FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
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FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 0-27918
CENTURY ALUMINUM COMPANY
(Exact name of registrant as specified in its charter)
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Delaware
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13-3070826 |
(State or other jurisdiction of
Incorporation or organization) |
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(IRS Employer
Identification No.) |
2511 Garden Road
Building A, Suite 200
Monterey, California
(Address of registrants principal offices) |
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93940
(Zip Code) |
Registrants telephone number, including area code
(831) 642-9300
Securities registered pursuant to Section 12(b) of the
Act:
None
Securities registered pursuant to Section 12(g) of the
Act:
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Title of each class |
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Common Stock, $0.01 par value per share
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Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K is
not contained herein, and will not be contained, to the best of
the registrants knowledge, in a definitive proxy or
information statement incorporated by reference in Part III
of this Form 10-K
or any amendment to this
Form 10-K. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated file and large
accelerated filer in
Rule 12b-2 of the
Act).
Large Accelerated
Filer o Accelerated
Filer þ Non-Accelerated
Filer o
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2 of the
Act). Yes o No þ
Based upon the NASDAQ closing price on June 30, 2005, the
approximate aggregate market value of the common stock held by
non-affiliates of the registrant was $458,697,000. As of
March 10, 2006, 32,321,891 shares of common stock of
the registrant were issued and outstanding.
Documents Incorporated by Reference:
None.
TABLE OF CONTENTS
2
PART I
Throughout this
Form 10-K, and
unless expressly stated otherwise or as the context otherwise
requires, Century Aluminum, Century,
we, us, our and
ours refer to Century Aluminum Company and its
consolidated subsidiaries.
FORWARD-LOOKING STATEMENTS
This Annual Report on
Form 10-K contains
forward-looking statements. We have based these forward-looking
statements on current expectations and projections about future
events. Many of these statements may be identified by the use of
forward-looking words such as expects,
anticipates, plans,
believes, projects,
estimates, intends, should,
could, would, will,
potential and similar words. These forward-looking
statements are subject to risks, uncertainties and assumptions
including, among other things, those discussed under
Part I, Item 1, Business, Part I,
Item 1A, Risk Factors, Part II,
Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations, and
Part II, Item 8, Financial Statements and
Supplementary Data, and:
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Our high level of indebtedness reduces cash available for other
purposes and limits our ability to incur additional debt and
pursue our growth strategy; |
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The cyclical nature of the aluminum industry causes variability
in our earnings and cash flows; |
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The loss of a customer to whom we deliver molten aluminum would
increase our production costs; |
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Glencore International AG owns a large percentage of our common
stock and has the ability to influence matters requiring
shareholder approval; |
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We could suffer losses due to a temporary or prolonged
interruption of the supply of electrical power to one or more of
our facilities, which can be caused by unusually high demand,
blackouts, equipment failure, natural disasters or other
catastrophic events; |
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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, or if we are unable to obtain economic
replacement contracts for our alumina supply or power for those
portions of our power requirements that are currently unpriced; |
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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; |
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Changes in the relative cost of certain raw materials and energy
compared to the price of primary aluminum could affect our
margins; |
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Most of our employees are unionized and any labor dispute or
failure to successfully renegotiate an existing labor agreement
could materially impair our ability to conduct our production
operations at our unionized facilities; |
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We are subject to a variety of existing environmental laws that
could result in unanticipated costs or liabilities; |
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We may not realize the expected benefits of our growth strategy
if we are unable to successfully integrate the businesses we
acquire; and |
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We cannot guarantee that our subsidiary Nordural will be able to
complete its expansion in the time forecast or without
significant cost overruns or that we will be able to realize the
expected benefits of the expansion. |
We believe the expectations reflected in our forward-looking
statements are reasonable, based on information available to us
on the date of this filing. However, given the described
uncertainties and risks, we cannot guarantee our future
performance or results of operations and you should not place
undue reliance on these forward-looking statements. We undertake
no obligation to update or revise any forward-looking
statements, whether as a result of new information, future
events or otherwise. The risks described above and
3
elsewhere in this report, including in Item 1A, Risk
Factors should be considered when reading any
forward-looking statements in this filing.
We have obtained the market data used throughout this
Form 10-K from our
own research and from surveys or studies conducted by third
parties and cited in industry or general publications, including
studies prepared by CRU International Inc., an internationally
recognized research firm which collects and analyzes data about
the aluminum industry. Industry and general publications and
surveys generally state that they have obtained information from
sources believed to be reliable, but do not guarantee the
accuracy and completeness of such information. We have not
independently verified such data and do not make any
representation as to its accuracy. Similarly, we believe our
internal research is reliable but it has not been verified by
any independent sources.
Overview
Prior to our initial public offering in April 1996, we were an
indirect, wholly-owned subsidiary of Glencore International AG
(together with its subsidiaries, Glencore). As of
March 10, 2006, Glencore, our largest shareholder, owned
28.8% of our outstanding common stock.
We produce primary aluminum. Our primary aluminum facilities
produce value-added and standard-grade primary aluminum
products. We are the third largest primary aluminum producer in
North America, behind Alcoa Inc. (together with its affiliates,
Alcoa) and Alcan Inc. (together with its affiliates,
Alcan). In April 2004, we acquired the Nordural
facility, an Icelandic primary aluminum facility which became
our first production facility located outside of the United
States. We produced approximately 616,000 metric tons of primary
aluminum in 2005 with net sales of approximately
$1,132 million. Our current primary aluminum annual
production capacity is 617,000 metric tons. With the completion
of an ongoing expansion projects at Nordural, our rated
production capacity will increase to 745,000 metric tons by the
fourth quarter of 2006, with the possibility of further
expansion to 785,000 metric tons by late 2008. We also own 50%
joint venture interests in the Gramercy alumina refinery,
located in Gramercy, Louisiana and a related bauxite mining
operations in Jamaica. The Gramercy refinery supplies all of the
alumina used for the production of primary aluminum at our
Hawesville facility.
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Current Primary Aluminum Facilities: |
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Ownership |
Facility |
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Location |
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Operational |
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Capacity |
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Percent |
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(metric tons per year) |
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Nordural(1)
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Grundartangi, Iceland |
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1998 |
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90,000 |
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100 |
% |
Hawesville
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Hawesville, Kentucky, USA |
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1970 |
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244,000 |
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100 |
% |
Ravenswood
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Ravenswood, West Virginia, USA |
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1957 |
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170,000 |
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100 |
% |
Mt. Holly(2)
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Mount Holly, South Carolina, USA |
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1980 |
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227,000 |
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49.7 |
% |
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(1) |
Nordurals rated production capacity is scheduled to
increase to 220,000 metric tons per year by the fourth quarter
of 2006. Further expansion to 260,000 metric tons per year is
projected for late 2008. |
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Alcoa holds the remaining 50.3% ownership interest.
Centurys share of Mt. Hollys capacity is
approximately 113,000 metric tons per year. |
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Our Ownership | |
Facility |
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Location |
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Type | |
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Capacity | |
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Percent | |
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Gramercy
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Gramercy, Louisiana, USA |
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Alumina Refinery |
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1.25 million metric tons per year |
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50 |
% |
St. Ann Limited(1)
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St. Ann, Jamaica |
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Bauxite |
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4.5 million dry metric tons per year |
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50 |
% |
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(1) |
St. Ann Bauxite Limited (SABL) is entitled to mine
4.5 million dry metric tons (DMT) of bauxite on
specified lands annually through September 30, 2030. The
government of Jamaica is required to provide additional land if
the land covered by the mining rights does not contain
sufficient levels of commercially exploitable bauxite. SABL is
responsible for reclamation of the land that it mines. |
Our strategic objectives are to: (i) expand our primary
aluminum business by investing in or acquiring additional
capacity that offers favorable returns and lowers our per unit
production costs; (ii) diversify our geographic presence;
and (iii) pursue opportunities in bauxite mining and
alumina refining. The following table shows our primary aluminum
shipment volumes since 1999 (the year in which we completed a
divesture of our rolling and fabrication businesses).
To date, our growth activities have included:
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acquiring an additional 23% interest in the Mt. Holly facility
(Mt. Holly) in April 2000; |
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acquiring an 80% interest in the Hawesville facility
(Hawesville) in April 2001; |
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acquiring the remaining 20% interest in Hawesville in April 2003; |
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acquiring the Nordural facility (Nordural) in April
2004; |
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acquiring through a joint venture the Gramercy facility
(Gramercy), our first alumina refining facility,
together with related bauxite mining assets in October 2004, and; |
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an expansion of Nordurals production capacity to 220,000
metric tons of primary aluminum, which is expected to be
completed in the fourth quarter of 2006. |
More information on our recent developments is available in
Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations included
herein.
5
Primary aluminum is an internationally traded commodity, and its
price is effectively determined on the London Metal Exchange
(LME). The LME price generally reflects the
worldwide balance of primary aluminum supply and demand, but may
be influenced significantly from time to time by currency
exchange rates and speculative actions. The LME price, however,
does not represent the actual price paid for all aluminum
products. For example, products delivered to U.S. customers
are often sold at a premium to the LME price, typically referred
to as the U.S. Midwest Market Price. Over the last
10 years through December 2005, the average monthly Midwest
premium has ranged from $46 to $170 per metric ton
($111 per metric ton for December 2005 delivery). Premiums
are also charged for adding certain alloys to aluminum for use
in specific applications and for casting aluminum into specific
shapes, such as extrusion billet or rolling slab.
The primary aluminum industry is currently experiencing a period
of strong prices based on constrained production and increasing
demand. Spot aluminum prices, as quoted on the LME, remain well
above the five and
10-year averages. The
key factors in the current strong pricing environment are:
(i) strong global demand for aluminum driven by global
economic growth; (ii) strong demand growth in China;
(iii) a tightening market for alumina, the major raw
material input for aluminum, that has resulted in a rapid
escalation of alumina prices; and (iv) increased cost
pressures from rising electricity and raw material inputs on
high-cost producers in Europe, China, and the United States
resulting in idled production capacity and plant closure. During
2005, global demand increased approximately 5.1%. Despite growth
in production, LME inventories of aluminum remained historically
low. Low inventories together with higher costs for alumina and
power, pushed the market price for primary aluminum to record
prices in 2005. During 2004, global demand increased by 9.0% to
30.1 million metric tons and LME inventories declined 54%
from 1.5 million metric tons to 695,000 metric tons. In
2003, global demand for aluminum increased approximately 7.7% to
27.2 million metric tons, but global aluminum supply
increased only approximately 7.1%. The average LME cash price
for aluminum was $1,899, $1,716, and $1,432 per metric ton
for the years ended December 31, 2005, 2004, and 2003,
respectively. Through February 28, 2006, the LME cash price
for primary aluminum for 2006 averaged $2,419 per metric
ton.
The market for primary aluminum is global, and demand for
aluminum varies widely from region to region. Aluminum is
produced throughout the world. Aluminum competes with materials
such as steel, plastic and glass, which may be substituted for
aluminum in certain applications.
Today, the U.S. demand for aluminum is robust and
U.S. production capacity has declined substantially over
the past few years in the face of rising electrical power costs.
As a consequence, much of the U.S. demand must be met by
foreign production, and delivery premiums to the
U.S. Midwest (reflecting cost of delivery to this market)
have risen in 2005. The geographic proximity of our plants to
the U.S. Midwest provides us with a competitive advantage
over our off-shore competitors by enabling us to capture this
premium without incurring the additional delivery costs.
We also have certain advantages in product quality. Our
Hawesville plant produces the high purity aluminum needed by
Southwire, one of our largest customers, for the manufacture of
electrical transmission lines. Hawesville delivers high purity
metal in molten form to Southwires adjacent facility, at a
cost savings and competitive advantage to both parties. Our
Ravenswood plant also delivers molten metal to Alcans
adjacent rolling mill, providing similar competitive advantages
to Ravenswood and Alcan. Our versatile cast house at Mt. Holly
produces premium products almost exclusively.
In addition, Icelandic aluminum producers are exempt from the
duty payable by other non-European producers for sales of
aluminum into Europe. Icelandic aluminum producers are exempt
from this duty. The alumina toll conversion agreements between
our Nordural subsidiary and third parties allow Nordural share
in the premium those third parties earn on as a result of these
duty-free sales into Europe.
6
In 2005, we derived a combined total of 84.8% of our
consolidated sales from our four largest customers, as shown in
the table below. A loss of any of these customers could have a
material adverse effect on our results of operations. We
currently have long-term primary aluminum sales contracts with
all of these customers. More information about these contracts
is available at Key Long-term Primary Aluminum Sales
Contracts in Item 7, Managements
Discussion and Analysis of Financial Condition and Results of
Operations.
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Year Ended December 31, | |
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2005 | |
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2004 | |
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2003 | |
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$(000) | |
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% | |
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$(000) | |
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% | |
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$(000) | |
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% | |
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Alcan
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356,347 |
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31.5 |
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301,033 |
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28.4 |
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198,448 |
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25.4 |
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Southwire
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294,468 |
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26.0 |
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258,320 |
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24.4 |
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199,067 |
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25.4 |
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Glencore
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171,027 |
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15.1 |
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163,209 |
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15.4 |
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121,886 |
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15.6 |
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BHP Billiton
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137,736 |
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12.2 |
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85,518 |
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8.1 |
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All other customers
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172,784 |
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15.2 |
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252,667 |
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23.7 |
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263,078 |
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33.6 |
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Total
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1,132,362 |
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100.0 |
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1,060,747 |
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100.0 |
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782,479 |
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100.0 |
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Financial Information about Segments and Geographic
Areas |
We operate in one reportable segment, primary aluminum. More
information about the primary aluminum segment and certain
geographic information is available in Note 18 to the
Consolidated Financial Statements included herein. For a
description of certain risks attendant to our foreign
operations, see Risk Factors Operating in
foreign countries exposes us to political, regulatory, currency
and other related risks.
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Energy, Key Supplies and Raw Materials |
We consume the following key supplies and raw materials in the
primary aluminum reduction process:
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electricity
alumina
labor
aluminum fluoride |
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carbon
cathode blocks
liquid pitch
natural gas |
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silicon carbide
caustic soda
calcined petroleum coke |
Electrical power, alumina, and labor are the principal
components of cost of goods sold. These components together
represented over 70 percent of our 2005 cost of goods sold.
We have long-term contracts to ensure the future availability of
many of these supplies. More information about these long-term
supply contracts is available at Key Long-term Supply
Contracts in Item 7, Managements
Discussion and Analysis of Financial Condition and Results of
Operations.
Our operating results are sensitive to changes in the price of
primary aluminum and the raw materials used in our production.
As a result, Century attempts to mitigate the effects of
fluctuations in primary aluminum and raw material prices through
the use of various fixed-price commitments and financial
instruments.
We offer a number of pricing alternatives to our customers
which, combined with our metals risk management activities, are
designed to lock in a certain level of price stability on our
primary aluminum sales. Pricing of Centurys products is
generally offered at an indexed or market price, in
which the customer pays an agreed-upon premium over the LME
price or other market indices.
7
Substantially all of Nordurals revenues are derived from a
tolling arrangement whereby it converts alumina provided to it
by its customers into primary aluminum for a fee based on the
LME price for primary aluminum. Nordurals revenues are
subject to the risk of decreases in the market price of primary
aluminum; however, because it produces primary aluminum under a
tolling arrangement, Nordural is not exposed to fluctuations in
the price for alumina, the principal raw material used in the
production of primary aluminum. In addition, under its current
power contract, Nordural purchases power at a rate which is a
percentage of the LME price for primary aluminum. By linking its
most significant production cost to the LME price for primary
aluminum, Nordural is hedged against downswings in the market
for primary aluminum; however, this hedge also limits
Nordurals upside as the LME price increases.
Primary Aluminum Facilities
The Nordural facility (Nordural) is located in
Grundartangi, Iceland and is owned and operated by our subsidiary,
Nordural. Nordural is our most modern and lowest cost facility.
Operations at Nordural began in 1998 and production capacity was
expanded in 2001 and again in 2006. It has an annual rated
production capacity of 90,000 metric tons, which will increase
by 130,000 metric tons to 220,000 metric tons upon completion of
an expansion of the facility, which is expected in the fourth
quarter of 2006, with further possible expansion to 260,000
metric tons of annual rated production capacity by late 2008.
Nordural operates under various long-term agreements with the
Government of Iceland, local municipalities, and
Faxafloahafnir sf (which operates the harbor at
Grundartangi and is jointly owned by several municipalities.
These agreements include: (i) an investment agreement which
establishes Nordurals tax status and the Governments
obligations to grant certain permits; (ii) a reduction
plant site agreement by which Nordural leases the property
through 2020, subject to renewal at its option; and (iii) a
harbor agreement by which Nordural is granted access to the port
at Grundartangi. In connection with the expansion of Nordural,
Nordural has entered into amendments to the investment agreement
and the reduction plant site agreements with the Government of
Iceland.
Expansion Project. We are currently expanding Nordural to
increase its annual production capacity to 220,000 metric tons.
As currently planned, the expansion will add 130,000 metric tons
to Nordurals annual rated production capacity at an
estimated total cost of approximately $475 million. A
phased start-up of the
expansion capacity began in February 2006 and the expansion is
projected to be completed by the fourth quarter of 2006 at an
estimated total cost of approximately $475 million.
Following completion of the expansion, Nordural will have all
the infrastructure and support facilities necessary for further
expansion to 260,000 metric tons of annual production capacity.
On February 10, 2005, Nordural executed agreements and
documents related to a $365 million senior term loan
facility arranged by Landsbanki Islands hf. and Kaupthing Bank
hf. More information about the Nordural term loan facility is
available in Note 6 of the Consolidated Financial
Statements. Based on current conditions, we expect to fund the
remaining costs of the expansion capacity with operating cash
flow generated by Nordural operations.
Tolling Agreements. Nordural has a long-term alumina
tolling contract with a subsidiary of BHP Billiton which expires
December 31, 2013. Under this contract, which is for
virtually all of Nordurals 90,000 metric tons of existing
production capacity and 40,000 metric tons of the expansion
capacity, Nordural receives an LME-based fee for the conversion
of alumina, supplied by BHP Billiton, into primary aluminum.
Nordural has entered into a
10-year alumina tolling
contract with Glencore for 90,000 metric tons of the expansion
capacity at Nordural. The fee Nordural will receive under the
Glencore contract will also be LME-based. In December 2005,
Glencore assigned 50% of its tolling rights under this agreement
to Hydro Aluminum AS for the period 2007 to 2010. Nordural
consented to the assignment.
Power. Landsvirkjun, a power company jointly owned by the
Republic of Iceland and two Icelandic municipal governments,
provides power to Nordural for 90,000 metric tons of capacity
under a long-term contract due to expire in 2019. The power
delivered by Landsvirkjun is priced at a rate based on the LME
8
price for primary aluminum and is from hydroelectric and
geothermal sources. For the expansion, Nordural entered into an
agreement with Hitaveita Sudurnesja hf. (HS)
and Orkuveita Reykjavíkur (OR) to supply the
power required for the additional 130,000 metric tons of
capacity. Under this agreement, Nordural will be required to
take or pay for a significant percentage of the power to be
supplied for a specified period that begins after signing
(subject to extension for agreed upon events), even if the
Nordural expansion is not completed. The price paid by Nordural
for power delivered by HS and OR is also LME-based. Landsvirkjun
has agreed on a best commercial efforts basis to provide backup
power to Nordural if HS and OR are unable to meet the
obligations of their contract to provide power for the Nordural
expansion. OR has agreed to deliver additional power annually,
which will allow a further expansion to 260,000 metric tons by
late 2008. The power agreement and the construction of
additional production capacity are each subject to the
satisfaction of certain conditions. We are considering various
options for financing the additional capacity expansion from
220,000 to 260,000 metric tons.
Employees. In Iceland, our employees at Nordural are
represented by six labor unions that operate under a labor
contract approved in April 2005 that establishes wages and work
rules for covered employees for the period from January 1,
2005 through December 31, 2009.
Hawesville is owned by our subsidiary, Century Kentucky, Inc.
Hawesville is located adjacent to the Ohio River near
Hawesville, Kentucky and began operations in 1970. Hawesville
has five reduction potlines with an annual rated production
capacity of 244,000 metric tons.
Hawesvilles original four potlines have an annual
production capacity of approximately 195,000 metric tons and are
specially configured and operated to produce high purity primary
aluminum. The average purity level of primary aluminum produced
by these potlines is 99.9%, compared to standard-purity aluminum
which is approximately 99.7%. High purity primary aluminum is
sold at a premium to standard-purity aluminum. The high purity
primary aluminum also provides the conductivity required by
Hawesvilles largest customer, Southwire, for its
electrical wire and cable products as well as for certain
aerospace applications. A fifth potline added in 2001 has an
annual capacity of approximately 49,000 metric tons of
standard-purity aluminum.
In April 2005, we paid Southwire a $7,000 post-closing payment
related to the acquisition of the Hawesville facility. This
payment satisfied in full our obligation to pay contingent
consideration to Southwire under the acquisition agreement.
Metal Sales Agreement. Hawesville has a long-term
contract with Southwire (the Southwire Metal
Agreement). The Southwire Metal Agreements expires
March 31, 2011, subject to automatic renewal for additional
five-year terms, unless either party provides
12 months notice that it has elected not to renew.
The price for the molten aluminum delivered to Southwire is
variable and is determined by reference to the U.S. Midwest
Market Price. Under the contract, Hawesville supplies
240 million pounds (approximately 109,000 metric tons) of
high-purity molten aluminum annually to Southwires
adjacent wire and cable manufacturing facility. Under this
contract, Southwire will also purchase 60 million
pounds (approximately 27,000 metric tons) of standard-grade
molten aluminum each year through March 2010. Southwire has an
option to purchase an equal amount of standard-grade molten
aluminum in for 2011. More information about this long-term
contract is available at Key Long-term Primary Aluminum
Sales Contracts in Item 7, Managements
Discussion and Analysis of Financial Condition and Results of
Operations.
Alumina. The alumina used by Hawesville is purchased
under a supply agreement with Gramercy Alumina LLC
(GAL). GAL is a joint venture company owned by
Century and Falconbridge Limited (as successor by merger to
Noranda Inc., Falconbridge), which owns and operates
the Gramercy alumina refinery. The alumina supply agreement runs
through December 31, 2010 and the contract pricing varies
based on GALs cost of production. More information about
this long-term contract is available at Key Long-term
Supply Contracts in Item 7, Managements
Discussion and Analysis of Financial Condition and Results of
Operations.
Power. Hawesville purchases all of its power from Kenergy
Corp. (Kenergy), a local retail electric
cooperative, under a power supply contract. Kenergy acquires
most of the power it provides to Hawesville from
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a subsidiary of LG&E Energy Corp., with delivery guaranteed
by LG&E. Hawesville has unpriced power requirements of
130 MW or 27% of its power requirements from 2007 through
2010. We are working with Big Rivers Electric Corporation and
Kenergy Corporation on a proposal that would restructure and
extend the existing power supply contract from 2007 through 2023.
Employees. The bargaining unit employees at Hawesville
are represented by the United Steelworkers of America
(USWA). Centurys collective bargaining
agreement, which covers all of the represented hourly employees
at Hawesville, expires March 31, 2006.
The Ravenswood facility (Ravenswood) is owned and
operated by our subsidiary, Century Aluminum of West Virginia,
Inc. (Century of West Virginia). Built in 1957,
Ravenswood operates four potlines with an annual rated
production capacity of 170,000 metric tons. The facility is
located adjacent to the Ohio River in Ravenswood, West Virginia.
Metal Sales Agreements. Ravenswood produces molten
aluminum that is delivered to Alcans adjacent fabricating
facility and standard-grade ingot that we sell in the
marketplace. We have a contract (the Alcan Metal
Agreement) with Alcan under which Alcan purchases 23
to 27 million pounds (approximately 10,500 to 12,250 metric
tons) per month of molten aluminum produced at Ravenswood
through July 31, 2007. The price for primary aluminum
delivered under the Alcan Metal Agreement is variable and
determined by reference to the U.S. Midwest Market Price.
This contract requires us to deliver molten aluminum, which
reduces our casting and shipping costs. Alcan has the right,
upon 12 months notice, to reduce its purchase
obligations by 50% under this contract. Ravenswood also sells
10,000 metric tons per year of primary aluminum under a
10-year contract with
Glencore (the Glencore Metal Agreement II)
through December 31, 2013. Under the Glencore Metal
Agreement II, Glencore agrees to purchase 20,000 metric
tons per year of the primary aluminum produced at Ravenswood and
Mt. Holly facilities, at a price determined by reference to the
U.S. Midwest Market Price, subject to an agreed cap and
floor as applied to the U.S. Midwest Premium.
Alumina. Glencore supplies the alumina used at Ravenswood
under a contract that expires on December 31, 2006. The
contract pricing varies based on the LME price for primary
aluminum. We are currently assessing our options for future
alumina purchases to replace the Glencore contract.
Power. During 2005, we purchased all of the electricity
requirements for Ravenswood from Ohio Power Company, a unit of
American Electric Power Company, under a fixed price power
supply agreement that ran through December 31, 2005. Under
Ravenswoods new power contract, Appalachian Power Company
has agreed to continuously supply power to Ravenswood. After
December 31, 2007, we may terminate the agreement by
providing 12 months notice of termination. Power delivered
under the new power supply agreement is priced as set forth in
currently published tariffs. Appalachian Power Company filed a
rate case on September 26, 2005, seeking increases in its
tariff rates. We have been advised to expect those rates to
become effective on July 1, 2006. We intend to contest the
rate increase.
Employees. The bargaining unit employees at Ravenswood
are represented by the USWA. The collective bargaining agreement
that covers all of the represented hourly employees at
Ravenswood expires May 31, 2006.
Mt. Holly, located in Mt. Holly, South Carolina, was built in
1980 and is the most recently constructed aluminum reduction
facility in the United States. The facility consists of two
potlines with a total annual rated production capacity of
227,000 metric tons and casting equipment used to cast molten
aluminum into standard-grade ingot, extrusion billet and other
value-added primary aluminum products. Value-added primary
aluminum products are sold at a premium to standard-grade
primary aluminum. Our 49.7% interest represents approximately
113,000 metric tons of the facilitys production capacity.
Our interest in Mt. Holly is held through our subsidiary,
Berkeley Aluminum, Inc. (Berkeley). Under the Mt.
Holly ownership structure, we hold an undivided 49.7% interest
in the property, plant and equipment
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comprising the aluminum reduction operations at Mt. Holly and an
equivalent share in the general partnership responsible for the
operation and maintenance of the facility. Alcoa owns the
remaining 50.3% interest in Mt. Holly and an equivalent share of
the operating partnership. Under the terms of the operating
partnership, Alcoa is responsible for operating and maintaining
the facility. Each owner supplies its own alumina for conversion
to primary aluminum and is responsible for its proportionate
share of operational and maintenance costs.
Metal Sales Agreements. We have a contract to sell to
Glencore 50,000 metric tons of primary aluminum produced at Mt.
Holly each year through December 31, 2009 (the
Glencore Metal Agreement I). The Glencore Metal
Agreement I provides for variable pricing determined by
reference to the quoted LME price of primary aluminum. Mt. Holly
also sells 10,000 metric tons per year of primary aluminum under
the Glencore Metal Agreement II. More information on the
Glencore Metal Agreement II is available under
Ravenswood above or under Key Long-term
Primary Aluminum Sales Contracts in Item 7,
Managements Discussion and Analysis of Financial
Condition and Results of Operations.
Alumina. Glencore supplies all of our alumina
requirements for Mt. Holly under two contracts which expire
December 31, 2006 and January 31, 2008. The contract
expiring December 31, 2006 supplies 54% of alumina
requirements at Mt. Holly. The price under both contracts is
determined by reference to the quoted LME price for primary
aluminum. We recently entered into an agreement with Trafigura
AG that provides us with sufficient supplies of alumina to cover
all of Mt. Hollys alumina requirements when our agreements
with Glencore expire in 2006 and 2008. The price for alumina
under our contract with Trafigura will also be variable and
based on the LME price for primary aluminum.
Power. Mt. Holly purchases all of its power requirements
from the South Carolina Public Service Authority
(SCPSA) under a contract that runs through 2015.
Power delivered through 2010 will be priced at rates fixed under
currently published schedules, subject to adjustments to cover
SCPSAs fuel costs. Rates for the period 2011 through 2015
will be as provided under then-applicable schedules.
Employees. The employees at Mt. Holly are employed by
Alcoa and are not unionized.
Joint Venture Facilities
On October 1, 2004, Century and Falconbridge through joint
venture companies, acquired an alumina refinery in Gramercy,
Louisiana and related bauxite mining assets in Jamaica
(collectively, the Gramercy assets) from Kaiser
Aluminum & Chemical Company (Kaiser).
The alumina refinery in Gramercy, owned by GAL, began operations
in 1959 and consists of a production facility, a powerhouse for
steam and electricity production, a deep water dock and a barge
loading facility. Extensive portions of the Gramercy plant were
rebuilt and modernized between 2000 and 2002, including a double
digestion system.
Alumina Operations. The Gramercy plant has an annual
rated capacity rate of 1.25 million metric tons of alumina
per year. Gramercys production consists of approximately
80% smelter grade alumina and 20% alumina hydrate or chemical
grade alumina. GAL sells smelter grade alumina to Hawesville
based on Gramercys production costs under an alumina
supply contract due to expire on December 31, 2010. All of
the chemical grade alumina production is currently sold under
existing short-term and long-term contracts with approximately
20 third party purchasers.
We expect production at the Gramercy plant to remain at or near
capacity for the foreseeable future.
Supply Agreements. Bauxite is the principal raw material
used in the production of alumina, and natural gas is the
principal energy source. The Gramercy plant purchases all of its
bauxite requirements from SABL under a contract that expires at
the end of 2010. The Gramercy plant purchases its natural gas
requirements at market prices under short-term agreements with
local suppliers.
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SABL, which owns the bauxite mining assets, is jointly owned by
Century and Falconbridge. The bauxite mining assets are
comprised of: (i) a concession from the Government of
Jamaica (GOJ) to mine bauxite in Jamaica (the
mining rights,) and (ii) a 49% interest in a
Jamaican partnership that owns certain mining assets in Jamaica
(the mining assets.) The GOJ owns the remaining 51%
interest in the partnership. Following the acquisition, SABL and
the GOJ established a new partnership to hold the mining assets
and to conduct mining and related operations pursuant to the
mining rights. The mining assets consist primarily of rail
facilities, other mobile equipment, dryers, and loading and dock
facilities.
Bauxite Mining Rights. Under the terms of the mining
rights, SABL manages the operations of the new partnership, pays
operating costs and is entitled to all of its bauxite
production. The GOJ receives: (i) a royalty based on the
amount of bauxite mined, (ii) an annual asset usage
fee for the use of the GOJs 51% interest in the
mining assets, and (iii) certain fees for lands owned by
the GOJ that are covered by the mining rights. SABL also pays to
the GOJ customary income taxes and certain other fees pursuant
to an agreement with the GOJ that establishes a fiscal regime
for SABL. A production levy normally applicable to bauxite mined
in Jamaica has been waived for SABL through December 2007. If
the levy is subsequently assessed on bauxite produced by SABL,
the Establishment Agreement provides that certain payments to
the GOJ will be reduced and SABL and GOJ will negotiate
amendments to SABLs fiscal regime in order to mitigate the
effects of the levy.
Under the terms of the mining rights, SABL mines the land
covered by the mining rights and the GOJ retains surface rights
and ownership of the land. The GOJ granted the mining rights and
entered into other agreements with SABL for the purpose of
ensuring the Gramercy plant will have sufficient reserves to
meet its annual alumina requirements and existing or
contemplated future obligations under third party contracts.
Under the mining rights, SABL is entitled to mine
4.5 million dry metric tons of bauxite on specified lands
annually through September 30, 2030. The GOJ is required to
provide additional land if the land covered by the mining rights
does not contain sufficient levels of commercially exploitable
bauxite. SABL is responsible for reclamation of the land that it
mines. In addition, SABL assumed reclamation obligations related
to the prior owners operations of approximately
$9 million.
Customers. Most of the bauxite from St. Ann is refined
into alumina at the Gramercy refinery and the remainder is sold
to a third party alumina refinery in Texas. SABL and GAL have a
contract under which SABL will supply the Gramercy plants
bauxite requirements through December 2010. The price for
bauxite under the contract was fixed through December 31,
2005, and an extension of this fixed price through 2008 has been
conditionally accepted by the GOJ.
SABL has various short-term agreements with third parties for
the supply of fuel oil, diesel fuel, container leasing and other
locally provided services.
Environmental Matters
We are subject to various environmental laws and regulations. We
have spent, and expect to spend, significant amounts for
compliance with those laws and regulations. In addition, some of
our past manufacturing activities have resulted in environmental
consequences which require remedial measures. Under certain
environmental laws which may impose liability regardless of
fault, we may be liable for the costs of remediation of
contaminated property, including our current and formerly owned
or operated properties or adjacent areas, or for the
amelioration of damage to natural resources. We believe, based
on currently available information, that our current
environmental liabilities are not likely to have a material
adverse effect on Century. However, we cannot predict the
requirements of future environmental laws and future
requirements at current or formerly owned or operated properties
or adjacent areas. Such future requirements may result in
liabilities which may have a material adverse effect on our
financial condition, results of operations or liquidity. More
information concerning our environmental contingencies can be
found in Note 13 to the Consolidated Financial Statements
included herein.
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Intellectual Property
We own or have rights to use a number of patents or patent
applications relating to various aspects of our operations. We
do not consider our business to be materially dependent on any
of these patents or patent applications.
Employees
We employ a work force of approximately 1,750, consisting of
1,460 hourly employees and 290 salaried employees.
Available Information
Additional information about Century may be obtained from our
website, which is located at www.centuryaluminum.com. Our
website provides access to filings we have made through the
SECs EDGAR filing system, including our annual, quarterly
and current reports filed on
Forms 10-K, 10-Q
and 8-K,
respectively, and ownership reports filed on Forms 3, 4 and
5 after December 16, 2002 by our directors, executive
officers and beneficial owners of more than 10% of our
outstanding common stock. These filings are also available on
the SEC website at www.sec.gov. In addition, we will make
available free of charge copies of our
Form 10-Ks,
Form 10-Qs, and
Form 8-Ks upon
request. Requests for these documents can be made by contacting
our Investor Relations Department by mail at: 2511 Garden Road,
Suite A200, Monterey, CA 93940, or phone at:
(831) 642-9300. Information contained in our website is not
incorporated by reference in, and should not be considered a
part of, this Annual Report on
Form 10-K.
The following describes certain of the risks and uncertainties
we face that could cause our future results to differ materially
from our current results and from those anticipated in our
forward-looking statements. These risk factors should be
considered together with the other risks and uncertainties
described in Managements Discussion and Analysis of
Financial Condition and Results of Operations and
elsewhere herein.
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The cyclical nature of the aluminum industry causes
variability in our earnings and cash flows. |
Our operating results depend on the market for primary aluminum,
which is a highly cyclical commodity affected by global demand
and supply conditions. Historically, global demand and prices
for primary aluminum have fluctuated in part due to economic and
market conditions in the United States and other major global
economies, as well as currency fluctuations. The relative
pricing of other materials, such as steel, plastic and glass,
which are used as alternatives for aluminum in some
applications, also affects demand for aluminum. Certain aluminum
end-use markets, including the automotive sector and the
building and construction sector, are also cyclical. When
downturns occur in these sectors, demand for primary aluminum
decreases, resulting in lower prices for our products. Over the
past 10 years, the average annual cash price for primary
aluminum on the LME was $1,522 per metric ton and has
ranged from a low of $1,182 per metric tons in 1999 to a
high of $2,668 per metric ton in February 2006. The average
LME cash price for aluminum was $1,899, $1,716, and
$1,432 per metric ton for the years ended December 31,
2005, 2004, and 2003, respectively. Primary aluminum prices
could decline below current levels, reducing our earnings and
cash flows. A prolonged downturn in prices for primary aluminum
could significantly reduce the amount of cash available to meet
our current obligations and fund our long-term business
strategies and may force the curtailment of all or a portion of
our operations at one or more of our smelters.
Conversely, if prices increase, certain of our hedging
transactions, including our forward sales of primary aluminum
and our LME-based alumina contracts, may limit our ability to
take advantage of the increased prices. More information about
Centurys market risks is available in Item 7A,
Quantitative and Qualitative Disclosures About Market
Risk.
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We reduce our casting and shipping costs by selling molten
aluminum to the major customers of our Ravenswood and Hawesville
facilities; the loss of one of these major customers would
increase our production costs at those facilities. |
A combined total of 57% of our consolidated net sales for 2005
were derived from sales to Alcan and Southwire Company.
Alcans facility is located adjacent to Ravenswood and
Southwires facility is located adjacent to Hawesville. Due
to this proximity, we are able to deliver molten aluminum to
these customers, thereby eliminating our casting and shipping
costs and our customers remelting costs. Century has
contracts with Alcan and Southwire which are due to expire at
the end of July 2007 and at the end of 2011, respectively. Alcan
has the right to reduce its purchases under its contract by 50%,
upon 12 months notice, and Southwire has the right to
reduce purchases under its contract by 20% beginning in 2010. We
may be unable to extend or replace these contracts when they
terminate. If we are unable to renew these contracts when they
expire, or if either customer significantly reduces its
purchases under those contracts, we will incur higher casting
and shipping costs.
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A material change in our relationship with Glencore could
affect how we purchase raw materials, sell our products and
hedge our exposure to metal price risk. |
We benefit from our relationship with Glencore, our largest
shareholder. We have entered into various long-term contracts
with Glencore to sell up to 11.3% of our current annual primary
aluminum production and to purchase up to 46.0% of our annual
alumina requirements under contracts expiring at various dates
from the end of 2006 through 2013. In addition, our subsidiary
Nordural has entered into an alumina tolling agreement with
Glencore for 90,000 metric tons of the expansion capacity at
Nordural. In December 2005, Glencore assigned 50% of its tolling
rights under this agreement to Hydro Aluminum AS for the period
2007 to 2010. Nordural consented to the assignment. We also
enter into forward sales and hedging contracts with Glencore
that help us manage our exposure to fluctuating aluminum prices.
Because Glencore is a major customer, supplier and metal hedge
counterparty, a material change in our relationship with
Glencore, could affect how we purchase raw materials, sell our
products and hedge our exposure to metal price risk, which could
impact our operating costs.
