
||||||||||
Prepaid
and other assets
|
7,693
|
8,627
|
7,598
|
—
|
23,918
|
|||||||||||
Deferred
taxes — current portion
|
46,339
|
—
|
—
|
(8,634
|
)
|
37,705
|
||||||||||
Total
current assets
|
286,193
|
52,480
|
710,340
|
(754,520
|
)
|
294,493
|
||||||||||
Investment
in subsidiaries
|
15,205
|
—
|
146,166
|
(161,371
|
)
|
—
|
||||||||||
Property,
plant and equipment — net
|
458,618
|
613,368
|
308
|
(2,136
|
)
|
1,070,158
|
||||||||||
Intangible
asset — net
|
74,643
|
—
|
—
|
—
|
74,643
|
|||||||||||
Goodwill
|
—
|
94,844
|
—
|
—
|
94,844
|
|||||||||||
Other
assets
|
54,049
|
8,951
|
156,242
|
(75,949
|
)
|
143,293
|
||||||||||
Total
assets
|
$
|
888,708
|
$
|
769,643
|
$
|
1,013,056
|
$
|
(993,976
|
)
|
$
|
1,677,431
|
|||||
Liabilities
and shareholders’ equity:
|
||||||||||||||||
Accounts
payable -
trade
|
$
|
36,670
|
$
|
25,249
|
$
|
—
|
$
|
—
|
$
|
61,919
|
||||||
Due
to affiliates
|
138,615
|
52,208
|
15,485
|
(47,626
|
)
|
158,682
|
||||||||||
Industrial
revenue bonds
|
7,815
|
—
|
—
|
—
|
7,815
|
|||||||||||
Long
term debt — current portion
|
—
|
581
|
—
|
—
|
581
|
|||||||||||
Accrued
and other current liabilities
|
19,994
|
3,357
|
31,514
|
(1,150
|
)
|
53,715
|
||||||||||
Accrued
employee benefits costs — current portion
|
8,139
|
—
|
1,194
|
—
|
9,333
|
|||||||||||
Deferred
tax liability - current
|
—
|
—
|
8,634
|
(8,634
|
)
|
—
|
||||||||||
Convertible
senior notes
|
—
|
—
|
175,000
|
—
|
175,000
|
|||||||||||
Total
current liabilities
|
211,233
|
81,395
|
231,827
|
(57,410
|
)
|
467,045
|
||||||||||
Senior
unsecured notes payable
|
—
|
—
|
250,000
|
—
|
250,000
|
|||||||||||
Nordural
debt
|
—
|
230,436
|
—
|
—
|
230,436
|
|||||||||||
Revolving
credit facility
|
8,069
|
—
|
8,069
|
|||||||||||||
Accrued
pension benefit costs — less current portion
|
—
|
—
|
10,350
|
—
|
10,350
|
|||||||||||
Accrued
postretirement benefit costs — less current portion
|
95,731
|
—
|
929
|
—
|
96,660
|
|||||||||||
Other
liabilities/intercompany loan
|
397,778
|
327,073
|
—
|
(696,841
|
)
|
28,010
|
||||||||||
Due
to affiliates — less current portion
|
58,090
|
—
|
279,326
|
—
|
337,416
|
|||||||||||
Deferred
taxes
|
83,019
|
12,225
|
—
|
(78,354
|
)
|
16,890
|
||||||||||
Total
noncurrent liabilities
|
634,618
|
569,734
|
548,674
|
(775,195
|
)
|
977,831
|
||||||||||
Shareholders’
equity:
|
||||||||||||||||
Common
stock
|
60
|
12
|
322
|
(72
|
)
|
322
|
||||||||||
Additional
paid-in capital
|
259,148
|
85,190
|
419,009
|
(344,338
|
)
|
419,009
|
||||||||||
Accumulated
other comprehensive income (loss)
|
(90,953
|
)
|
—
|
(91,418
|
)
|
90,953
|
(91,418
|
)
|
||||||||
Retained
earnings (accumulated deficit)
|
(125,398
|
)
|
33,312
|
(95,358
|
)
|
92,086
|
(95,358
|
)
|
||||||||
Total
shareholders’ equity
|
42,857
|
118,514
|
232,555
|
(161,371
|
)
|
232,555