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Losses caused by disruptions in the supply of power would
reduce the profitability of our operations. |
We use large amounts of electricity to produce primary aluminum,
and any loss of power which causes an equipment shutdown can
result in the hardening or freezing of molten
aluminum in the pots where it is produced. We may incur losses
due to a temporary or prolonged interruption of the supply of
electrical power to our facilities, which can be caused by
unusually high demand, blackouts, equipment failure, natural
disasters or other catastrophic events. If such a condition were
to occur, we may lose production for a prolonged period of time
and incur significant losses. Although we maintain property and
business interruption insurance to mitigate losses resulting
from catastrophic events, we may be required to pay significant
amounts under the deductible provisions of those insurance
policies. In addition, the coverage under those policies may not
be sufficient to cover all losses, or may not cover certain
events. Certain of our insurance policies do not cover any
losses that may be incurred if our suppliers are unable to
provide power during periods of unusually high demand. Certain
losses which are not covered by insurance may trigger a default
under our revolving credit facility.
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Changes or disruptions to our current alumina supply
arrangements could increase our raw material costs. |
We depend on a limited number of suppliers for alumina, the
principal raw material used to produce primary aluminum. Supply
of alumina has been constrained over the past three years, and
the construction of new production facilities requires
substantial lead time. Disruptions to our supply of alumina
could occur for a variety of reasons, including disruptions of
production at a particular suppliers alumina refinery.
These disruptions may require Century to purchase alumina on
less favorable terms than under our current agreements. Spot
alumina prices are currently substantially higher than the
prices we pay under our long-term agreements.
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Glencore supplies the alumina used at Ravenswood under a
contract that expires on December 31, 2006. We are
currently assessing our options for future alumina purchases to
replace the Glencore contract.
Century and Falconbridge, through joint venture companies,
purchased in 2004 the Gramercy alumina refinery that supplies
the alumina used at Hawesville. As part of the acquisition, the
joint venture also purchased an interest in a Jamaican
partnership that owns bauxite mining assets in St. Ann, Jamaica.
Bauxite is the principal raw material used in the production of
alumina and all of the bauxite used at the Gramercy alumina
refinery is purchased from the Jamaican partnership. If there is
a significant disruption of bauxite shipments in the future, the
joint venture could incur additional costs if it is required to
use bauxite from other sources.
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The cost of alumina used at Hawesville may be higher than
under our LME-based alumina contracts. |
We acquire alumina used at our Ravenswood and Mt. Holly
facilities at prices based on the LME price for primary
aluminum. The Gramercy refinery that Century and Falconbridge
acquired from Kaiser supplies all of the alumina used at
Hawesville at prices based on the Gramercy refinerys
production costs. Those production costs could be materially
higher than the price paid under LME-based contracts during
periods when aluminum prices are low and raw material costs used
in the production of alumina, such as natural gas, are high.
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Changes in the relative cost of certain raw materials and
energy compared to the price of primary aluminum could affect
our operating results. |
Our operating results are sensitive to changes in the price of
primary aluminum and the raw materials used in its production,
including caustic soda and calcined petroleum coke. Although we
attempt to mitigate the effects of such price fluctuations
through the use of various fixed-price commitments and financial
instruments, these efforts may limit our ability to take
advantage of favorable changes in the market prices for primary
aluminum or raw materials. In addition, because we have sold
forward a certain amount of our production capacity in future
years, rising raw material and energy prices would negatively
impact our earnings and cash flow, all other things being equal.
See Item 7A Quantitative and Qualitative
Disclosures About Market Risk.
Electricity represents our single largest operating cost. As a
result, the availability of electricity at economic prices is
critical to the profitability of our operations. While we
purchase primarily all of our electricity for our existing
U.S. facilities under fixed-price contracts through 2006, a
portion of the contracted cost of the electricity supplied to
Mt. Holly varies with the suppliers fuel costs. An
increase in these fuel costs would increase the price Mt. Holly
pays for electricity. Power costs at Mt. Holly were
$12.4 million higher in 2005 than 2004, primarily due to
fuel cost adjustments. Also, the fixed price in the contract for
Ravenswood may be increased as a result of an ongoing rate case.
The fixed price portions of our current power contracts at
Hawesville are due to expire at various times from the end of
2006 through 2010. If we are unable to obtain power at economic
rates upon the expiration of these contracts or in connection
with the rate case, we may be forced to curtail or idle a
portion of our production capacity, which would lower our
revenues and adversely affect the profitability of our
operations.
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We are subject to the risk of union disputes. |
The bargaining unit employees at our Ravenswood and Hawesville
facilities and at the Gramercy refinery are represented by the
United Steel Workers of America. Centurys labor contracts
at Hawesville and Ravenswood expire in March and May 2006,
respectively. We may be unable to satisfactorily renegotiate
those labor contracts. In addition, our recently negotiated
contract with Nordurals employees that expires in 2009 and
our contract with employees at the Gramercy plant that expires
in 2010 may not prevent a strike or work stoppage at any of
these facilities in the future, and any such work stoppage could
prevent or significantly impair our ability to conduct
production operations at those facilities which could materially
adversely affect our financial results.
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We are subject to a variety of environmental laws that
could result in costs or liabilities. |
We are obligated to comply with various federal, state and other
environmental laws and regulations, including the environmental
laws and regulations of Iceland, the European Economic Area and
Jamaica. Environmental laws and regulations may expose us to
costs or liabilities relating to our manufacturing operations or
property ownership. We incur operating costs and capital
expenditures on an ongoing basis to comply with applicable
environmental laws and regulations. In addition, we are
currently and may in the future be responsible for the cleanup
of contamination at some of our current and former manufacturing
facilities or for the amelioration of damage to natural
resources. For example, we, along with others, including former
owners of our former St. Croix facility, has been sued for
alleged natural resources damages at the facility. While it is
not presently possible to determine the outcome of this matter,
our known liabilities with respect to this and other matters
relating to compliance and cleanup, based on current
information, are not expected to be material and should not
materially adversely affect our operating results. However, if
more stringent compliance or cleanup standards under
environmental laws or regulations are imposed, previously
unknown environmental conditions or damages to natural resources
are discovered, or if contributions from other responsible
parties with respect to sites for which we have cleanup
responsibilities are not available, we may be subject to
additional liability, which may be material and could affect our
liquidity. Further, additional environmental matters for which
we may be liable may arise in the future at our present sites
where no problem is currently known, with respect to sites
previously owned or operated by us, by related corporate
entities or by our predecessors, or at sites that we may acquire
in the future. Overall production costs may become prohibitively
expensive and prevent us from effectively competing in price
sensitive markets if future capital expenditures and costs for
environmental compliance or cleanup are significantly greater
than current or projected expenditures and costs. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations Liquidity and
Capital Resources Environmental Expenditures and
Other Contingencies and Note 13 to our consolidated
financial statements for a detailed description of our
environmental matters and associated costs and risks.
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Acquisitions may present difficulties. |
We have a history of making strategic acquisitions. We expect to
make strategic acquisitions in the future. We are subject to
numerous risks as a result of our acquisitions, including the
following:
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it may be challenging for us to manage our existing business as
we integrate acquired operations; |
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we may not achieve the anticipated reductions in average unit
production costs as a result of our acquisitions; and |
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management of acquisitions will require continued development of
financial controls and information systems, which may prove to
be expensive, time-consuming, and difficult to maintain. |
Accordingly, our recent or future acquisitions might not improve
our competitive position and business prospects as anticipated.
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We may not realize the expected benefits of the planned
expansion of Nordural. |
The ongoing expansion of Nordural, which is expected to be
completed in the fourth quarter of 2006, will more than double
the facilitys existing production capacity. The expected
benefits of the expansion may not be realized if Nordural is
unable to complete the expansion in the time forecast or
experiences significant cost overruns. We may add additional
capacity to the current expansion project or in a future
expansion of Nordural. In each case, our ability to add the
additional capacity depends on our ability to enter into certain
key contracts for that capacity.
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Operating in foreign countries exposes us to political,
regulatory, currency and other related risks. |
Nordural is our first facility located outside of the United
States and following completion of the ongoing expansion, it
will represent 29.5% of our overall primary aluminum production
capacity. The bauxite operations related to the Gramercy plant,
which we acquired through a joint venture with Falconbridge, are
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located in Jamaica. We may in the future consider other
investments in foreign countries. International operations may
expose us to risks, including unexpected changes in foreign laws
and regulations, political and economic instability, challenges
in managing foreign operations, increased cost to adapt our
systems and practices to those used in foreign countries, export
duties, tariffs and other trade barriers, and the burdens of
complying with a wide variety of foreign laws. In addition, we
may be exposed to fluctuations in currency exchange rates and,
as a result, an increase in the value of foreign currencies
relative to the U.S. dollar could increase our operating
expenses which are denominated and payable in those currencies.
For example, Nordurals revenues are denominated in
U.S. dollars, while its labor costs are denominated in
Icelandic krona and a portion of its anode costs are denominated
in euros.
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Our historical financial information may not be comparable
to our results for future periods. |
Our historical financial information is not necessarily
indicative of our future results of operations, financial
position and cash flows. For example, our historical financial
data does not reflect the effects of:
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our acquisition of the remaining 20% interest in Hawesville
prior to April 1, 2003; |
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our acquisition of Nordural prior to April 27,
2004; and |
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the equity earnings of the joint venture purchases of the
Gramercy assets prior to October 1, 2004. |
|
|
|
Our high level of indebtedness requires significant cash
flow to meet our debt service requirements, which reduces cash
available for other purposes, such as the payment of dividends,
and limits our ability to pursue our growth strategy. |
We are highly leveraged. We have an aggregate of approximately
$671.9 million of outstanding indebtedness as of
December 31, 2005. In addition, we could borrow additional
amounts under our $100 million credit facility and Nordural
has access to an additional $143.0 million under its
$365.0 million term loan facility. The level of our
indebtedness could have important consequences, including:
|
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|
|
|
limiting cash flow available for capital expenditures,
acquisitions, dividends, working capital and other general
corporate purposes because a substantial portion of our cash
flow from operations must be dedicated to servicing our debt; |
|
|
|
increasing our vulnerability to adverse economic and industry
conditions; |
|
|
|
limiting our flexibility in planning for, or reacting to,
competitive and other changes in our business and the industry
in which we operate; |
|
|
|
placing us at a disadvantage compared to our competitors who may
have less debt and greater operating and financing flexibility
than we do; and |
|
|
|
limiting our ability to borrow additional funds, which may
prevent us from pursuing favorable acquisition opportunities
when they arise. |
In addition to our indebtedness, we have liabilities and other
obligations which could reduce cash available for other purposes
and limit our ability to pursue our growth strategy. We will
need a significant amount of cash to service our debt. In
addition, we will be required to settle in cash up to the
principal amount of our convertible notes (which are convertible
by the holder at any time) upon conversion, which could increase
our debt service obligations. More information about our
liquidity and debt service obligations is available at
Managements Discussion and Analysis of Financial
Condition and Results of Operations included herein.
We are also exposed to risks of interest rate increases.
Nordural entered into a $365.0 million senior term loan
facility and had outstanding borrowings of $230.4 million
at December 31, 2005. Nordurals annual debt service
requirements will vary, as amounts outstanding under its new
term loan facility will bear interest at a variable rate.
17
Our ability to pay interest and to repay or refinance our
indebtedness, including Nordurals senior term loan
facility, and our senior notes and convertible notes, and to
satisfy other commitments, including funding the Nordural
expansion, will depend upon our future operating performance,
which is subject to general economic, financial, competitive,
legislative, regulatory, business and other factors that are
beyond our control. Accordingly, there is no assurance that our
business will generate sufficient cash flow from operations or
that future borrowings will be available to us in an amount
sufficient to enable us to pay our indebtedness, including the
notes, or to fund our other liquidity needs. If we are unable to
meet our debt service obligations or fund our other liquidity
needs, we could attempt to restructure or refinance our
indebtedness or seek additional equity capital. There can be no
assurance that we will be able to accomplish those actions on
satisfactory terms, or at all.
|
|
|
Restrictive covenants in our credit facilities and the
indenture governing our senior notes limit our ability to incur
additional debt and pursue our growth strategy. |
Our revolving credit facility and the indenture governing our
senior term notes each contain various covenants that restrict
the way we conduct our business and limits our ability to incur
debt, pay dividends and engage in transactions such as
acquisitions and investments, which may impair our ability to
pursue our growth strategy. See Liquidity and Capital
Resources Debt Service. Any failure to comply
with those covenants may constitute a breach under the revolving
credit facility or the indenture governing the notes, which may
result in the acceleration of all or a substantial portion of
our outstanding indebtedness and termination of commitments
under our revolving credit facility. If our indebtedness is
accelerated, we may be unable to repay those amounts upon
acceleration and our secured lenders could foreclose on any
collateral securing our secured debt.
Substantially all of Nordurals assets are pledged as
security under its term loan facility, including, but not
limited to, all of Nordurals property, plant and equipment
related to the smelter and the harbor area and all of
Nordurals current and future inventory, receivables,
insurance policies, bank accounts, and rights under specified
contracts relating to the operation of Nordural, including its
tolling, anode supply and power contracts having a term longer
than two years. In addition, the shares of Nordural have been
pledged to the lenders as collateral. If Nordural is unable to
comply with these covenants, the lenders would be able to cancel
commitments under Nordurals loan facility, cause all or
part of the amounts outstanding under the loan facility to be
immediately due and payable and foreclose on any collateral
securing the loan facility. The term loan facility also contains
restrictions on Nordurals ability to pay dividends,
including a requirement that Nordural make a repayment of
principal in an amount equal to 50% of any dividend paid to
shareholders. See Liquidity and Capital Resources.
Based on Nordurals needs for cash to finance its expansion
and operations, we do not currently anticipate that Nordural
will distribute any cash in the foreseeable future.
|
|
|
We depend upon dividends from our subsidiaries to meet our
debt service obligations. |
We are a holding company and conduct all of our operations
through our subsidiaries. Our ability to meet our debt service
obligations depends upon the receipt of dividends from our
subsidiaries. Nordurals senior term loan facility places
significant limits on Nordurals ability to pay dividends.
Subject to the restrictions contained in our revolving credit
facility and the indentures governing our senior and convertible
notes, future borrowings by our subsidiaries could contain
restrictions or prohibitions on the payment of dividends by
those subsidiaries. In addition, under applicable law, our
subsidiaries could be limited in the amounts that they are
permitted to pay as dividends on their capital stock.
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|
|
The price of our common stock may fluctuate
significantly. |
The market price of our common stock has experienced significant
volatility from time to time, and this volatility may continue
in the future. From January 1, 2005, through
February 28, 2006, the intra-day sales price of our common
stock on NASDAQ ranged from $17.82 to $39.07 per share. In
addition, the securities markets have experienced significant
price and volume fluctuations. The market price for our common
stock may be affected by a number of factors, including actual
or anticipated variations in our quarterly results of
operations, expectations about the future price of aluminum,
changes in earnings estimates or recommenda-
18
tions by securities analysts, changes in research coverage by
securities analysts, the conversion of some or all of our
outstanding convertible notes, any announcement by us of
significant acquisitions, strategic partnerships, joint ventures
or capital commitments, developments in the aluminum industry
and sales of substantial numbers of shares by current holders of
our common stock in the public market. In addition, general
economic, political and market conditions and other factors
unrelated to our operating performance may cause the market
price of our common stock to be volatile.
|
|
|
Provisions in our charter documents and state law may make
it difficult for others to obtain control of Century Aluminum,
even though some stockholders may consider it to be
beneficial. |
Certain provisions of our restated certificate of incorporation
and amended and restated bylaws, as well as provisions of the
Delaware General Corporation Law, may have the effect of
delaying, deferring or preventing a change of control of
Century, including transactions in which our stockholders might
otherwise have received a substantial premium for their shares
over then current market prices. For example, these provisions:
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|
|
give authority to our board of directors to issue preferred
stock and to determine the price, rights, preferences,
privileges and restrictions of those shares without any
stockholder vote; |
|
|
|
provide, under our charter documents, for a board of directors
consisting of three classes, each of which serves for a
different three-year term; |
|
|
|
require stockholders to give advance notice prior to submitting
proposals for consideration at stockholders meetings or to
nominate persons for election as directors; and |
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|
|
restrict, under our charter documents, certain business
combinations between us and any person who beneficially owns 10%
or more of our outstanding voting stock. |
In addition, several of our officers have entered into
employment and severance compensation agreements that provide
for cash payments, immediate vesting of stock options and
performance shares and acceleration of other benefits under
certain circumstances, including a change in control of Century.
Our 1996 Stock Incentive Plan, as amended, also provides for
acceleration of the ability to exercise stock options and the
vesting of performance shares upon a change of control, and our
Non-Employee Directors Stock Option Plan provides for
acceleration of an option holders ability to exercise
stock options upon a change of control.
|
|
Item 1B. |
Unresolved Staff Comments |
We have no unresolved comments with the Securities and Exchange
Commission.
We own the property on which our Hawesville and Ravenswood
facilities are located. The 220 acres upon which the
Nordural facility is situated is leased from the Government of
Iceland under a long-term lease that runs through 2020,
renewable at our option. In addition, substantially all of
Nordurals assets (including, but not limited to, all of
Nordurals property, plant and equipment related to the
smelter and the harbor area) are pledged as security for
Nordurals obligations under its term loan facility. The
corporate offices are subject to an operating lease that expires
in June 2010.
We believe all of our facilities are suitable and adequate for
our current operations. All of our facilities are operating at
or near their productive capacity. Additional information about
the age, location, and productive capacity of our facilities is
available in the Overview section of Item 1,
Business.
|
|
Item 3. |
Legal Proceedings |
We have pending against us or may be subject to various
lawsuits, claims and proceedings related primarily to
employment, commercial, environmental and safety and health
matters. Although it is not presently possible to determine the
outcome of these matters, management believes the ultimate
disposition will not have a material adverse effect on our
financial condition, results of operations, or liquidity. For a
19
description of certain environmental matters involving Century,
see Note 13 to the Consolidated Financial Statements
included herein.
|
|
Item 4. |
Submission of Matters to a Vote of Security Holders |
No matters were submitted to a vote of our security holders
during the fourth quarter of 2005.
PART II
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|
Item 5. |
Market for Registrants Common Equity, Related
Stockholder Matters and Issuer Repurchase of Equity
Securities |
Our common stock trades on the NASDAQ National Market tier of
the NASDAQ Stock Market under the symbol: CENX. The following
table sets forth, on a quarterly basis, the high and low sales
prices of the common stock during the two most recent fiscal
years. Our common stock reached a record intra-day high of
$39.07 on February 7, 2006 and closed at $35.47 on
March 10, 2006.
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|
2004 | |
|
2005 | |
|
|
| |
|
| |
Year Quarter |
|
First | |
|
Second | |
|
Third | |
|
Fourth | |
|
First | |
|
Second | |
|
Third | |
|
Fourth | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
High sales price
|
|
$ |
29.70 |
|
|
$ |
29.40 |
|
|
$ |
28.00 |
|
|
$ |
29.10 |
|
|
$ |
34.70 |
|
|
$ |
32.18 |
|
|
$ |
27.60 |
|
|
$ |
26.79 |
|
Low sales price
|
|
$ |
19.15 |
|
|
$ |
18.64 |
|
|
$ |
21.70 |
|
|
$ |
22.42 |
|
|
$ |
23.69 |
|
|
$ |
20.16 |
|
|
$ |
20.00 |
|
|
$ |
17.82 |
|
Closing sales price
|
|
$ |
28.23 |
|
|
$ |
24.79 |
|
|
$ |
27.73 |
|
|
$ |
26.26 |
|
|
$ |
30.26 |
|
|
$ |
20.40 |
|
|
$ |
22.48 |
|
|
$ |
26.21 |
|
As of March 10, 2006, there were 95 holders of record and
approximately 14,000 shareholders of our outstanding common
stock, which does not include the number of beneficial owners
whose common stock was held in street name.
We did not declare any dividends in 2005 or 2004 on our common
stock. In 2004, we paid $3.3 million in dividend arrearages
on our convertible preferred stock to Glencore.
Our revolving credit facility and the indenture governing our
senior notes contain restrictions which limit our ability to pay
dividends. Nordurals term loan facility contains
restrictions on Nordurals ability to pay dividends. More
information about the terms of our long-term borrowing
agreements is available at Note 6 to the Consolidated
Financial Statements included herein.
We do not anticipate paying cash dividends in the foreseeable
future.
|
|
Item 6. |
Selected Consolidated Financial Data |
The following table presents selected consolidated financial
data for the years indicated. The selected consolidated
historical balance sheet data as of each of the years ended
December 31, 2005 and 2004 and the selected consolidated
statement of operations data for each of the years ended
December 31, 2005, 2004, and 2003 is derived from our
consolidated financial statements audited by Deloitte &
Touche LLP included herein. The selected consolidated historical
balance sheet data as of each of the years ended
December 31, 2003, 2002 and 2001 and the selected
consolidated statement of operations data for each of the years
ended December 31, 2002 and 2001 is derived from our
consolidated financial statements audited by Deloitte &
Touche LLP which are not included herein. Our selected
historical results of operations include:
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|
the results of operations from the 80% interest in Hawesville
since we acquired it in April 2001; |
|
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|
the results of operations from the 20% interest in Hawesville
since we acquired it in April 2003; |
20
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|
|
|
the results of operations from Nordural since we acquired it in
April 2004; and |
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|
our equity in the earnings of our joint venture investments in
Gramercy Alumina LLC and St. Ann Bauxite Ltd. since we acquired
an interest in those companies in October 2004. |
Our results for these periods and prior periods are not fully
comparable to our results of operations for fiscal year 2005 and
are may not be indicative of our future financial position or
results of operations. The information set forth below should be
read in conjunction with Item 7, Managements
Discussion and Analysis of Financial Condition and Results of
Operations and Item 8, Financial Statements and
Supplementary Data and notes thereto.
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|
Year Ended December 31, | |
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| |
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|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
|
|
2005(1) | |
|
Restated(2,3) | |
|
Restated(3,4) | |
|
Restated(3) | |
|
Restated(3) | |
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| |
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| |
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| |
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| |
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| |
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|
(In thousands, except per share data) | |
Net sales revenue
|
|
$ |
1,132,362 |
|
|
$ |
1,060,747 |
|
|
$ |
782,479 |
|
|
$ |
711,338 |
|
|
$ |
654,922 |
|
Gross profit
|
|
|
161,677 |
|
|
|
185,287 |
|
|
|
43,370 |
|
|
|
20,360 |
|
|
|
19,129 |
|
Operating income
|
|
|
126,904 |
|
|
|
160,371 |
|
|
|
22,537 |
|
|
|
4,577 |
|
|
|
531 |
|
Income (loss) before cumulative effect of change in accounting
principle
|
|
|
(116,255 |
) |
|
|
33,482 |
|
|
|
3,922 |
|
|
|
(18,443 |
) |
|
|
(14,685 |
) |
Net income (loss)
|
|
|
(116,255 |
) |
|
|
33,482 |
|
|
|
(1,956 |
) |
|
|
(18,443 |
) |
|
|
(14,685 |
) |
Earnings (loss) per share:
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|
|
|
|
|
|
|
|
|
|
|
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Basic and Diluted:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative effect of change in accounting
principle
|
|
$ |
(3.62 |
) |
|
$ |
1.14 |
|
|
$ |
0.09 |
|
|
$ |
(0.99 |
) |
|
$ |
(0.79 |
) |
|
|
Cumulative effect of change in accounting principle
|
|
|
|
|
|
|
|
|
|
|
(0.28 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Net income (loss) per share Basic
|
|
$ |
(3.62 |
) |
|
$ |
1.14 |
|
|
$ |
(0.19 |
) |
|
$ |
(0.99 |
) |
|
$ |
(0.79 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per common share
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
0.15 |
|
|
$ |
0.20 |
|
Total assets
|
|
$ |
1,677,431 |
|
|
$ |
1,332,553 |
|
|
$ |
804,242 |
|
|
$ |
763,751 |
|
|
$ |
774,991 |
|
Total debt(5)
|
|
|
671,901 |
|
|
|
524,108 |
|
|
|
344,125 |
|
|
|
329,667 |
|
|
|
329,261 |
|
Long-term debt obligations(6)
|
|
|
488,505 |
|
|
|
330,711 |
|
|
|
336,310 |
|
|
|
321,852 |
|
|
|
321,446 |
|
Other information:
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|
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Shipments Primary aluminum:
|
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|
|
|
|
|
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|
Direct shipment pounds (000)
|
|
|
1,153,731 |
|
|
|
1,179,824 |
|
|
|
1,126,542 |
|
|
|
1,049,295 |
|
|
|
918,443 |
|
|
Toll shipment pounds (000)(7)
|
|
|
203,966 |
|
|
|
138,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average LME per pound
|
|
$ |
0.861 |
|
|
$ |
0.778 |
|
|
$ |
0.649 |
|
|
$ |
0.612 |
|
|
$ |
0.655 |
|
Average Midwest premium per pound
|
|
$ |
0.056 |
|
|
$ |
0.068 |
|
|
$ |
0.037 |
|
|
$ |
0.041 |
|
|
$ |
0.038 |
|
Average realized price per pound:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct shipments
|
|
$ |
0.86 |
|
|
$ |
0.83 |
|
|
$ |
0.69 |
|
|
$ |
0.68 |
|
|
$ |
0.71 |
|
|
Toll shipments
|
|
$ |
0.67 |
|
|
$ |
0.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Income (loss) before cumulative effect of change in accounting
principle and Net income (loss) include an after-tax charge of
$198.2 million, or $6.17 per diluted share for
mark-to-market losses
on forward contracts, which will settle during the period
2006-2015, that do not qualify for cash flow hedge accounting. |
21
|
|
(2) |
Income (loss) before cumulative effect of change in accounting
principle and Net income (loss) include an after-tax charge of
$30.4 million, or $1.06 per diluted share for a loss
on early extinguishment of debt, see Note 6 in the
Consolidated Financial Statements included herein. |
|
(3) |
During the second quarter of 2005, we changed our method of
inventory costing from
last-in-first-out
(LIFO) to
first-in-first-out
(FIFO). We retroactively restated the financial information for
the periods prior to 2005 to reflect this change in accounting
principle. |
|
(4) |
We adopted SFAS No. 143, Accounting for Asset
Retirement Obligations on January 1, 2003. As a
result, we recorded a one-time, non-cash charge of $5,878, for
the cumulative effect of a change in accounting principle. |
|
(5) |
Total debt includes all long-term debt obligations and any debt
classified as short-term obligations, including, IRBs and the
1.75% Convertible senior notes, excluding preferred stock. |
|
(6) |
Long-term debt obligations are all payment obligations under
long-term borrowing arrangements, excluding the current portion
of long-term debt. |
|
(7) |
Nordural began the
start-up of its
expansion capacity in February 2006. We expect the tolling
shipments to increase to 386 million pounds (175,000 metric
tons) in 2006 as a result of this increased capacity. |
|
|
Item 7. |
Managements Discussion and Analysis of Financial
Condition and Results of Operations |
The following discussion reflects our historical results of
operations, which do not include results from:
|
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|
|
the remaining 20% interest in Hawesville until acquired in April
2003; |
|
|
|
our ownership of Nordural until acquired in late April 2004, and; |
|
|
|
our ownership interest in the Gramercy assets until acquired in
October 2004. |
Accordingly, the results for fiscal years 2003 and 2004 are not
fully comparable to the results of operations for fiscal year
2005. Our historical results are not indicative of our current
business. You should read the following discussion in
conjunction with our consolidated financial statements included
herein.
Overview
We produce primary aluminum. The aluminum industry is cyclical
and the price of primary aluminum (which trades as a commodity)
is determined by global supply and demand. The key determinants
of our results of operations and cash flow from operations are
as follows:
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|
|
Our selling price is based on the LME price of primary aluminum
and fixed price sales contracts. |
|
|
|
Our facilities operate at or near capacity, and fluctuations in
volume, other than through acquisitions, generally are small. |
|
|
|
The principal components of cost of goods sold are alumina,
power and labor, which in aggregate were in excess of 70% of the
2005 cost of goods sold. Many of these costs are covered by
long-term contracts, as described below. |
Average realized price and cost of goods sold per pound shipped
are our key performance indicators. Revenue varies significantly
from period to period due to fluctuations in the LME and Midwest
price of aluminum. Any adverse changes in the conditions that
affect the market price of primary aluminum could have a
material adverse effect on our results of operations and cash
flows. Revenue is also impacted by our hedging activities.
Fluctuations in working capital are influenced by the LME and
Midwest price of primary aluminum and by the timing of cash
receipts and disbursements from major customers and suppliers.
Cost of goods sold, excluding alumina and energy costs, is
expected to remain relatively stable because our plants operate
near capacity and our major cost drivers are covered by
long-term contracts. Fluctuations in the cost of alumina are
expected as the pricing in these contracts is variable and,
except for the Gramercy alumina contract, based on LME prices.
22
The long-term success of our U.S. facilities will depend on
our ability to operate these facilities at planned capacity and
to obtain or renegotiate long-term power, alumina, and labor
contracts at economic rates. Our long-term alumina contracts for
Ravenswood and a portion of Mt. Hollys requirements expire
at the end of 2006. Given the tightening of supply in the
alumina market, we expect our alumina costs to increase.
Power contracts for our U.S. facilities provide for
primarily fixed priced power through 2010, subject to
adjustments for fuel costs for Mt. Holly (the power costs at Mt.
Holly were $12.4 million higher in 2005 than 2004,
primarily due to fuel cost adjustments), and a possible
adjustment arising out of a rate case for Ravenswood.
Hawesvilles unpriced power increases to 27% (130 MW)
in 2007 through 2010. We are currently reviewing our options for
the unpriced power. We expect rates for the unpriced power to be
significantly higher than the rates paid under our current
long-term power contracts. Power contract pricing for Nordural
is variable and based on LME prices.
Labor agreements with the United Steelworkers of America at our
Hawesville and Ravenswood facilities expire in 2006.
Through our ownership of Ravenswood, Hawesville and Nordural,
and our ownership interest in Mt. Holly, we have an annual
rated production capacity of approximately 617,000 metric tons
of primary aluminum. Our annual production capacity should
increase to 745,000 metric tons by the fourth quarter of 2006
with possible further increase to 785,000 metric tons by the end
of 2008 as a result of expansions at Nordural.
Recent Developments
|
|
|
Alumina Supply Contract with Trafigura |
On March 8, 2006, Century entered into a long-term alumina
supply contract with Trafigura for the supply of alumina.
Trafigura will supply approximately 125,000 metric tons per year
of alumina beginning January 1, 2007, increasing to 220,000
metric tons after January 2008. The contract pricing will be
variable, based on the LME price for primary aluminum.
|
|
|
Hawesville Electrical Power Supply Agreements |
On February 21, 2006, Century signed an agreement with
Kenergy for the supply of a substantial portion of the remaining
unpriced power requirements of Hawesville through 2006, at fixed
prices. Approximately 2.5% (or 12 MW) of Hawesvilles
power requirements though 2006 will be priced at variable market
rates.
On December 6, 2005, we signed a memorandum of
understanding with Big Rivers Electric Corporation and Kenergy
Corporation anticipating that the parties would negotiate a
contract to replace the current power supply service agreement
that provides power to Hawesville. The proposed new agreement,
if completed, would restructure and extend the existing power
supply contract from 2007 through 2023.
The start-up of
Nordurals expansion capacity began in February 2006. We
expect to reach full production capacity of 220,000 metric tons
annual production by the fourth quarter of 2006. The expansion
is expected to cost approximately $475 million.
In connection with the expansion, we amended several long-term
contracts with the Government of Iceland, local municipalities
and the Faxafloahafnir sf. We amended the Billiton Tolling
Agreement, increasing the volume to 130,000 metric tons per year
effective upon completion of the expansion. We have also agreed
to an LME-based 10-year
alumina tolling contract with Glencore for 90,000 metric tons of
the expansion capacity, effective upon the completion of the
expansion. Power for the expansion capacity will be purchased
under a long-term LME-based agreement with Hitaveita
Sudurnesja hf. (HS) and Orkuveita
Reykjavíkur (OR). Following completion of the
expansion, Nordural will have all the infrastructure and support
facilities necessary for further expansion to 260,000 metric
tons of annual production capacity. OR has agreed to deliver
power that will allow the further expansion to 260,000 metric
tons by late 2008. We are considering various options for
financing the additional capacity.
23
|
|
|
Icelandic Greenfield Joint Action Plan |
On November 8, 2005, we announced that Nordural signed a
joint action plan with the Reykjanesbaer Municipality, the
Invest in Iceland Agency, which is owned by the Ministry of
Industry and Commerce and the Trade Council of Iceland, to
further evaluate the possible construction of a new aluminum
smelter in the vicinity of Helguvik, approximately 30 miles
from the city of Reykjavik. The joint action plan will focus on
the development of an industrial site, securing power generation
and transmission, satisfying environmental regulations and
meeting other regulatory and administrative requirements. The
joint action plan is scheduled for completion no later than July
2006.
|
|
|
$100 Million Revolving Credit Facility |
On September 19, 2005, we entered into a new five-year
$100.0 million senior secured revolving credit facility
with a syndicate of lending institutions. The new credit
facility replaced our previous $100.0 million senior
secured revolving credit.
|
|
|
New Directors and Officers |
On January 25, 2006, our Board of Directors (the
Board) elected Jarl Berntzen to serve as a member of
the Board effective March 8, 2006.
On January 9, 2006, we announced that Michael A. Bless
would succeed David W. Beckley as Executive Vice President and
Chief Financial Officer of the Company upon
Mr. Beckleys retirement on January 23, 2006.
On December 13, 2005, Logan W. Kruger was appointed
President and Chief Executive Officer, succeeding Craig A. Davis
who retired effective December 31, 2005. Mr. Davis
continues to serve as the Chairman of our Board.
Key Long-Term Contracts
|
|
|
Primary Aluminum Sales Contracts |
We routinely enter into market priced contracts for the sale of
primary aluminum. A summary of Centurys long-term primary
aluminum sales contracts is provided below.
|
|
|
|
|
|
|
|
|
Contract |
|
Customer |
|
Volume |
|
Term |
|
Pricing |
|
|
|
|
|
|
|
|
|
Alcan Metal Agreement(1)
|
|
Alcan |
|
276 to 324 million pounds per year |
|
Through July 31, 2007 |
|
Variable, based on U.S. Midwest market |
Glencore Metal Agreement I(2)
|
|
Glencore |
|
50,000 metric tons per year |
|
January 2005 through December 31, 2009 |
|
Variable, LME-based |
Glencore Metal Agreement II(3)
|
|
Glencore |
|
20,000 metric tons per year |
|
January 2004 through December 31, 2013 |
|
Variable, based on U.S. Midwest market |
Southwire Metal Agreement(4)
|
|
Southwire |
|
240 million pounds per year (high purity molten aluminum) |
|
Through March 31, 2011 |
|
Variable, based on U.S. Midwest market |
|
|
|
|
|
60 million pounds per year (standard-grade molten aluminum) |
|
Through December 31, 2010 |
|
Variable, based on U.S. Midwest market |
|
|
(1) |
Alcan has the right, upon 12 months notice, to reduce its
purchase obligations by 50% under this contract. |
|
(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 |
24
|
|
|
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. |
|
(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)(2)
|
|
BHP Billiton |
|
130,000 mtpy |
|
Through December 2013 |
|
LME-based |
|
Glencore Tolling Agreement(3)(4)
|
|
Glencore |
|
90,000 mtpy |
|
Through July 2016 |
|
LME-based |
|
|
(1) |
Substantially all of Nordurals existing sales consist of
tolling revenues earned under a long-term Alumina Supply, Toll
Conversion and Aluminum Metal Supply Agreement (the
Billiton Tolling Agreement) between Nordural and a
subsidiary of BHP Billiton Ltd (together with its subsidiaries,
BHP Billiton). Under the Billiton Tolling Agreement,
Nordural receives an LME-based fee for the conversion of
alumina, supplied by BHP Billiton, into primary aluminum. |
|
(2) |
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. |
|
(3) |
Nordural entered into a
10-year LME-based
alumina tolling agreement with Glencore for 90,000 metric tons
of the expansion capacity at Nordural. The term of the agreement
is expected to begin July 2006. |
|
(4) |
In December 2005, Glencore assigned to Hydro 50% of its tolling
rights under this agreement for the period 2007 to 2010.
Nordural consented to the assignment. |
|
|
|
Key Long-Term Supply Agreements |
|
|
|
Alumina Supply Agreements |
We are party to long-term supply agreements with Glencore that
supply a fixed quantity of alumina to our Ravenswood and Mt.
Holly facilities at prices indexed to the price of primary
aluminum quoted on the LME. We recently entered into a long-term
supply agreement with Trafigura to supply alumina beginning in
2007. We are party to a long-term supply agreement with Gramercy
Alumina LLC that supplies a fixed quantity of alumina to
Hawesville at prices based on the alumina production costs at
the Gramercy refinery. A summary of these agreements is provided
below. Nordural toll converts alumina provided by BHP Billiton,
and will toll convert alumina provided by Glencore beginning in
2006.
|
|
|
|
|
|
|
Facility |
|
Supplier |
|
Term |
|
Pricing |
|
|
|
|
|
|
|
Ravenswood
|
|
Glencore |
|
Through December 31, 2006 |
|
Variable, LME-based |
|
Mt. Holly
|
|
Glencore |
|
Through December 31, 2006 (54% of requirement) |
|
Variable, LME-based |
|
Mt. Holly
|
|
Glencore |
|
Through January 31, 2008 |
|
Variable, LME-based |
|
|
|
|
(46% of requirement) |
|
|
|
Hawesville(1)
|
|
Gramercy Alumina |
|
Through December 31, 2010 |
|
Variable, Cost-based |
|
Undesignated(2)
|
|
Trafigura |
|
January 1, 2007 through |
|
Variable, LME-based |
|
|
|
|
December 31, 2013 |
|
|
25
|
|
(1) |
The alumina supply agreement with Gramercy Alumina LLC, which
was entered into on November 2, 2004, replaced our alumina
supply agreement with Kaiser. |
|
(2) |
The alumina supply contract with Trafigura will supply Century
with 125,000 metric tons in 2007 and 220,000 metric tons
beginning in 2008 through 2013. |
|
|
|
Electrical Power Supply Agreements |
We use significant amounts of electricity in the aluminum
production process. A summary of these power supply agreements
is provided below.
|
|
|
|
|
|
|
Facility |
|
Supplier |
|
Term |
|
Pricing |
|
|
|
|
|
|
|
Ravenswood(1)
|
|
Appalachian Power Company |
|
Continuous |
|
Fixed price |
Mt. Holly
|
|
South Carolina Public Service Authority |
|
Through December 31, 2015 |
|
Fixed price, with fuel cost adjustment clause through 2010;
subject to a new fixed price schedule after 2010 |
Hawesville
|
|
Kenergy |
|
Through December 31, 2010 |
|
Fixed price through 2006, 27% (or 130 MW) unpriced 2007
though 2010 |
Nordural(2)
|
|
Landsvirkjun |
|
Through 2019 |
|
Variable rate based on the LME price for primary aluminum |
|
|
(1) |
On February 18, 2005, Century of West Virginia signed an
agreement with Appalachian Power Company for the supply of
electricity to Ravenswood beginning January 1, 2006. The
agreement is continuous; however after an initial term of two
years Century may give 12 months notice of
cancellation. Power under the new agreement is priced under an
Appalachian Power tariff. Appalachian Power Company filed a rate
case on September 26, 2005, seeking increases in its tariff
rates. It has advised Century it expects those rates to become
effective July 1, 2006. We intend to contest the rate
increase. |
|
(2) |
In connection with the expansion of Nordural, Nordural entered
into contracts with Hitaveita Sudurnesja hf. and Orkuveita
Reykjavíkur for the supply of the power required for
130,000 metric tons of the expansion capacity. Nordural may
purchase additional electrical power under one of those
contracts to support the further expansion of the facility. The
rate for the power supplied under both contracts is LME-based. |
Our labor costs at Ravenswood and Hawesville are subject to the
terms of labor contracts which generally have provisions for
annual fixed increases in hourly wages and benefits adjustments.
The six labor unions represented at Nordural operate under a
labor contract that establishes wages and work rules for covered
employees. The employees at Mt. Holly are employed by Alcoa and
are not unionized. A summary of key labor agreements is provided
below.
|
|
|
|
|
Facility |
|
Organization |
|
Term |
|
|
|
|
|
Hawesville
|
|
USWA |
|
Through March 31, 2006 |
Ravenswood
|
|
USWA |
|
Through May 31, 2006 |
Mt. Holly
|
|
Not unionized |
|
Not Applicable |
Nordural(1)
|
|
Icelandic labor unions |
|
Through December 31, 2009 |
Gramercy
|
|
USWA |
|
Through September 30, 2010 |
St. Ann(2)
|
|
Jamaican labor unions |
|
Through December 31, 2007 |
26
|
|
(1) |
The Nordural union employees approved the current labor contract
in April 2005. The contracts provisions, including wage
increases and increases in pension payments, were retroactive to
January 1, 2005. |
|
(2) |
St. Ann has two labor unions, the University and Allied Workers
Union (the UAWU) and a smaller union covering
certain salaried employees. St. Ann renegotiated the UAWU labor
contracts in 2005 and the labor agreement will expire on
April 30, 2007. On February 14, 2006, the salaried
employees labor union agreed to a labor contract that will
expire on December 31, 2007. |
Application of Critical Accounting Policies
Our significant accounting policies are discussed in Note 1
of the consolidated financial statements. The preparation of the
financial statements requires that management make subjective
estimates, assumptions and judgments in applying these
accounting policies. Those judgments are normally based on
knowledge and experience about past and current events and on
assumptions about future events. Critical accounting estimates
require management to make assumptions about matters that are
highly uncertain at the time of the estimate and a change in
these estimates may have a material impact on the presentation
of our financial position or results of operations. Significant
judgments and estimates made by our management include expenses
and liabilities related to pensions and other postemployment
benefits and forward delivery contracts and financial
instruments.
|
|
|
Pension and Other Postemployment Benefit
Liabilities |
We sponsor various pension plans and also participate in a union
sponsored multi-employer pension plan for the collective
bargaining unit employees at Hawesville. The liabilities and
annual income or expense of our pension and other postemployment
benefit plans are determined using methodologies that involve
several actuarial assumptions, the most significant of which are
the discount rate and the long-term rate of asset return.
In developing our expected long-term rate of return assumption
for pension fund assets, we evaluated input from our actuaries,
including their review of asset class return expectations as
well as long-term inflation assumptions. Projected returns are
based on historical returns of broad equity and bond indices. We
also considered our historical
10-year compound
returns. We anticipate that our pension investments will
generate long-term rates of return of 9.0%. Our expected
long-term rate of return is based on an assumed asset allocation
of 65% equity funds and 35% fixed-income funds.
It is our policy to select a discount rate for purposes of
measuring obligations under the pension and retiree medical
plans by matching cash flows separately for each plan to yields
on zero coupon bonds. We use the Citigroup Pension Liability
Index for determining these yields.
The Citigroup Pension Liability Index was specifically developed
to meet the criteria set forth in paragraph 186 of
FAS 106. The published information at the end of each
calendar month includes spot rate yields (zero coupon bond yield
estimates) in half year increments for use in tailoring a
discount rate to a particular plans projected benefit cash
flows. The Citigroup Pension Liability Index rate represents the
discount rate developed from these spot rate yields, based on
the pattern and duration of the benefit payments of a typical,
large, somewhat mature pension plan.
The individual characteristics of each plan, including projected
cash flow patterns and payment durations, have been taken into
account, since discount rates are determined on a plan-by-plan
basis. We will generally select a discount rate rounded to the
nearest 0.25%, unless specific circumstances provide for a more
appropriate non-rounded rate to be used. We believe the
projected cash flows used to determine the Citigroup Pension
Liability Index rate provide a good approximation of the timing
and amounts of our defined benefits payments under our plans and
no adjustment to the Citigroup Pension Liability Index rate has
been made.
27
Therefore, as of December 31, 2005, Century has selected a
discount rate of 5.50% for all of the post retirement and
post-employment plans and 5.25% for our workers
compensation plans.
Although the duration of the Supplemental Executive Retirement
Benefits (SERB) Plan is slightly shorter than the
Salaried Plan, Century Aluminum will also use a 5.50% discount
rate for this plan. Because we do not believe that the
difference in duration is significant, and because the
obligations of the SERB are very small in comparison to the
other plans, we feel that the disclosure of a single rate that
was used for the majority of the obligations will enhance the
readers understanding of the employee benefit footnote,
rather than a weighted average rate that may complicate any
determinations the reader may have.
We have modified our approach for selecting a discount rate. For
prior valuations, we looked to the yields on high quality
corporate bond indices at the measurement date, such as
Moodys Aa, and made any adjustments, as appropriate, based
on differences between the index and our plans. We changed our
approach because the method now used provides for a more precise
method of determining an appropriate discount rate. In
accordance with SFAS No. 87, this change is a change
in basis of estimation, not a change in method of applying an
accounting principle.
Lowering the expected long-term rate of return by 0.5% (from
9.0% to 8.5%) would have increased our pension expense for the
year ended December 31, 2005 by approximately
$0.3 million. Lowering the discount rate assumptions by
0.5% would have increased our pension expense for the year ended
December 31, 2005 by approximately $0.4 million.
Century provides postemployment benefit plans that provide
health care and life insurance benefits for substantially all
retired employees of our U.S. based operations. FAS 106
requires the accrual of the estimated cost of providing
postretirement benefits during the working careers of those
employees who could become eligible for such benefits when they
retire. We fund these benefits as the retirees submit claims.
Measurement of our postretirement benefit obligations requires
the use of several assumptions about factors that will affect
the amount and timing of future benefit payments. The assumed
health care cost trend rates are the most critical assumptions
for measurement of the postretirement benefits obligation.
Changes in the health care cost trend rates have a significant
effect on the amounts reported for the health care benefit
obligations.
Century assumes medical inflation is initially 9%, declining to
5% over six years and thereafter. A one-percentage-point change
in the assumed health care cost trend rates would have the
following effects in 2006:
|
|
|
|
|
|
|
|
|
|
|
One | |
|
One | |
|
|
Percentage | |
|
Percentage | |
|
|
Point Increase | |
|
Point Decrease | |
|
|
| |
|
| |
|
|
(In thousands) | |
Effect on total of service and interest cost components
|
|
$ |
1,381 |
|
|
$ |
(1,275 |
) |
Effect on accumulated postretirement benefit obligation
|
|
$ |
32,915 |
|
|
$ |
(26,115 |
) |
|
|
|
Forward Delivery Contracts and Financial
Instruments |
We routinely enter into market-priced physical and fixed-priced
financial contracts for the sale of primary aluminum and the
purchase of raw materials in future periods. We apply the
provisions of SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, as amended,
in accounting for these types of contracts. For those physical
delivery contracts which management believes are probable of
future delivery, such contracts are classified as normal
purchases and normal sales and are not accounted for as
derivatives.
The aluminum-based financial and physical delivery contracts
that are derivatives, as provided for in current accounting
standards, are
marked-to-market using
the LME spot and forward market for primary aluminum. Because
there is no quoted futures market price for the
U.S. Midwest premium component of the market price for
primary aluminum, it is necessary for management to estimate the
U.S. Midwest premium. Fluctuations in the LME price of
primary aluminum have a significant impact on gains and losses
included in our financial statements from period to period.
Unrealized gains and losses are either included in Other
28
comprehensive income (loss) (for cash flow hedges) or Net gain
(loss) on forward contracts (for derivative instruments),
depending on criteria as provided for in the accounting
standards.
The forward natural gas purchase contracts are
marked-to-market using
the NYMEX spot and forward market for natural gas. Fluctuations
in the NYMEX price of natural gas can have a significant impact
on gains and losses included in our financial statements from
period to period. We have designated these forward contracts as
cash flow hedges for forecasted natural gas transactions in
accordance with the provisions of SFAS No. 133 (as
amended). We assess the effectiveness of these cash flow hedges
quarterly. The effective portion of the gains and losses are
recorded in other comprehensive income (loss) and subsequently
reclassified into earnings when the forecasted transaction
affects earnings. The ineffective portion of the gain or loss is
reported in earnings immediately.
The principal contracts affected by these standards and the
resulting effects on the financial statements are described in
Note 14 to the consolidated financial statements included
herein.
Results of Operations
The following table sets forth, for the years indicated, the
percentage relationship to net sales of certain items included
in our Statements of Operations. The following table includes
the results from our additional 20% interest in Hawesville since
its acquisition in April 2003, the results from our purchase of
Nordural since its acquisition in April 2004 and the results
from our interest in the Gramercy assets since its acquisition
in October 2004.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of Net Sales | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
|
|
Restated | |
|
Restated | |
Net sales
|
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
Cost of goods sold
|
|
|
(85.7 |
) |
|
|
(82.5 |
) |
|
|
(94.5 |
) |
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
14.3 |
|
|
|
17.5 |
|
|
|
5.5 |
|
Selling, general and administrative expenses
|
|
|
(3.1 |
) |
|
|
(2.4 |
) |
|
|
(2.6 |
) |
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
11.2 |
|
|
|
15.1 |
|
|
|
2.9 |
|
Interest expense
|
|
|
(2.3 |
) |
|
|
(3.8 |
) |
|
|
(5.5 |
) |
Interest income
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
|
|
Loss on early extinguishment of debt
|
|
|
(0.1 |
) |
|
|
(4.5 |
) |
|
|
|
|
Other expense
|
|
|
|
|
|
|
(0.1 |
) |
|
|
(0.1 |
) |
Net gain (loss) on forward contracts
|
|
|
(27.2 |
) |
|
|
(2.0 |
) |
|
|
3.3 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes, minority interest, equity in
earnings of joint venture and cumulative effect of change in
accounting principle
|
|
|
(18.3 |
) |
|
|
4.8 |
|
|
|
0.6 |
|
Income tax benefit (expense)
|
|
|
7.1 |
|
|
|
(1.7 |
) |
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority interest, equity in earnings of
joint venture and cumulative effect of accounting change
|
|
|
(11.2 |
) |
|
|
3.1 |
|
|
|
0.5 |
|
Minority interest
|
|
|
|
|
|
|
|
|
|
|
0.1 |
|
Equity in earnings of joint venture
|
|
|
0.9 |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative effect of change in accounting
principle
|
|
|
(10.3 |
) |
|
|
3.2 |
|
|
|
0.6 |
|
Cumulative effect of change in accounting principle
|
|
|
|
|
|
|
|
|
|
|
(0.8 |
) |
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(10.3 |
)% |
|
|
3.2 |
% |
|
|
(0.2 |
)% |
|
|
|
|
|
|
|
|
|
|
29
The following table sets forth, for the periods indicated, the
pounds and the average sales price per pound shipped:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Primary Aluminum | |
|
|
| |
|
|
Direct | |
|
Toll | |
|
|
| |
|
| |
|
|
Metric Tons | |
|
Pounds (000) | |
|
$/Pound | |
|
Metric Tons | |
|
Pounds (000) | |
|
$/Pound | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter
|
|
|
132,712 |
|
|
|
292,581 |
|
|
$ |
0.88 |
|
|
|
23,302 |
|
|
|
51,372 |
|
|
$ |
0.69 |
|
|
Third Quarter
|
|
|
129,555 |
|
|
|
285,619 |
|
|
|
0.83 |
|
|
|
23,435 |
|
|
|
51,665 |
|
|
|
0.64 |
|
|
Second Quarter
|
|
|
130,974 |
|
|
|
288,748 |
|
|
|
0.86 |
|
|
|
23,025 |
|
|
|
50,761 |
|
|
|
0.67 |
|
|
First Quarter
|
|
|
130,083 |
|
|
|
286,783 |
|
|
|
0.88 |
|
|
|
22,756 |
|
|
|
50,168 |
|
|
|
0.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
523,324 |
|
|
|
1,153,731 |
|
|
$ |
0.86 |
|
|
|
92,518 |
|
|
|
203,966 |
|
|
$ |
0.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter
|
|
|
133,940 |
|
|
|
295,287 |
|
|
$ |
0.87 |
|
|
|
23,324 |
|
|
|
51,421 |
|
|
$ |
0.64 |
|
|
Third Quarter
|
|
|
132,893 |
|
|
|
292,978 |
|
|
|
0.83 |
|
|
|
23,232 |
|
|
|
51,218 |
|
|
|
0.61 |
|
|
Second Quarter(2)
|
|
|
133,726 |
|
|
|
294,816 |
|
|
|
0.82 |
|
|
|
16,148 |
|
|
|
35,600 |
|
|
|
0.60 |
|
|
First Quarter
|
|
|
134,601 |
|
|
|
296,743 |
|
|
|
0.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
535,160 |
|
|
|
1,179,824 |
|
|
$ |
0.83 |
|
|
|
62,704 |
|
|
|
138,239 |
|
|
$ |
0.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
116,592 |
|
|
|
257,040 |
|
|
$ |
0.70 |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
Second Quarter(1)
|
|
|
131,552 |
|
|
|
290,023 |
|
|
|
0.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
132,706 |
|
|
|
292,567 |
|
|
|
0.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter
|
|
|
130,141 |
|
|
|
286,912 |
|
|
|
0.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
510,991 |
|
|
|
1,126,542 |
|
|
$ |
0.69 |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The table includes the results from our additional 20% interest
in Hawesville since its acquisition in April 2003. |
|
(2) |
The table includes the results from our purchase of Nordural
since its acquisition in April 2004. |
|
|
|
Year Ended December 31, 2005 Compared to Year Ended
December 31, 2004 |
Net sales: Net sales for the year ended December 31,
2005 increased $71.6 million or 7% to $1,132 million.
Higher price realizations for primary aluminum in 2005, due to
an improved LME price and Midwest premium for primary aluminum,
contributed an additional $41.7 million in sales. This
amount was partially offset by a $21.5 million decrease in
direct shipment revenues. Direct shipments were
26.1 million pounds less than the previous year due to
reduced pot count at Hawesville and fewer days in 2005 versus
2004. The additional revenue provided by Nordural tolling
activities for the year ended December 31, 2005 contributed
$51.4 million to the 2005 net sales increase.
Gross profit: For the year ended December 31, 2005,
gross profit decreased $23.6 million to
$161.7 million. Improved price realizations net of
increased alumina costs improved gross profit by
$42.6 million. Increased shipment volume, the result of the
Nordural acquisition, contributed $11.6 million in
additional gross profit. Offsetting these gains were
$77.8 million in net cost increases comprised of: higher
raw material costs and replacement of pot cells,
$22.9 million; increased cost of Gramercy alumina,
$19.5 million; higher power and natural gas costs,
$17.6 million; increased net amortization and depreciation
charges, $6.2 million; increased pension and other
post-employment benefit accruals, $3.3 million and other
increased spending, $8.3 million.
Selling, general and administrative expenses: Selling,
general and administrative expenses for the year ended
December 31, 2005 increased $9.9 million to
$34.8 million relative to the same period in 2004.
30
Approximately 63%, or $6.2 million of the increase, was a
result of increased compensation and pension expense, with the
remaining increase associated with increased professional fees
and other general expenses. In addition, allowance for bad debts
was reduced $0.6 million in 2004, reflecting the settlement
of a claim.
Interest expense, net: Interest expense for the year
ended December 31, 2005 declined $14.9 million to
$24.3 million. The reduction in interest expense was a
direct result of our refinancing activities during the year 2004.
Net gain/loss on forward contracts: For the year ended
December 31, 2005, net loss on forward contracts was
$309.7 million as compared to a net loss on forward
contracts of $21.5 million for the same period in 2004. The
loss reported for the year ended December 31, 2005 was
primarily a result of
mark-to-market losses
associated with our long term financial sales contracts with
Glencore that do not qualify for cash flow hedge accounting. The
losses reported for the year ended December 31, 2004
primarily relate to the early termination of a fixed price
forward sales contract with Glencore.
Loss on early extinguishment of debt: For the year ended
December 31, 2005, we recorded a loss of $0.8 million
with the redemption of the remaining $9.9 million of
outstanding 11.75% senior secured first mortgage notes. For the
year ended December 31, 2004, we recorded a loss of
$47.4 million for the cost of tendering the first mortgage
notes.
Tax provision: We recorded an income tax benefit for the
year ended December 31, 2005 of $80.7 million, a
change of $98.9 million from the recorded tax expense of
$18.2 million for the year ended December 31, 2004.
The change in the tax provision is due to changes in the income
(loss) before income taxes and the discontinuance of accrual for
United States taxes on Nordurals earnings, resulting from
a decision made in 2005 that such earnings would remain invested
outside the United States indefinitely. These items were
partially offset by changes in equity in earnings of joint
ventures.
Equity in earnings of joint venture: Equity in earnings
from the Gramercy and SABL investments, which were acquired on
October 1, 2004, was $10.7 million for the year ended
December 31, 2005. These earnings represent our share of
profits from third-party bauxite, hydrate and chemical grade
alumina sales.
|
|
|
Year Ended December 31, 2004 Compared to Year Ended
December 31, 2003 |
Net sales. Net sales for the year ended December 31,
2004 increased $278.3 million or 36% to
$1,060.7 million. Higher price realizations for primary
aluminum in 2004, due to an improved LME price and Midwest
premium for primary aluminum, contributed an additional
$155.4 million in sales. Shipment volume increased
191.5 million pounds, primarily associated with the
Nordural acquisition beginning in late April 2004 and the
acquisition of the additional 20% interest in Hawesville
beginning in April 2003. Tolling revenues from the Nordural
acquisition contributed an additional $85.4 million in net
sales. The remaining $37.5 million increase was associated
with increased direct shipment volumes.
Gross profit. For the year ended December 31, 2004,
gross profit improved $141.9 million to
$185.3 million. Improved price realizations net of
increased alumina costs improved gross profit by
$120.9 million with increased shipment volume, primarily a
result of Nordural acquisition in April 2004 and the acquisition
of the additional 20% interest in Hawesville beginning in April
2003, contributing $36.8 million in additional gross
profit. Offsetting these gains were increased power costs due to
lower efficiencies and price, $7.7 million; raw material
quality issues, $4.6 million; and costs associated with the
replacement of pot cells and its effect on operational
performance, $3.5 million.
Selling, general and administrative expenses. Selling,
general and administrative expenses for the year ended
December 31, 2004 increased $4.1 million from the same
period in 2003. The increase was primarily a result of incentive
compensation expense accruals and increased fees associated with
Sarbanes Oxley Section 404 compliance work during the year.
Interest expense, net: Interest expense during the year
ended December 31, 2004 declined $4.3 million to
$39.2 million. The change in interest expense was a direct
result of our refinancing activities in 2004.
31
Net gain/loss on forward contracts. For the year ended
December 31, 2004, net loss on forward contracts was
$21.5 million as compared to a net gain on forward
contracts of $25.7 million for the same period in 2003. The
loss and gain reported for the years ended December 31,
2004 and December 31, 2003, respectively, primarily relate
to the early termination in 2003 of a fixed price forward sales
contract with Glencore and the improved LME price and Midwest
premium for primary aluminum in the current period.
Loss on early extinguishment of debt. For the year ended
December 31, 2004, we recorded a loss on early
extinguishment of debt of $47.4 million for the one-time
cost of tendering the first mortgage notes.
Tax provision. Income tax expense for the year ended
December 31, 2004 increased $17.1 million due to the
changes in income before income taxes discussed above.
Equity in earnings of joint venture: Equity in earnings
from the Gramercy assets, which were acquired on October 1,
2004, was $0.8 million in the current period.
Liquidity and Capital Resources
Our principal sources of liquidity are cash flow from operations
and available borrowings under our revolving credit facility and
Nordurals term loan facility. We believe these sources of
cash will be sufficient to meet our near-term working capital
needs. We have not determined the sources of funding for our
long-term debt repayment requirements; however, it is likely
that these sources would include cash flow from operations,
available borrowing under our revolving credit facility and to
the extent necessary and/or economically attractive, future
financial market activities. Our principal uses of cash are
operating costs, payments of interest on our outstanding debt,
the funding of capital expenditures and investments in related
businesses, working capital and other general corporate
requirements.
As of December 31, 2005, we had $671.9 million of
indebtedness outstanding, including $175.0 million of
principal under our 1.75% convertible senior notes,
$250.0 million of principal under our 7.5% senior
notes, $222.0 million of indebtedness outstanding under the
term loan outstanding at Nordural, $8.1 million of
borrowings under our revolving credit facility,
$7.8 million of principal under our industrial revenue
bonds, and $9.0 million indebtedness outstanding for
various site loans at Nordural. More information concerning the
various debt instruments and our borrowing arrangements is
available in Note 6 to the Consolidated Financial
Statements included herein.
Adjusted Working Capital Calculation as of
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
|
|
|
Restated | |
|
|
(Dollars in thousands) | |
Current assets
|
|
$ |
294,493 |
|
|
$ |
285,774 |
|
Current liabilities
|
|
|
(467,045 |
) |
|
|
(387,458 |
) |
|
|
|
|
|
|
|
Working capital
|
|
|
(172,552 |
) |
|
|
(101,684 |
) |
|
|
|
|
|
|
|
Adjustments(1):
|
|
|
|
|
|
|
|
|
|
Convertible senior notes
|
|
|
175,000 |
|
|
|
175,000 |
|
|
Industrial revenue bonds
|
|
|
7,815 |
|
|
|
7,815 |
|
|
|
|
|
|
|
|
Adjusted working capital
|
|
$ |
10,263 |
|
|
$ |
81,131 |
|
|
|
|
|
|
|
|
|
|
(1) |
The convertible senior notes mature in 2024. The industrial
revenue bonds mature in 2028. Due to certain features of these
debt instruments, they are classified as current liabilities.
For example, the convertible senior notes are classified as
current because they may be converted by the holder at any time. |
Our adjusted working capital decreased during 2005 because our
Due to Affiliates liability increased, primarily as a result of
the mark-to-market of
derivative contracts with Glencore that settle in 2006. We
expect working capital to increase as the Nordural expansion
comes on line in 2006. With the exception of
32
Nordural and
mark-to-market
adjustments on our derivative contracts, we do not anticipate
significant changes in working capital.
Capital expenditures for 2005 were $298.1 million,
$280.1 million of which was related to the expansion
project at Nordural, with the balance principally related to
upgrading production equipment, maintaining facilities and
complying with environmental requirements. We anticipate capital
expenditures of approximately $15.0 to $20.0 million in
2006, exclusive of the Nordural expansion. The Nordural
expansion will require approximately $134.0 million of
capital expenditures in 2006. Through December 31, 2005, we
had outstanding capital commitments related to the Nordural
expansion of $89.9 million. Our cost commitments for the
Nordural expansion may materially change depending on the
exchange rate between the U.S. dollar and certain foreign
currencies, principally the euro and the Icelandic krona. As of
December 31, 2005, we had no hedges to mitigate our foreign
currency exposure.
Our Statements of Cash Flows for the years ended
December 31, 2005, 2004 and 2003 are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
(Dollars in thousands) | |
Net cash provided by operating activities
|
|
$ |
134,936 |
|
|
$ |
105,828 |
|
|
$ |
87,379 |
|
Net cash used in investing activities
|
|
|
(305,339 |
) |
|
|
(275,286 |
) |
|
|
(78,695 |
) |
Net cash (used in) provided by financing activities
|
|
|
143,987 |
|
|
|
185,422 |
|
|
|
(25,572 |
) |
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
$ |
(26,416 |
) |
|
$ |
15,964 |
|
|
$ |
(16,888 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash from operating activities of $134.9 million in
2005 was $29.1 million higher than the same period in 2004.
Exclusive of the $50.3 million cash payment in 2004 for the
tender premium plus accrued interest for the refinancing of our
first mortgage notes, net cash from operating activities
decreased $21.2 million in 2005. This decrease was a direct
result of lower gross profit, offset by lower debt service costs
related to the 2004 debt refinancing.
Net cash from operating activities of $105.8 million in
2004 was $18.4 million higher than the same period in 2003.
Exclusive of the $35.5 million settlement received in 2003
from the termination of a primary aluminum sales contract and
entering into the Glencore Metal Agreement I for the years 2005
through 2009 and the $50.3 million cash payment in 2004 for
the tender premium plus accrued interest for the refinancing of
our first mortgage notes, net cash from operating activities
increased $104.2 million in 2004. This increase was a
direct result of improved price realizations and the added
margin contributions from Nordural which was acquired in April
2004.
Net cash used in investing activities in 2005 was
$305.3 million, an increase of $30.0 million from
2004. Exclusive of the net acquisition cost of $7.0 million
for a Southwire contingency payment in April 2005, related to
the Hawesville acquisition in 2001, the combined net acquisition
cost of Nordural in April 2004 and the Gramercy assets in
October 2004 of $198.6 million, net cash used in investing
activities increased $221.6 million. Purchases of property,
plant and equipment, including the Nordural expansion costs,
were $298.1 million in 2005 as compared to the purchases of
property, plant and equipment of $75.0 million in 2004.
Centurys net cash used in investing activities in 2004 was
$275.3 million, an increase of $196.6 million from
2003. The combined net acquisition cost of Nordural in April
2004 and the Gramercy assets in October 2004 was
$198.6 million as compared to the net acquisition cost for
the additional 20% interest in Hawesville in April 2003 of
$59.8 million. Purchases of property, plant and equipment,
including the Nordural expansion costs, were $75.0 million
in 2004 as compared to the 2003 purchases of property, plant and
equipment of $18.9 million.
33
Net cash provided by financing activities during 2005 was
$144.0 million, a decrease of $41.4 million from the
previous year. During 2005, we borrowed $222.9 million
under Nordurals new term loan facility, borrowed
$8.1 million under our revolving credit facility, and
received proceeds from the issuance of common stock of
$1.4 million. The additional borrowings were partially
offset by debt repayments of $83.3 million, consisting of
payments of $9.9 million for the remaining first mortgage
notes tendered in a debt refinancing, $68.5 million for the
prior Nordural term loan facility and $4.9 million for
other miscellaneous debt payments. Additionally, we paid
$5.1 million of financing fees for Nordurals new term
loan facility and our revolving credit facility.
Net cash provided by financing activities during 2004 was
$185.4 million, an increase of $211.0 million from the
previous year. The increase was primarily due to the issuance of
$425.9 million of debt, and the issuance of
$215.8 million of common stock. This increase was partially
offset by debt repayments of $439.9 million, consisting of
$315.1 million for the first mortgage notes tendered in a
debt refinancing, $106.9 million for the Nordural term loan
facility, $14.0 million for the repayment of the Glencore
note, and $3.9 million for other miscellaneous debt
payments. Additionally, Century paid $13.1 million of
financing fees for the debt issued in the fourth quarter of 2004
and $3.3 million payment of accrued preferred dividends in
the second quarter of 2004.
Contractual Obligations
In the normal course of business, we have entered into various
contractual obligations that will be settled in cash. These
obligations consist primarily of long-term debt obligations and
purchase obligations. The expected future cash flows required to
meet these obligations are shown in the table below. The
purchase obligations consist of long-term supply contracts for
alumina and electrical power. The Pension and OPEB obligations
includes the estimated benefit payments through 2015 for our
pension, SERB, other postretirement benefits plans. Other
long-term liabilities include asset retirement obligations and
workers compensation liabilities. More information is
available about these contractual obligations in the notes to
the Consolidated Financial Statements included herein.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period | |
|
|
| |
|
|
Total | |
|
2006 | |
|
2007 | |
|
2008 | |
|
2009 | |
|
2010 | |
|
Thereafter | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in millions) | |
Long-term debt(1)
|
|
$ |
671.9 |
|
|
$ |
0.6 |
|
|
$ |
30.1 |
|
|
$ |
28.6 |
|
|
$ |
28.7 |
|
|
$ |
145.3 |
|
|
$ |
438.6 |
|
Estimated interest payments(2)
|
|
|
272.1 |
|
|
|
37.9 |
|
|
|
37.0 |
|
|
|
35.2 |
|
|
|
34.3 |
|
|
|
25.7 |
|
|
|
102.0 |
|
Purchase obligations(3)
|
|
|
1,565.8 |
|
|
|
427.1 |
|
|
|
298.8 |
|
|
|
220.1 |
|
|
|
214.7 |
|
|
|
213.0 |
|
|
|
192.1 |
|
OPEB obligations(4)
|
|
|
76.9 |
|
|
|
5.0 |
|
|
|
5.6 |
|
|
|
6.2 |
|
|
|
6.9 |
|
|
|
7.6 |
|
|
|
45.6 |
|
Other long-term liabilities(5)
|
|
|
189.3 |
|
|
|
7.1 |
|
|
|
6.5 |
|
|
|
10.4 |
|
|
|
6.3 |
|
|
|
6.3 |
|
|
|
152.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
2,776.0 |
|
|
$ |
477.7 |
|
|
$ |
378.0 |
|
|
$ |
300.5 |
|
|
$ |
290.9 |
|
|
$ |
397.9 |
|
|
$ |
931.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Debt includes principal repayments on the 7.5% senior
notes, 1.75% convertible senior notes, the IRBs, borrowing
on our revolving credit facility, and the Nordural debt. |
|
(2) |
Estimated interest payments on our long-term debt are based on
several assumptions, including the borrowing under the term loan
facility for the Nordural expansion project and assumptions for
the interest rates for our variable rate debt. Our variable rate
debt is based primarily on the Eurodollar rate plus an
applicable margin. We assume that the Eurodollar rate will be
4.50% in 2006 increasing to 5.00% in 2009 and remaining steady
thereafter. The IRBs interest rate is variable and our
estimated future payments based on a rate of 3.30%. In addition,
we assume the 7.5% senior notes due 2014 and
1.75% convertible senior notes due in 2024 will remain
outstanding until their respective due dates. The borrowings on
our revolving credit facility are assumed to remain outstanding
through 2010 (the term of the credit facility) and the interest
rate is assumed to be 7.0%. |
34
|
|
(3) |
Purchase obligations include long-term alumina, electrical power
contracts, anode contracts and the Nordural expansion project
commitments. Nordurals power contracts and our domestic
alumina contracts, except for our Gramercy alumina contract, are
priced as a percentage of the LME price of primary aluminum. We
assumed an LME price of $1,900 per metric ton for 2006,
$1,800 per metric ton for 2007, $1,650 per metric ton
for 2008 and $1,550 per metric ton thereafter for purposes
of calculating expected future cash flows for these contracts.
Our Gramercy long-term alumina contract has variable cost-based
pricing. We used GAL cost forecasts to calculate the expected
future cash flows for this contract. The Nordural anode contract
and some Nordural expansion contract commitments are denominated
in euros. We assumed a $1.20/ Euro conversion rate to estimate
the obligations under these contracts. |
|
(4) |
Includes the estimated benefit payments for our OPEB obligations
through 2015, which are unfunded. |
|
(5) |
Other long-term liabilities include our expected pension
contributions, SERB benefit payments, workers compensation
benefit payments, estimated tax payments and asset retirement
obligations. Expected benefit payments for the SERB plans, which
are unfunded, are included for 2006 through 2015. Our estimated
contributions to the pension plans are included for 2006.
Estimated contributions for 2007 and beyond are not included in
the table because these estimates would be heavily dependent
upon assumptions about future events, including, among other
things, future regulatory changes, changes to tax laws, future
interest rates levels and future return on plan assets. Asset
retirement obligations consist primarily of disposal costs for
spent potliner. The amount and timing of these costs are
estimated based on the number of operating pots and their
expected pot life. |
Environmental Expenditures and Other Contingencies
We have incurred and in the future will continue to incur
capital expenditures and operating expenses for matters relating
to environmental control, remediation, monitoring and compliance.
The aggregate environmental related accrued liabilities were
$0.5 million and $0.6 million at December 31,
2005 and December 31, 2004, respectively. We believe that
compliance with current environmental laws and regulations is
not likely to have a material adverse effect on our financial
condition, results of operations or liquidity; however,
environmental laws and regulations may change, and we may become
subject to more stringent environmental laws and regulations in
the future.
We have planned environmental capital expenditures of
approximately $1.8 million for 2006. In addition, we expect
to incur operating expenses relating to environmental matters of
approximately $11.4 million, $11.9 million, and
$12.5 million in 2006, 2007 and 2008, respectively. These
amounts do not include any projected capital expenditures or
operating expenses for our joint venture interest in the
Gramercy assets. As part of our general capital expenditure
plan, we also expect to incur capital expenditures for other
capital projects that may, in addition to improving operations,
reduce certain environmental impacts. See Note 13
Commitments and Contingencies.
Centurys income tax returns are periodically examined by
various tax authorities. We are currently under audit by the
Internal Revenue Service (IRS) for the tax years
through 2002. In connection with such examinations, the IRS has
raised issues and proposed tax deficiencies. We are reviewing
the issues raised by the IRS and plan to contest the proposed
tax deficiencies. We believe that our tax position is
well-supported and, based on current information, do not believe
that the outcome of the tax audit will have a material impact on
our financial condition or results of operations.
We are a defendant in several actions relating to various
aspects of our business. While it is impossible to predict the
ultimate disposition of any litigation, we do not believe that
any of these lawsuits, either individually or in the aggregate,
will have a material adverse effect on our financial condition,
results of operations or liquidity. See Item 3, Legal
Proceedings.
35
Recently Adopted Accounting Standards
In March 2005, the FASB issued Interpretation No.
(FIN) 47, Accounting for Conditional Asset
Retirement Obligations, which clarifies certain guidance
used in SFAS No. 143, Accounting for Asset
Retirement Obligations. We adopted FIN 47 in December
2005 and recorded an adjustment to our asset retirement
obligations.
When we initially adopted SFAS No. 143 in 2003, we
recognized asset retirement obligations related to the disposal
of spent pot liner used in the reduction cells of our
facilities. In our initial calculation of the asset retirement
obligations, we included our costs to remove the spent potliner
as part of our asset retirement obligations. Under FIN 47,
these removal costs should not have been included in our asset
retirement obligations and should have been accounted for as
maintenance costs. The adoption of FIN 47 did not have a
material effect on our financial position, statement of
operations, and liquidity.
In December 2004, the Financial Accounting Standards Board
(FASB) issued SFAS No. 123(R), Share
Based Payment. This Statement is a revision of FASB
Statement No. 123, Accounting for Stock-Based
Compensation and supersedes Accounting Principles Board
(APB) Opinion No. 25, Accounting for
Stock Issued to Employees. This statement focuses
primarily on accounting for transactions in which a company
obtains services in share-based payment transactions. This
Statement will require us to recognize the grant date fair value
of an award of equity-based instruments to employees and the
cost will be recognized over the period in which the employees
are required to provide service. The Statement is effective for
fiscal year 2006 and thereafter.
We have adopted SFAS No. 123(R) effective
January 1, 2006. We have elected to use the Modified
Prospective Application Method. Under this method, we will
recognize the fair value of employee stock-based compensation
awards as compensation cost beginning January 1, 2006.
SFAS No. 123(R) will apply to new awards granted
subsequent to our adoption and for any portion of previous
awards that had not vested as of January 1, 2006. The
compensation cost recognized from the unvested awards will be
based on the original grant-date fair value used to calculate
our pro forma financial disclosure under SFAS No. 123.
We would recognize stock-based compensation expense before
income tax benefit of approximately $3.3 million
($1.8 million in 2006, $1.2 million in 2007, and
$0.3 million in 2008) related to the stock option awards
outstanding at December 31, 2005.
Recently Issued Accounting Standards
In November 2004, the FASB issued SFAS No. 151,
Inventory Costs. This Statement amends the guidance
in Accounting Research Bulletin No. 43,
Chapter 4, Inventory Pricing to clarify the
accounting treatment for certain inventory costs. In addition,
the Statement requires that the allocation of production
overheads be based on the facilities normal production
capacity. The Statement is effective for fiscal year 2006 and
thereafter. We are currently assessing the Statement and have
not yet determined the impact of adopting SFAS No. 151
on our financial position and results of operations,
|
|
Item 7A. |
Quantitative and Qualitative Disclosures about Market
Risk |
Commodity Price Sensitivity
We are exposed to the price of primary aluminum. We manage our
exposure to fluctuations in the price of primary aluminum by
selling aluminum at fixed prices for future delivery and through
financial instruments, as well as by purchasing alumina under
supply contracts with prices tied to the same indices as our
aluminum sales contracts (the LME price of primary aluminum).