|
||||||||||
Total
liabilities and shareholders’ equity
|
$
|
888,708
|
$
|
769,643
|
$
|
1,013,056
|
$
|
(993,976
|
)
|
$
|
1,677,431
|
CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS
|
||||||||||||||||
For
the Three months ended September 30, 2006
|
||||||||||||||||
Combined
Guarantor Subsidiaries
|
Combined
Non-Guarantor Subsidiaries
|
The
Company
|
Reclassifications
and
Eliminations
|
Consolidated
|
||||||||||||
Net
sales:
|
||||||||||||||||
Third-party
customers
|
$
|
266,118
|
$
|
45,920
|
$
|
—
|
$
|
—
|
$
|
312,038
|
||||||
Related
parties
|
33,432
|
35,807
|
—
|
—
|
69,239
|
|||||||||||
299,550
|
81,727
|
—
|
—
|
381,277
|
||||||||||||
Cost
of goods sold
|
253,258
|
58,603
|
—
|
(1,558
|
)
|
310,303
|
||||||||||
Gross
profit
|
46,292
|
23,124
|
—
|
1,558
|
70,974
|
|||||||||||
Selling,
general and admin expenses
|
7,974
|
170
|
—
|
—
|
8,144
|
|||||||||||
Operating
income
|
38,318
|
22,954
|
—
|
1,558
|
62,830
|
|||||||||||
Interest
expense - third party
|
(6,033
|
)
|
(4,238
|
)
|
—
|
—
|
(10,271
|
)
|
||||||||
Interest
expense - affiliates
|
7,749
|
(7,749
|
)
|
—
|
—
|
—
|
||||||||||
Interest
income
|
410
|
38
|
—
|
—
|
448
|
|||||||||||
Net
loss on forward contracts
|
210,268
|
—
|
—
|
—
|
210,268
|
|||||||||||
Other
income (expense) - net
|
5
|
(2
|
)
|
—
|
—
|
3
|
||||||||||
Income
before taxes and equity in earnings (loss) of subsidiaries
|
250,717
|
11,003
|
—
|
1,558
|
263,278
|
|||||||||||
Income
tax expense
|
(92,102
|
)
|
(259
|
)
|
—
|
(561
|
)
|
(92,922
|
)
|
|||||||
Net
income before equity in earnings (loss) of subsidiaries
|
158,615
|
10,744
|
—
|
997
|
170,356
|
|||||||||||
Equity
earnings (loss) of subsidiaries and joint ventures
|
4,218
|
853
|
173,939
|
(175,427
|
)
|
3,583
|
||||||||||
Net
income (loss)
|
$
|
162,833
|
$
|
11,597
|
$
|
173,939
|
$
|
(174,430
|
)
|
$
|
173,939
|
CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS
|
||||||||||||||||
For
the Three months ended September 30, 2005
|
||||||||||||||||
Combined
Guarantor Subsidiaries
|
Combined
Non-Guarantor Subsidiaries
|
The
Company
|
Reclassifications
and
Eliminations
|
Consolidated
|
||||||||||||
Net
sales:
|
||||||||||||||||
Third-party
customers
|
$
|
189,456
|
$
|
33,355
|
$
|
--
|
$
|
--
|
$
|
222,811
|
||||||
Related
parties
|
48,025
|
--
|
--
|
--
|
48,025
|
|||||||||||
237,481
|
33,355
|
--
|
--
|
270,836
|
||||||||||||
Cost
of goods sold
|
217,924
|
23,345
|
--
|
(491
|
)
|
240,778
|
||||||||||
Gross
profit
|
19,557
|
10,010
|
--
|
491
|
30,058
|
|||||||||||
Selling,
general and admin expenses
|
7,904
|
200
|
--
|
--
|
8,104
|
|||||||||||
Operating
income
|
11,653
|
9,810
|
--
|
491
|
21,954
|
|||||||||||
Interest
expense - third party
|
(6,158
|
)
|
(55
|
)
|
--
|
--
|
(6,213
|
)
|
||||||||
Interest
expense - affiliates
|
6,283
|
(6,283
|