Our risk management activities do not
36
include any trading or speculative transactions. The following
table shows our forward priced sales as a percentage of our
estimated production capacity.
|
|
|
Forward Priced Sales as of December 31, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006(1)(2) | |
|
2007(2) | |
|
2008(2) | |
|
2009(2) | |
|
2010(2) | |
|
2011-2015(2) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Base Volume:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pounds (000)
|
|
|
437,381 |
|
|
|
374,565 |
|
|
|
240,745 |
|
|
|
231,485 |
|
|
|
231,485 |
|
|
|
826,733 |
|
|
Metric tons
|
|
|
198,393 |
|
|
|
169,900 |
|
|
|
109,200 |
|
|
|
105,000 |
|
|
|
105,000 |
|
|
|
375,000 |
|
|
Percent of capacity
|
|
|
28 |
% |
|
|
22 |
% |
|
|
14 |
% |
|
|
14 |
% |
|
|
14 |
% |
|
|
10 |
% |
Potential additional volume(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pounds (000)
|
|
|
55,556 |
|
|
|
111,113 |
|
|
|
220,903 |
|
|
|
231,485 |
|
|
|
231,485 |
|
|
|
826,733 |
|
|
Metric tons
|
|
|
25,200 |
|
|
|
50,400 |
|
|
|
100,200 |
|
|
|
105,000 |
|
|
|
105,000 |
|
|
|
375,000 |
|
|
Percent of capacity
|
|
|
4 |
% |
|
|
7 |
% |
|
|
13 |
% |
|
|
14 |
% |
|
|
14 |
% |
|
|
10 |
% |
|
|
(1) |
The forward priced sales in 2006 exclude January 2006 shipments
to customers that are priced based upon the prior months
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. |
Apart from the contracts described under Key Long-Term
Primary Aluminum Sales Contracts, we had forward delivery
contracts to sell 107,546 metric tons and 113,139 metric tons of
primary aluminum at December 31, 2005 and December 31,
2004, respectively. Of these forward delivery contracts, we had
fixed price commitments to sell 4,643 metric tons and 6,033
metric tons of primary aluminum at December 31, 2005 and
December 31, 2004, respectively, of which, 186 metric tons
at December 31, 2005 were with Glencore (none in 2004).
|
|
|
Financial Sales Agreements |
To mitigate the volatility in our unpriced forward delivery
contracts, we enter into fixed price financial sales contracts,
which settle in cash in the period corresponding to the intended
delivery dates of the forward delivery contracts. Certain of
these fixed price financial sales contracts are accounted for as
cash flow hedges depending on our designation of each contract
at its inception. Glencore is our counterparty for all of these
financial sales contracts.
Substantially all of the contracts accounted for as derivatives
contain clauses that trigger additional shipment volume when the
market price for a contract month is above the contract ceiling
price. If the market price exceeds the ceiling price for all
contract months through 2015, the maximum additional shipment
volume would be 760,800 metric tons. These contracts will be
settled monthly. We had no fixed price financial contracts to
purchase aluminum at December 31, 2005 or December 31,
2004.
37
Primary Aluminum Financial Sales Contracts as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005 | |
|
December 31, 2004 | |
|
|
| |
|
| |
|
|
Cash Flow | |
|
|
|
Cash Flow | |
|
|
|
|
Hedges | |
|
Derivatives | |
|
Total | |
|
Hedges | |
|
Derivatives | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Metric Tons) | |
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
193,083 |
|
|
|
|
|
|
|
193,083 |
|
2006
|
|
|
142,750 |
|
|
|
51,000 |
|
|
|
193,750 |
|
|
|
142,750 |
|
|
|
25,200 |
|
|
|
167,950 |
|
2007
|
|
|
119,500 |
|
|
|
50,400 |
|
|
|
169,900 |
|
|
|
119,500 |
|
|
|
50,400 |
|
|
|
169,900 |
|
2008
|
|
|
9,000 |
|
|
|
100,200 |
|
|
|
109,200 |
|
|
|
9,000 |
|
|
|
75,000 |
|
|
|
84,000 |
|
2009
|
|
|
|
|
|
|
105,000 |
|
|
|
105,000 |
|
|
|
|
|
|
|
75,000 |
|
|
|
75,000 |
|
2010
|
|
|
|
|
|
|
105,000 |
|
|
|
105,000 |
|
|
|
|
|
|
|
75,000 |
|
|
|
75,000 |
|
2011-2015
|
|
|
|
|
|
|
375,000 |
|
|
|
375,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
271,250 |
|
|
|
786,600 |
|
|
|
1,057,850 |
|
|
|
464,333 |
|
|
|
300,600 |
|
|
|
764,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additionally, to mitigate the volatility of the natural gas
markets, we enter into fixed price financial purchase contracts,
accounted for as cash flow hedges, which settle in cash in the
period corresponding to the intended usage of natural gas. One
decatherm (DTH) is equivalent to one million British
Thermal Units (BTU).
Natural Gas Fixed Price Financial Purchase Contracts as
of:
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
|
(Thousands of DTH) | |
2005
|
|
|
|
|
|
|
2,880 |
|
2006
|
|
|
1,680 |
|
|
|
480 |
|
2007
|
|
|
780 |
|
|
|
480 |
|
2008
|
|
|
480 |
|
|
|
480 |
|
|
|
|
|
|
|
|
Total
|
|
|
2,940 |
|
|
|
4,320 |
|
|
|
|
|
|
|
|
On a hypothetical basis, a $100 per metric ton increase in
the market price of primary aluminum is estimated to have an
unfavorable impact of $17.4 million after tax on
accumulated other comprehensive income for the contracts
designated as cash flow hedges, and $50.3 million on net
income for the contracts designated as derivatives, for the
period ended December 31, 2005 as a result of the forward
primary aluminum financial sales contracts outstanding at
December 31, 2005.
On a hypothetical basis, a $1.00 per DTH decrease in the
market price of natural gas is estimated to have an unfavorable
impact of $1.9 million after tax on accumulated other
comprehensive income for the period ended December 31, 2005
as a result of the forward natural gas financial purchase
contracts outstanding at December 31, 2005.
Our metals and natural gas risk management activities are
subject to the control and direction of senior management. These
activities are regularly reported to Centurys board of
directors.
This quantification of our exposure to the commodity price of
aluminum is necessarily limited, as it does not take into
consideration our inventory or forward delivery contracts, or
the offsetting impact on the sales price of primary aluminum
products. Because all of our alumina contracts, except
Hawesville alumina contract with Gramercy are indexed to the LME
price for primary aluminum, they act as a natural hedge for
approximately 10% of our production. As of December 31,
2005, approximately 49% (excluding 25,200 metric tons of
potential additional volume under our derivative sales
contracts) of our production for 2006 was either hedged by the
alumina contracts, Nordural electrical power and tolling
contracts, and/or by fixed price forward delivery and financial
sales contracts.
38
Nordural. Presently, substantially all of Nordurals
revenues are derived from a Toll Conversion Agreement with a
subsidiary of BHP Billiton Ltd. whereby Nordural converts
alumina provided to it by BHP Billiton into primary aluminum for
a fee based on the LME price for primary aluminum. Because of
this agreement, Nordurals revenues are subject to the risk
of decreases in the market price of primary aluminum; however,
Nordural is not exposed to increases in the price for alumina,
the principal raw material used in the production of primary
aluminum. In addition, under its power contract, Nordural
purchases power at a rate which is a percentage of the LME price
for primary aluminum, providing Nordural with a natural hedge
against downswings in the market for primary aluminum.
Nordural is exposed to foreign currency risk due to fluctuations
in the value of the U.S. dollar as compared to the euro and
the Icelandic krona. Under its Toll Conversion and power
contracts, Nordurals revenues and power costs are based on
the LME price for primary aluminum, which is denominated in
U.S. dollars. There is no currency risk associated with
these contracts. However, Nordurals labor costs are
denominated in Icelandic krona and a portion of its anode costs
are denominated in euros. As a result, an increase or decrease
in the value of those currencies relative to the
U.S. dollar would affect Nordurals operating margins.
Nordural does not currently have financial instruments to hedge
commodity or currency risk. Nordural may hedge such risks in the
future, including the purchase of aluminum put options to hedge
Nordurals commodity risk.
Interest Rates
Interest Rate Risk. Centurys primary debt
obligations at December 31, 2005 were the
$250.0 million of outstanding senior unsecured notes,
$175.0 million of outstanding convertible notes, the
Nordural debt, including $222.0 million of borrowings under
Nordurals term loan facility, $8.1 million of
borrowing under the revolving credit facility, and the
$7.8 million in industrial revenue bonds. The senior
unsecured notes and convertible notes bear a fixed rate of
interest, so changes in interest rates do not subject Century to
changes in future interest expense with respect to these
borrowings. Borrowings under our revolving credit facility are
at variable rates at a margin over LIBOR or the bank base rate,
as defined in the revolving credit facility. The industrial
revenue bonds bear interest at variable rates determined by
reference to the interest rate of similar instruments in the
industrial revenue bond market. At December 31, 2005,
Nordural had approximately $231.0 million of long-term debt
consisting primarily of obligations under the Nordural term loan
facility. Borrowings under Nordurals term loan facility
bear interest at a margin over the applicable Eurodollar rate.
At December 31, 2005, Nordural had $224.1 million of
liabilities which bear interest at a variable rate.
At December 31, 2005, Century had $240.0 million of
variable rate borrowings. A hypothetical one percentage point
increase in the interest rate would increase our annual interest
expense by $2.4 million, assuming no debt reduction. We do
not currently hedge our interest rate risk, but may do so in the
future through interest rate swaps which would have the effect
of fixing a portion of our floating rate debt.
Our primary financial instruments are cash and short-term
investments, including cash in bank accounts and other highly
rated liquid money market investments and government securities.
39
|
|
Item 8. |
Financial Statements and Supplementary Data |
INDEX TO FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page | |
|
|
| |
|
|
|
41 |
|
|
|
|
42-44 |
|
|
|
|
45 |
|
|
|
|
46 |
|
|
|
|
47 |
|
|
|
|
48 |
|
|
|
|
49-84 |
|
40
MANAGEMENTS ANNUAL REPORT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining an
adequate system of internal controls over financial reporting
for the company. This system is designed to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles.
Because of its inherent limitations, a system of internal
controls over financial reporting can provide only reasonable
assurance and may not prevent or detect misstatements. Further,
because of changes in conditions, effectiveness of internal
controls over financial reporting may vary over time. Our system
of internal controls contains self-monitoring mechanisms, and
actions are taken to correct deficiencies as they are identified.
As required by Section 404 of the Sarbanes-Oxley Act,
management conducted an evaluation of the effectiveness of the
system of internal controls over financial reporting for the
year ended December 31, 2005. Managements evaluation
was based on the framework in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations (COSO) of the Treadway Commission. Based on
this evaluation, management concluded that our system of
internal controls over financial reporting was effective as of
December 31, 2005. Managements assessment of the
effectiveness of our internal control over financial reporting
has been audited by Deloitte and Touche LLP, an independent
registered public accounting firm, as stated in its report
under the heading Report of Independent Registered Public
Accounting Firm.
41
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Century Aluminum Company:
We have audited managements assessment, included in the
accompanying Managements Annual Report on Internal Control
over Financial Reporting, that Century Aluminum Company and
subsidiaries (the Company) maintained effective
internal control over financial reporting as of
December 31, 2005, based on criteria established in
Internal Control Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission. The Companys management is responsible for
maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control
over financial reporting. Our responsibility is to express an
opinion on managements assessment and an opinion on the
effectiveness of the Companys internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating
managements assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinions.
A companys internal control over financial reporting is a
process designed by, or under the supervision of, the
companys principal executive and principal financial
officers, or persons performing similar functions, and effected
by the companys board of directors, management, and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our opinion, managements assessment that the Company
maintained effective internal control over financial reporting
as of December 31, 2005, is fairly stated, in all material
respects, based on the criteria established in Internal
Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. Also in our opinion, the Company maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2005, based on the criteria
established in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
42
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated financial statements as of and for the year ended
December 31, 2005 of the Company and our report on those
financial statements, dated March 14, 2006 expresses an
unqualified opinion and includes an explanatory paragraph as to
the change in method of accounting for inventory and the
adoption of Statement of Financial Accounting Standards
No. 143, Accounting for Asset Retirement Obligations.
/s/ DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
March 14, 2006
43
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Century Aluminum Company:
We have audited the accompanying consolidated balance sheets of
Century Aluminum Company and subsidiaries (the
Company) as of December 31, 2005 and 2004, and
the related consolidated statements of operations,
shareholders equity, and cash flows for each of the three
years in the period ended December 31, 2005. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Century Aluminum Company and subsidiaries as of
December 31, 2005 and 2004, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2005, in conformity with
accounting principles generally accepted in the United States of
America.
We have also audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
effectiveness of the Companys internal control over
financial reporting as of December 31, 2005, based on the
criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated
March 14, 2006 expressed an unqualified opinion on
managements assessment of the effectiveness of the
Companys internal control over financial reporting and an
unqualified opinion on the effectiveness of the Companys
internal control over financial reporting.
As discussed in Note 3 to the consolidated financial
statements, in 2005 the Company changed its method of accounting
for its last-in, first
out (LIFO) inventory and, retroactively, restated
the 2004 and 2003 consolidated financial statements for the
change. Also, as discussed in Note 15 to the consolidated
financial statements, on January 1, 2003, the Company
adopted Statement of Financial Standards No. 143,
Accounting for Asset Retirement Obligations.
/s/ DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
March 14, 2006
44
CENTURY ALUMINUM COMPANY
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
|
|
|
Restated | |
|
|
(Dollars in thousands, | |
|
|
except share data) | |
ASSETS |
ASSETS:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
17,752 |
|
|
$ |
44,168 |
|
Restricted cash
|
|
|
2,028 |
|
|
|
1,678 |
|
Accounts receivable net
|
|
|
83,016 |
|
|
|
79,576 |
|
Due from affiliates
|
|
|
18,638 |
|
|
|
14,371 |
|
Inventories
|
|
|
111,436 |
|
|
|
111,284 |
|
Prepaid and other current assets
|
|
|
23,918 |
|
|
|
10,055 |
|
Deferred taxes current portion
|
|
|
37,705 |
|
|
|
24,642 |
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
294,493 |
|
|
|
285,774 |
|
Property, plant and equipment net
|
|
|
1,070,158 |
|
|
|
806,250 |
|
Intangible asset net
|
|
|
74,643 |
|
|
|
86,809 |
|
Goodwill
|
|
|
94,844 |
|
|
|
95,610 |
|
Other assets
|
|
|
143,293 |
|
|
|
58,110 |
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$ |
1,677,431 |
|
|
$ |
1,332,553 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts payable, trade
|
|
$ |
61,919 |
|
|
$ |
47,479 |
|
Due to affiliates
|
|
|
158,682 |
|
|
|
84,815 |
|
Accrued and other current liabilities
|
|
|
53,715 |
|
|
|
53,309 |
|
Long term debt current portion
|
|
|
581 |
|
|
|
10,582 |
|
Accrued employee benefits costs current portion
|
|
|
9,333 |
|
|
|
8,458 |
|
Convertible senior notes
|
|
|
175,000 |
|
|
|
175,000 |
|
Industrial revenue bonds
|
|
|
7,815 |
|
|
|
7,815 |
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
467,045 |
|
|
|
387,458 |
|
|
|
|
|
|
|
|
Senior unsecured notes payable
|
|
|
250,000 |
|
|
|
250,000 |
|
Nordural debt
|
|
|
230,436 |
|
|
|
80,711 |
|
Revolving credit facility
|
|
|
8,069 |
|
|
|
|
|
Accrued pension benefits costs less current portion
|
|
|
10,350 |
|
|
|
10,685 |
|
Accrued postretirement benefits costs less current
portion
|
|
|
96,660 |
|
|
|
85,549 |
|
Due to affiliates less current portion
|
|
|
337,416 |
|
|
|
30,416 |
|
Other liabilities
|
|
|
28,010 |
|
|
|
34,961 |
|
Deferred taxes
|
|
|
16,890 |
|
|
|
68,273 |
|
|
|
|
|
|
|
|
|
Total noncurrent liabilities
|
|
|
977,831 |
|
|
|
560,595 |
|
|
|
|
|
|
|
|
CONTINGENCIES AND COMMITMENTS (NOTE 13)
|
|
|
|
|
|
|
|
|
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; 32,188,165 and 32,038,297 shares issued and
outstanding at December 31, 2005 and 2004, respectively)
|
|
|
322 |
|
|
|
320 |
|
Additional paid-in capital
|
|
|
419,009 |
|
|
|
415,453 |
|
Accumulated other comprehensive loss
|
|
|
(91,418 |
) |
|
|
(52,186 |
) |
Retained earnings (accumulated deficit)
|
|
|
(95,358 |
) |
|
|
20,913 |
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
232,555 |
|
|
|
384,500 |
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$ |
1,677,431 |
|
|
$ |
1,332,553 |
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
45
CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
|
|
Restated | |
|
Restated | |
|
|
(In thousands, except per share amounts) | |
NET SALES:
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-party customers
|
|
$ |
961,335 |
|
|
$ |
897,538 |
|
|
$ |
660,593 |
|
Related parties
|
|
|
171,027 |
|
|
|
163,209 |
|
|
|
121,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,132,362 |
|
|
|
1,060,747 |
|
|
|
782,479 |
|
Cost of goods sold
|
|
|
970,685 |
|
|
|
875,460 |
|
|
|
739,109 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
161,677 |
|
|
|
185,287 |
|
|
|
43,370 |
|
Selling, general and administrative expenses
|
|
|
34,773 |
|
|
|
24,916 |
|
|
|
20,833 |
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
126,904 |
|
|
|
160,371 |
|
|
|
22,537 |
|
Interest expense third party
|
|
|
(25,668 |
) |
|
|
(39,946 |
) |
|
|
(41,269 |
) |
Interest expense related party
|
|
|
|
|
|
|
(380 |
) |
|
|
(2,579 |
) |
Interest income
|
|
|
1,367 |
|
|
|
1,086 |
|
|
|
339 |
|
Net gain (loss) on forward contracts
|
|
|
(309,698 |
) |
|
|
(21,521 |
) |
|
|
25,691 |
|
Loss on early extinguishment of debt
|
|
|
(835 |
) |
|
|
(47,448 |
) |
|
|
|
|
Other income (expense) net
|
|
|
275 |
|
|
|
(1,305 |
) |
|
|
(688 |
) |
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes, minority interest, equity in
earnings of joint venture and cumulative effect of change in
accounting principle
|
|
|
(207,655 |
) |
|
|
50,857 |
|
|
|
4,031 |
|
Income tax benefit (expense)
|
|
|
80,697 |
|
|
|
(18,196 |
) |
|
|
(1,095 |
) |
|
|
|
|
|
|
|
|
|
|
Income (loss) before minority interest, equity in earnings of
joint venture and cumulative effect of change in accounting
principle
|
|
|
(126,958 |
) |
|
|
32,661 |
|
|
|
2,936 |
|
Minority interest
|
|
|
|
|
|
|
|
|
|
|
986 |
|
Equity in earnings of joint venture
|
|
|
10,703 |
|
|
|
821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative effect of change in accounting
principle
|
|
|
(116,255 |
) |
|
|
33,482 |
|
|
|
3,922 |
|
Cumulative effect of change in accounting principle, net of tax
benefit of $3,430
|
|
|
|
|
|
|
|
|
|
|
(5,878 |
) |
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(116,255 |
) |
|
|
33,482 |
|
|
|
(1,956 |
) |
Preferred dividends
|
|
|
|
|
|
|
(769 |
) |
|
|
(2,000 |
) |
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to common shareholders
|
|
$ |
(116,255 |
) |
|
$ |
32,713 |
|
|
$ |
(3,956 |
) |
|
|
|
|
|
|
|
|
|
|
EARNINGS (LOSS) PER COMMON SHARE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before cumulative effect of change in accounting
principle
|
|
$ |
(3.62 |
) |
|
$ |
1.14 |
|
|
$ |
0.09 |
|
|
|
Cumulative effect of change in accounting principle
|
|
|
|
|
|
|
|
|
|
|
(0.28 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
(3.62 |
) |
|
$ |
1.14 |
|
|
$ |
(0.19 |
) |
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
46
CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated | |
|
|
|
|
|
|
|
|
Convertible | |
|
|
|
Additional | |
|
Other | |
|
Retained | |
|
Total | |
|
|
Comprehensive | |
|
Preferred | |
|
Common | |
|
Paid-In | |
|
Comprehensive | |
|
Earnings | |
|
Shareholders | |
|
|
Income (Loss) | |
|
Stock | |
|
Stock | |
|
Capital | |
|
Income (Loss) | |
|
(Deficit) | |
|
Equity | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in thousands) | |
Balance, December 31, 2002 (Restated)
|
|
|
|
|
|
$ |
25,000 |
|
|
$ |
211 |
|
|
$ |
172,133 |
|
|
$ |
1,173 |
|
|
$ |
(7,291 |
) |
|
$ |
191,226 |
|
Comprehensive income (loss) 2003
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss 2003
|
|
$ |
(1,956 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,956 |
) |
|
|
(1,956 |
) |
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized loss on financial instruments, net of $2,171 in
tax
|
|
|
(3,940 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount reclassified to income, net of $3,531 in tax
|
|
|
(6,262 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum pension liability adjustment, net of $(1,371) in tax
|
|
|
3,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
(6,395 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,395 |
) |
|
|
|
|
|
|
(6,395 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
$ |
(8,351 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11 |
) |
|
|
(11 |
) |
Issuance of common stock compensation plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,005 |
|
|
|
|
|
|
|
|
|
|
|
1,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2003 (Restated)
|
|
|
|
|
|
$ |
25,000 |
|
|
$ |
211 |
|
|
$ |
173,138 |
|
|
$ |
(5,222 |
) |
|
$ |
(9,258 |
) |
|
$ |
183,869 |
|
Comprehensive income (loss) 2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
Net income 2004
|
|
$ |
33,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,482 |
|
|
|
33,482 |
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized loss on financial instruments, net of $29,380 in
tax
|
|
|
(51,554 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount reclassified to income, net of $(2,196) in tax
|
|
|
3,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum pension liability adjustment, net of $(360) in tax
|
|
|
640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
(46,964 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(46,964 |
) |
|
|
|
|
|
|
(46,964 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
$ |
(13,482 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(42 |
) |
|
|
(42 |
) |
Dividends on preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,269 |
) |
|
|
(3,269 |
) |
Preferred stock conversion
|
|
|
|
|
|
|
(25,000 |
) |
|
|
14 |
|
|
|
24,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock equity offering
|
|
|
|
|
|
|
|
|
|
|
90 |
|
|
|
208,121 |
|
|
|
|
|
|
|
|
|
|
|
208,211 |
|
Issuance of common stock compensation plans
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
9,208 |
|
|
|
|
|
|
|
|
|
|
|
9,213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2004 (Restated)
|
|
|
|
|
|
$ |
|
|
|
$ |
320 |
|
|
$ |
415,453 |
|
|
$ |
(52,186 |
) |
|
$ |
20,913 |
|
|
$ |
384,500 |
|
Comprehensive income (loss) 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss 2005
|
|
$ |
(116,255 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(116,255 |
) |
|
|
(116,255 |
) |
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized loss on financial instruments, net of $36,420 in
tax
|
|
|
(64,710 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount reclassified to income, net of $(14,655) in tax
|
|
|
25,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum pension liability adjustment, net of $63 in tax
|
|
|
(113 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
(39,232 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(39,232 |
) |
|
|
|
|
|
|
(39,232 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
$ |
(155,487 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends on common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16 |
) |
|
|
(16 |
) |
Issuance of common stock compensation plans
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
3,556 |
|
|
|
|
|
|
|
|
|
|
|
3,558 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2005
|
|
|
|
|
|
$ |
|
|
|
$ |
322 |
|
|
$ |
419,009 |
|
|
$ |
(91,418 |
) |
|
$ |
(95,358 |
) |
|
$ |
232,555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
47
CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
|
|
Restated | |
|
Restated | |
|
|
(Dollars in thousands) | |
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
(116,255 |
) |
|
$ |
33,482 |
|
|
$ |
(1,956 |
) |
|
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized net loss on forward contracts
|
|
|
306,756 |
|
|
|
2,405 |
|
|
|
6,325 |
|
|
|
Depreciation and amortization
|
|
|
56,533 |
|
|
|
50,254 |
|
|
|
51,264 |
|
|
|
Deferred income taxes
|
|
|
(59,834 |
) |
|
|
11,818 |
|
|
|
387 |
|
|
|
Pension and other post retirement benefits
|
|
|
12,381 |
|
|
|
8,040 |
|
|
|
10,986 |
|
|
|
Workers compensation
|
|
|
(1,572 |
) |
|
|
820 |
|
|
|
1,426 |
|
|
|
(Gain) loss on disposal of assets
|
|
|
(32 |
) |
|
|
761 |
|
|
|
1,040 |
|
|
|
Non-cash loss on early extinguishment of debt
|
|
|
253 |
|
|
|
9,659 |
|
|
|
|
|
|
|
Minority interest
|
|
|
|
|
|
|
|
|
|
|
(986 |
) |
|
|
Cumulative effect of change in accounting principle
|
|
|
|
|
|
|
|
|
|
|
9,308 |
|
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable net
|
|
|
(3,440 |
) |
|
|
(19,440 |
) |
|
|
(5,130 |
) |
|
|
|
Due from affiliates
|
|
|
(4,267 |
) |
|
|
(3,623 |
) |
|
|
(2,155 |
) |
|
|
|
Inventories
|
|
|
(152 |
) |
|
|
(16,023 |
) |
|
|
(5,616 |
) |
|
|
|
Prepaids and other assets
|
|
|
(10,092 |
) |
|
|
(3,590 |
) |
|
|
(261 |
) |
|
|
|
Accounts payable, trade
|
|
|
8,528 |
|
|
|
2,602 |
|
|
|
(2,928 |
) |
|
|
|
Due to affiliates
|
|
|
920 |
|
|
|
16,179 |
|
|
|
3,660 |
|
|
|
|
Accrued and other current liabilities
|
|
|
(32,664 |
) |
|
|
13,614 |
|
|
|
8,970 |
|
|
|
|
Other net
|
|
|
(22,127 |
) |
|
|
(1,130 |
) |
|
|
13,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
134,936 |
|
|
|
105,828 |
|
|
|
87,379 |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant, and equipment
|
|
|
(18,027 |
) |
|
|
(15,240 |
) |
|
|
(18,858 |
) |
|
Nordural expansion
|
|
|
(280,086 |
) |
|
|
(59,784 |
) |
|
|
|
|
|
Business acquisitions, net of cash acquired
|
|
|
(7,000 |
) |
|
|
(198,584 |
) |
|
|
(59,837 |
) |
|
Restricted cash deposits
|
|
|
(350 |
) |
|
|
(1,678 |
) |
|
|
|
|
|
Proceeds from sale of property, plant, and equipment
|
|
|
124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(305,339 |
) |
|
|
(275,286 |
) |
|
|
(78,695 |
) |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings of long-term debt
|
|
|
222,937 |
|
|
|
425,883 |
|
|
|
|
|
|
Repayment of long-term debt third party
|
|
|
(83,279 |
) |
|
|
(425,881 |
) |
|
|
|
|
|
Repayment of long-term debt related party
|
|
|
|
|
|
|
(14,000 |
) |
|
|
(26,000 |
) |
|
Net borrowing under revolving credit facility
|
|
|
8,069 |
|
|
|
|
|
|
|
|
|
|
Financing fees
|
|
|
(5,132 |
) |
|
|
(13,062 |
) |
|
|
(297 |
) |
|
Issuance of common stock
|
|
|
1,408 |
|
|
|
215,793 |
|
|
|
736 |
|
|
Dividends
|
|
|
(16 |
) |
|
|
(3,311 |
) |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
143,987 |
|
|
|
185,422 |
|
|
|
(25,572 |
) |
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH
|
|
|
(26,416 |
) |
|
|
15,964 |
|
|
|
(16,888 |
) |
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
|
|
44,168 |
|
|
|
28,204 |
|
|
|
45,092 |
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF YEAR
|
|
$ |
17,752 |
|
|
$ |
44,168 |
|
|
$ |
28,204 |
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
48
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2005, 2004 and 2003
(Dollars in Thousands, except Per Share Amounts)
|
|
1. |
Summary of Significant Accounting Policies |
Organization and Basis of Presentation
Century Aluminum Company (Century, we or
us) is a holding company, whose principal
subsidiaries are Century Aluminum of West Virginia, Inc.
(Century of West Virginia), Berkeley Aluminum, Inc.
(Berkeley), Century Kentucky, Inc. (Century
Kentucky) and Nordural ehf (Nordural). Century
of West Virginia operates a primary aluminum reduction facility
in Ravenswood, West Virginia (Ravenswood). Berkeley
holds a 49.7% interest in a partnership which operates a primary
aluminum reduction facility in Mt. Holly, South Carolina
(Mt. Holly) and a 49.7% undivided interest in the
property, plant, and equipment comprising Mt. Holly. The
remaining interest in the partnership and the remaining
undivided interest in Mt. Holly are owned by Alumax of South
Carolina, Inc., a subsidiary of Alcoa (ASC). ASC
manages and operates Mt. Holly pursuant to an Owners Agreement,
prohibiting the disposal of the interest held by any of the
owners without the consent of the other owners and providing for
certain rights of first refusal. Pursuant to the Owners
Agreement, each owner furnishes their own alumina, for
conversion to aluminum, and is responsible for their pro rata
share of the operating and conversion costs.
Prior to April 1996, we were an indirect, wholly-owned
subsidiary of Glencore International AG (Glencore
and, together with its subsidiaries, the Glencore
Group). In April 1996, we completed an initial public
offering of our common stock. At December 31, 2005,
Glencore owned 29.0% of Centurys outstanding common stock.
Century and Glencore enter into various transactions such as the
purchase and sale of primary aluminum, alumina and forward
primary aluminum financial sales contracts.
Our historical results of operations included in the
accompanying consolidated financial statements may not be
indicative of the results of operations to be expected in the
future.
Principles of Consolidation The consolidated
financial statements include the accounts of Century Aluminum
Company and our subsidiaries, after elimination of all
significant intercompany transactions and accounts.
Berkeleys interest in the Mt. Holly partnership and our
interest in the Gramercy and St. Ann Bauxite joint ventures, see
Note 2, are accounted for under the equity method. Our
equity in the earnings of St. Ann Bauxite is recorded net of
Jamaican taxes. There are no material undistributed earnings in
the Mt. Holly partnership or the Gramercy and St. Ann
Bauxite joint ventures.
Revenue Revenue is recognized when title and
risk of loss pass to customers in accordance with contract
terms. In some instances, we invoice our customers prior to
physical shipment of goods. In such instances, revenue is
recognized only when the customer has specifically requested
such treatment and has made a fixed commitment to purchase the
product. The goods must be complete, ready for shipment and
physically separated from other inventory with risk of ownership
passing to the customer. We must retain no performance
obligations and a delivery schedule must be obtained. Sales
returns and allowances are treated as a reduction of sales and
are provided for based on historical experience and current
estimates.
Cash and Cash Equivalents Cash equivalents
are comprised of cash and short-term investments having
maturities of less than 90 days at the time of purchase.
The carrying amount of cash equivalents approximates fair value.
Accounts Receivable The accounts receivable
are net of an allowance for uncollectible accounts of $1,000 and
$1,020 at December 31, 2005 and 2004, respectively.
Inventories The majority of our inventories,
including alumina and aluminum inventories, are stated at the
lower of cost (using the
first-in, first-out
(FIFO) method) or market. The remaining inventories
(principally supplies) are valued at the lower of average cost
or market.
Property, Plant and Equipment Property,
plant and equipment is stated at cost. Additions, renewals and
improvements are capitalized. Asset and accumulated depreciation
accounts are relieved for dispositions
49
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
with resulting gains or losses included in earnings. Maintenance
and repairs are expensed as incurred. Depreciation of plant and
equipment is provided for by the straight-line method over the
following estimated useful lives:
|
|
|
|
|
Buildings and improvements
|
|
|
14 to 45 years |
|
Machinery and equipment
|
|
|
5 to 22 years |
|
We periodically evaluate the carrying value of long-lived assets
to be held and used when events and circumstances warrant such a
review. The carrying value of a separately identifiable,
long-lived asset is considered impaired when the anticipated
undiscounted cash flow from such asset is less than its carrying
value. In that event, a loss is recognized based on the amount
by which the carrying value exceeds the fair value of the
long-lived asset. Fair value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with
the risk involved.
Goodwill and Intangible Asset We recognized
$94,844 of goodwill in the Nordural acquisition, see
Note 2. In the first quarter of 2005, goodwill decreased
$766 from previously recorded amounts as the result of asset
allocation adjustments. We will annually test our goodwill for
impairment in the second quarter of the fiscal year and other
times whenever events or circumstances indicate that the
carrying amount of goodwill may exceed its fair value. If the
carrying value of goodwill exceeds its fair value, an impairment
loss will be recognized. The fair value is estimated using
market comparable information.
The intangible asset consists of the power contract acquired in
connection with our acquisition of the Hawesville facility
(Hawesville). The contract value is being amortized
over its term (10 years) using a method that results in
annual amortization equal to the percentage of a given
years expected gross annual benefit to the total as
applied to the total recorded value of the power contract. As of
December 31, 2005 and 2004, the gross carrying amount of
the intangible asset was $155,986 and $153,592, respectively,
with accumulated amortization of $81,343 and $66,783,
respectively. In April 2005, we made a $7,000 post-closing
payment to the Southwire Company (Southwire), a
privately held wire and cable manufacturing company, related to
the acquisition of Hawesville. This payment satisfied in full
our obligation to pay contingent consideration to Southwire
under the acquisition agreement. This post-closing payment
obligation was allocated to the acquired fixed assets and
intangible asset based on the allocation percentages used in the
original acquisition. The gross carrying amount of the
intangible asset increased $2,394 as a result of this liability.
For the years ended December 31, 2005, 2004 and 2003,
amortization expense for the intangible asset totaled $14,561,
$12,327, and $18,680, respectively. The estimated aggregate
amortization expense for the intangible asset for the following
five years is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ending December 31, | |
|
|
| |
|
|
2006 | |
|
2007 | |
|
2008 | |
|
2009 | |
|
2010 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
Estimated Amortization Expense
|
|
$ |
13,048 |
|
|
$ |
13,991 |
|
|
$ |
15,076 |
|
|
$ |
16,149 |
|
|
$ |
16,379 |
|
The intangible asset is reviewed for impairment in accordance
with SFAS 142, Goodwill and Other Intangible
Assets, whenever events or circumstances indicate that its
net carrying amount may not be recoverable.
Other Assets At December 31, 2005 and
2004, other assets consist primarily of Centurys
investment in the Mt. Holly partnership, the investment in the
Gramercy and St. Ann Bauxite joint venture, deferred financing
costs, deferred tax assets, deferred pension assets, and
intangible pension assets. Our equity share of the undistributed
earnings (loss) increases (decreases) the investment in the
joint venture. Deferred financing costs are amortized on a
straight-line basis over the life of the related financing. In
2005 and 2004, we
50
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
recorded an additional minimum liability related to employee
pension plan obligations as required under SFAS No. 87.
We account for our 49.7% interest in the Mt. Holly partnership
using the equity method of accounting. Additionally, our 49.7%
undivided interest in certain property, plant and equipment of
Mt. Holly is held outside of the partnership and the undivided
interest in these assets of the facility is accounted for in
accordance with the EITF Issue
No. 00-01,
Investor Balance Sheet and Income Statement Display under
the Equity Method for Investments in Certain Partnerships and
Other Ventures. Accordingly, the undivided interest in
these assets and the related depreciation are being accounted
for on a proportionate gross basis.
Income Taxes We account for income taxes
using the liability method, whereby deferred income taxes
reflect the net tax effect of temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
In evaluating our ability to realize deferred tax assets, we use
judgment in considering the relative impact of negative and
positive evidence. The weight given to the potential effect of
negative and positive evidence is commensurate with the extent
to which it can be objectively verified. Based on the weight of
evidence, both negative and positive, if it is more likely than
not that some portion or all of a deferred tax asset will not be
realized, a valuation allowance is established.
During the second quarter of 2005, we determined that certain
Nordural earnings would remain invested outside the United
States indefinitely.
Tax reserves have been established which we believe to be
adequate in relation to the potential for additional
assessments. Once established, reserves are adjusted only when
there is more information available or when an event occurs
necessitating a change to the reserves.
Postemployment Benefits We provide certain
postemployment benefits to former and inactive employees and
their dependents during the period following employment, but
before retirement. These benefits include salary continuance,
supplemental unemployment and disability healthcare.
Postemployment benefits are accounted for in accordance with
SFAS No. 112, Employers Accounting for
Postemployment Benefits. The statement requires
recognition of the estimated future cost of providing
postemployment benefits on an accrual basis over the active
service life of the employee.
Forward Contracts and Financial Instruments
We routinely enter into fixed and market priced contracts for
the sale of primary aluminum and the purchase of raw materials
in future periods. We also enter into fixed price financial
sales contracts to be settled in cash to manage our exposure to
changing primary aluminum prices. We have also entered into
financial purchase contracts for natural gas to be settled in
cash to manage our exposure to changing natural gas prices.
All aluminum-based financial and physical delivery contracts are
marked-to-market using
the LME spot and forward market for primary aluminum. Because
there is no quoted futures market price for the
U.S. Midwest premium component of the market price for
primary aluminum, it is necessary for management to estimate the
U.S. Midwest premium. The forward natural gas purchase
contracts are
marked-to-market using
the NYMEX spot and forward market for natural gas. Fluctuations
in the NYMEX price of natural gas can have a significant impact
on gains and losses included in our financial statements from
period to period.
Certain financial sales contracts for primary aluminum and all
financial purchase contracts for natural gas have been
designated as cash flow hedges in accordance with the provisions
of SFAS No. 133 (as amended). We assess the
effectiveness of these cash flow hedges quarterly. To the extent
such cash flow hedges are effective, unrealized gains and losses
on the financial sales contracts are deferred in the balance
sheet as accumulated other comprehensive income until the hedged
transaction occurs when the realized gain or loss is recognized
as revenue or cost of goods sold, as applicable, in the
Statement of Operations. Any ineffective
51
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
portion of the gain or loss is reported in earnings immediately.
Mark-to-market gains
and losses are recorded in net gain (loss) on forward contracts
in the period delivery is no longer deemed probable.
The aluminum-based financial and physical delivery contracts
that are not designated cash flow hedges or do not qualify for
cash flow hedge treatment, as provided for in current accounting
standards, are
marked-to-market
monthly. Fluctuations in the LME price of primary aluminum have
a significant impact on gains and losses included in our
financial statements from period to period. Unrealized gains and
losses are included in net gain (loss) on forward contracts.
The effectiveness of our hedges is measured by a historical and
probable future high correlation of changes in the fair value of
the hedging instruments with changes in value of the hedged
item. If high correlation ceases to exist, then gains or losses
will be recorded in net gain (loss) on forward contracts. To
date, high correlation has always been achieved. During 2005 and
2004, we did not recognize any gains or losses for ineffective
portions of hedging instruments. As of December 31, 2005
and 2004, we had recorded in other comprehensive income deferred
losses of $88,458 and $49,113, respectively, on our cash flow
hedges, net of tax.
Financial Instruments Our financial
instruments (principally receivables, payables, debt related to
industrial revenue bonds (the IRBs) and forward
financial contracts) are carried at amounts that approximate
fair value. At December 31, 2005, our 7.5% senior
unsecured notes due 2014 and 1.75% convertible senior notes
due 2024 had carrying amounts of $250,000 and $175,000,
respectively. At December 31, 2005, the estimated fair
value of the 7.5% senior unsecured notes due 2014 and
1.75% convertible senior notes due 2024 were $249,375 and
$177,734, respectively.
Concentration of Credit Risk Financial
instruments, which potentially expose Century to concentrations
of credit risk, consist principally of cash investments and
trade receivables. We place our cash investments with highly
rated financial institutions. At times, such investments may be
in excess of the FDIC insurance limit. Our limited customer base
increases our concentrations of credit risk with respect to
trade receivables. We routinely assess the financial strength of
our customers.
Use of Estimates The preparation of financial
statements in conformity with accounting principles generally
accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Stock-Based Compensation We elected not to
adopt the recognition provisions for employee stock-based
compensation as permitted in SFAS No. 123,
Accounting for Stock-Based Compensation, but have
adopted SFAS No. 123(R), Share-Based
Payment effective January 1, 2006. As such, through
December 31, 2005, we accounted for stock based
compensation in accordance with Accounting Principles Board
(APB) Opinion No. 25 Accounting for Stock
Issued to Employees. No compensation cost has been
recognized for the stock option portions of the plan because the
exercise prices of the stock options granted were equal to the
market value of our stock on the date of grant. Had compensation
cost for the Stock Incentive Plan, see Note 10, been
determined using the fair value method provided under
SFAS No. 123, our
52
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
net income (loss) and earnings (loss) per share would have
changed to the pro forma amounts indicated below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
|
|
| |
|
| |
|
| |
|
|
|
|
|
|
Restated | |
|
Restated | |
Net income (loss) applicable to common shareholders
|
|
As Reported |
|
$ |
(116,255 |
) |
|
$ |
32,713 |
|
|
$ |
(3,956 |
) |
Add: Stock-based employee compensation expense included in
reported net income, net of related tax effects
|
|
|
|
|
2,840 |
|
|
|
1,767 |
|
|
|
1,441 |
|
Deduct: Stock-based employee compensation expense determined
under fair value based method for all awards, net of related tax
effects
|
|
|
|
|
(3,570 |
) |
|
|
(2,148 |
) |
|
|
(2,106 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income (loss)
|
|
|
|
$ |
(116,985 |
) |
|
$ |
32,332 |
|
|
$ |
(4,621 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share
|
|
As Reported |
|
$ |
(3.62 |
) |
|
$ |
1.14 |
|
|
$ |
(0.19 |
) |
|
|
Pro Forma |
|
$ |
(3.64 |
) |
|
$ |
1.13 |
|
|
$ |
(0.22 |
) |
Diluted income (loss) per share
|
|
As Reported |
|
$ |
(3.62 |
) |
|
$ |
1.14 |
|
|
$ |
(0.19 |
) |
|
|
Pro Forma |
|
$ |
(3.64 |
) |
|
$ |
1.12 |
|
|
$ |
(0.22 |
) |
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 2005,
2004 and 2003:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Weighted average fair value per option granted during the year
|
|
$ |
15.19 |
|
|
$ |
14.12 |
|
|
$ |
7.78 |
|
Dividends per quarter
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
|
$ |
0.00 |
|
Risk-free interest rate
|
|
|
4.29 |
% |
|
|
3.54 |
% |
|
|
3.11 |
% |
Expected volatility
|
|
|
67 |
% |
|
|
70 |
% |
|
|
75 |
% |
Expected lives (in years)
|
|
|
5.5 |
|
|
|
5 |
|
|
|
5 |
|
Recently Adopted Accounting Standards In
March 2005, the Financial Accounting Standards Board
(FASB) Interpretation No. (FIN) 47,
Accounting for Conditional Asset Retirement
Obligations, which clarifies certain guidance used in
SFAS No. 143, Accounting for Asset Retirement
Obligations. We adopted FIN 47 in December 2005 and
recorded an adjustment to our asset retirement obligations.
When we initially adopted SFAS No. 143 in 2003, we
recognized asset retirement obligations related to the disposal
of spent pot liner used in the reduction cells of our
facilities. In our initial calculation of the asset retirement
obligations, we included our costs to remove the spent potliner
as part of our asset retirement obligations. Under FIN 47,
these removal costs should not have been included in our asset
retirement obligations and should have been accounted for as
maintenance costs. The adoption of FIN 47 did not have a
material effect on our financial position, statement of
operations, and liquidity.
In December 2004, the FASB issued SFAS No. 123(R),
Share Based Payment. This Statement is a revision of
FASB Statement No. 123, Accounting for Stock-Based
Compensation and supersedes Accounting Principles Board
(APB) Opinion No. 25, Accounting for
Stock Issued to Employees. This statement focuses
primarily on accounting for transactions in which a company
obtains services in share-based payment transactions. This
Statement will require us to recognize the grant date fair value
of an award of equity-based instruments to employees and the
cost will be recognized over the period in which the employees
are required to provide service. The Statement is effective for
fiscal year 2006 and thereafter.
We have adopted SFAS No. 123(R) effective
January 1, 2006. We have elected to use the Modified
Prospective Application Method. Under this method, we will
recognize the fair value of employee stock-based compensation
awards as compensation cost beginning January 1, 2006.
SFAS No. 123(R) will apply to new
53
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
awards granted subsequent to our adoption and for any portion of
previous awards that had not vested as of January 1, 2006.
The compensation cost recognized from the unvested awards will
be based on the original grant-date fair value used to calculate
our pro forma financial disclosure under SFAS No. 123.
Over the next three years, we will recognize stock-based
compensation expense before income tax benefit of approximately
$3,288 ($1,760 in 2006, $1,217 in 2007, and $311 in 2008)
related to the unvested stock option awards outstanding at
December 31, 2005.
Recently Issued Accounting Standard In
November 2004, the FASB issued SFAS No. 151,
Inventory Costs. This Statement amends the guidance
in Accounting Research Bulletin No. 43,
Chapter 4, Inventory Pricing to clarify the
accounting treatment for certain inventory costs. In addition,
the Statement requires that the allocation of production
overheads be based on the facilities normal production
capacity. The Statement is effective for fiscal year 2006 and
thereafter. We are currently assessing the Statement and have
not yet determined the impact of adopting SFAS No. 151
on our financial position and results of operations,
Foreign Currency Our Nordural subsidiary
located in Iceland uses the U.S. Dollar as its functional
currency. Certain operating and construction expenses are
denominated and payable in foreign currencies. For example,
Nordurals revenues are denominated in U.S. Dollars,
while its labor costs are denominated in Icelandic krona and a
portion of its anode costs are denominated in euros.
Transactions denominated in currencies other than the functional
currency are recorded based on exchange rates at the time such
transactions arise and result in transaction gains and losses
which are reflected in the Consolidated Statement of Operations.
On October 1, 2004, Century and Falconbridge Limited
(successor by merger to Noranda Inc., Falconbridge)
completed the joint purchase of the Gramercy, Louisiana alumina
refinery (Gramercy) owned by Kaiser Aluminum and
Chemical Corporation (Kaiser) and Kaisers 49%
interest in a Jamaican bauxite mining partnership (St. Ann
Bauxite). The purchase price was $23.0 million,
subject to working capital adjustments. Century and Falconbridge
each paid one-half of the purchase price. All of the bauxite
mined by the partnership is used for the production of alumina
at the Gramercy refinery and at a third party refinery in Texas.
The Gramercy refinery chemically refines bauxite into alumina,
the principal raw material in the production of primary
aluminum. Hawesville purchases virtually all of its alumina
requirements from Gramercy. We use the equity method of
accounting for our investment in Gramercy and St. Ann Bauxite.
On April 27, 2004, we completed the acquisition of Nordural
from Columbia Ventures Corporation. Nordural is an Icelandic
company that owns and operates a primary aluminum reduction
facility located in Grundartangi, Iceland. The results of
operations of Nordural are included in our Statement of
Operations beginning April 28, 2004.
We accounted for the acquisition as a purchase using the
accounting standards established in SFAS No. 141,
Business Combinations. We recognized $94,844 of
goodwill in the transaction. None of the goodwill is expected to
be deductible for Icelandic tax purposes; however, all of the
goodwill is expected to be deductible for U.S. tax purposes.
54
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The purchase price for Nordural was $195,346, allocated as
follows:
|
|
|
|
|
Allocation of Purchase Price: |
|
|
|
|
|
Current assets
|
|
$ |
41,322 |
|
Property, plant and equipment
|
|
|
276,597 |
|
Goodwill
|
|
|
94,844 |
|
Current liabilities
|
|
|
(25,848 |
) |
Long-term debt
|
|
|
(177,898 |
) |
Other non-current liabilities
|
|
|
(13,671 |
) |
|
|
|
|
Total purchase price
|
|
$ |
195,346 |
|
|
|
|
|
The following tables represent the unaudited pro forma results
of operations for the years ended December 31, 2004 and
2003 assuming the acquisition occurred on January 1, 2003.
The unaudited pro forma amounts may not be indicative of the
results that actually would have occurred if the transaction
described above had been completed and in effect for the periods
indicated.
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
|
(Unaudited) | |
Net sales
|
|
$ |
1,099,122 |
|
|
$ |
883,418 |
|
Income before cumulative effect of change in accounting principle
|
|
|
40,298 |
|
|
|
18,040 |
|
Net income
|
|
|
40,298 |
|
|
|
12,162 |
|
Net income available to common shareholders
|
|
|
39,529 |
|
|
|
10,162 |
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
1.25 |
|
|
$ |
0.34 |
|
|
Diluted
|
|
$ |
1.25 |
|
|
$ |
0.34 |
|
|
|
|
The Acquisition of Glencore interest in Hawesville |
On April 1, 2003, we completed the acquisition of the
remaining 20% interest in Hawesville. The operating results of
the 20% interest in Hawesville have been included in our
consolidated financial statements from the date of acquisition.
Century paid a purchase price of $99,400 which it financed with
approximately $59,400 of available cash and $40,000 from a note
payable to Glencore. We made the final payment on the note in
April 2004. In connection with the acquisition, we assumed all
of Glencores obligations related to the 20% interest in
Hawesville.
|
|
3. |
Change in Accounting Principle |
During the second quarter of fiscal 2005, we changed our method
of inventory costing from
last-in-first-out
(LIFO) to
first-in-first-out
(FIFO). We believe that using the FIFO method provides better
matching of expenses and revenues and provides more consistent
inventory costing on a company-wide basis. Prior to the change,
approximately 69% of our inventory was valued based upon the
LIFO method. Our net loss for the year ended December 31,
2005 would have increased $6,318 to $122,573 had we reported
using the LIFO
55
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
method of inventory costing. The change has been applied
retroactively and the financial statements have been restated
for all prior periods presented. The effect of the change on net
income for 2004 and 2003 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended | |
|
|
December 31, | |
|
|
| |
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
Net income (loss) applicable to common shareholders as reported
|
|
$ |
27,202 |
|
|
$ |
(1,034 |
) |
Change in inventory costing method, net of tax
|
|
|
5,511 |
|
|
|
(2,922 |
) |
|
|
|
|
|
|
|
Net income (loss) applicable to common shareholders as restated
|
|
$ |
32,713 |
|
|
$ |
(3,956 |
) |
|
|
|
|
|
|
|
Basic and Diluted earnings (loss) per share as reported
|
|
$ |
0.95 |
|
|
$ |
(0.05 |
) |
Change in inventory costing method, net of tax
|
|
|
0.19 |
|
|
|
(0.14 |
) |
|
|
|
|
|
|
|
Basic and Diluted earnings (loss) per share as restated
|
|
$ |
1.14 |
|
|
$ |
(0.19 |
) |
|
|
|
|
|
|
|
Inventories, at December 31, consist of the following:
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
|
|
|
Restated | |
Raw materials
|
|
$ |
47,352 |
|
|
$ |
48,631 |
|
Work-in-process
|
|
|
11,461 |
|
|
|
10,215 |
|
Finished goods
|
|
|
5,446 |
|
|
|
8,954 |
|
Operating and other supplies
|
|
|
47,177 |
|
|
|
43,484 |
|
|
|
|
|
|
|
|
|
|
$ |
111,436 |
|
|
$ |
111,284 |
|
|
|
|
|
|
|
|
Inventories are stated at the lower of cost, using the
first-in, first-out
method, or market.
|
|
5. |
Property, Plant and Equipment |
Property, plant and equipment, at December 31, consist of
the following:
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Land and improvements
|
|
$ |
13,652 |
|
|
$ |
13,412 |
|
Buildings and improvements
|
|
|
122,356 |
|
|
|
116,695 |
|
Machinery and equipment
|
|
|
856,577 |
|
|
|
849,815 |
|
Construction in progress
|
|
|
358,674 |
|
|
|
68,718 |
|
|
|
|
|
|
|
|
|
|
|
1,351,259 |
|
|
|
1,048,640 |
|
Less accumulated depreciation
|
|
|
(281,101 |
) |
|
|
(242,390 |
) |
|
|
|
|
|
|
|
|
|
$ |
1,070,158 |
|
|
$ |
806,250 |
|
|
|
|
|
|
|
|
For the years ended December 31, 2005 and 2004, we recorded
depreciation expense of $41,972 and $37,927, respectively.
At December 31, 2005 and 2004, the cost of property, plant
and equipment includes $157,162 and $154,209, respectively, and
accumulated depreciation includes $64,932 and $57,102,
respectively, representing our undivided interest in the
property, plant and equipment comprising Mt. Holly.
56
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Debt classified as current liabilities:
|
|
|
|
|
|
|
|
|
|
1.75% convertible senior notes due 2024, interest payable
semiannually(1)(2)(5)(7)
|
|
$ |
175,000 |
|
|
$ |
175,000 |
|
|
Hancock County industrial revenue bonds due 2028, interest
payable quarterly (variable interest rates (not to exceed
12%))(1)
|
|
|
7,815 |
|
|
|
7,815 |
|
|
Current portion of long-term debt(3)(7)
|
|
|
581 |
|
|
|
10,582 |
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
7.5% senior unsecured notes payable due 2014, interest
payable semiannually(5)(7)(9)
|
|
|
250,000 |
|
|
|
250,000 |
|
|
Nordural
|
|
|
|
|
|
|
|
|
|
Senior term loan facility maturing in 2010, variable interest
rate, principal and interest payments due semiannually through
2010(4)(6)(8)
|
|
|
222,000 |
|
|
|
|
|
|
Nordural
|
|
|
|
|
|
|
|
|
|
Senior term loan facility maturing in 2018, variable interest
rate, principal and interest payments due semiannually through
2018
|
|
|
|
|
|
|
68,494 |
|
|
Nordural
|
|
|
|
|
|
|
|
|
|
Various loans, with interest rates ranging from 2.70% to 6.75%
due 2012 to 2020, less current portion
|
|
|
8,436 |
|
|
|
12,217 |
|
|
Borrowings under revolving credit facility(7)
|
|
|
8,069 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt
|
|
$ |
671,901 |
|
|
$ |
524,108 |
|
|
|
|
|
|
|
|
|
|
(1) |
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 convertible notes are
classified as current because they are convertible at any time
by the holder. The IRB interest rate at December 31, 2005
was 3.81%. |
|
(2) |
The convertible notes are convertible at any time by the holder
at an initial conversion rate of 32.7430 shares of Century
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 Century common
stock. Upon conversion of a convertible note, the holder of such
convertible note shall receive cash equal to the principal
amount of the convertible note and, at our election, either cash
or Century common stock, or a combination thereof, for the
convertible notes conversion value in excess of such principal
amount, if any. |
|
(3) |
In April 2005, we exercised our right to call the remaining
$9,945 of 11.75% senior secured first mortgage notes due
2008 that remained outstanding at 105.875% of the principal
balance, plus accrued and unpaid interest. The
11.75% senior secured first mortgage notes, less
unamortized discounts on the notes of $67, were classified as a
current liability at December 31, 2004 based on our
intention to call the notes. |
|
(4) |
All outstanding principal must be repaid at final maturity on
February 28, 2010. |
|
(5) |
The obligations of Century pursuant to the notes are
unconditionally guaranteed, jointly and severally, on a senior
unsecured basis by all of our existing domestic restricted
subsidiaries. |
57
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
(6) |
Nordurals obligations under the term loan facility are
secured by a pledge of all of Nordurals shares pursuant to
a share pledge agreement with the lenders. In addition,
substantially all of Nordurals assets are pledged as
security under the loan facility. |
|
(7) |
The indentures governing these 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. |
|
(8) |
Senior term loan interest rate at December 31, 2005 was
5.93%. Nordurals $365.0 million 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 is required to make the following minimum repayments of
principal on the facility: $15.5 million on
February 28, 2007 and $14.0 million 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. |
|
(9) |
On or after August 15, 2009, we may redeem any of the
senior 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. |
In September 2005, we replaced our revolving credit facility
that was due to expire in March 2006 with a new $100,000 senior
secured revolving credit facility (Credit Facility)
with a syndicate of banks. The Credit Facility will mature
September 19, 2010. Our obligations under the Credit
Facility are unconditionally guaranteed by our domestic
subsidiaries (other than Century Aluminum Holdings, Inc.,
Century Louisiana, Inc., and Nordural US LLC) and secured by a
first priority security interest in all accounts receivable and
inventory belonging to Century and our subsidiary borrowers. The
availability of funds under the Credit Facility is subject to a
$15,000 reserve and limited by a specified borrowing base
consisting of certain eligible accounts receivable and
inventory. Borrowings under the Credit Facility are, at our
option, at the LIBOR rate or bank base rate, plus or minus in
each case an applicable margin. The Credit Facility is subject
to customary covenants, including limitations on capital
expenditures, additional indebtedness, affiliate transactions,
liens, guarantees, mergers and acquisitions, dividends,
distributions, capital redemptions and investments. We had
$8,069 outstanding borrowings under the Credit Facility as of
December 31, 2005 with an interest rate of 7.00%. As of
December 31, 2005, we had a borrowing availability of
$91,931 under the Credit Facility. We pay a commitment fee for
the unused portion of the line.
|
|
|
Refinanced Secured First Mortgage Notes |
In August 2004, we completed a tender offer and consent
solicitation for our 11.75% senior secured first mortgage
notes due 2008 (the Notes). The principal purpose of
the tender offer and consent solicitation was to refinance
Centurys outstanding Notes with debt bearing a lower
interest rate, thereby reducing our annual interest expense.
Following the tender offer, we had outstanding a principal
amount of $9,945 of Notes. On April 15, 2005, we exercised
our right to call the remaining Notes at 105.875% of the
principal balance, plus accrued and unpaid interest.
We financed the tender offer and consent solicitation with a
portion of the proceeds from the private placement of our
7.5% Senior Unsecured Notes due 2014 (Senior
Unsecured Notes) in the aggregate principal amount of
$250,000 and 1.75% Senior Convertible Notes due 2024
(Convertible Notes) in the
58
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
aggregate principal amount of $175,000. We used the remaining
proceeds from these offerings and available cash to repay a
portion of the outstanding debt at Nordural and for general
corporate purposes.
In 2005 and 2004, we recognized a loss on early extinguishment
of debt of $835 and $47,448, respectively, related to the
refinancing of the 11.75% senior secured first mortgage
notes due 2008. The loss was composed of the following:
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Purchase price premium, less consent fee
|
|
$ |
582 |
|
|
$ |
30,516 |
|
Consent payments
|
|
|
|
|
|
|
6,301 |
|
Write-off of capitalized financing fees
|
|
|
190 |
|
|
|
7,373 |
|
Write-off of bond discount
|
|
|
63 |
|
|
|
2,286 |
|
Other tender costs
|
|
|
|
|
|
|
972 |
|
|
|
|
|
|
|
|
|
|
$ |
835 |
|
|
$ |
47,448 |
|
|
|
|
|
|
|
|
|
|
|
Principal Payments on Long Term Debt |
Principal payments on our long term debt in the next five years
and thereafter are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total | |
|
2006 |
|
2007 | |
|
2008 | |
|
2009 | |
|
2010 | |
|
Thereafter | |
|
|
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
7.5% senior notes due August 2014
|
|
$ |
250,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
250,000 |
|
Nordural debt
|
|
|
230,436 |
|
|
|
|
|
|
|
30,105 |
|
|
|
28,631 |
|
|
|
28,658 |
|
|
|
137,186 |
|
|
|
5,856 |
|
Borrowing under revolving credit facility
|
|
|
8,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
488,505 |
|
|
$ |
|
|
|
$ |
30,105 |
|
|
$ |
28,631 |
|
|
$ |
28,658 |
|
|
$ |
145,255 |
|
|
$ |
255,856 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. |
Accumulated Other Comprehensive Loss at December 31 |
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Components of Accumulated Other Comprehensive Loss:
|
|
|
|
|
|
|
|
|
Unrealized loss on financial instruments, net of tax of $49,776
and $28,011
|
|
$ |
(88,458 |
) |
|
$ |
(49,113 |
) |
Minimum pension liability adjustment, net of tax of $1,665 and
$1,728
|
|
|
(2,960 |
) |
|
|
(3,073 |
) |
|
|
|
|
|
|
|
|
|
$ |
(91,418 |
) |
|
$ |
(52,186 |
) |
|
|
|
|
|
|
|
|
|
8. |
Pension and Other Postretirement Benefits |
We maintain noncontributory defined benefit pension plans for
all of our domestic hourly and salaried employees. For the
domestic salaried employees, plan benefits are based primarily
on years of service and average compensation during the later
years of employment. For hourly employees at Ravenswood, plan
benefits are based primarily on a formula that provides a
specific benefit for each year of service. Our funding policy is
to contribute annually an amount based upon actuarial and
economic assumptions designed to achieve adequate funding of the
projected benefit obligations and to meet the minimum funding
requirements of ERISA. Plan assets consist principally of
U.S. equity securities, growth funds and fixed income
accounts. In addition, we provide supplemental executive
retirement benefits (SERB) for certain executive
officers. We use a measurement date of December 31st to
determine the pension and OPEB benefit liabilities.
59
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The hourly employees at Hawesville are part of a United
Steelworkers of America (USWA) sponsored
multi-employer plan. Our contributions to the plan are
determined at a fixed rate per hour worked. During the years
ended December 31, 2005, 2004 and 2003, we contributed
$1,531, $1,454 and $1,407, respectively, to the plan, and had no
outstanding liability at year end.
As of December 31, 2005 and 2004, our accumulated pension
benefit obligation exceeded the fair value of the pension plan
assets at year end. At December 31, 2005 and 2004, we
recorded a minimum pension liability, which related to Mt. Holly
and the SERB plan, of $2,960 and $3,073, net of tax,
respectively, which is included in other comprehensive income.
In the future, the amount of the minimum pension liability will
vary depending on changes in market conditions, performance of
pension investments, and the level of company contributions to
the pension plans. We evaluate and adjust the minimum pension
liability on an annual basis.
|
|
|
Other Postretirement Benefits (OPEB) |
In addition to providing pension benefits, we provide certain
healthcare and life insurance benefits for substantially all
domestic retired employees. We account for these plans in
accordance with SFAS No. 106, Employers
Accounting for Postretirement Benefits Other Than
Pensions. SFAS No. 106 requires companies to
accrue the estimated cost of providing postretirement benefits
during the working careers of those employees who could become
eligible for such benefits when they retire. We fund these
benefits as the retirees submit claims.
The change in benefit obligations and change in plan assets as
of December 31 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension | |
|
OPEB | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
Change in benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
|
$ |
80,293 |
|
|
$ |
67,249 |
|
|
$ |
147,936 |
|
|
$ |
117,525 |
|
Service cost
|
|
|
4,015 |
|
|
|
3,369 |
|
|
|
5,032 |
|
|
|
4,082 |
|
Interest cost
|
|
|
4,676 |
|
|
|
4,261 |
|
|
|
8,878 |
|
|
|
7,336 |
|
Plan changes
|
|
|
1,893 |
|
|
|
114 |
|
|
|
|
|
|
|
(4,717 |
) |
Losses
|
|
|
3,612 |
|
|
|
8,379 |
|
|
|
21,828 |
|
|
|
28,467 |
|
Benefits paid
|
|
|
(3,281 |
) |
|
|
(3,079 |
) |
|
|
(5,224 |
) |
|
|
(4,757 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year
|
|
$ |
91,208 |
|
|
$ |
80,293 |
|
|
$ |
178,450 |
|
|
$ |
147,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
$ |
67,190 |
|
|
$ |
53,095 |
|
|
$ |
|
|
|
$ |
|
|
Actual return (loss) on plan assets
|
|
|
3,492 |
|
|
|
7,321 |
|
|
|
|
|
|
|
|
|
Employer contributions
|
|
|
10,341 |
|
|
|
9,853 |
|
|
|
5,224 |
|
|
|
4,757 |
|
Benefits paid
|
|
|
(3,281 |
) |
|
|
(3,079 |
) |
|
|
(5,224 |
) |
|
|
(4,757 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets at end of year
|
|
$ |
77,742 |
|
|
$ |
67,190 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status of plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
$ |
(13,466 |
) |
|
$ |
(13,103 |
) |
|
$ |
(178,450 |
) |
|
$ |
(147,936 |
) |
Unrecognized actuarial loss
|
|
|
18,237 |
|
|
|
12,852 |
|
|
|
81,363 |
|
|
|
63,248 |
|
Unrecognized transition obligation
|
|
|
|
|
|
|
60 |
|
|
|
|
|
|
|
|
|
Unrecognized prior service cost
|
|
|
3,540 |
|
|
|
4,549 |
|
|
|
(4,544 |
) |
|
|
(5,422 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset (liability) recognized
|
|
$ |
8,311 |
|
|
$ |
4,358 |
|
|
$ |
(101,631 |
) |
|
$ |
(90,110 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
60
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension | |
|
OPEB | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
Amounts Recognized in the Statement of Financial Position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid benefit cost
|
|
$ |
19,130 |
|
|
$ |
15,043 |
|
|
$ |
|
|
|
$ |
|
|
Accrued benefit liability
|
|
|
(11,543 |
) |
|
|
(10,685 |
) |
|
|
(101,631 |
) |
|
|
(90,110 |
) |
Intangible asset
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
|
724 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$ |
8,311 |
|
|
$ |
4,358 |
|
|
$ |
(101,631 |
) |
|
$ |
(90,110 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Our pension plans projected benefit obligation, accumulated
benefit obligation, and fair value of plan assets as of
December 31 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected Benefit | |
|
Accumulated Benefit | |
|
Fair Value of | |
|
|
Obligation | |
|
Obligation | |
|
Plan assets | |
|
|
| |
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Hourly pension plan
|
|
$ |
46,227 |
|
|
$ |
43,941 |
|
|
$ |
45,768 |
|
|
$ |
43,512 |
|
|
|
48,464 |
|
|
$ |
44,606 |
|
Salaried pension plan
|
|
|
32,140 |
|
|
|
27,300 |
|
|
|
26,609 |
|
|
|
22,579 |
|
|
|
29,278 |
|
|
|
22,584 |
|
Supplemental executive benefits pension plan (SERB)
|
|
|
12,841 |
|
|
|
9,052 |
|
|
|
11,544 |
|
|
|
9,052 |
|
|
|
|
|
|
|
|
|
There are no plan assets in the SERB due to the nature of the
plan.
Net periodic benefit costs were comprised of the following
elements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
Pension | |
|
OPEB | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Service cost
|
|
$ |
4,015 |
|
|
$ |
3,369 |
|
|
$ |
3,339 |
|
|
$ |
5,032 |
|
|
$ |
4,082 |
|
|
$ |
3,757 |
|
Interest cost
|
|
|
4,676 |
|
|
|
4,261 |
|
|
|
3,761 |
|
|
|
8,878 |
|
|
|
7,336 |
|
|
|
6,823 |
|
Expected return on plan assets
|
|
|
(5,899 |
) |
|
|
(4,750 |
) |
|
|
(3,454 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net amortization and deferral
|
|
|
3,596 |
|
|
|
1,167 |
|
|
|
2,055 |
|
|
|
2,836 |
|
|
|
1,493 |
|
|
|
1,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic cost
|
|
$ |
6,388 |
|
|
$ |
4,047 |
|
|
$ |
5,701 |
|
|
$ |
16,746 |
|
|
$ |
12,911 |
|
|
$ |
11,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average assumptions were used to determine benefit
obligations at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension | |
|
|
|
|
Benefits | |
|
OPEB | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
| |
|
| |
Discount rate
|
|
|
5.50 |
% |
|
|
5.75 |
% |
|
|
5.50 |
% |
|
|
5.75 |
% |
Rate of compensation increase
|
|
|
4.00 |
% |
|
|
4.00 |
% |
|
|
4.00 |
% |
|
|
4.00 |
% |
61
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Weighted average assumptions were used to determine net periodic
benefit cost for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension | |
|
OPEB | |
|
|
| |
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Measurement date
|
|
|
12/31/2004 |
|
|
|
12/31/2003 |
|
|
|
12/31/2002 |
|
|
|
12/31/2004 |
|
|
|
12/31/2003 |
|
|
|
12/31/2002 |
|
Fiscal year end
|
|
|
12/31/2005 |
|
|
|
12/31/2004 |
|
|
|
12/31/2003 |
|
|
|
12/31/2005 |
|
|
|
12/31/2004 |
|
|
|
12/31/2003 |
|
Discount rate
|
|
|
5.75 |
% |
|
|
6.25 |
% |
|
|
6.50 |
% |
|
|
5.75 |
% |
|
|
6.25 |
% |
|
|
6.50 |
% |
Rate of compensation increase
|
|
|
4.00 |
% |
|
|
4.00 |
% |
|
|
4.00 |
% |
|
|
4.00 |
% |
|
|
4.00 |
% |
|
|
4.00 |
% |
Expected return on plan assets
|
|
|
9.00 |
% |
|
|
9.00 |
% |
|
|
9.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
In developing the long-term rate of return assumption for
pension fund assets, we evaluated input from our actuaries,
including their review of asset class return expectations as
well as long-term inflation assumptions. Projected returns are
based on historical returns of broad equity and bond indices. We
also considered our historical
10-year compound
returns. We anticipate that our investments will generate
long-term rates of return of 9.0%, based on target asset
allocations discussed below.
|
|
|
Effect of Medicare Part D |
Centurys prescription drug programs are assumed to be
actuarially equivalent and eligible for Medicare Part D
subsidy as written into law on December 8, 2003. The
approach used to measure this impact is based on our
understanding of FASB Staff Position (FSP) 106-2
published May 19, 2004. The impact was recognized during
2004 on a prospective basis. The effect of the Medicare
Part D subsidy reduced the accumulated projected benefit
obligation by $22,901, a decrease of approximately 12.8% for
Century. In addition, FSP 106-2 requires that employers disclose
the effect of the Medicare Part D subsidy on the components
of net periodic benefit cost.
The following table shows the effect of the Medicare Part D
Subsidy on the components of our 2005 net periodic
postretirement benefit cost.
|
|
|
|
|
|
|
|
|
|
|
Year Ended | |
|
|
December 31, 2005 | |
|
|
| |
|
|
Included | |
|
Excluded | |
|
|
| |
|
| |
Service cost
|
|
$ |
5,032 |
|
|
$ |
5,650 |
|
Interest cost
|
|
|
8,878 |
|
|
|
9,999 |
|
Expected return on plan assets
|
|
|
|
|
|
|
|
|
Net amortization and deferral
|
|
|
2,836 |
|
|
|
3,968 |
|
|
|
|
|
|
|
|
Net periodic cost
|
|
$ |
16,746 |
|
|
$ |
19,617 |
|
|
|
|
|
|
|
|
For measurement purposes, medical cost inflation is initially
9%, declining to 5% over six years and thereafter.
Assumed health care cost trend rates have a significant effect
on the amounts reported for the health care benefit obligations.
A one-percentage-point change in the assumed health care cost
trend rates would have had the following effects in 2006:
|
|
|
|
|
|
|
|
|
|
|
One Percent | |
|
One Percent | |
|
|
Increase | |
|
Decrease | |
|
|
| |
|
| |
Effect on total of service and interest cost components
|
|
$ |
1,381 |
|
|
$ |
(1,275 |
) |
Effect on accumulated postretirement benefit obligation
|
|
$ |
32,915 |
|
|
$ |
(26,115 |
) |
62
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We sponsor a tax-deferred savings plan under which eligible
domestic employees may elect to contribute specified percentages
of their compensation with Century providing matching
contributions of 60% of the first 6% of a participants
annual compensation contributed to the savings plan. One half of
our contribution is invested in the common stock of Century and
the other half of our contribution is invested based on employee
election. Our contributions to the savings plan were $560, $602
and $590 for the years ended December 31, 2005, 2004 and
2003, respectively. Shares of common stock of Century may be
sold at any time. Employees are considered fully vested in the
plan upon completion of two years of service. A year of service
is defined as a plan year in which the employee works at least
1,000 hours.
Our pension plans weighted average asset allocations at
December 31, 2005 and 2004, by asset category are as
follows:
|
|
|
|
|
|
|
|
|
|
|
Pension Plan | |
|
|
Assets At | |
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Equity securities
|
|
|
65 |
% |
|
|
65 |
% |
Debt securities
|
|
|
35 |
% |
|
|
35 |
% |
|
|
|
|
|
|
|
|
|
|
100 |
% |
|
|
100 |
% |
|
|
|
|
|
|
|
We seek a balanced return on plan assets through a diversified
investment strategy. Our weighted average target allocation for
plan assets is 65% equity securities and funds and 35% fixed
income funds.
Our other postretirement benefit plans are unfunded. We fund
these benefits as the retirees submit claims.
|
|
|
Pension and OPEB Cash Flows |
Contributions
We expect to contribute approximately $1,200 to our pension
plans and approximately $5,000 to our other postretirement
benefit plans for the year ending December 31, 2006.
Estimated Future Benefit Payments
The following table provides the estimated future benefit
payments for the pension and other postretirement benefit plans.
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits | |
|
OPEB Benefits | |
|
|
| |
|
| |
2006
|
|
$ |
4,938 |
|
|
$ |
4,969 |
|
2007
|
|
|
5,118 |
|
|
|
5,584 |
|
2008
|
|
|
5,348 |
|
|
|
6,177 |
|
2009
|
|
|
5,658 |
|
|
|
6,882 |
|
2010
|
|
|
5,741 |
|
|
|
7,572 |
|
Years 2011-2015
|
|
|
30,151 |
|
|
|
45,577 |
|
Preferred Stock Under our Restated
Certificate of Incorporation, the Board of Directors is
authorized to issue up to 5,000,000 shares of preferred
stock, with a par value of one cent per share, in one or more
series. The authorized, but unissued preferred shares may be
issued with such dividend rates, conversion privileges,
63
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
voting rights, redemption prices and liquidation preferences as
the Board of Directors may determine, without action by
shareholders. At December 31, 2005 and 2004, we had no
outstanding Preferred Stock.
Common Stock In 2005, our shareholders voted
to approve an amendment of our Restated Certificate of
Incorporation to increase the total number of shares of common
stock that Century has the authority to issue from
50 million to 100 million.
|
|
10. |
Stock Based Compensation |
1996 Stock Incentive Plan We adopted the 1996
Stock Incentive Plan (the Stock Incentive Plan) for
the purpose of awarding performance share units and granting
qualified incentive stock options and nonqualified stock options
to our salaried officers and other key employees. The Stock
Incentive Plan was amended in 2005 and its term was extended
four years through February 28, 2015. Additionally, the
number of shares available for issuance was increased
2,000,000 shares to a total of 5,000,000 shares and
non-employee directors will be eligible for awards under the
Stock Incentive Plan, as amended. Granted stock options vest
one-third on the grant date and an additional one-third on each
of the first and second anniversary dates, and have a term of
10 years. The performance share units represent the right
to receive common stock, on a one-for-one basis on their vesting
dates.
The Stock Incentive Plan provides for grants of performance
share units upon the passage of time or the attainment of
certain established performance goals. As of December 31,
2005, approximately 518,000 performance share units have been
authorized and will vest upon the attainment of the performance
goals.
We recognized $4,437, $2,761, and $2,254 of expense related to
the Stock Incentive Plan in 2005, 2004 and 2003, respectively.
Service based performance share units do not affect the issued
and outstanding shares of common stock until conversion at the
end of the vesting periods. However, the service based
performance share units are considered common stock equivalents
and therefore are included, using the treasury stock method, in
average common shares outstanding for diluted earnings per share
computations. Goal based performance share units are not
considered common stock equivalents until it becomes probable
that performance goals will be obtained.
Non-Employee Directors Stock Option Plan We
adopted a non-employee directors stock option plan for the
purpose of granting non-qualified stock options to non-employee
directors. The number of shares available under this plan is
200,000, of which options for 179,000 shares have been
awarded. The initial options vest one-third on the grant date
and an additional one-third on each of the first and second
anniversary dates. Subsequent options vest one-fourth each
calendar quarter. Each option granted under this plan will be
exercisable for a period of 10 years from the date of grant.