)
|
--
|
--
|
--
|
||||||||||
Interest
income
|
446
|
150
|
--
|
--
|
596
|
|||||||||||
Net
loss on forward contracts
|
(53,481
|
)
|
--
|
--
|
--
|
(53,481
|
)
|
|||||||||
Other
income (expense) - net
|
86
|
(153
|
)
|
--
|
--
|
(67
|
)
|
|||||||||
Income
before taxes and equity in earnings (loss) of subsidiaries
|
(41,171
|
)
|
3,469
|
--
|
491
|
(37,211
|
)
|
|||||||||
Income
tax benefit (expense)
|
14,366
|
966
|
--
|
(177
|
)
|
15,155
|
||||||||||
Net
income before equity in earnings (loss) of subsidiaries
|
(26,805
|
)
|
4,435
|
--
|
314
|
(22,056
|
)
|
|||||||||
Equity
earnings (loss) of subsidiaries and joint ventures
|
1,316
|
669
|
(20,071
|
)
|
20,071
|
1,985
|
||||||||||
Net
income (loss)
|
$
|
(25,489
|
)
|
$
|
5,104
|
$
|
(20,071
|
)
|
$
|
20,385
|
$
|
(20,071
|
)
|
CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS
|
||||||||||||||||
For
the Nine months ended September 30, 2006
|
||||||||||||||||
Combined
Guarantor Subsidiaries
|
Combined
Non-Guarantor
Subsidiaries
|
The
Company
|
Reclassifications
and Eliminations
|
Consolidated
|
||||||||||||
Net
sales:
|
||||||||||||||||
Third-party
customers
|
$
|
797,657
|
$
|
169,096
|
$
|
—
|
$
|
—
|
$
|
966,753
|
||||||
Related
parties
|
131,639
|
35,807
|
—
|
—
|
167,446
|
|||||||||||
929,296
|
204,903
|
—
|
—
|
1,134,199
|
||||||||||||
Cost
of goods sold
|
742,606
|
139,927
|
—
|
(3,780
|
)
|
878,753
|
||||||||||
Gross
profit
|
186,690
|
64,976
|
—
|
3,780
|
255,446
|
|||||||||||
Selling,
general and administrative expenses
|
28,133
|
506
|
—
|
—
|
28,639
|
|||||||||||
Operating
income
|
158,557
|
64,470
|
—
|
3,780
|
226,807
|
|||||||||||
Interest
expense - third party
|
(18,584
|
)
|
(7,238
|
)
|
—
|
—
|
(25,822
|
)
|
||||||||
Interest
income (expense) - affiliates
|
22,796
|
(22,796
|
)
|
—
|
—
|
—
|
||||||||||
Interest
income
|
527
|
270
|
—
|
—
|
797
|
|||||||||||
Net
loss on forward contracts
|
(106,948
|
)
|
—
|
—
|
—
|
(106,948
|
)
|
|||||||||
Other
income (expense), net
|
(144
|
)
|
23
|
—
|
—
|
(121
|
)
|
|||||||||
Income
(loss) before income taxes and equity in earnings (loss) of subsidiaries
and joint ventures
|
56,204
|
34,729
|
—
|
3,780
|
94,713
|
|||||||||||
Income
tax expense
|
(25,412
|
)
|
(902
|
)
|
—
|
(1,361
|
)
|
(27,675
|
)
|
|||||||
Income
(loss) before equity in earnings (loss) of subsidiaries
|
30,792
|
33,827
|
—
|
2,419
|
67,038
|
|||||||||||
Equity
in earnings (loss) of subsidiaries and joint ventures
|
12,933
|
2,910
|
78,168
|
(82,881
|
)
|
11,130
|
||||||||||
Net
income (loss)
|
$
|
43,725
|
$
|
36,737
|
$
|
78,168
|
$
|
(80,462
|
)
|
$
|
78,168
|
CONDENSED
CONSOLIDATING STATEMENT OF OPERATIONS
|
||||||||||||||||
For
the Nine months ended September 30, 2005
|
||||||||||||||||
Combined
Guarantor Subsidiaries
|
Combined
Non-Guarantor
Subsidiaries
|
The
Company