A summary of the status of our Stock Incentive Plan and the
Non-Employee Directors Stock Option Plan as of December 31,
2005, 2004 and 2003 and changes during the year ended on those
dates is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
|
|
Weighted | |
|
|
|
Weighted | |
|
|
|
Weighted | |
|
|
|
|
Average | |
|
|
|
Average | |
|
|
|
Average | |
|
|
|
|
Exercise | |
|
|
|
Exercise | |
|
|
|
Exercise | |
Options |
|
Shares | |
|
Price | |
|
Shares | |
|
Price | |
|
Shares | |
|
Price | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Outstanding at beginning of year
|
|
|
321,430 |
|
|
$ |
16.15 |
|
|
|
677,020 |
|
|
$ |
12.94 |
|
|
|
691,200 |
|
|
$ |
12.58 |
|
Granted
|
|
|
221,850 |
|
|
|
24.79 |
|
|
|
90,750 |
|
|
|
23.54 |
|
|
|
161,750 |
|
|
|
14.06 |
|
Exercised
|
|
|
(86,952 |
) |
|
|
13.07 |
|
|
|
(445,840 |
) |
|
|
12.73 |
|
|
|
(60,630 |
) |
|
|
12.48 |
|
Forfeited
|
|
|
(2,667 |
) |
|
|
22.14 |
|
|
|
(500 |
) |
|
|
7.98 |
|
|
|
(115,300 |
) |
|
|
12.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
453,661 |
|
|
$ |
20.93 |
|
|
|
321,430 |
|
|
$ |
16.15 |
|
|
|
677,020 |
|
|
$ |
12.94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes information about stock options
outstanding at December 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding | |
|
Options Exercisable | |
|
|
| |
|
| |
|
|
Number | |
|
Weighted Avg. | |
|
|
|
Number | |
|
Weighted | |
|
|
Outstanding at | |
|
Remaining | |
|
Weighted Avg. | |
|
Exercisable at | |
|
Avg. Exercise | |
Range of Exercise Prices |
|
12/31/05 | |
|
Contractual Life | |
|
Exercise Price | |
|
12/31/05 | |
|
Price | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
$23.18 to $30.05
|
|
|
307,269 |
|
|
|
9.5 years |
|
|
$ |
24.45 |
|
|
|
108,063 |
|
|
$ |
24.41 |
|
$12.86 to $19.01
|
|
|
98,890 |
|
|
|
4.4 years |
|
|
$ |
15.83 |
|
|
|
98,890 |
|
|
$ |
15.83 |
|
$ 7.03 to $11.59
|
|
|
47,502 |
|
|
|
5.7 years |
|
|
$ |
8.81 |
|
|
|
47,502 |
|
|
$ |
8.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
453,661 |
|
|
|
|
|
|
|
|
|
|
|
254,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11. |
Earnings (Loss) Per Share |
Basic earnings per common share (EPS) amounts are
computed by dividing earnings after the deduction of preferred
stock dividends by the average number of common shares
outstanding. In accordance with current accounting guidance, for
the purpose of calculating EPS, the cumulative preferred stock
dividends accumulated for the period were deducted from net
income, as if declared. Diluted EPS amounts assume the issuance
of common stock for all potentially dilutive common shares
outstanding. The following table provides a reconciliation of
the computation of the basic and diluted earnings (loss) per
share for income (loss) before cumulative effect of change in
accounting principle (shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the fiscal Year Ended December 31, | |
|
|
| |
|
|
|
|
2004 | |
|
2003 | |
|
|
2005 | |
|
Restated | |
|
Restated | |
|
|
| |
|
| |
|
| |
|
|
Income | |
|
Shares | |
|
Per-Share | |
|
Income | |
|
Shares | |
|
Per-Share | |
|
Income | |
|
Shares | |
|
Per-Share | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Income (loss) before cumulative effect of change in accounting
principle
|
|
$ |
(116,255 |
) |
|
|
|
|
|
|
|
|
|
$ |
33,482 |
|
|
|
|
|
|
|
|
|
|
$ |
3,922 |
|
|
|
|
|
|
|
|
|
Less: Preferred stock dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(769 |
) |
|
|
|
|
|
|
|
|
|
|
(2,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) applicable to common shareholders
|
|
|
(116,255 |
) |
|
|
32,136 |
|
|
$ |
(3.62 |
) |
|
|
32,713 |
|
|
|
28,668 |
|
|
$ |
1.14 |
|
|
|
1,922 |
|
|
|
21,073 |
|
|
$ |
0.09 |
|
Effect of Dilutive Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incremental Shares from assumed conversion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
107 |
|
|
|
|
|
|
|
|
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) applicable to common shareholders with assumed
conversion
|
|
$ |
(116,255 |
) |
|
|
32,136 |
|
|
$ |
(3.62 |
) |
|
$ |
32,713 |
|
|
|
28,775 |
|
|
$ |
1.14 |
|
|
$ |
1,922 |
|
|
|
21,099 |
|
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period ended December 31, 2005, 453,661 options to
purchase common stock and 59,000 performance share grants were
outstanding, but were excluded from the calculation of diluted
earnings per share because of the antidilutive effect. For the
periods ended December 31, 2004 and 2003, 2,500 and 59,750
options to purchase common stock, respectively, were excluded
from the calculation of diluted earnings per share because of
the antidilutive effect. In 2003, convertible preferred stock,
convertible at the holders option into
1,395,089 shares of our common stock, was excluded in the
computation of dilutive EPS because of their antidilutive effect.
65
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In 2005 and 2004, we assumed no conversion of our outstanding
1.75% convertible senior notes in calculating dilutive EPS
because the conversion price had not been met.
Significant components of the income tax expense, before
minority interest, equity in earnings in joint venture, and
cumulative effect of a change in accounting principle consist of
the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal current benefit (expense)
|
|
$ |
18,136 |
|
|
$ |
(6,378 |
) |
|
$ |
|
|
|
State current benefit (expense)
|
|
|
2,727 |
|
|
|
|
|
|
|
(708 |
) |
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
20,863 |
|
|
|
(6,378 |
) |
|
|
(708 |
) |
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal deferred benefit (expense)
|
|
|
61,325 |
|
|
|
(8,748 |
) |
|
|
(310 |
) |
|
Foreign deferred expense
|
|
|
(10,348 |
) |
|
|
(2,084 |
) |
|
|
|
|
|
State deferred benefit (expense)
|
|
|
8,857 |
|
|
|
(986 |
) |
|
|
(77 |
) |
|
|
|
|
|
|
|
|
|
|
Total deferred tax benefit (expense)
|
|
|
59,834 |
|
|
|
(11,818 |
) |
|
|
(387 |
) |
|
|
|
|
|
|
|
|
|
|
Total income tax benefit (expense)
|
|
$ |
80,697 |
|
|
$ |
(18,196 |
) |
|
$ |
(1,095 |
) |
|
|
|
|
|
|
|
|
|
|
A reconciliation of the statutory U.S. Federal income tax
rate to the effective income tax rate on income (loss) before
cumulative effect of a change in accounting principle is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Federal statutory rate
|
|
|
35 |
% |
|
|
35 |
% |
|
|
35 |
% |
|
Effect of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent differences
|
|
|
|
|
|
|
|
|
|
|
(19 |
) |
|
|
State taxes, net of Federal benefit
|
|
|
4 |
|
|
|
1 |
|
|
|
11 |
|
|
|
Foreign earnings not taxed
|
|
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
Foreign taxes
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
Equity earnings in joint ventures
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39 |
% |
|
|
36 |
% |
|
|
27 |
% |
|
|
|
|
|
|
|
|
|
|
Permanent differences primarily relate to our settlement of
prior year tax examinations, meal and entertainment
disallowance, certain state income tax credits and other
nondeductible expenses.
66
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Significant components of our deferred tax assets and
liabilities as of December 31 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Accrued postretirement benefit cost
|
|
$ |
32,393 |
|
|
$ |
17,721 |
|
|
Accrued liabilities
|
|
|
9,359 |
|
|
|
9,930 |
|
|
NOL carried forward
|
|
|
|
|
|
|
5,425 |
|
|
Pension
|
|
|
2,998 |
|
|
|
5,925 |
|
|
Derivative and hedging contracts
|
|
|
114,939 |
|
|
|
|
|
|
Foreign tax credit
|
|
|
16,459 |
|
|
|
11,359 |
|
|
Valuation allowance
|
|
|
(11,359 |
) |
|
|
(11,359 |
) |
|
Equity contra other comprehensive loss
|
|
|
51,442 |
|
|
|
29,739 |
|
|
Other
|
|
|
1,304 |
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
217,535 |
|
|
|
68,740 |
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Tax over financial statement depreciation
|
|
|
(109,545 |
) |
|
|
(107,825 |
) |
|
Unrepatriated foreign earnings
|
|
|
(8,449 |
) |
|
|
(3,500 |
) |
|
Foreign basis differences
|
|
|
(10,566 |
) |
|
|
|
|
|
Other
|
|
|
(12,107 |
) |
|
|
(1,046 |
) |
|
|
|
|
|
|
|
Net deferred tax asset (liability)
|
|
$ |
76,868 |
|
|
$ |
(43,631 |
) |
|
|
|
|
|
|
|
The net deferred tax asset of $76,868 at December 31, 2005,
is net of a non-current deferred foreign income tax liability of
$16,890 and includes $37,705 of current deferred tax assets and
$56,053 of non-current deferred tax assets.
We have not recorded deferred income taxes applicable to
unrepatriated foreign earnings that are permanently reinvested
outside the United States. If Nordurals earnings were not
permanently reinvested, an additional deferred tax liability of
$7,015 would have been reported at December 31, 2005.
|
|
13. |
Contingencies and Commitments |
Environmental
Contingencies
We believe our current environmental liabilities do not have,
and are not likely to have, a material adverse effect on our
financial condition, results of operations or liquidity.
However, there can be no assurance that future requirements or
conditions at currently or formerly owned or operated properties
will not result in liabilities which may have a material adverse
effect.
Century Aluminum of West Virginia, Inc. (Century of West
Virginia) continues to perform remedial measures at
Ravenswood pursuant to an order issued by the Environmental
Protection Agency (EPA) in 1994 (the 3008(h)
Order). Century of West Virginia also conducted a RCRA
facility investigation (RFI) under the 3008(h) Order
evaluating other areas at Ravenswood that may have contamination
requiring remediation. The RFI has been approved by appropriate
agencies. Century of West Virginia has completed interim
remediation measures at two sites identified in the RFI, and we
believe no further remediation will be required. A Corrective
Measures Study, which will formally document the conclusion of
these activities, is being completed with the EPA. We believe a
significant portion of the contamination on the two sites
identified in the RFI is attributable to the operations of third
parties and is their financial responsibility.
67
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Prior to our purchase of Hawesville, the EPA issued a final
Record of Decision (ROD) under the Comprehensive
Environmental Response, Compensation and Liability Act. By
agreement, Southwire is to perform all obligations under the
ROD. Century Aluminum of Kentucky LLC (Century
Kentucky) has agreed to operate and maintain the ground
water treatment system required under the ROD on behalf of
Southwire, and Southwire will reimburse Century Kentucky for any
expense that exceeds $400 annually.
Century is a party to an EPA Administrative Order on Consent
(the Order) pursuant to which other past and present
owners of an alumina refining facility at St. Croix, Virgin
Islands have agreed to carry out a Hydrocarbon Recovery Plan to
remove and manage hydrocarbons floating on groundwater
underlying the facility. Pursuant to the Hydrocarbon Recovery
Plan, recovered hydrocarbons and groundwater are delivered to
the adjacent petroleum refinery where they are received and
managed. Lockheed Martin Corporation (Lockheed),
which sold the facility to one of our affiliates, Virgin Islands
Alumina Corporation (Vialco), in 1989, has tendered
indemnity and defense of this matter to Vialco pursuant to the
terms of the Lockheed Vialco Asset Purchase
Agreement. Management does not believe Vialcos liability
under the Order or its indemnity to Lockheed will require
material payments. Through December 31, 2005, we have
expended approximately $440 on the Recovery Plan. Although there
is no limit on the obligation to make indemnification payments,
we expect the future potential payments under this
indemnification to comply with the Order will be approximately
$200, which may be offset in part by sales of recoverable
hydrocarbons.
In May 2005, Century and Vialco were among the defendants listed
in a lawsuit filed by the Commissioner of the Department of
Planning and Natural Resources, in his capacity as Trustee for
Natural Resources of the United States Virgin Islands. The
complaint alleges damages to natural resources caused by alleged
releases from the alumina refinery facility at St. Croix and the
adjacent petroleum refinery. Lockheed has tendered indemnity and
defense of the case to Vialco pursuant to terms of the
Lockheed-Vialco Asset Purchase Agreement. The complaint seeks
unspecified monetary damages, costs and attorney fees.
It is our policy to accrue for costs associated with
environmental assessments and remedial efforts when it becomes
probable that a liability has been incurred and the costs can be
reasonably estimated. The aggregate environmental-related
accrued liabilities were $532 and $596 at December 31, 2005
and December 31, 2004, respectively. All accrued amounts
have been recorded without giving effect to any possible future
recoveries. With respect to cost for ongoing environmental
compliance, including maintenance and monitoring, such costs are
expensed as incurred.
Because of the issues and uncertainties described above, and our
inability to predict the requirements of the future
environmental laws, there can be no assurance that future
capital expenditures and costs for environmental compliance will
not have a material adverse effect on our future financial
condition, results of operations, or liquidity. Based upon all
available information, management does not believe that the
outcome of these environmental matters will have a material
adverse effect on our financial condition, results of
operations, or liquidity.
Legal Contingencies
We have pending against us or may be subject to various
lawsuits, claims and proceedings related primarily to
employment, commercial, environmental and safety and health
matters. Although it is not presently possible to determine the
outcome of these matters, management believes their ultimate
disposition will not have a material adverse effect on our
financial condition, results of operations, or liquidity.
Power Commitments
Hawesville currently purchases substantially all of its power
from Kenergy Corporation (Kenergy), a local retail
electric cooperative, under a fixed price power supply contract
that expires at the end of 2010. Kenergy acquires the power it
provides to Hawesville mostly from a subsidiary of LG&E
Energy Corporation
68
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(LG&E), with delivery guaranteed by LG&E. We
recently priced 131 megawatts (MW) of previously
unpriced power for 2006. All of Hawesvilles power
requirements are at fixed prices, except for 2.5% (or
12 MW) which will remain variably priced. However,
Hawesvilles unpriced power requirements increase to 27%
(130 MW) of its power requirements in calendar years 2007
through 2010. We are reviewing our options for our unpriced
energy requirements.
We purchased all of the electricity requirements for Ravenswood
from Ohio Power Company, a unit of American Electric Power
Company, under a fixed price power supply agreement that ran
through December 31, 2005. Under Ravenswoods new
power contract, Appalachian Power Company supplies power to
Ravenswood. After December 31, 2007, Century Aluminum of
West Virginia, Inc. may terminate the agreement by providing
12 months notice of termination. Power delivered under the
new power supply agreement will be as set forth in currently
published tariffs. Appalachian Power Company filed a rate case
on September 26, 2005, seeking increases in its tariff
rates. It has advised Century it expects those rates to become
effective July 1, 2006. We intend to contest the rate
increase.
Mt. Holly purchases all of its power from the South Carolina
Public Service Authority at rates established by published
schedules. Mt. Hollys current power contract expires
December 31, 2015. Power delivered through 2010 will be
priced as set forth in currently published schedules, subject to
adjustments for fuel costs. Rates for the period 2011 through
2015 will be as provided under then-applicable schedules.
The Nordural facility purchases power from Landsvirkjun, a power
company jointly owned by the Republic of Iceland and two
Icelandic municipal governments, under a long-term contract due
to expire in 2019. The power delivered by Landsvirkjun is priced
at a rate based on the LME price for primary aluminum and is
from hydroelectric and geothermal sources. For the expansion,
Nordural has entered into a power contract with Hitaveita
Sudurnesja hf. (HS) and Orkuveita
Reykjavíkur (OR) to supply of the power
required for the 130,000 metric tons of capacity. The price for
power delivered by HS and OR is also LME-based. In addition, OR
has conditionally agreed to supply the power required to further
expand the plants production capacity to 260,000 metric
tons per year by late 2008. Power under these agreements will be
generated from geothermal resources and prices will be
LME-based. Landsvirkjun has agreed on a best commercial efforts
basis to provide backup power to Nordural should HS or OR be
unable to meet the obligations of their contract to provide
power for the Nordural expansion.
Labor Commitments
Approximately 82% of our U.S. based work force are
represented by the United Steelworkers of America (the
USWA) and are working under agreements that expire
as follows: March 31, 2006 (Hawesville) and May 31,
2006 (Ravenswood).
Approximately 89% of Nordurals work force is represented
by six labor unions under an agreement that expires on
December 31, 2009.
Other Commitments and
Contingencies
Our income tax returns are periodically examined by various tax
authorities. We are currently under audit by the Internal
Revenue Service (IRS) for the tax years through
2002. In connection with such examinations, the IRS has raised
issues and proposed tax deficiencies. We are reviewing the
issues raised by the IRS and have filed an administrative appeal
with the IRS, contesting the proposed tax deficiencies. We
believe our tax position is well supported and based on current
information, we do not believe that the outcome of the tax audit
will have a material impact on our financial condition or
results of operations.
At December 31, 2005 and December 31, 2004, we had
outstanding capital commitments related to the Nordural
expansion of $89,910 and $218,800, respectively. Our cost
commitments for the Nordural expansion
69
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
may materially change depending on the exchange rate between the
U.S. dollar and certain foreign currencies, principally the
euro and the Icelandic krona.
|
|
14. |
Forward Delivery Contracts and Financial Instruments |
As a producer of primary aluminum products, we are exposed to
fluctuating raw material and primary aluminum prices. We
routinely enter into fixed and market priced contracts for the
sale of primary aluminum and the purchase of raw materials in
future periods.
Primary Aluminum Sales
Contracts
|
|
|
|
|
|
|
|
|
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 metric tons per year (mtpy) |
|
Through December 31, 2009 |
|
LME-based |
Glencore Metal Agreement II(3)
|
|
Glencore |
|
20,000 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 |
|
|
(1) |
Alcan has the right, upon 12 months notice, to reduce its
purchase obligations by 50% under this contract. |
|
(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. |
|
(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. |
70
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Tolling Contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract |
|
Customer |
|
Volume |
|
Term |
|
Pricing |
|
|
|
|
|
|
|
|
|
Billiton Tolling Agreement(1)(2)
|
|
|
BHP Billiton |
|
|
|
130,000 mtpy |
|
|
|
Through December 31, 2013 |
|
|
|
LME-based |
|
Glencore Tolling Agreement(3)(4)
|
|
|
Glencore |
|
|
|
90,000 mtpy |
|
|
|
Through July 2016 |
|
|
|
LME-based |
|
|
|
(1) |
Substantially all of Nordurals existing sales consist of
tolling revenues earned under a long-term Alumina Supply, Toll
Conversion and Aluminum Metal Supply Agreement (the
Billiton Tolling Agreement) between Nordural and a
subsidiary of BHP Billiton Ltd (together with its subsidiaries,
BHP Billiton). Under the Billiton Tolling Agreement,
Nordural receives an LME-based fee for the conversion of
alumina, supplied by BHP Billiton, into primary aluminum. |
|
(2) |
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. |
|
(3) |
Nordural entered into a
10-year LME-based
alumina tolling agreement with Glencore for 90,000 metric tons
of the expansion capacity at Nordural. The term of the agreement
is expected to begin in July 2006. |
|
(4) |
In December 2005, Glencore assigned 50% of its tolling rights
under this agreement to Hydro Aluminum AS (Hydro)
for the period 2007 to 2010. |
Apart from the Alcan Metal Agreement, Glencore Metal
Agreement I, Glencore Metal Agreement II and Southwire
Metal Agreement, we had forward delivery contracts to sell
107,546 metric tons and 113,126 metric tons of primary aluminum
at December 31, 2005 and December 31, 2004,
respectively. Of these forward delivery contracts, we had fixed
price commitments to sell 4,643 metric tons and 6,033 metric
tons of primary aluminum at December 31, 2005 and
December 31, 2004, respectively, of which 186 metric tons
were with Glencore at December 31, 2005 and none were with
Glencore at December 31, 2004.
Financial Sales
Agreements
To mitigate the volatility in our unpriced forward delivery
contracts, we enter into fixed price financial sales contracts,
which settle in cash in the period corresponding to the intended
delivery dates of the forward delivery contracts. Certain of
these fixed price financial sales contracts are accounted for as
cash flow hedges
71
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
depending on our designation of each contract at its inception.
Glencore is the counterparty for all of the contracts summarized
below:
Primary Aluminum Financial Sales Contracts as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2005 | |
|
December 31, 2004 | |
|
|
| |
|
| |
|
|
Cash Flow | |
|
|
|
Cash Flow | |
|
|
|
|
Hedges | |
|
Derivatives | |
|
Total | |
|
Hedges | |
|
Derivatives | |
|
Total | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
(Metric Tons) | |
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
193,083 |
|
|
|
|
|
|
|
193,083 |
|
2006
|
|
|
142,750 |
|
|
|
51,000 |
|
|
|
193,750 |
|
|
|
142,750 |
|
|
|
25,200 |
|
|
|
167,950 |
|
2007
|
|
|
119,500 |
|
|
|
50,400 |
|
|
|
169,900 |
|
|
|
119,500 |
|
|
|
50,400 |
|
|
|
169,900 |
|
2008
|
|
|
9,000 |
|
|
|
100,200 |
|
|
|
109,200 |
|
|
|
9,000 |
|
|
|
75,000 |
|
|
|
84,000 |
|
2009
|
|
|
|
|
|
|
105,000 |
|
|
|
105,000 |
|
|
|
|
|
|
|
75,000 |
|
|
|
75,000 |
|
2010
|
|
|
|
|
|
|
105,000 |
|
|
|
105,000 |
|
|
|
|
|
|
|
75,000 |
|
|
|
75,000 |
|
2010-2015
|
|
|
|
|
|
|
375,000 |
|
|
|
375,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
271,250 |
|
|
|
786,600 |
|
|
|
1,057,850 |
|
|
|
464,333 |
|
|
|
300,600 |
|
|
|
764,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substantially all of the contracts accounted for as derivatives
contain clauses that trigger additional shipment volume when the
market price for a contract month is above the contract ceiling
price. If the market price exceeds the ceiling price for all
contract months through 2015, the maximum additional shipment
volume would be 760,800 metric tons. These contracts will be
settled monthly. We had no fixed price financial contracts to
purchase aluminum at December 31, 2005 or December 31,
2004.
Additionally, to mitigate the volatility of the natural gas
markets, we enter into financial purchase contracts, accounted
for as cash flow hedges, which settle in cash in the period
corresponding to the intended usage of natural gas.
Natural Gas Financial Purchase Contracts as of:
|
|
|
|
|
|
|
|
|
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
|
|
(Thousands | |
|
|
of DTH) | |
2005
|
|
|
|
|
|
|
2,880 |
|
2006
|
|
|
1,680 |
|
|
|
480 |
|
2007
|
|
|
780 |
|
|
|
480 |
|
2008
|
|
|
480 |
|
|
|
480 |
|
|
|
|
|
|
|
|
Total
|
|
|
2,940 |
|
|
|
4,320 |
|
|
|
|
|
|
|
|
Based on the fair value of our financial sales contracts for
primary aluminum and financial purchase contracts for natural
gas that qualify as cash flow hedges as of December 31,
2005, an accumulated other comprehensive loss of $54,510 is
expected to be reclassified as a reduction to earnings over the
next 12 month period.
The forward financial sales and purchase contracts are subject
to the risk of non-performance by the counterparties. However,
we only enter into forward financial contracts with
counterparties we determine to be creditworthy. If any
counterparty failed to perform according to the terms of the
contract, the accounting impact would be limited to the
difference between the contract price and the market price
applied to the contract volume on the date of settlement.
72
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
15. |
Asset Retirement Obligations |
With the adoption of SFAS No. 143 on January 1,
2003, we recorded an ARO asset of $6,848, net of accumulated
amortization of $7,372, a deferred tax asset of $3,430 and an
ARO liability of $14,220. The net amount initially recognized as
a result of applying the Statement is reported as a cumulative
effect of a change in accounting principle. We recorded a
one-time, non-cash charge of $5,878, for the cumulative effect
of a change in accounting principle.
Our asset retirement obligations consist primarily of costs
associated with the disposal of spent pot liner used in the
reduction cells of our facilities.
We adopted FASB Interpretation No. (FIN) 47,
Accounting for Conditional Asset Retirement
Obligations in 2005, and recorded an adjustment to our
asset retirement obligations, the effect of which was not
material.
The reconciliation of the changes in the asset retirement
obligations is presented below:
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended | |
|
|
December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Beginning balance, ARO liability
|
|
$ |
17,232 |
|
|
$ |
16,495 |
|
Additional ARO liability incurred
|
|
|
1,849 |
|
|
|
1,383 |
|
ARO liabilities settled
|
|
|
(3,330 |
) |
|
|
(3,379 |
) |
Accretion expense
|
|
|
1,370 |
|
|
|
2,733 |
|
FIN 47 adoption
|
|
|
(5,313 |
) |
|
|
|
|
|
|
|
|
|
|
|
Ending balance, ARO liability
|
|
$ |
11,808 |
|
|
$ |
17,232 |
|
|
|
|
|
|
|
|
|
|
16. |
Related Party Transactions |
The significant related party transactions occurring during the
years ended December 31, 2005, 2004, and 2003, are
described below.
The Chairman of the Board of Directors of Century is a member of
the Board of Directors of Glencore International AG. One of
Centurys Board members is the Chairman of the Board of
Directors of Glencore International AG.
We enter into forward financial sales and hedging contracts with
Glencore to help manage exposure to fluctuating primary aluminum
prices. Management believes that all of our forward financial
sales and hedge contracts with Glencore approximated market at
the time of placing the contracts.
Century of West Virginia has purchased alumina, and purchased
and sold primary aluminum in transactions with Glencore at
prices which management believes approximated market.
Berkeley has purchased alumina, and purchased and sold primary
aluminum in transactions with Glencore at prices which
management believes approximated market.
Century of Kentucky has purchased and sold primary aluminum in
transactions with Glencore at prices which management believes
approximated market.
Century of Kentucky has purchased alumina in transactions with
Gramercy at prices which management believes approximated market.
Mr. Stuart M. Schreiber, a director, is the managing
director and owner of Integis, Inc., which we paid approximately
$840 in fees for management and executive search services
provided to us in 2005.
73
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During 2003, all of Centurys facilities participated in
primary aluminum swap arrangements with Glencore at prices which
management believes approximated market.
Summary
A summary of the aforementioned related party transactions for
the years ended December 31, 2005, 2004 and 2003 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Net sales to Glencore
|
|
$ |
171,027 |
|
|
$ |
163,209 |
|
|
$ |
121,886 |
|
Purchases from Glencore
|
|
|
129,757 |
|
|
|
131,427 |
|
|
|
99,185 |
|
Management fees from Glencore
|
|
|
|
|
|
|
|
|
|
|
121 |
|
Gramercy alumina purchases
|
|
|
138,022 |
|
|
|
26,680 |
|
|
|
|
|
See Note 14 for a discussion of our fixed-price
commitments, forward financial contracts, and contract
settlements with related parties.
|
|
17. |
Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Cash paid for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
30,358 |
|
|
$ |
37,587 |
|
|
$ |
40,289 |
|
|
Income taxes
|
|
|
12,649 |
|
|
|
248 |
|
|
|
257 |
|
Cash received from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
1,388 |
|
|
|
1,088 |
|
|
|
341 |
|
|
Income tax refunds
|
|
|
|
|
|
|
80 |
|
|
|
9,489 |
|
Non-cash investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued Nordural expansion costs
|
|
|
6,170 |
|
|
|
5,591 |
|
|
|
|
|
Non-Cash Activities
In the year ended December 31, 2005, we had a significant
non-cash equity transaction. In the second quarter of 2005, we
issued approximately 59,000 shares of common stock to
satisfy a performance share liability of $1,965 to certain key
employees. In the year ended December 31, 2004, we had two
significant non-cash equity transactions. In April 2004, we
issued approximately 67,000 shares of common stock to
satisfy a performance share liability of $1,630 to certain key
employees. Additionally, in May 2004, Glencore exercised its
option to convert its shares of cumulative convertible preferred
stock. We issued 1,395,089 shares of common stock in
exchange for Glencores $25,000 of preferred stock. During
2003, we incurred $40,000 of borrowings in the form of seller
financing related to the acquisition of the 20% interest in
Hawesville.
During the years ended December 31, 2005, 2004 and 2003, we
capitalized interest cost incurred in the construction of
equipment of $8,711, $668 and $685, respectively.
74
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
We operate in one reportable business segment, primary aluminum.
A reconciliation of our consolidated assets to the total of
primary aluminum segment assets is provided below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Assets(1) |
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Primary
|
|
$ |
1,648,351 |
|
|
$ |
1,307,168 |
|
|
$ |
787,017 |
|
Corporate, Unallocated
|
|
|
29,080 |
|
|
|
25,385 |
|
|
|
17,225 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$ |
1,677,431 |
|
|
$ |
1,332,553 |
|
|
$ |
804,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Segment assets include accounts receivable, due from affiliates,
inventory, intangible assets, and property, plant and
equipment-net; the remaining assets are unallocated corporate
assets, and deferred tax assets. |
Geographic
information
Included in the consolidated financial statements are the
following amounts related to geographic locations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
Net Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$ |
992,442 |
|
|
$ |
974,481 |
|
|
$ |
779,229 |
|
|
Other
|
|
|
139,920 |
|
|
|
86,266 |
|
|
|
3,250 |
|
Long-lived assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$ |
604,411 |
|
|
$ |
615,618 |
|
|
$ |
622,921 |
|
|
Other
|
|
|
722,474 |
|
|
|
431,161 |
|
|
|
|
|
Major Customer
information
In 2005, we had four major customers whose sales revenue
exceeded 10% of our net sales. In 2004 and 2003, we had three
major customers whose sales revenue exceeded 10% of our net
sales. The revenue and percentage of net sales for these
customers are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, | |
|
|
| |
|
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
|
$ | |
|
% | |
|
$ | |
|
% | |
|
$ | |
|
% | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Alcan
|
|
|
356,347 |
|
|
|
31.5 |
|
|
|
301,033 |
|
|
|
28.4 |
|
|
|
198,448 |
|
|
|
25.4 |
|
Southwire
|
|
|
294,468 |
|
|
|
26.0 |
|
|
|
258,320 |
|
|
|
24.4 |
|
|
|
199,067 |
|
|
|
25.4 |
|
Glencore
|
|
|
171,027 |
|
|
|
15.1 |
|
|
|
163,209 |
|
|
|
15.4 |
|
|
|
121,886 |
|
|
|
15.6 |
|
BHP Billiton
|
|
|
137,736 |
|
|
|
12.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19. |
Quarterly Information (Unaudited) |
The following information includes the results from Nordural
since we acquired it in April 2004 and the equity in earnings of
the GAL and SABL joint venture since we acquired our interest in
October 2004.
75
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Financial results by quarter for the years ended
December 31, 2005 and 2004 (restated for change in
accounting principle) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income | |
|
|
|
|
|
|
Net Income | |
|
(Loss) Per | |
|
|
Net Sales | |
|
Gross Profit | |
|
(Loss) | |
|
Share | |
|
|
| |
|
| |
|
| |
|
| |
2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4th Quarter(2)
|
|
$ |
292,874 |
|
|
$ |
34,704 |
|
|
$ |
(148,658 |
) |
|
$ |
(4.62 |
) |
|
3rd Quarter(3)
|
|
|
270,836 |
|
|
|
30,058 |
|
|
|
(20,071 |
) |
|
|
(0.62 |
) |
|
2nd Quarter
|
|
|
283,256 |
|
|
|
45,348 |
|
|
|
40,744 |
|
|
|
1.27 |
|
|
1st Quarter
|
|
|
285,396 |
|
|
|
51,567 |
|
|
|
11,730 |
|
|
|
0.37 |
|
2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4th Quarter
|
|
$ |
290,603 |
|
|
$ |
56,773 |
|
|
$ |
24,643 |
|
|
$ |
0.77 |
|
|
3rd Quarter(1)
|
|
|
274,317 |
|
|
|
43,482 |
|
|
|
(15,973 |
) |
|
|
(0.50 |
) |
|
2nd Quarter
|
|
|
263,733 |
|
|
|
46,679 |
|
|
|
19,219 |
|
|
|
0.63 |
|
|
1st Quarter
|
|
|
232,094 |
|
|
|
38,353 |
|
|
|
5,593 |
|
|
|
0.24 |
|
|
|
(1) |
The third quarter 2004 net income includes a charge of
$30,367, net of tax, for a loss on the early extinguishment of
debt. |
|
(2) |
The fourth quarter of 2005 net income includes a charge of
$164,620, net of tax, for loss on forward contracts. |
|
(3) |
The third quarter of 2005 net income includes a charge of
$34,228, net of tax, for loss on forward contracts. |
|
|
20. |
Condensed Consolidating Financial Information |
Our 7.5% senior notes due 2014 and 1.75% convertible
senior notes due 2024 are guaranteed by each of our material
existing and future domestic subsidiaries. These notes are not
guaranteed by our foreign subsidiaries (the Non-Guarantor
Subsidiaries). During the second quarter of 2005, Century
Aluminum of Kentucky, LLC (the LLC) became a
guarantor subsidiary. In the periods presented prior to 2005,
the LLC was classified with the Non-Guarantor Subsidiaries. We
allocate corporate expenses or income to our subsidiaries. For
the years ended December 31, 2005, 2004, and 2003 we
allocated total corporate expenses of $2,211, $1,452 and $9,139
to our subsidiaries, respectively. Additionally, we charge
interest on certain intercompany balances.
The following summarized condensed consolidating balance sheets
as of December 31, 2005 and December 31, 2004,
condensed consolidating statements of operations for the years
ended December 31, 2005, December 31, 2004 and
December 31, 2003 and the condensed consolidating
statements of cash flows for the years ended December 31,
2005, December 31, 2004 and December 31, 2003 present
separate results for Century, the Guarantor Subsidiaries and the
Non-Guarantor Subsidiaries.
This summarized condensed consolidating financial information
may not necessarily be indicative of the results of operations
or financial position had Century, the Guarantor Subsidiaries or
the Non-Guarantor Subsidiaries operated as independent entities.
76
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined | |
|
Combined | |
|
|
|
Reclassifications | |
|
|
|
|
Guarantor | |
|
Non-Guarantor | |
|
The | |
|
and | |
|
|
|
|
Subsidiaries | |
|
Subsidiaries | |
|
Company | |
|
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
|
|
|
19,994 |
|
|
|
3,357 |
|
|
|
31,514 |
|
|
|
(1,150 |
) |
|
|
53,715 |
|
|
Accrued and other current liabilities
|
|
|
|
|
|
|
581 |
|
|
|
|
|
|
|
|
|
|
|
581 |
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONDENSED CONSOLIDATING BALANCE SHEET
As of December 31, 2004
(Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined | |
|
Combined | |
|
|
|
Reclassifications | |
|
|
|
|
Guarantor | |
|
Non-Guarantor | |
|
The | |
|
and | |
|
|
|
|
Subsidiaries | |
|
Subsidiaries | |
|
Company | |
|
Eliminations | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
185 |
|
|
$ |
1,759 |
|
|
$ |
42,224 |
|
|
$ |
|
|
|
$ |
44,168 |
|
|
Restricted cash
|
|
|
1,174 |
|
|
|
504 |
|
|
|
|
|
|
|
|
|
|
|
1,678 |
|
|
Accounts receivable net
|
|
|
71,051 |
|
|
|
8,449 |
|
|
|
76 |
|
|
|
|
|
|
|
79,576 |
|
|
Due from affiliates
|
|
|
168,328 |
|
|
|
8,142 |
|
|
|
684,458 |
|
|
|
(846,557 |
) |
|
|
14,371 |
|
|
Inventories
|
|
|
72,264 |
|
|
|
39,020 |
|
|
|
|
|
|
|
|
|
|
|
111,284 |
|
|
Prepaid and other assets
|
|
|
1,514 |
|
|
|
4,299 |
|
|
|
4,242 |
|
|
|
|
|
|
|
10,055 |
|
|
Deferred taxes current portion
|
|
|
24,349 |
|
|
|
293 |
|
|
|
|
|
|
|
|
|
|
|
24,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
338,865 |
|
|
|
62,466 |
|
|
|
731,000 |
|
|
|
(846,557 |
) |
|
|
285,774 |
|
Investment in subsidiaries
|
|
|
66,393 |
|
|
|
|
|
|
|
270,178 |
|
|
|
(336,571 |
) |
|
|
|
|
Property, plant and equipment net
|
|
|
464,418 |
|
|
|
341,692 |
|
|
|
140 |
|
|
|
|
|
|
|
806,250 |
|
Intangible asset net
|
|
|
|
|
|
|
86,809 |
|
|
|
|
|
|
|
|
|
|
|
86,809 |
|
Goodwill
|
|
|
|
|
|
|
95,610 |
|
|
|
|
|
|
|
|
|
|
|
95,610 |
|
Other assets
|
|
|
20,391 |
|
|
|
16,792 |
|
|
|
20,927 |
|
|
|
|
|
|
|
58,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
890,067 |
|
|
$ |
603,369 |
|
|
$ |
1,022,245 |
|
|
$ |
(1,183,128 |
) |
|
$ |
1,332,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity: |
|
Accounts payable trade
|
|
$ |
12,000 |
|
|
$ |
35,479 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
47,479 |
|
|
Due to affiliates
|
|
|
83,819 |
|
|
|
1,911 |
|
|
|
162,150 |
|
|
|
(163,065 |
) |
|
|
84,815 |
|
|
Industrial revenue bonds
|
|
|
7,815 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,815 |
|
|
Accrued and other current liabilities
|
|
|
15,545 |
|
|
|
10,023 |
|
|
|
27,741 |
|
|
|
|
|
|
|
53,309 |
|
|
Long term debt current portion
|
|
|
|
|
|
|
704 |
|
|
|
9,878 |
|
|
|
|
|
|
|
10,582 |
|
|
Accrued employee benefits costs current portion
|
|
|
6,507 |
|
|
|
1,951 |
|
|
|
|
|
|
|
|
|
|
|
8,458 |
|
|
Convertible senior notes
|
|
|
|
|
|
|
|
|
|
|
175,000 |
|
|
|
|
|
|
|
175,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
125,686 |
|
|
|
50,068 |
|
|
|
374,769 |
|
|
|
(163,065 |
) |
|
|
387,458 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior unsecured notes payable
|
|
|
|
|
|
|
|
|
|
|
250,000 |
|
|
|
|
|
|
|
250,000 |
|
Nordural debt
|
|
|
|
|
|
|
80,711 |
|
|
|
|
|
|
|
|
|
|
|
80,711 |
|
Accrued pension benefit costs less current portion
|
|
|
|
|
|
|
|
|
|
|
10,685 |
|
|
|
|
|
|
|
10,685 |
|
Accrued postretirement benefit costs less current
portion
|
|
|
56,947 |
|
|
|
27,812 |
|
|
|
790 |
|
|
|
|
|
|
|
85,549 |
|
Other liabilities/intercompany loan
|
|
|
479,213 |
|
|
|
239,124 |
|
|
|
|
|
|
|
(683,376 |
) |
|
|
34,961 |
|
Due to affiliates less current portion
|
|
|
30,416 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,416 |
|
Deferred taxes
|
|
|
47,509 |
|
|
|
19,379 |
|
|
|
1,501 |
|
|
|
(116 |
) |
|
|
68,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent liabilities
|
|
|
614,085 |
|
|
|
367,026 |
|
|
|
262,976 |
|
|
|
(683,492 |
) |
|
|
560,595 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
|
59 |
|
|
|
13 |
|
|
|
320 |
|
|
|
(72 |
) |
|
|
320 |
|
|
Additional paid-in capital
|
|
|
188,424 |
|
|
|
242,818 |
|
|
|
415,453 |
|
|
|
(431,242 |
) |
|
|
415,453 |
|
|
Accumulated other comprehensive income (loss)
|
|
|
(51,665 |
) |
|
|
(521 |
) |
|
|
(52,186 |
) |
|
|
52,186 |
|
|
|
(52,186 |
) |
|
Retained earnings (accumulated deficit)
|
|
|
13,478 |
|
|
|
(56,035 |
) |
|
|
20,913 |
|
|
|
42,557 |
|
|
|
20,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
150,296 |
|
|
|
186,275 |
|
|
|
384,500 |
|
|
|
(336,571 |
) |
|
|
384,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$ |
890,067 |
|
|
$ |
603,369 |
|
|
$ |
1,022,245 |
|
|
$ |
(1,183,128 |
) |
|
$ |
1,332,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined | |
|
Combined | |
|
|
|
Reclassifications | |
|
|
|
|
Guarantor | |
|
Non-Guarantor | |
|
The | |
|
and | |
|
|
|
|
Subsidiaries | |
|
Subsidiaries | |
|
Company | |
|
Eliminations | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-party customers
|
|
$ |
824,072 |
|
|
$ |
137,263 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
961,335 |
|
|
Related parties
|
|
|
171,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
171,027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
995,099 |
|
|
|
137,263 |
|
|
|
|
|
|
|
|
|
|
|
1,132,362 |
|
Cost of goods sold
|
|
|
884,241 |
|
|
|
95,820 |
|
|
|
|
|
|
|
(9,376 |
) |
|
|
970,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss)
|
|
|
110,858 |
|
|
|
41,443 |
|
|
|
|
|
|
|
9,376 |
|
|
|
161,677 |
|
Selling, general and admin expenses
|
|
|
34,314 |
|
|
|
459 |
|
|
|
|
|
|
|
|
|
|
|
34,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
76,544 |
|
|
|
40,984 |
|
|
|
|
|
|
|
9,376 |
|
|
|
126,904 |
|
Interest expense third party
|
|
|
(24,832 |
) |
|
|
(836 |
) |
|
|
|
|
|
|
|
|
|
|
(25,668 |
) |
Interest expense affiliates
|
|
|
24,451 |
|
|
|
(24,451 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,011 |
|
|
|
356 |
|
|
|
|
|
|
|
|
|
|
|
1,367 |
|
Net gain (loss) on forward contracts
|
|
|
(309,698 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(309,698 |
) |
Loss on early extinguishment of debt
|
|
|
(835 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(835 |
) |
Other income (expense) net
|
|
|
(428 |
) |
|
|
703 |
|
|
|
|
|
|
|
|
|
|
|
275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes and equity in earnings (loss) of
subsidiaries
|
|
|
(233,787 |
) |
|
|
16,756 |
|
|
|
|
|
|
|
9,376 |
|
|
|
(207,655 |
) |
Income tax (expense) benefit
|
|
|
81,803 |
|
|
|
2,298 |
|
|
|
|
|
|
|
(3,404 |
) |
|
|
80,697 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before equity in earnings (loss) of
subsidiaries
|
|
|
(151,984 |
) |
|
|
19,054 |
|
|
|
|
|
|
|
5,972 |
|
|
|
(126,958 |
) |
Equity earnings (loss) of subsidiaries and joint ventures
|
|
|
8,847 |
|
|
|
4,932 |
|
|
|
(116,255 |
) |
|
|
113,179 |
|
|
|
10,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
(143,137 |
) |
|
$ |
23,986 |
|
|
$ |
(116,255 |
) |
|
$ |
119,151 |
|
|
$ |
(116,255 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2004 (Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined | |
|
Combined | |
|
|
|
Reclassifications | |
|
|
|
|
Guarantor | |
|
Non-Guarantor | |
|
The | |
|
and | |
|
|
|
|
Subsidiaries | |
|
Subsidiaries | |
|
Company | |
|
Eliminations | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-party customers
|
|
$ |
811,705 |
|
|
$ |
85,833 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
897,538 |
|
|
Related parties
|
|
|
163,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
163,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
974,914 |
|
|
|
85,833 |
|
|
|
|
|
|
|
|
|
|
|
1,060,747 |
|
Cost of goods sold
|
|
|
805,267 |
|
|
|
407,650 |
|
|
|
|
|
|
|
(337,457 |
) |
|
|
875,460 |
|
Reimbursement from owners
|
|
|
|
|
|
|
(337,738 |
) |
|
|
|
|
|
|
337,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss)
|
|
|
169,647 |
|
|
|
15,921 |
|
|
|
|
|
|
|
(281 |
) |
|
|
185,287 |
|
Selling, general and admin expenses
|
|
|
24,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,916 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
144,731 |
|
|
|
15,921 |
|
|
|
|
|
|
|
(281 |
) |
|
|
160,371 |
|
Interest expense third party
|
|
|
(36,281 |
) |
|
|
(3,665 |
) |
|
|
|
|
|
|
|
|
|
|
(39,946 |
) |
Interest expense related party
|
|
|
(380 |
) |
|
|
(9,078 |
) |
|
|
|
|
|
|
9,078 |
|
|
|
(380 |
) |
Interest income
|
|
|
9,872 |
|
|
|
172 |
|
|
|
|
|
|
|
(8,958 |
) |
|
|
1,086 |
|
Net gain (loss) on forward contracts
|
|
|
(21,521 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,521 |
) |
Loss on early extinguishment of debt
|
|
|
(47,448 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47,448 |
) |
Other income (expense) net
|
|
|
(1,380 |
) |
|
|
43 |
|
|
|
|
|
|
|
32 |
|
|
|
(1,305 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes and equity in earnings (loss) of
subsidiaries
|
|
|
47,593 |
|
|
|
3,393 |
|
|
|
|
|
|
|
(129 |
) |
|
|
50,857 |
|
Income tax (expense) benefit
|
|
|
(17,218 |
) |
|
|
(5,709 |
) |
|
|
|
|
|
|
4,731 |
|
|
|
(18,196 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before equity in earnings (loss) of
subsidiaries
|
|
|
30,375 |
|
|
|
(2,316 |
) |
|
|
|
|
|
|
4,602 |
|
|
|
32,661 |
|
Equity earnings (loss) of subsidiaries
|
|
|
(7,642 |
) |
|
|
821 |
|
|
|
33,482 |
|
|
|
(25,840 |
) |
|
|
821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
22,733 |
|
|
$ |
(1,495 |
) |
|
$ |
33,482 |
|
|
$ |
(21,238 |
) |
|
$ |
33,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 2003 (Restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined | |
|
|
|
|
|
Reclassifications | |
|
|
|
|
Guarantor | |
|
Non-Guarantor | |
|
The | |
|
and | |
|
|
|
|
Subsidiaries | |
|
Subsidiary | |
|
Company | |
|
Eliminations | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-party customers
|
|
$ |
660,593 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
660,593 |
|
|
Related parties
|
|
|
121,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
782,479 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
782,479 |
|
Cost of goods sold
|
|
|
720,484 |
|
|
|
334,020 |
|
|
|
|
|
|
|
(315,395 |
) |
|
|
739,109 |
|
Reimbursement from owners
|
|
|
|
|
|
|
(315,519 |
) |
|
|
|
|
|
|
315,519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit (loss)
|
|
|
61,995 |
|
|
|
(18,501 |
) |
|
|
|
|
|
|
(124 |
) |
|
|
43,370 |
|
Selling, general and admin expenses
|
|
|
20,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
41,162 |
|
|
|
(18,501 |
) |
|
|
|
|
|
|
(124 |
) |
|
|
22,537 |
|
Interest expense third party
|
|
|
(41,248 |
) |
|
|
(124 |
) |
|
|
|
|
|
|
103 |
|
|
|
(41,269 |
) |
Interest expense related party
|
|
|
(2,579 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,579 |
) |
Interest income
|
|
|
339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
339 |
|
Net gain on forward contracts
|
|
|
25,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,691 |
|
Other income (expense) net
|
|
|
(653 |
) |
|
|
(56 |
) |
|
|
|
|
|
|
21 |
|
|
|
(688 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes, minority interest and cumulative
effect of a change in accounting principle
|
|
|
22,712 |
|
|
|
(18,681 |
) |
|
|
|
|
|
|
|
|
|
|
4,031 |
|
Income tax (expense) benefit
|
|
|
(7,818 |
) |
|
|
|
|
|
|
|
|
|
|
6,723 |
|
|
|
(1,095 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before minority interest and cumulative effect
of a change in accounting principle
|
|
|
14,894 |
|
|
|
(18,681 |
) |
|
|
|
|
|
|
6,723 |
|
|
|
2,936 |
|
Minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
986 |
|
|
|
986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before cumulative effect of a change in
accounting principle
|
|
|
14,894 |
|
|
|
(18,681 |
) |
|
|
|
|
|
|
7,709 |
|
|
|
3,922 |
|
Cumulative effect of a change in accounting principle
|
|
|
(5,878 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,878 |
) |
Equity earnings (loss) of subsidiaries
|
|
|
(10,972 |
) |
|
|
|
|
|
|
(1,956 |
) |
|
|
12,928 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
(1,956 |
) |
|
$ |
(18,681 |
) |
|
$ |
(1,956 |
) |
|
$ |
20,637 |
|
|
$ |
(1,956 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined | |
|
Combined | |
|
|
|
|
|
|
Guarantor | |
|
Non-Guarantor | |
|
The | |
|
|
|
|
Subsidiaries | |
|
Subsidiaries | |
|
Company | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
Net cash provided by operating activities
|
|
$ |
103,122 |
|
|
$ |
31,814 |
|
|
$ |
|
|
|
$ |
134,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
|
|
(15,515 |
) |
|
|
(2,176 |
) |
|
|
(336 |
) |
|
|
(18,027 |
) |
|
Nordural expansion
|
|
|
|
|
|
|
(280,086 |
) |
|
|
|
|
|
|
(280,086 |
) |
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
(7,000 |
) |
|
|
(7,000 |
) |
|
Proceeds from sale of property, plant and equipment
|
|
|
6 |
|
|
|
118 |
|
|
|
|
|
|
|
124 |
|
|
Restricted cash deposits
|
|
|
(350 |
) |
|
|
|
|
|
|
|
|
|
|
(350 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(15,859 |
) |
|
|
(282,144 |
) |
|
|
(7,336 |
) |
|
|
(305,339 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
|
|
|
|
222,937 |
|
|
|
|
|
|
|
222,937 |
|
|
Repayment of third party debt
|
|
|
|
|
|
|
(73,334 |
) |
|
|
(9,945 |
) |
|
|
(83,279 |
) |
|
Borrowings under revolving credit facility
|
|
|
|
|
|
|
|
|
|
|
8,069 |
|
|
|
8,069 |
|
|
Financing fees
|
|
|
|
|
|
|
(4,307 |
) |
|
|
(825 |
) |
|
|
(5,132 |
) |
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
(16 |
) |
|
|
(16 |
) |
|
Intercompany transactions
|
|
|
(87,448 |
) |
|
|
122,280 |
|
|
|
(34,832 |
) |
|
|
|
|
|
Issuance of common stock
|
|
|
|
|
|
|
|
|
|
|
1,408 |
|
|
|
1,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(87,448 |
) |
|
|
267,576 |
|
|
|
(36,141 |
) |
|
|
143,987 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
(185 |
) |
|
|
17,246 |
|
|
|
(43,477 |
) |
|
|
(26,416 |
) |
Beginning cash and cash equivalents
|
|
|
185 |
|
|
|
1,759 |
|
|
|
42,224 |
|
|
|
44,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending cash and cash equivalents
|
|
$ |
|
|
|
$ |
19,005 |
|
|
$ |
(1,253 |
) |
|
$ |
17,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2004
(RESTATED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined | |
|
Combined | |
|
|
|
|
|
|
Guarantor | |
|
Non-Guarantor | |
|
The | |
|
|
|
|
Subsidiaries | |
|
Subsidiaries | |
|
Company | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
Net cash provided by operating activities
|
|
$ |
14,071 |
|
|
$ |
91,757 |
|
|
$ |
|
|
|
$ |
105,828 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
|
|
(6,814 |
) |
|
|
(8,426 |
) |
|
|
|
|
|
|
(15,240 |
) |
|
Nordural expansion
|
|
|
|
|
|
|
(59,784 |
) |
|
|
|
|
|
|
(59,784 |
) |
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
(198,584 |
) |
|
|
(198,584 |
) |
|
Restricted cash deposits
|
|
|
(1,174 |
) |
|
|
(504 |
) |
|
|
|
|
|
|
(1,678 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(7,988 |
) |
|
|
(68,714 |
) |
|
|
(198,584 |
) |
|
|
(275,286 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
|
|
|
|
|
883 |
|
|
|
425,000 |
|
|
|
425,883 |
|
|
Repayment of third party debt
|
|
|
|
|
|
|
(110,826 |
) |
|
|
(315,055 |
) |
|
|
(425,881 |
) |
|
Repayment of related party debt
|
|
|
|
|
|
|
|
|
|
|
(14,000 |
) |
|
|
(14,000 |
) |
|
Financing fees
|
|
|
|
|
|
|
|
|
|
|
(13,062 |
) |
|
|
(13,062 |
) |
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
(3,311 |
) |
|
|
(3,311 |
) |
|
Intercompany transactions
|
|
|
(6,002 |
) |
|
|
88,659 |
|
|
|
(82,657 |
) |
|
|
|
|
|
Issuance of common stock
|
|
|
|
|
|
|
|
|
|
|
215,793 |
|
|
|
215,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(6,002 |
) |
|
|
(21,284 |
) |
|
|
212,708 |
|
|
|
185,422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
81 |
|
|
|
1,759 |
|
|
|
14,124 |
|
|
|
15,964 |
|
Beginning cash and cash equivalents
|
|
|
104 |
|
|
|
|
|
|
|
28,100 |
|
|
|
28,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending cash and cash equivalents
|
|
$ |
185 |
|
|
$ |
1,759 |
|
|
$ |
42,224 |
|
|
$ |
44,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83
CENTURY ALUMINUM COMPANY
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2003
(RESTATED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Combined | |
|
|
|
|
|
|
|
|
Guarantor | |
|
Non-Guarantor | |
|
The | |
|
|
|
|
Subsidiaries | |
|
Subsidiary | |
|
Company | |
|
Consolidated | |
|
|
| |
|
| |
|
| |
|
| |
Net cash provided by operating activities
|
|
$ |
72,825 |
|
|
$ |
14,554 |
|
|
$ |
|
|
|
$ |
87,379 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
|
|
|
(15,809 |
) |
|
|
(3,049 |
) |
|
|
|
|
|
|
(18,858 |
) |
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
|
(59,837 |
) |
|
|
(59,837 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(15,809 |
) |
|
|
(3,049 |
) |
|
|
(59,837 |
) |
|
|
(78,695 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments
|
|
|
|
|
|
|
|
|
|
|
(26,000 |
) |
|
|
(26,000 |
) |
|
Financing fees
|
|
|
|
|
|
|
|
|
|
|
(297 |
) |
|
|
(297 |
) |
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
(11 |
) |
|
|
(11 |
) |
|
Intercompany transactions
|
|
|
(57,657 |
) |
|
|
(11,505 |
) |
|
|
69,162 |
|
|
|
|
|
|
Issuance of common stock
|
|
|
|
|
|
|
|
|
|
|
736 |
|
|
|
736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(57,657 |
) |
|
|
(11,505 |
) |
|
|
43,590 |
|
|
|
(25,572 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(641 |
) |
|
|
|
|
|
|
(16,247 |
) |
|
|
(16,888 |
) |
Beginning cash and cash equivalents
|
|
|
745 |
|
|
|
|
|
|
|
44,347 |
|
|
|
45,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending cash and cash equivalents
|
|
$ |
104 |
|
|
$ |
|
|
|
$ |
28,100 |
|
|
$ |
28,204 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84
|
|
Item 9. |
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure |
Not applicable.
|
|
Item 9A. |
Controls and Procedures |
Disclosure Controls and Procedures
As of December 31, 2005, we carried out an evaluation,
under the supervision and with the participation of our
management, including our Chief Executive Officer and the Chief
Financial Officer, of the effectiveness of our disclosure
controls and procedures. Based upon that evaluation, our
management, including the Chief Executive Officer and the Chief
Financial Officer, concluded that our disclosure controls and
procedures were effective.
Internal Control over Financial Reporting
The Managements Annual Report on Internal Control over
Financial Reporting is included herein at Item 8 prior to
the Consolidated Financial Statement presentation.
The Attestation Report of the Registered Public Accounting Firm
is included herein at Item 8 prior to the Consolidated
Financial Statement presentation.
|
|
|
Changes in Internal Control over Financial
Reporting |
During the year ended December 31, 2005, we had changes in
the following processes of internal control over financial
reporting:
|
|
|
|
|
Nordural ehf converted information systems to SAP from Concord. |
|
|
|
Century Aluminum of West Virginia converted information systems
to SAP from Oracle. |
|
|
|
We changed our payroll processing service to SAP from ADP. |
Apart from these items, there have not been any changes in our
internal controls over financial reporting that have materially
affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
|
|
Item 9B. |
Other Information |
None.
85
PART III
|
|
Item 10. |
Directors and Executive Officers of the Registrant |
Our Executive Officers
Executive officers are appointed by and serve at the discretion
of the Board of Directors. Below is certain information
concerning our executive officers as of March 10, 2006.
|
|
|
|
|
|
|
Name |
|
Age | |
|
Position and Duration |
|
|
| |
|
|
Logan W. Kruger
|
|
|
55 |
|
|
President and Chief Executive Officer since December 2005. |
Gerald J. Kitchen
|
|
|
65 |
|
|
Executive Vice President, General Counsel, Chief Administrative
Officer and Secretary for more than five years. |
David W. Beckley
|
|
|
61 |
|
|
Executive Vice President and Chief Financial Officer for more
than five years. |
Michael A. Bless
|
|
|
40 |
|
|
Executive Vice President and Chief Financial Officer of the
Company since January 2006. |
E. Jack Gates
|
|
|
64 |
|
|
Executive Vice President and Chief Operating Officer since
October 2003; Vice President, Reduction Operations, of the
Company since December 2000. |
Daniel J. Krofcheck
|
|
|
52 |
|
|
Vice President and Treasurer of the Company for more than five
years. |
Giulio Casello
|
|
|
46 |
|
|
Vice President of Bauxite and Alumina Operations since December
2005. |
Steve Schneider
|
|
|
50 |
|
|
Vice President and Corporate Controller since April 2002;
Corporate Controller since April 2001. |
Peter C. McGuire
|
|
|
58 |
|
|
Vice President and Associate General Counsel since April 2002;
Associate General Counsel for more than five years. |
In December 2005, Logan Kruger succeeded Craig Davis as our
President and Chief Executive Officer upon the retirement of
Mr. Davis. Prior to joining the Company, Mr. Kruger
served as President, Asia/ Pacific for Inco Limited, from
September 2005 to November 2005; Executive Vice-President,
Technical Services from September 2003 to September 2005; Chief
Executive Officer of Anglo American Chile Ltd., from July 2002
through September 2003; and President and Chief Executive
Officer, Hudson Bay Mining and Smelting Co., Limited, from
September 1996 until June 2002. Craig Davis will continue to
serve as Chairman of the Board.
In January 2006, Michael Bless succeeded David Beckley as our
Executive Vice President and Chief Financial Officer upon the
resignation of Mr. Beckley. Prior to joining the Company,
Mr. Bless served as managing director of M.
Safra & Co., Inc., from February 2005 to January 2006
and Executive Vice President and Chief Financial Officer of
Maxtor Corporation from August 2004 to October 2004. From August
1997 through January 2004, Mr. Bless served in a number of
senior executive positions with Rockwell Automation, Inc.
(formerly known as Rockwell International Corporation), a
leading industrial automation hardware, software and services
company, including as Senior Vice President and Chief Financial
Officer from June 2001 to January 2004.
Mr. Giulio Casello has served as Vice President of Bauxite
and Alumina Operations since December 2005. Mr. Casello
served as Vice President of Century Alumina, Inc. from September
2005 to December 2005. Prior to joining the Company,
Mr. Casello served in a number of senior positions with
Alcoa World Alumina Australia from 1986 to 2005, including as
Director of Western Australian Operations from January
86
2003 to September 2005; General Manager of Alcoa World Chemicals
from April 2001 to December 2002; and Kwinana Alumina Refinery
Location Manager from April 1999 to April 2001.
Our Directors
Our Board of Directors currently consists of 10 members, divided
into three classes: Class I, Class II and
Class III. Directors in each class are elected to serve for
three-year terms, with each class standing for election in
successive years. Set forth below is certain information
concerning our directors.
Class I Directors with Terms to Expire in 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director | |
Name and Age |
|
|
|
Business Experience; Other Directorships |
|
Since | |
|
|
|
|
|
|
| |
Logan W. Kruger
|
|
55 |
|
President and Chief Executive Officer since December 2005. |
|
|
2005 |
|
Willy R. Strothotte
|
|
61 |
|
Chairman of the Board of Glencore International AG since 1994
and Chief Executive Officer from 1993 to December 2001; Chairman
of the Board of Xstrata AG (formerly Südelektra Holding AG)
since 1990. Mr. Strothotte was designated to serve as a
director by Glencore International AG. |
|
|
1996 |
|
Jarl Berntzen
|
|
39 |
|
Managing Director Mergers and Acquisitions,
ThinkEquity Partners LLC since March 2006. Senior Vice
President, Barrington Associates, LLC from April 2005 to
February 2006; Founder of Berntzen Capital Management, LLC from
March 2003 to April 2005; Managing Director of Providence
Capital, Inc. from September 2002 to March 2003; Vice President,
Mergers & Acquisitions of Goldman, Sachs & Co.
from July 1998 to December 2001. |
|
|
2006 |
|
Stuart M. Schreiber
|
|
52 |
|
Founder and Managing Director of Integis, Inc. since 1997;
partner of Heidrick & Struggles from 1988 to 1997. |
|
|
1999 |
|
Roman A. Bninski
|
|
59 |
|
Partner, law firm of Curtis, Mallet-Prevost, Colt &
Mosle LLP, since 1984. |
|
|
1996 |
|
Class II Directors with Terms to Expire in 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director | |
Name and Age |
|
|
|
Business Experience; Other Directorships |
|
Since | |
|
|
|
|
|
|
| |
John C. Fontaine
|
|
74 |
|
Of Counsel, law firm of Hughes Hubbard & Reed LLP since
January 2000 and partner from July 1997 to December 1999;
President of Knight-Ridder, Inc. from July 1995 to July 1997;
Chairman of the Samuel H. Kress Foundation; Trustee of the
National Gallery of Art. |
|
|
1996 |
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director | |
Name and Age |
|
|
|
Business Experience; Other Directorships |
|
Since | |
|
|
|
|
|
|
| |
John P. OBrien
|
|
64 |
|
Managing Director of Inglewood Associates Inc. since 1990;
Chairman of Allied Construction Products since March 1993;
Director of Oglebay Norton Company since April 2003; Director of
International Total Services, Inc. from August 1999 to January
2003; Director of American Italian Pasta Company from March 1997
to November 2002; Chairman and CEO of Jeffrey Mining Products
L.P. from October 1995 to June 1999. |
|
|
2000 |
|
Class III Directors with Terms to Expire in 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director | |
Name and Age |
|
|
|
Business Experience; Other Directorships |
|
Since | |
|
|
|
|
|
|
| |
Craig A. Davis
|
|
65 |
|
Chairman of the Board since August 1995; Chief Executive Officer
from August 1995 to December 2002 and from October 2003 to
December 13, 2005; Director of Glencore International AG
since December 1993 and Executive of Glencore from September
1990 to June 1996. |
|
|
1995 |
|
Robert E. Fishman, PhD
|
|
54 |
|
Executive Vice President of Calpine Corporation since 2001;
President of PB Power, Inc. from 1998 to 2001 and Senior Vice
President from 1991 to 1998. |
|
|
2002 |
|
Jack E. Thompson
|
|
56 |
|
Director of Stillwater Mining Co. since 2002; Director of Phelps
Dodge Corp. since 2003; Director of Tidewater Inc. since 2005;
Vice Chairman of Barrick Gold Corporation from December 2001 to
April 2005; Chairman of the Board and Chief Executive Officer of
Homestake Mining Company from 1998 to 2001, and Chairman,
President and Chief Executive Officer from 1998 to 1999; serves
on the advisory board of Resource Capital Funds III, LLP |
|
|
2005 |
|
Two of our Class I directors, Mr. Roman Bninski and
Mr. Stuart Schreiber, each notified the Board of Directors
on March 8, 2006 that they will not stand for reelection
when their current terms expire on the date of our 2006 annual
meeting of stockholders. On March 8, 2006, the Board
elected Jarl Berntzen to serve as a Class I director.
For the year ended December 31, 2005, the Board of
Directors determined that each of Roman A. Bninski, Robert E.
Fishman, John C. Fontaine, Jack E. Thompson and John P.
OBrien is independent under the criteria
established by NASDAQ. Mr. Jarl Berntzen, who was elected
to the board on March 8, 2006, also is independent.
|
|
|
Board Committees and Meetings |
The table below identifies the members of each committee of our
Board of Directors during the year ended December 31, 2005
and the number of times each committee met in 2005. Effective
December 9, 2005, Mr. Fishman and Mr. Thompson
were appointed to the Governance and Nominating Committee and
88
Mr. OBrien resigned from that committee. Effective
March 8, 2006, Mr. Fontaine was replaced on the Audit
Committee by Jarl Berntzen, who was elected to the board on
March 8, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Governance & | |
Name |
|
Audit | |
|
Compensation | |
|
Nominating | |
|
|
| |
|
| |
|
| |
Robert E. Fishman
|
|
|
X |
|
|
|
|
|
|
|
|
|
John C. Fontaine
|
|
|
X |
|
|
|
X |
|
|
|
X |
|
John P. OBrien
|
|
|
X |
|
|
|
X |
|
|
|
X |
|
Jack E. Thompson
|
|
|
X |
|
|
|
X |
|
|
|
X |
|
|
|
|
|
|
|
|
|
|
|
Total meetings in fiscal 2005
|
|
|
4 |
|
|
|
8 |
|
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
Audit Committee
The Audit Committees responsibilities include:
|
|
|
|
|
overseeing the financial reporting process for which management
is responsible; |
|
|
|
approving the engagement of the independent auditors; |
|
|
|
monitoring the independence of the independent auditors and
reviews; |
|
|
|
approving all audit and non-audit services and fees to the
independent auditors; |
|
|
|
reviewing the scope and results of the audit with the
independent auditors; |
|
|
|
reviewing the scope and results of internal audit procedures
with our internal auditors; |
|
|
|
evaluating and discussing with the independent auditors and
management the effectiveness of our system of internal
accounting controls; |
|
|
|
approving transactions with Glencore International AG and its
subsidiaries (collectively, Glencore); and |
|
|
|
making inquiries into other matters within the scope of its
duties. |
The Board of Directors has determined that
Mr. OBrien, Chairman of the Audit Committee, is an
audit committee financial expert, as defined in
Item 401(h) of
Regulation S-K
under the Securities Act of 1933, as amended. Each member of
this committee is an independent director and meets each of the
other requirements for audit committee members under applicable
NASDAQ listing standards.
Directors that are also full-time salaried employees are not
compensated for their service on the board or on any board
committee. Non-employee directors receive an annual retainer of
$25,000 for their services. In addition, each non-employee
director received a fee of $2,000 during 2005 for each board or
board committee meeting attended. Mr. OBrien, as
Chairman of the Audit Committee, receives an additional $5,000
annual retainer and an additional $1,000 per Audit
Committee meeting attended. All directors are reimbursed for
their travel and other expenses incurred in attending board and
board committee meetings.
Each non-employee director receives a one-time grant of options
to purchase 10,000 shares of our common stock.
Mr. Bninskis grant became effective upon the closing
of the Companys initial public offering at an exercise
price equal to the initial public offering price, while grants
to Messrs. Berntzen, Fishman, Fontaine, OBrien,
Schreiber, Strothotte and Thompson became effective upon their
election as directors at an exercise price equal to the market
price of our common stock at such times. One-third of the
options vest on the grant date, and an additional one-third vest
on each of the first and second anniversaries of the grant date.
In addition, each non-employee director continuing in office
after the annual meeting of stockholders each year receives an
annual grant of options at an exercise price equal to the market
price of such shares on the date of the grant. During 2005,
non-employee directors each received options to
purchase 3,000 shares.
89
|
|
|
Changes to Nominating Procedures |
There were no material changes to the procedures by which our
stockholders may recommend nominees to the board since the proxy
statement for our 2005 annual meeting of stockholders.
We have adopted a code of ethics that applies to all employees.
A copy of the code of ethics is available on our Internet
website at www.centuryaluminum.com and a copy will be mailed to
any person, without charge, upon written request addressed to:
|
|
|
Corporate Secretary
Century Aluminum Company
2511 Garden Road, Bldg. A, Suite 200
Monterey, California 93940 |
We intend to disclose any amendments to or waivers of our code
of ethics on behalf of our Chief Executive Officer, Chief
Financial Officer, Controller, and persons performing similar
functions, on our website at the Internet website address set
forth above.
Compensation Committee Interlocks and Insider
Participation
During 2005, the members of the Compensation Committee were John
C. Fontaine, Jack E. Thompson and John P. OBrien. No
member of this committee was at any time during 2005 or at any
other time an officer or employee of Century or any of our
subsidiaries.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Exchange Act requires our directors
and executive officers, and persons owning more than 10% of a
registered class of our equity securities, to file with the
Securities and Exchange Commission reports of ownership and
changes in ownership of our equity securities. These same
persons are also required to furnish us with copies of all such
forms. Based solely on a review of the copies of the forms
furnished to us and, in certain cases, written representations
that no Form 5 filings were required, we believe that, with
respect to the 2005 fiscal year, all required Section 16(a)
filings were timely made, except that the Form 3 for
Mr. Guilio Casello was not timely filed.
90
|
|
Item 11. |
Executive Compensation |
|
|
|
Summary Compensation Table |
The following table sets forth the compensation earned by each
person who served as chief executive officer during 2005 and the
four other most highly compensated executive officers (referred
to collectively as the Named Executive Officers) for
services rendered to us in all capacities for each of the last
three fiscal years.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Compensation | |
|
Long-Term | |
|
|
|
|
|
|
| |
|
Compensation | |
|
|
|
|
|
|
|
|
Other | |
|
Awards/Payouts | |
|
|
|
|
|
|
|
|
Annual | |
|
| |
|
|
Name and |
|
|
|
|
|
Compensation | |
|
LTIP | |
|
All Other | |
Principal Position |
|
Year | |
|
Salary ($) | |
|
Bonus ($) | |
|
($)(1) | |
|
Payouts ($)(2) | |
|
Compensation ($)(3) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Logan W. Kruger(4)
|
|
|
2005 |
|
|
$ |
62,500 |
|
|
$ |
475,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Executive Officer
|
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and President
|
|
|
2003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Craig A. Davis(4)
|
|
|
2005 |
|
|
$ |
876,562 |
|
|
$ |
3,658,750 |
|
|
|
|
|
|
$ |
1,360,578 |
|
|
$ |
7,650 |
|
|
Chairman and Chief
|
|
|
2004 |
|
|
$ |
809,167 |
|
|
$ |
1,810,000 |
|
|
|
|
|
|
$ |
1,233,515 |
|
|
$ |
9,600 |
|
|
Executive Officer
|
|
|
2003 |
|
|
$ |
558,333 |
|
|
$ |
525,000 |
|
|
|
|
|
|
$ |
1,092,036 |
|
|
$ |
8,400 |
|
Gerald J. Kitchen
|
|
|
2005 |
|
|
$ |
298,167 |
|
|
$ |
215,000 |
|
|
|
|
|
|
$ |
562,983 |
|
|
$ |
12,074 |
|
|
Executive Vice President,
|
|
|
2004 |
|
|
$ |
281,292 |
|
|
$ |
497,775 |
|
|
|
|
|
|
$ |
339,591 |
|
|
$ |
24,848 |
|
|
General Counsel,
|
|
|
2003 |
|
|
$ |
269,333 |
|
|
$ |
130,000 |
|
|
|
|
|
|
$ |
292,917 |
|
|
$ |
27,179 |
|
|
Chief Administrative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer and Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David W. Beckley(5)
|
|
|
2005 |
|
|
$ |
295,667 |
|
|
$ |
337,500 |
|
|
|
|
|
|
$ |
557,162 |
|
|
$ |
11,365 |
|
|
Executive Vice President
|
|
|
2004 |
|
|
$ |
279,083 |
|
|
$ |
431,200 |
|
|
|
|
|
|
$ |
335,971 |
|
|
$ |
13,065 |
|
|
and Chief Financial |
|
|
2003 |
|
|
$ |
266,896 |
|
|
$ |
129,000 |
|
|
|
|
|
|
$ |
289,929 |
|
|
$ |
10,845 |
|
|
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E. Jack Gates(6)
|
|
|
2005 |
|
|
$ |
332,292 |
|
|
$ |
225,000 |
|
|
|
|
|
|
$ |
476,207 |
|
|
$ |
11,681 |
|
|
Executive Vice President
|
|
|
2004 |
|
|
$ |
310,417 |
|
|
$ |
511,250 |
|
|
|
|
|
|
$ |
207,019 |
|
|
$ |
14,249 |
|
|
and Chief Operating |
|
|
2003 |
|
|
$ |
235,842 |
|
|
$ |
125,000 |
|
|
|
|
|
|
$ |
165,539 |
|
|
$ |
13,114 |
|
|
Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel J. Krofcheck
|
|
|
2005 |
|
|
$ |
206,375 |
|
|
$ |
100,000 |
|
|
|
|
|
|
$ |
302,655 |
|
|
$ |
10,845 |
|
|
Vice President and
|
|
|
2004 |
|
|
$ |
195,292 |
|
|
$ |
341,700 |
|
|
|
|
|
|
$ |
173,164 |
|
|
$ |
13,202 |
|
|
Treasurer |
|
|
2003 |
|
|
$ |
187,135 |
|
|
$ |
86,000 |
|
|
$ |
5,795 |
|
|
$ |
159,340 |
|
|
$ |
14,456 |
|
|
|
(1) |
Represents reimbursement of interest on funds borrowed to pay
estimated taxes due upon the vesting of performance share grants. |
|
(2) |
On March 7, 2006, our compensation committee awarded
performance share units to the Named Executive Officers based on
our attainment of certain award targets for the three-year
period from 2003 through 2005. LTIP Payouts for 2005 represent
the value realized by the Named Executive Officers for
performance share units that vested based on our achievement of
award targets for the three-year period from 2003 through 2005.
The value of the vested performance share units was calculated
using a per share price of $36.27, the average of the high and
low sales price of our common stock on the NASDAQ National
Market on March 7, 2006, the date of vesting. See
Long-Term Incentive Plan Awards Table. LTIP Payouts
for 2004 represent the value realized by the Named Executive
Officers for performance share units that vested based on our
achievement of award targets for the three-year period from 2002
through 2004. The value of the vested performance share units
was calculated using a per share price of $33.37, the average of
the high and low sales price of our common stock on the NASDAQ
National Market on March 21, 2005, the date of vesting.
Also includes accrued dividend equivalents paid to
Messrs. Davis, Kitchen, Beckley, Gates and Krofcheck upon
the vesting of the performance share units in the amounts of
$5,744, $1,520, $1,503, $926 and $775, respectively. LTIP
Payouts for 2003 represent the |
91
|
|
|
value realized by the Named Executive Officers for performance
share units that vested based on our achievement of award
targets for the three-year period from 2001 through 2003. The
value of the vested performance share units was calculated using
a per share price of $24.35, the average of the high and low
sales price of our common stock on the NASDAQ National Market on
April 13, 2004, the date of vesting. Also includes accrued
dividend equivalents paid to Messrs. Davis, Kitchen,
Beckley, Gates and Krofcheck upon the vesting of the performance
share units in the amounts of $15,474, $4,151, $4,108, $2,346
and $2,258, respectively. |
|
(3) |
All other compensation is comprised of matching contributions
under our Defined Contribution Retirement Plan for each of the
Named Executive Officers. In 2005, those contributions were
$7,650, $7,967, $7,900, $7,560, and $7,430 for each of
Messrs. Davis, Kitchen, Beckley, Gates and
Mr. Krofcheck, respectively. All other compensation also
includes Company-paid life insurance premiums in 2005 in the
amounts of, $3,465, $2,445, $4,055 and $3,415 for
Messrs. Kitchen, Beckley, Gates and Krofcheck, respectively |
|
(4) |
Mr. Davis served as our Chief Executive Officer from August
1995 to December 2002 and from October 2003 through his
retirement on December 13, 2005, when he was succeeded by
Logan W. Kruger. Mr. Davis will continue to serve as
Chairman of the Board, a position he has held since August 1995. |
|
(5) |
Mr. Beckley retired as our Executive Vice President and
Chief Financial Officer effective January 23, 2006. |
|
(6) |
Mr. Gates was elected Executive Vice President effective
April 1, 2003. |
|
|
|
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year End Option Value Table |
The following table sets forth information regarding the shares
acquired and value realized by the Named Executive Officers upon
the exercise of options during 2005 and the aggregate number and
value of options held by the Named Executive Officers at
December 31, 2005.
Aggregated Option Exercises in Last Fiscal Year and FY-End
Option Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares | |
|
|
|
|
|
|
|
|
Underlying | |
|
Value of | |
|
|
|
|
|
|
Unexercised Options | |
|
Unexercised Options | |
|
|
Shares | |
|
|
|
at December 31, 2005 (#) | |
|
at December 31, 2005 ($)(2) | |
|
|
Acquired On | |
|
Value Realized | |
|
| |
|
| |
Name |
|
Exercise (#) | |
|
($)(1) | |
|
Exercisable | |
|
Unexercisable | |
|
Exercisable | |
|
Unexercisable | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
Logan W. Kruger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
|
|
|
$ |
223,000 |
|
Craig A. Davis
|
|
|
23,000 |
|
|
$ |
324,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gerald J. Kitchen
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David W. Beckley
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
E. Jack Gates
|
|
|
10,000 |
|
|
$ |
134,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel J. Krofcheck
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
|
|
|
|
|
$ |
99,600 |
|
|
|
|
|
|
|
(1) |
The value realized represents the difference between the
exercise price of the options and the last reported sale price
of the Companys common stock on the NASDAQ National Market
on the respective dates the options were exercised. |
Value of unexercised options is calculated on the basis of the
difference between the respective option exercise prices and
$26.21, the last reported sale price for the Companys
common stock on the NASDAQ National Market on December 30,
2005.