|
Reclassifications
and Eliminations
|
Consolidated
|
||||||||||||
Net
sales:
|
||||||||||||||||
Third-party
customers
|
$
|
612,045
|
$
|
101,520
|
$
|
--
|
$
|
--
|
$
|
713,565
|
||||||
Related
parties
|
125,923
|
--
|
--
|
--
|
125,923
|
|||||||||||
737,968
|
101,520
|
--
|
--
|
839,488
|
||||||||||||
Cost
of goods sold
|
646,270
|
71,444
|
--
|
(5,199
|
)
|
712,515
|
||||||||||
Gross
profit
|
91,698
|
30,076
|
--
|
5,199
|
126,973
|
|||||||||||
Selling,
general and administrative expenses
|
24,746
|
200
|
--
|
--
|
24,946
|
|||||||||||
Operating
income
|
66,952
|
29,876
|
--
|
5,199
|
102,027
|
|||||||||||
Interest
expense - third party
|
(18,811
|
)
|
(602
|
)
|
--
|
--
|
(19,413
|
)
|
||||||||
Interest
income (expense) - affiliates
|
17,616
|
(17,616
|
)
|
--
|
--
|
--
|
||||||||||
Interest
income
|
864
|
224
|
--
|
--
|
1,088
|
|||||||||||
Net
loss on forward contracts
|
(52,480
|
)
|
--
|
--
|
--
|
(52,480
|
)
|
|||||||||
Loss
on early extinguishment of debt
|
(835
|
)
|
--
|
--
|
--
|
(835
|
)
|
|||||||||
Other
income (expense), net
|
34
|
669
|
--
|
--
|
703
|
|||||||||||
Income
before income taxes and equity in earnings (loss) of subsidiaries
and
joint ventures
|
13,340
|
12,551
|
--
|
5,199
|
31,090
|
|||||||||||
Income
tax benefit (expense)
|
(7,422
|
)
|
1,716
|
--
|
(1,872
|
)
|
(7,578
|
)
|
||||||||
Income
before equity in earnings (loss) of subsidiaries
|
5,918
|
14,267
|
--
|
3,327
|
23,512
|
|||||||||||
Equity
in earnings (loss) of subsidiaries and joint ventures
|
6,166
|
2,725
|
32,403
|
(32,403
|
)
|
8,891
|
||||||||||
Net
income (loss)
|
$
|
12,084
|
$
|
16,992
|
$
|
32,403
|
$
|
(29,076
|
)
|
$
|
32,403
|
CONDENSED
CONSOLIDATING STATEMENT OF CASH FLOWS
|
|||||||||||||
For
the Nine months ended September 30, 2006
|
|||||||||||||
|
|
Combined
Guarantor Subsidiaries
|
|
Combined
Non-Guarantor Subsidiaries
|
|
The
Company
|
|
Consolidated
|
|||||
Net
cash provided by operating activities
|
$
|
91,442
|
$
|
26,068
|
$
|
—
|
$
|
117,510
|
|||||
Investing
activities:
|
|||||||||||||
Purchase
of property, plant and equipment
|
(5,950
|
)
|
(4,656
|
)
|
(4
|
)
|
(10,610
|
)
|
|||||
Nordural
expansion
|
—
|
(155,756
|
)
|
—
|
(155,756
|
)
|
|||||||
Proceeds
from sale of property
|
10
|
12
|
—
|
22
|
|||||||||
Restricted
and other cash deposits
|
(3,998
|
)
|
—
|
—
|
(3,998
|
)
|
|||||||
Net
cash used in investing activities
|
(9,938
|
)
|
(160,400
|
)
|
(4
|
)
|
(170,342
|
)
|
|||||
Financing
activities:
|
|||||||||||||
Borrowings
|
—
|
89,000
|
—
|
89,000
|
|||||||||
Repayment
of third party debt
|
—
|
(434
|
)
|
—
|
(434
|
)
|
|||||||
Payments
for revolving credit facility
|
—
|
—
|
(8,069
|
)
|
(8,069
|
)
|
|||||||
Excess
tax benefits from share-based compensation
|
—
|
—
|
1,244
|
1,244
|
|||||||||
Intercompany
transactions
|
(81,504
|
)
|
33,635
|
47,869
|
—
|
||||||||
Issuance
of common stock
|
—
|
—
|
3,433
|
3,433
|
|||||||||
Net
cash provided by (used in) financing activities
|
(81,504
|
)
|
122,201
|
44,477
|
85,174
|
||||||||
Net
change in cash and cash equivalents
|
—
|
(12,131
|
)
|
44,473
|
32,342
|
||||||||
Cash
and cash equivalents, beginning of period
|
—
|
19,005
|
(1,253
|
)
|
17,752
|
||||||||
Cash
and cash equivalents, end of period
|
$
|
—
|
$
|
6,874
|
$
|
43,220
|
$
|
50,094
|
CONDENSED
CONSOLIDATING STATEMENT OF CASH FLOWS
|
|||||||||||||
For
the Nine months ended September 30, 2005
|
|||||||||||||
Combined
Guarantor Subsidiaries
|
|
Combined
Non-Guarantor Subsidiaries
|
|
The
Company
|
|
Consolidated
|
|||||||
Net
cash provided by operating activities
|
$
|
45,562
|
$
|
81,662
|
$
|
--
|
$
|
127,224
|
|||||
Investing
activities:
|
|||||||||||||
Nordural
expansion
|
--
|
(200,641
|
)
|
--
|
(200,641
|
)
|
|||||||
Purchase
of property, plant and equipment
|
(7,689
|
)
|
(1,604
|
)
|
(336
|
)
|
(9,629
|
)
|
|||||
Business
acquisitions, net of cash acquired
|
--
|
--
|
(7,000
|
)
|
(7,000
|
)
|
|||||||
Restricted
and other cash deposits
|
(350
|
)
|
--
|
--
|
(350
|
)
|
|||||||
Proceeds
from sale of property
|
48
|
53
|
--
|
101
|
|||||||||
Net
cash used in investing activities
|
(7,991
|
)
|
(202,192
|
)
|
(7,336
|
)
|
(217,519
|
)
|
|||||
Financing
activities:
|
|||||||||||||
Borrowings
|
--
|
188,937
|
--
|
188,937
|
|||||||||
Repayment
of debt
|
--
|
(73,193
|
)
|
(9,945
|
)
|
(83,138
|
)
|
||||||
Financing
fees
|
--
|
(4,617
|
)
|
(515
|
)
|
(5,132
|
)
|
||||||
Intercompany
transactions
|
(20,242
|
)
|
13,235
|
7,007
|
--
|
||||||||
Dividends
|
--
|
--
|
(16
|
)
|
(16
|
)
|
|||||||
Issuance
of common stock
|
--
|
--
|
1,323
|
1,323
|
|||||||||
Net
cash provided by (used in) financing activities
|
(20,242
|
)
|
124,362
|
(2,146
|
)
|
101,974
|
|||||||
Net
change in cash and cash equivalents
|
17,329
|
3,832
|
(9,482
|
)
|
11,679
|
||||||||
Cash
and cash equivalents, beginning of period
|
185
|
1,759
|
42,224
|
44,168
|
|||||||||
Cash
and cash equivalents, end of period
|
$
|
17,514
|
$
|
5,591
|
$
|
32,742
|
$
|
55,847
|
·
|
Our
high level of indebtedness reduces cash available for other purposes
and
limits our ability to incur additional debt and pursue our growth
strategy;
|
·
|
The
cyclical nature of the aluminum industry causes variability in our
earnings and cash flows;
|
·
|
The
loss of a customer to whom we deliver molten aluminum would increase
our
production costs;
|
·
|
Glencore
International AG (together with its subsidiaries, “Glencore”) owns a large
percentage of our common stock and has the ability to influence matters
requiring shareholder approval;
|
·
|
We
could suffer losses due to a temporary or prolonged interruption
of the
supply of electrical power to one or more of our facilities, such
interruptions could be caused by unusually high demand, blackouts,
equipment failure, natural disasters or other catastrophic events;
|
·
|
Due
to volatile prices for alumina and electricity, the principal cost
components of primary aluminum production, our production costs could
be
materially impacted if we experience changes to or disruptions in
our
current alumina or power supply arrangements, production costs at
our
alumina refining operation increase significantly, we are unable
to obtain
economic replacement contracts for power for those portions of our
power
requirements that are currently unpriced, or we are subject to significant
fuel cost adjustments under our existing power contracts;
|
·
|
By
expanding our geographic presence and diversifying our operations
through
the acquisition of bauxite mining, alumina refining and additional
aluminum reduction assets, we are exposed to new risks and uncertainties
that could adversely affect the overall profitability of our
business;
|
·
|
Changes
in the relative cost of certain raw materials and energy compared
to the
price of primary aluminum could affect our margins;
|
·
|
Most
of our employees are unionized and any labor dispute could materially
impair our ability to conduct our production operations at our unionized
facilities;
|
·
|
We
are subject to a variety of existing environmental laws that could
result
in unanticipated costs or liabilities;
|
·
|
We
may not realize the expected benefits of our growth strategy if we
are
unable to successfully integrate the businesses we acquire;
and
|
·
|
We
cannot guarantee that our subsidiary Nordural will be able to complete
its
ongoing expansions in the time forecast or without significant cost
overruns or that we will be able to realize the expected benefits
of the
ongoing expansions.
|
Three
months ended September 30,
|
Nine
months ended September 30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
(In
thousands, except per share data)
|
|||||||||||||
Net
sales:
|
|||||||||||||
Third-party
customers
|
$
|
312,038
|
$
|
222,811
|
$
|
966,753
|
$
|
713,565
|
|||||
Related
party customers
|
69,239
|
48,025
|
167,446
|
125,923
|
|||||||||
Total
|
$
|
381,277
|
$
|
270,836
|
$
|
1,134,199
|
$
|
839,488
|
|||||
Net
income (loss)
|
$
|
173,939
|
$
|
(20,071
|
)
|
$
|
78,168
|
$
|
32,403
|
||||
Earnings
(loss) per common share:
|
|||||||||||||
Basic
|
$
|
5.36
|
$
|
(0.62
|
)
|
$
|
2.41
|
$
|
1.01
|
||||
Diluted
|
$
|
5.26
|
$
|
(0.62
|
)
|
$
|
2.38
|
$
|
1.01
|
Net
Sales (in millions)
|
2006
|
2005
|
$
Difference
|
%
Difference
|
|||||||||
Three
months ended September 30,
|
$
|
381.3
|
$
|
270.8
|
$
|
110.5
|
40.8
|
%
|
|||||
Nine
months ended September 30,
|
$
|
1,134.2
|
$
|
839.5
|
$
|
294.7
|
35.1
|
%
|
Gross
Profit (in millions)
|
2006
|
2005
|
$
Difference
|
%
Difference
|
|||||||||
Three
months ended September 30,
|
$
|
71.0
|
$
|
30.1
|
$
|
40.9
|
135.9
|
%
|
|||||
Nine
months ended September 30,
|
$
|
255.4
|
$
|
127.0
|
$
|
128.4
|
101.1
|
%
|
Selling,
general and administrative expenses (in
millions)
|
2006
|
2005
|
$
Difference
|
%
Difference
|
|||||||||
Three
months ended September 30,
|
$
|
8.1
|
$
|
8.1
|
--
|
0.0
|
%
|
||||||
Nine
months ended September 30,
|
$
|
28.6
|
$
|
24.9
|
$
|
3.7
|
14.9
|
%
|
Interest
expense, net (in millions)
|
2006
|
2005
|
$
Difference
|
%
Difference
|
|||||||||
Three
months ended September 30,
|
$
|
9.8
|
$
|
5.6
|
$
|
4.2
|
75.0
|
%
|
|||||
Nine
months ended September 30,
|
$
|
25.0
|
$
|
18.3
|
$
|
6.7
|
36.6
|
%
|
Net
loss on forward contracts
(in
millions)
|
2006
|
2005
|
$
Difference
|
%
Difference
|
|||||||||
Three
months ended September 30,
|
$
|
210.3
|
$
|
(53.5
|
)
|
$
|
263.8
|
493.1
|
%
|
||||
Nine
months ended September 30,
|
$
|
(106.9
|
)
|
$
|
(52.5
|
)
|
$
|
(54.4
|
)
|
(103.6
|
)%
|
Tax
provision (in millions)
|
2006
|
2005
|
$
Difference
|
%
Difference
|
|||||||||
Three
months ended September 30,
|
$
|
(92.9
|
)
|
$
|
15.2
|
$
|
(108.1
|
)
|
(711.2
|
)%
|
|||
Nine
months ended September 30,
|
$
|
(27.7
|
)
|
$
|
(7.6
|
)
|
$
|
(20.1
|
)
|
(264.5
|
)%
|
Equity
in earnings of joint venture
(in
millions)
|
2006
|
2005
|
$
Difference
|
%
Difference
|
|||||||||
Three
months ended September 30,
|
$
|
3.6
|
$
|
2.0
|
$
|
1.6
|
80.0
|
%
|
|||||
Nine
months ended September 30,
|
$
|
11.1
|
$
|
8.9
|
$
|
2.2
|
24.7
|
%
|
Nine
months ended September 30,
|
|||||||
2006
|
2005
|
||||||
(dollars
in thousands)
|
|||||||
Net
cash provided by operating activities
|
$
|
117,510
|
$
|
127,224
|
|||
Net
cash used in investing activities
|
(170,342
|
)
|
(217,519
|
)
|
|||
Net
cash provided by financing activities
|
85,174
|
101,974
|
|||||
Net
change in cash and cash equivalents
|
$
|
32,342
|
$
|
11,679
|
2006
(1)(2)
|
2007(2)
|
2008
(2)
|
2009
(2)
|
2010
(2)
|
2011-2015
(2)
|
||||||||||||||
Base
Volume:
|
|||||||||||||||||||
Pounds
(000)
|
100,891
|
374,565
|
240,745
|
231,485
|
231,485
|
826,733
|
|||||||||||||
Metric
tons
|
45,763
|
169,900
|
109,200
|
105,000
|
105,000
|
375,000
|
|||||||||||||
Percent
of capacity
|
25
|
%
|
22
|
%
|
14
|
%
|
13
|
%
|
13
|
%
|
9
|
%
|
|||||||
Potential
additional volume (2):
|
|||||||||||||||||||
Pounds
(000)
|
13,889
|
111,113
|
220,903
|
231,485
|
231,485
|
826,733
|
|||||||||||||
Metric
tons
|
6,300
|
50,400
|
100,200
|
105,000
|
105,000
|
375,000
|
|||||||||||||
Percent
of capacity
|
3
|
%
|
7
|
%
|
12
|
%
|
13
|
%
|
13
|
%
|
9
|
%
|
(1)
The forward priced sales in 2006 exclude October 2006 shipments to
customers that are priced based upon the prior month’s market
price.
|
(2)
Certain financial contracts included in the forward priced sales
base
volume for the period 2006 through 2015 contain clauses that trigger
potential additional sales volume when the market price for a contract
month is above the base contract ceiling price. These contacts will
be
settled monthly and, if the market price exceeds the ceiling price
for all
contract months through 2015, the potential sales volume would be
equivalent to the amounts shown
above.
|
Primary
Aluminum Financial Sales Contracts as of:
|
|||||||||||||||||||
(Metric
Tons)
|
|||||||||||||||||||
September
30, 2006
|
December
31, 2005
|
||||||||||||||||||
Cash
Flow Hedges
|
Derivatives
|
Total
|
Cash
Flow Hedges
|
Derivatives
|
Total
|
||||||||||||||
2006
|
36,500
|
6,300
|
42,800
|
142,750
|
51,000
|
193,750
|
|||||||||||||
2007
|
119,500
|
50,400
|
169,900
|
119,500
|
50,400
|
169,900
|
|||||||||||||
2008
|
9,000
|
100,200
|
109,200
|
9,000
|
100,200
|
109,200
|
|||||||||||||
2009
|
--
|
105,000
|
105,000
|
--
|
105,000
|
105,000
|
|||||||||||||
2010
|
--
|
105,000
|
105,000
|
--
|
105,000
|
105,000
|
|||||||||||||
2011-2015
|
--
|
375,000
|
375,000
|
--
|
375,000
|
375,000
|
|||||||||||||
Total
|
165,000
|
741,900
|
906,900
|
271,250
|
786,600
|
1,057,850
|
Natural
Gas Financial Purchase Contracts as of:
|
|||||||
(Thousands
of DTH)
|
|||||||
September
30, 2006
|
December
31, 2005
|
||||||
2006
|
1,530
|
1,680
|
|||||
2007
|
780
|
780
|
|||||
2008
|
480
|
480
|
|||||
Total
|
2,790
|
2,940
|
Incorporated
by Reference
|
|||||
Exhibit Number |
Description
of Exhibit
|
Form
|
File
No.
|
Filing
Date
|
Filed Herewith |
31.1
|
Rule
13a-14(a)/15d-14(a) Certification of the Chief Executive
Officer.
|
X
|
|||
31.2
|
Rule
13a-14(a)/15d-14(a) Certification of the Chief Financial
Officer.
|
X
|
|||
32.1
|
Section
1350 Certifications.
|
X
|
Century
Aluminum Company
|
||||
Date:
|
November
9, 2006
|
By:
|
/s/
Logan W. Kruger
|
|
Logan
W. Kruger
|
||||
President
and Chief Executive Officer
|
||||
Date:
|
November
9, 2006
|
By:
|
/s/
Michael A. Bless
|
|
Michael
A. Bless
|
||||
Executive
Vice-President/Chief Financial
Officer
|
Incorporated
by Reference
|
|||||
Exhibit
Number
|
Description
of Exhibit
|
Form
|
File
No.
|
Filing
Date
|
Filed
Herewith
|
31.1
|
Rule
13a-14(a)/15d-14(a) Certification of the Chief Executive
Officer.
|
X
|
|||
31.2
|
Rule
13a-14(a)/15d-14(a) Certification of the Chief Financial
Officer.
|
X
|
|||
32.1
|
Section
1350 Certifications.
|
X
|