92
|
|
|
Long-Term Incentive Plan Awards Table |
The following table sets forth information with respect to
performance shares awarded to the Named Executive Officers
during 2005 under the 1996 Plan.
Long-Term Incentive Plans Awards in Last Fiscal
Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance or | |
|
|
|
|
|
|
Other Period | |
|
Estimated Future Common Stock Payouts | |
|
|
|
|
Until | |
|
Under Non-Stock Price-Based Plans | |
|
|
Performance | |
|
Maturation or | |
|
| |
Name |
|
Shares (#)(1) | |
|
Payout | |
|
Threshold (#) | |
|
Target (#)(2) | |
|
Maximum (#)(3) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Logan W. Kruger
|
|
|
|
|
|
|
2005-2007 |
|
|
|
-0- |
|
|
|
|
|
|
|
|
|
Craig A. Davis
|
|
|
29,778 |
|
|
|
2005-2007 |
|
|
|
-0- |
|
|
|
29,778 |
|
|
|
44,667 |
|
Gerald J. Kitchen
|
|
|
8,600 |
|
|
|
2005-2007 |
|
|
|
-0- |
|
|
|
8,600 |
|
|
|
12,900 |
|
David W. Beckley
|
|
|
8,526 |
|
|
|
2005-2007 |
|
|
|
-0- |
|
|
|
8,526 |
|
|
|
12,789 |
|
E. Jack Gates
|
|
|
9,588 |
|
|
|
2005-2007 |
|
|
|
-0- |
|
|
|
9,588 |
|
|
|
14,382 |
|
Daniel J. Krofcheck
|
|
|
4,469 |
|
|
|
2005-2007 |
|
|
|
-0- |
|
|
|
4,469 |
|
|
|
6,704 |
|
|
|
(1) |
Performance shares represent shares of our common stock that,
upon vesting, are issued to the award recipient. Except as
described herein, performance shares are forfeited if the award
recipient is not employed full-time by us at the end of the
award cycle period. Upon death, disability or retirement, the
award recipient will receive a pro rata award based upon the
number of weeks employed during the award cycle period. As a
result, Messrs. Davis and Beckley will continue to
participate in the 2004-2006 and 2005-2007 awards, while
retired. To the extent dividends are paid on our common stock,
dividend equivalents accrue on performance shares and are paid
upon vesting. |
|
(2) |
Target payouts represent the target number of shares that will
vest if we achieve specified performance targets (Award
Targets) in their entirety for the period. Award
Targets are based upon guidelines adopted under the 1996 Plan.
Our Compensation Committee has retained full discretion to
modify awards under the guidelines. If Award Targets are not
achieved in their entirety, awards may be adjusted downward or
eliminated in their entirety. In addition, regardless of
performance against Award Targets, the committees
discretion includes the right to determine that, should
circumstances warrant, no award would be payable. |
|
(3) |
Maximum payouts represent the maximum number of shares that the
Compensation Committee is authorized to award if we exceed all
of its Award Targets. In cases where the target is exceeded, the
number of shares vested in excess of the target number of shares
is calculated by converting the excess award into cash and
reconverting the excess award into shares at the greater of
(i) the share price at the time of the award, or
(ii) the average share price for the month preceding the
month in which the shares vest. |
We maintain a non-contributory defined benefit pension plan for
our salaried employees who meet certain eligibility
requirements. The following table shows estimated annual
benefits payable upon retirement in specified compensation and
years of service classifications. The figures shown include
supplemental benefits
93
payable to the Named Executive Officers, exclusive of benefits
payable under the enhanced supplemental retirement plan
described below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years of Credited Service | |
|
|
| |
Remuneration |
|
5 | |
|
10 | |
|
15 | |
|
20 | |
|
25 | |
|
30 | |
|
35 | |
|
40 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
$100,000
|
|
$ |
7,500 |
|
|
$ |
15,000 |
|
|
$ |
22,500 |
|
|
$ |
30,000 |
|
|
$ |
37,500 |
|
|
$ |
45,000 |
|
|
$ |
52,500 |
|
|
$ |
60,000 |
|
$200,000
|
|
$ |
15,000 |
|
|
$ |
30,000 |
|
|
$ |
45,000 |
|
|
$ |
60,000 |
|
|
$ |
75,000 |
|
|
$ |
90,000 |
|
|
$ |
105,000 |
|
|
$ |
120,000 |
|
$300,000
|
|
$ |
22,500 |
|
|
$ |
45,000 |
|
|
$ |
67,500 |
|
|
$ |
90,000 |
|
|
$ |
112,500 |
|
|
$ |
135,000 |
|
|
$ |
157,500 |
|
|
$ |
180,000 |
|
$400,000
|
|
$ |
30,000 |
|
|
$ |
60,000 |
|
|
$ |
90,000 |
|
|
$ |
120,000 |
|
|
$ |
150,000 |
|
|
$ |
180,000 |
|
|
$ |
210,000 |
|
|
$ |
240,000 |
|
$500,000
|
|
$ |
37,500 |
|
|
$ |
75,000 |
|
|
$ |
112,500 |
|
|
$ |
150,000 |
|
|
$ |
187,500 |
|
|
$ |
225,000 |
|
|
$ |
262,500 |
|
|
$ |
300,000 |
|
$600,000
|
|
$ |
45,000 |
|
|
$ |
90,000 |
|
|
$ |
135,000 |
|
|
$ |
180,000 |
|
|
$ |
225,000 |
|
|
$ |
270,000 |
|
|
$ |
315,000 |
|
|
$ |
360,000 |
|
$700,000
|
|
$ |
52,500 |
|
|
$ |
105,000 |
|
|
$ |
157,500 |
|
|
$ |
210,000 |
|
|
$ |
262,500 |
|
|
$ |
315,000 |
|
|
$ |
367,500 |
|
|
$ |
420,000 |
|
$800,000
|
|
$ |
60,000 |
|
|
$ |
120,000 |
|
|
$ |
180,000 |
|
|
$ |
240,000 |
|
|
$ |
300,000 |
|
|
$ |
360,000 |
|
|
$ |
420,000 |
|
|
$ |
480,000 |
|
$900,000
|
|
$ |
67,500 |
|
|
$ |
135,000 |
|
|
$ |
202,500 |
|
|
$ |
270,000 |
|
|
$ |
337,500 |
|
|
$ |
405,000 |
|
|
$ |
472,500 |
|
|
$ |
540,000 |
|
$1,000,000
|
|
$ |
75,000 |
|
|
$ |
150,000 |
|
|
$ |
225,000 |
|
|
$ |
300,000 |
|
|
$ |
375,000 |
|
|
$ |
450,000 |
|
|
$ |
525,000 |
|
|
$ |
600,000 |
|
$1,100,000
|
|
$ |
82,500 |
|
|
$ |
165,000 |
|
|
$ |
247,500 |
|
|
$ |
330,000 |
|
|
$ |
412,500 |
|
|
$ |
495,000 |
|
|
$ |
577,500 |
|
|
$ |
660,000 |
|
$1,200,000
|
|
$ |
90,000 |
|
|
$ |
180,000 |
|
|
$ |
270,000 |
|
|
$ |
360,000 |
|
|
$ |
450,000 |
|
|
$ |
540,000 |
|
|
$ |
630,000 |
|
|
$ |
720,000 |
|
$1,600,000
|
|
$ |
120,000 |
|
|
$ |
240,000 |
|
|
$ |
360,000 |
|
|
$ |
480,000 |
|
|
$ |
600,000 |
|
|
$ |
720,000 |
|
|
$ |
840,000 |
|
|
$ |
960,000 |
|
$2,000,000
|
|
$ |
150,000 |
|
|
$ |
300,000 |
|
|
$ |
450,000 |
|
|
$ |
600,000 |
|
|
$ |
750,000 |
|
|
$ |
900,000 |
|
|
$ |
1,050,000 |
|
|
$ |
1,200,000 |
|
$2,400,000
|
|
$ |
180,000 |
|
|
$ |
360,000 |
|
|
$ |
540,000 |
|
|
$ |
720,000 |
|
|
$ |
900,000 |
|
|
$ |
1,080,000 |
|
|
$ |
1,260,000 |
|
|
$ |
1,440,000 |
|
$2,800,000
|
|
$ |
210,000 |
|
|
$ |
420,000 |
|
|
$ |
630,000 |
|
|
$ |
840,000 |
|
|
$ |
1,050,000 |
|
|
$ |
1,260,000 |
|
|
$ |
1,470,000 |
|
|
$ |
1,680,000 |
|
$3,200,000
|
|
$ |
240,000 |
|
|
$ |
480,000 |
|
|
$ |
720,000 |
|
|
$ |
960,000 |
|
|
$ |
1,200,000 |
|
|
$ |
1,440,000 |
|
|
$ |
1,680,000 |
|
|
$ |
1,920,000 |
|
The plan provides lifetime monthly benefits starting at
age 62 equal to the greater of: (i) 1.5% of final
average monthly compensation multiplied by years of credited
service (up to 40 years), or (ii) $22.25, multiplied
by years of credited service (up to 40 years), less the
total monthly vested benefit payable as a life annuity at
age 62 under plans of a predecessor employer, with a
minimum benefit of $225 per month. Certain highly
compensated participants lifetime monthly benefits are a
higher dollar amount that is set forth in the Plan. Final
average monthly compensation means the highest monthly average
for 36 consecutive months in the
120-month period ending
on the last day of the calendar month completed at or prior to a
termination of service. Participants pension rights vest
after a five-year period of service. An early retirement benefit
(actuarially reduced beginning at age 55) and a disability
benefit are also available.
The compensation covered by the plan includes all compensation,
subject to certain exclusions, before any reduction for 401(k)
contributions, subject to the maximum limits under the Internal
Revenue Code of 1986, as amended (the Code).
The years of credited service for Messrs. Kruger, Davis,
Kitchen, Beckley, Gates and Krofcheck at December 31, 2005,
were approximately 0, 13, 10, 10, 5 and 8,
respectively.
|
|
|
Supplemental Retirement Income Benefit Plan |
We adopted a Supplemental Retirement Income Benefit Plan (the
SRP), in 2001. The SRP provides selected senior
executives with supplemental benefits in addition to those
benefits they are entitled to receive under our qualified
retirement plans. Those benefits include an unfunded
supplemental amount equal to the amount that would normally be
paid under our qualified retirement plans if there were no
limitations under Sections 415 and 401(a)(17) of the Code.
In addition, final average monthly compensation for purposes of
calculating the supplemental benefit will be based on the
greater of (i) projected final annual compensation,
assuming specified annual increases until retirement age, or
(ii) the average of the highest three years annual
compensation over the last 10 years of employment.
Messrs. Kruger, Bless, Davis, Gates, Kitchen and Beckley
are eligible participate in these benefits. Mr. Davis
retired on December 31, 2005.
The SRP also permits selected senior executives to achieve
estimated levels of retirement income when, due to the
executives age and potential years of service at normal
retirement age, benefits under our existing qualified and
nonqualified defined benefit pension plans are projected to be
less than a specified percentage of
94
the executives estimated final average annual compensation
(the Enhanced SRP). Subject to certain vesting
requirements, Messrs. Kruger, Davis, Kitchen and Beckley
were selected to participate in the Enhanced SRP at 50% of their
final average compensation. We believe this level of retirement
benefits is commensurate with retirement benefits paid to senior
executives of comparable companies. Each of Messrs. Davis,
Kitchen and Beckley are fully vested in their Enhanced SRP
benefit. The estimated annual retirement benefits under our
qualified and nonqualified defined benefit pension plans payable
Messrs Davis, Kitchen and Beckley are $930,000, $293,000, and,
$258,000, respectively. Mr. Davis retired December 31,
2005. Mr. Krugers right to participate in the
Enhanced SRP benefit begins on the fifth anniversary of his
employment and vests 20 percent per year thereafter. If
Mr. Kruger remains employed by the Company for a period of
10 years he will be fully vested in his Enhanced SRP
benefit. We have invested funds to meet a portion of our
Enhanced SRP obligations through the purchase of key-man life
insurance policies on the lives of the vested participating
executives that are held in a rabbi trust to fund part of our
payment obligations.
Employment Agreements
We have an employment agreement with Logan W. Kruger effective
December 13, 2005, the date Mr. Kruger succeeded Craig
A. Davis as our President and Chief Executive Officer. Under the
terms of his employment agreement, Mr. Kruger will receive
a base salary of $750,000 per year and will be eligible to
receive an annual performance-based cash bonus under the
Companys incentive compensation plan of up to 100% of his
base salary, subject to the discretion of the Compensation
Committee. Mr. Krugers agreement provides that his
annual cash bonus for 2006 will be no less than $325,000. In
addition, he received a one-time cash signing bonus of $475,000,
options to purchase 100,000 shares of our common stock
and a one-time grant of 50,000 shares of restricted stock.
Mr. Kruger is also eligible for bonuses in accordance with
our annual incentive plan and stock option grants and
performance share awards under the 1996 Plan.
Our employment agreement with Craig A. Davis set forth the terms
of his employment through December 31, 2005. Mr. Davis
retired as our Chief Executive Officer on December 13,
2005, but remained our employee for the remaining term of his
employment agreement. On December 8, 2005, the Compensation
Committee approved the payment of a retention bonus of $913,750
and a success bonus of $3 million to Mr. Davis, as
provided for under the terms of his employment agreement.
Mr. Davis received $1 million of his $3 million
success bonus in 2004. The Committee also approved the
compensation to be paid to Mr. Davis for his continued
service as Chairman of the Board of Directors following his
retirement. For the period from January 1, 2006 to
June 30, 2006, Mr. Davis will receive $250,000 for his
services. Thereafter, he will receive an annual retainer of
$100,000 for his services. In addition, beginning July 1,
2006, as a non-employee director Mr. Davis will receive a
fee of $2,000 for each Board or Board Committee meeting attended
and will be reimbursed for his travel and other expenses
incurred in attending Board and Board Committee meetings,
together with the other compensation generally paid to our
directors.
On December 8, 2005, our employment agreements with Gerald
J. Kitchen and David W. Beckley were each amended to extend
their employment through March 31, 2006, the date
Messrs. Kitchen and Beckley will retire as full-time
employees. From January 1, 2006 to March 31, 2006,
Messrs. Kitchen and Beckley will receive additional monthly
payments of $24,417 and $24,000, respectively, in addition to
the base salaries provided for under their employment
agreements. Under the terms of Mr. Beckleys
employment agreement, he was paid a special bonus in January
2006 equal to 50% of his base pay at the time of his retirement.
Mr. Beckley has agreed to be available to act as a
consultant following his retirement. Mr. Kitchen has
entered into a consulting agreement pursuant to which he has
agreed to act as a consultant following his retirement. Under
his consulting agreement, Mr. Kitchen will provide up to
900 hours of general consulting services during the
12 months following his retirement as reasonably requested
by the Board or our Chief Executive Officer. The consulting
agreement provides that Mr. Kitchen will be paid a monthly
retainer equal to his monthly base pay at the time of his
retirement. We amended our employment agreement with E. Jack
Gates on December 8, 2005, to extend the term of his
employment through December 31, 2006. Under the terms of
Mr. Gates agreement, his base salary is subject to
increase from time to time at the discretion of the Board of
Directors, although it may not be reduced below
$342,500 per year. In addition, Mr. Gates is eligible
for
95
bonuses in accordance with our annual incentive plan and stock
option grants and performance share awards under the 1996 Plan.
Our employment agreements with Messrs. Kruger, Kitchen,
Beckley and Gates each provide that upon termination of
employment without cause, the terminated executive
will be entitled to receive termination payments equal to 100%
of his base salary and bonus (based on the highest annual bonus
payment within the prior three years) for the remainder of the
term of the agreement (with a minimum of one years salary
plus bonus). Any termination payments under the employment
agreements may not be duplicated under the severance
compensation agreements described below.
Severance Compensation Arrangements
The Company is party to severance compensation agreements with
each of Messrs. Logan W. Kruger, David W. Beckley, Gerald
J. Kitchen, Michael A. Bless, Daniel J. Krofcheck and E. Jack
Gates. The agreements provide that if we experience a change in
control and within 36 months thereafter the
executives employment is terminated either: (i) by us
for other than cause or disability, or (ii) by such
executive for good reason, then such executive will receive a
lump sum payment equal to three times or two times, as the case
may be, the aggregate of the highest base salary and the highest
bonus received by such executive in any of the most recent five
years. Also, upon a change in control, the exercisability of
stock options and the vesting of performance shares held by such
executives will be accelerated.
The Code imposes certain excise taxes on, and limits the
deductibility of, certain compensatory payments made by a
corporation to or for the benefit of certain individuals if such
payments are contingent upon certain changes in the ownership or
effective control of the corporation or the ownership of a
substantial portion of the assets of the corporation, provided
that such payments to the individual have an aggregate present
value in excess of three times the individuals annualized
includible compensation for the base period, as defined in the
Code. The severance compensation agreements provide for
additional payments to the executives in order to fully offset
any excise taxes payable by an executive as a result of the
payments and benefits provided in the agreements.
|
|
Item 12. |
Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters |
Security Ownership of Certain Beneficial Owners and
Management
As of March 10, 2006, we had 32,321,891 shares of
common stock outstanding. The following table sets forth certain
information concerning the beneficial ownership of our common
stock as of March 10, 2005 (except as otherwise noted) by:
(i) each person known by us to be the beneficial owner of
five percent or more of the outstanding shares of common stock,
(ii) each of our directors, (iii) each of our
executive officers
96
named in the Summary Compensation Table under the heading
Executive Compensation below, and
(iv) all of our directors and executive officers as a group.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of | |
|
|
Name of Beneficial Owner |
|
Beneficial Ownership(1) | |
|
Percentage of Class | |
|
|
| |
|
| |
Glencore International AG
|
|
|
9,320,089 |
(2) |
|
|
28.8 |
|
Wellington Management Company, LLP
|
|
|
2,936,240 |
(3) |
|
|
9.1 |
|
Credit Suisse
|
|
|
1,797,986 |
(4) |
|
|
5.6 |
|
David W. Beckley
|
|
|
41,576 |
|
|
|
* |
|
Jarl Berntzen
|
|
|
3,333 |
(5) |
|
|
* |
|
Michael A. Bless
|
|
|
10,000 |
(6) |
|
|
* |
|
Roman A. Bninski
|
|
|
18,000 |
(7) |
|
|
* |
|
Craig A. Davis
|
|
|
147,467 |
(8) |
|
|
* |
|
Robert E. Fishman
|
|
|
|
|
|
|
* |
|
John C. Fontaine
|
|
|
11,750 |
(9) |
|
|
* |
|
E. Jack Gates
|
|
|
19,596 |
|
|
|
* |
|
Gerald J. Kitchen
|
|
|
28,944 |
|
|
|
* |
|
Daniel J. Krofcheck
|
|
|
4,669 |
|
|
|
* |
|
Logan W. Kruger
|
|
|
|
|
|
|
* |
|
John P. OBrien
|
|
|
14,500 |
(10) |
|
|
* |
|
Stuart M. Schreiber
|
|
|
4,500 |
(11) |
|
|
* |
|
Willy R. Strothotte
|
|
|
18,000 |
(12) |
|
|
* |
|
Jack E. Thompson
|
|
|
10,166 |
(13) |
|
|
* |
|
All directors and executive officers as a group (18 persons)
|
|
|
354,892 |
(14) |
|
|
1.1 |
|
|
|
|
|
(1) |
Each individual or entity has sole voting and investment power,
except as otherwise indicated. |
|
|
(2) |
Based upon information set forth in a Schedule 13D filing
dated May 25, 2004, Glencore International AG beneficially
owns such shares through its subsidiary, Glencore AG. The
principal business address of each of Glencore International AG
and Glencore AG is Baarermattstrasse 3, P.O. Box 555,
CH 6341, Baar, Switzerland. |
|
|
(3) |
Based upon information set forth in a Schedule 13G filing
dated February 14, 2006, Wellington Management Company, LLP
beneficially owns such shares in its capacity as an investment
advisor. The business address of Wellington Management Company,
LLP is 75 State Street, Boston, Massachusetts 02109. |
|
|
(4) |
Based upon information set forth in a Schedule 13G filed on
February 14, 2005 by Credit Suisse on behalf of its
Investment Banking division, such shares are beneficially owned
through Credit Suisse subsidiaries to the extent they constitute
the Investment Banking division. The principal business address
of Credit Suisse in the United States is Eleven Madison Avenue,
New York, New York 10010 |
|
|
(5) |
Includes 3,333 shares which are presently exercisable
options. |
|
|
(6) |
Includes 10,000 shares which are presently exercisable
options. |
|
|
(7) |
Includes 18,000 shares which are presently exercisable
options. |
|
|
(8) |
Excludes 9,320,089 shares beneficially owned by Glencore
International AG, of which Mr. Davis is a director. |
|
|
(9) |
Includes 11,500 shares which are subject to presently
exercisable options. Also includes 250 shares that
Mr. Fontaine owns jointly with his wife. |
97
|
|
(10) |
Includes 9,500 shares which are subject to presently
exercisable options. |
|
(11) |
Includes 4,500 shares which are subject to presently
exercisable options. |
|
(12) |
Includes 18,000 shares which are subject to presently
exercisable options. Excludes 9,320,089 shares beneficially
owned by Glencore International AG, of which Mr. Strothotte
serves as Chairman. |
|
(13) |
Includes 8,166 shares which are subject to presently
exercisable options |
|
(14) |
Includes 91,332 shares which are subject to presently
exercisable options. Excludes 9,320,089 shares beneficially
owned by Glencore International AG. |
Securities Authorized for Issuance under Equity Compensation
Plans
Equity Compensation Plan Information(1)
As of December 31, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares Remaining | |
|
|
|
|
Weighted | |
|
Available for Future Issuance | |
|
|
Number of Shares to be | |
|
Average | |
|
Under Equity Compensation | |
|
|
Issued Upon Exercise of | |
|
Exercise | |
|
Plans, Excluding | |
Plan Category |
|
Outstanding Options | |
|
Price | |
|
Outstanding Options(2) | |
|
|
| |
|
| |
|
| |
Equity compensation plans approved by security holders
|
|
|
453,661 |
|
|
$ |
20.93 |
|
|
|
3,633,651 |
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
453,661 |
|
|
$ |
20.93 |
|
|
|
3,633,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
All equity compensation plan information presented in this table
relates to the following plans approved by the Companys
shareholders: |
|
|
|
1996 Plan |
|
|
Non-Employee Directors Stock Option Plan |
|
|
|
Effective August 10, 2005, the 1996 Plan replaced our
Non-Employee Directors Stock Option Plan as the plan by which we
award equity to our non-employee directors. |
|
|
(2) |
Includes 517,655 unvested performance shares to be awarded
pursuant to the 1996 Plan upon attainment of certain performance
objectives. The performance shares vest and are issued in
accordance with the guidelines accompanying the 1996 Plan, as
implemented by our Board of Directors. |
Item 13. Certain
Relationships and Related Transactions
Purchases from Glencore
In 2005, we purchased alumina and primary aluminum from Glencore
International AG and its subsidiaries (collectively,
Glencore). Such purchases, which management believes
were made on an arms-length basis at market prices,
totaled $129.8 million in 2005. During 2005, we purchased
from Glencore all of our alumina requirements for Ravenswood and
our 49.67% interest in Mt. Holly under separate supply
agreements. The supply agreements for Ravenswood and 54% of our
alumina requirements for Mt. Holly run through 2006. The supply
agreement for the remaining 46% of our requirements for Mt.
Holly runs through January 31, 2008.
Sales to Glencore
We sold primary aluminum to Glencore in 2005 on an
arms-length basis at market prices. For the year ended
December 31, 2005, net sales to Glencore amounted to
$171.0 million, including gains and losses realized on the
settlement of financial contracts. Sales of primary aluminum to
Glencore amounted to 15.1% of the Companys total revenues
in 2005.
We have a contract to sell Glencore approximately 50,000 metric
tons of primary aluminum produced at Mt. Holly each year through
December 31, 2009 at a variable price determined by
reference to the LME. We
98
have a contract to sell Glencore 20,000 metric tons per year of
primary aluminum produced at Ravenswood and Mt. Holly through
December 31, 2013 at a variable price based on the LME,
adjusted by a negotiated U.S. Midwest market premium with a
cap and floor as applied to the current U.S. Midwest
premium.
As of December 31, 2005, we had outstanding forward
financial sales contracts with Glencore for 1,057,850 metric
tons of primary aluminum, of which 271,250 metric tons were
designated as cash flow hedges. These financial sales contracts
are scheduled for settlement at various dates through 2008. In
November 2004 and June 2005, we entered into forward financial
sales contracts with Glencore for the years 2006 through 2010
and 2008 through 2015, respectively. These sales contracts,
which are for a minimum of 300,600 and 460,200 metric tons of
primary aluminum, respectively, contain clauses that trigger
additional shipment volume when the market price for a contract
month is above the contract ceiling price. These contracts will
be settled monthly, and if the market price exceeds the ceiling
price for all contract months through each contracts term, the
maximum additional shipment volume under each set of contracts
would be 300,600 and 460,200 metric tons, respectively.
Other Transactions with Glencore
|
|
|
Nordural Tolling Agreement |
Effective as of February 10, 2005, we amended and restated
our alumina tolling agreement with Glencore dated August 1,
2004. The agreement is a
10-year LME-based
alumina tolling agreement with Glencore for 90,000 metric tons
of expansion capacity being added at Nordural. In December 2005,
Glencore assigned 50% of its tolling rights under this agreement
to Hydro Aluminum AS for the period 2007 to 2010. The term of
the agreement is expected to begin in July 2006. See Item 7
Key Long-Term Primary Aluminum Sales
Contracts.
|
|
|
Letter of Credit for Industrial Revenue Bonds |
Until June 30, 2005, the IRBs were secured by a Glencore
guaranteed letter of credit. Under that arrangement we had
agreed to reimburse Glencore for all costs related the letter of
credit, including servicing costs, and we secured this
reimbursement obligation with a first priority security interest
in 20% of our ownership of Hawesville. On June 30, 2005 we
replaced the Glencore letter of credit and our corresponding
security obligations to Glencore were released.
Certain Business Relationships
Mr. Craig A. Davis, the Chairman of our Board of Directors,
is a director of Glencore International AG and was an executive
of Glencore International AG and Glencore AG from September 1990
until June 1996.
Mr. Willy R. Strothotte, a director, is Chairman of the
Board of Directors of Glencore International AG and served as
its Chief Executive Officer from 1993 through 2001.
Mr. Roman A. Bninski, a director, is a partner of Curtis,
Mallet-Prevost, Colt & Mosle LLP, which furnishes legal
services to us and Glencore. On March 8, 2006,
Mr. Bninski informed the Board that he will not stand for
reelection when his current term expires on the date of our 2006
annual meeting of stockholders.
Mr. Stuart M. Schreiber, a director, is the managing
director and owner of Integis, Inc., which we paid $839,000 in
fees for management and executive search services provided to us
in 2005. In addition, Mr. Schreiber, who is not
independent, serves as a consultant to both the Compensation
Committee and the Nominating Committee. Our Board of Directors
determined that his service to these committees was in our and
our stockholders best interest due to his unique industry
experience and knowledge. Mr. Schreiber receives a fee of
$2,000 per committee meeting he attends as a consultant. In
2005, Mr. Schreiber attended 4 Compensation Committee
and 12 Nominating Committee meetings. On March 8, 2006,
Mr. Schreiber informed the Board that he will not stand for
reelection when his current term expires on the date of our 2006
annual meeting of stockholders.
99
|
|
Item 14. |
Principal Accountant Fees and Services |
In addition to performing the audit of our consolidated
financial statements, Deloitte & Touche LLP provided
various other services during the last two years. The aggregate
fees billed for the last two years for each of the following
categories of services are set forth below:
|
|
|
|
|
|
|
|
|
|
|
2005 | |
|
2004 | |
|
|
| |
|
| |
Audit Fees
|
|
$ |
1,857,000 |
|
|
$ |
2,264,000 |
|
Audit-Related Fees
|
|
|
99,000 |
|
|
|
90,000 |
|
Tax Fees
|
|
|
371,000 |
|
|
|
275,000 |
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total All Fees
|
|
$ |
2,327,000 |
|
|
$ |
2,629,000 |
|
|
|
|
|
|
|
|
Audit Fees. Audit Fees include professional services
rendered in connection with the audit of our consolidated
financial statements, audit of managements assessment of
the effectiveness of our internal control over financial
reporting, audit of the effectiveness of our internal control
over financial reporting, audit of the opening balance sheet of
acquisitions accounted for as a purchase, reviews of the
consolidated financial statements included in our quarterly
reports on
Form 10-Q,
consultation on accounting matters, and review of documents
filed with the Securities and Exchange Commission.
Audit-Related Fees. Audit-Related Fees include
audits of the Companys employee benefit plans and
consultation on accounting matters or transactions.
Tax Fees. Tax fees include the preparation of federal and
state tax returns, and consultation related to tax planning, tax
advice, tax compliance, and acquisitions.
All Other Fees. The aggregate fees for all other services
include actuarial services and evaluation and design of various
employee benefit matters including consultation on employee
benefit matters.
All services rendered by Deloitte & Touche LLP are
pre-approved by the Audit Committee in accordance with the
Committees pre-approval procedures. Under those
procedures, the terms and fees of annual audit services, and
changes thereto, must be approved by the Audit Committee. The
Audit Committee also pre-approves the scope of audit-related,
tax and other non-audit services that may be performed by our
independent auditors during the fiscal year, subject to dollar
limitations set by the Committee. The foregoing pre-approval
procedures are subject to the de minimis exceptions for
non-audit services described in Section 10A (i)(1)(B) of
the Exchange Act which are approved by the Audit Committee prior
to completion of the audit. All of the audit and non-audit
services furnished were pre-approved by the Audit Committee.
100
PART IV
|
|
Item 15. |
Exhibits, Financial Statement Schedules |
(a)(1) List of Financial Statements
The following Consolidated Financial Statements of Century
Aluminum Company and the Independent Auditors Report are
included in Part II, Item 8 of this
Form 10-K.
|
|
|
|
|
Report of Independent Registered Public Accounting Firm.
|
|
|
|
|
Consolidated Balance Sheets at December 31, 2005 and 2004.
|
|
|
|
|
Consolidated Statements of Operations for the years ended
December 31, 2005, 2004 and 2003.
|
|
|
|
|
Consolidated Statements of Shareholders Equity for the
years ended December 31, 2005, 2004 and 2003.
|
|
|
|
|
Consolidated Statements of Cash Flows for the years ended
December 31, 2005, 2004 and 2003.
|
|
|
|
|
Notes to the Consolidated Financial Statements.
|
|
|
|
|
(a)(2) List of Financial Statement Schedules
|
|
|
|
|
Report of Independent Registered Public Accounting Firm.
|
|
|
|
|
Schedule II Valuation and Qualifying Accounts
for the years ended December 31, 2005, 2004 and 2003.
|
|
|
|
|
(a)(3) List of Exhibits
Exhibit Index
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
Exhibit | |
|
|
|
| |
|
Filed | |
Number | |
|
Description of Exhibit |
|
Form | |
|
File No. | |
|
Filing Date | |
|
Herewith | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
3.1 |
|
|
Restated Certificate of Incorporation of Century Aluminum
Company, as amended |
|
|
8-K |
|
|
|
000-27918 |
|
|
|
August 16, 2005 |
|
|
|
|
|
|
|
3.2 |
|
|
Amended and Restated Bylaws of Century Aluminum Company |
|
|
8-K |
|
|
|
000-27918 |
|
|
|
August 16, 2005 |
|
|
|
|
|
|
|
4.1 |
|
|
Form of Stock Certificate |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
August 8, 1995 |
|
|
|
|
|
|
|
4.2 |
|
|
Purchase Agreement for Century Aluminum Companys
7.5% Senior Notes, dated August 10, 2004, among
Century Aluminum Company, as issuer, the guarantors party
thereto and Credit Suisse First Boston LLC, as representative of
the several purchasers |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
November 9, 2004 |
|
|
|
|
|
|
|
4.3 |
|
|
Registration Rights Agreement for Century Aluminum
Companys 7.5% Senior Notes, dated as of
August 26, 2004, among Century Aluminum Company, the
guarantors party thereto and Credit Suisse First Boston LLC, as
Representative of the Initial Purchasers |
|
|
8-K |
|
|
|
000-27918 |
|
|
|
September 1, 2004 |
|
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
Exhibit | |
|
|
|
| |
|
Filed | |
Number | |
|
Description of Exhibit |
|
Form | |
|
File No. | |
|
Filing Date | |
|
Herewith | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
|
4.4 |
|
|
Indenture for Century Aluminum Companys 7.5% Senior
Notes, dated as of August 26, 2004, among Century Aluminum
Company, as issuer, the guarantors party thereto and Wilmington
Trust Company, as trustee |
|
|
8-K |
|
|
|
000-27918 |
|
|
|
September 1, 2004 |
|
|
|
|
|
|
|
4.5 |
|
|
Supplemental Indenture No. 1 for Century Aluminum
Companys 7.5% Senior Notes, dated as of July 27,
2005, among Century Aluminum Company, as issuer, Century
Kentucky, LLC, as a guarantor, and Wilmington Trust Company, as
trustee |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
4.6 |
|
|
Supplemental Indenture No. 2 for Century Aluminum
Companys 7.5% Senior Notes dated as of December 29,
2005, among Century Aluminum Company, NSA General Partnership,
as a Guarantor and Wilmington Trust Company, as Trustee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
4.7 |
|
|
Purchase Agreement for Century Aluminum Companys
1.75% Convertible Senior Notes, dated as of July 30,
2004, between Century Aluminum Company and Credit Suisse First
Boston LLC, as representative of the several purchasers |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
November 9, 2004 |
|
|
|
|
|
|
|
4.8 |
|
|
Registration Rights Agreement for Century Aluminum
Companys 1.75% Convertible Senior Notes, dated as of
August 9, 2004, between Century Aluminum Company and Credit
Suisse First Boston LLC, as representative of the initial
purchasers set forth therein |
|
|
S-1 |
|
|
|
333-121255 |
|
|
|
December 14, 2004 |
|
|
|
|
|
|
|
4.9 |
|
|
Indenture for Century Aluminum Companys
1.75% Convertible Senior Notes, dated as of August 9,
2004, between Century Aluminum Company, as issuer, and
Wilmington Trust Company, as trustee |
|
|
8-K |
|
|
|
000-27918 |
|
|
|
November 1, 2004 |
|
|
|
|
|
|
|
4.10 |
|
|
Supplemental Indenture No. 1 for Century Aluminum
Companys 1.75% Convertible Senior Notes, dated as of
October 26, 2004, among Century Aluminum Company, as
issuer, and Wilmington Trust Company, as trustee |
|
|
8-K |
|
|
|
000-27918 |
|
|
|
November 1, 2004 |
|
|
|
|
|
|
|
4.11 |
|
|
Supplemental Indenture No. 2 for Century Aluminum
Companys 1.75% Convertible Senior Notes, dated as of
October 26, 2004, among Century Aluminum Company, as
issuer, the guarantors party thereto and Wilmington Trust
Company, as trustee |
|
|
8-K |
|
|
|
000-27918 |
|
|
|
November 1, 2004 |
|
|
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
Exhibit | |
|
|
|
| |
|
Filed | |
Number | |
|
Description of Exhibit |
|
Form | |
|
File No. | |
|
Filing Date | |
|
Herewith | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
|
4.12 |
|
|
Supplemental Indenture No. 3 for Century Aluminum
Companys 1.75% Convertible Senior Notes, dated as of
July 27, 2005, among Century Aluminum Company, as issuer,
Century Kentucky, LLC, as a guarantor, and Wilmington Trust
Company, as trustee |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
4.13 |
|
|
Supplemental Indenture No. 4 for Century Aluminum
Companys 1.75% Convertible Senior Notes, dated as of
December 29, 2005, among Century Aluminum Company, NSA
General Partnership, as a Guarantor and Wilmington Trust
Company, as Trustee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.1 |
|
|
Agreement, dated June 12, 1992, by and between Ravenswood
Aluminum Corporation and United Steelworkers of America AFL-
CIO, Local 5668 |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
March 28, 1996 |
|
|
|
|
|
|
|
10.2 |
|
|
Agreement, dated November 30, 1994, by and between
Ravenswood Aluminum Corporation and United Steelworkers of
America AFL-CIO, Local 5668 |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
March 28, 1996 |
|
|
|
|
|
|
|
10.3 |
|
|
Extension of Labor Agreement, dated February 21, 2002, by
and between Century Aluminum of West Virginia, Inc. and the
United Steelworkers of America AFL-CIO |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
May 14, 2002 |
|
|
|
|
|
|
|
10.4 |
|
|
Collective Bargaining Agreement, effective April 2, 2001,
by and between Century Aluminum of Kentucky, LLC and the United
Steelworkers of America, AFL-CIO-CLC |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 14, 2001 |
|
|
|
|
|
|
|
10.5 |
|
|
Amended and Restated Employment Agreement, effective as of
December 9, 2003, by and between Century Aluminum Company
and Craig A. Davis* |
|
|
10-K |
|
|
|
000-27918 |
|
|
|
February 26, 2004 |
|
|
|
|
|
|
|
10.6 |
|
|
Amendment to Employment Agreement, dated as of June 28,
2005, by and between Century Aluminum Company and Craig A. Davis* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
10.7 |
|
|
Employment Agreement, effective as of January 1, 2002, by
and between Century Aluminum Company and Gerald J. Kitchen* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
May 14, 2002 |
|
|
|
|
|
|
|
10.8 |
|
|
Amendment to Employment Agreement, effective as of
December 9, 2003, by and between Century Aluminum Company
and Gerald J. Kitchen* |
|
|
10-K |
|
|
|
000-27918 |
|
|
|
February 26, 2004 |
|
|
|
|
|
|
|
10.9 |
|
|
Second Amendment to Employment Agreement, dated as of
June 28, 2005, by and between Century Aluminum Company and
Gerald J. Kitchen* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
Exhibit | |
|
|
|
| |
|
Filed | |
Number | |
|
Description of Exhibit |
|
Form | |
|
File No. | |
|
Filing Date | |
|
Herewith | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
|
10.10 |
|
|
Omnibus Amendment Agreement, dated as of December 8, 2005,
by and between Century Aluminum Company and Gerald J. Kitchen |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.11 |
|
|
Consulting Agreement, effective as of April 1, 2006, by and
between Century Aluminum Company and Gerald J. Kitchen (as
modified by Omnibus Agreement) |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
10.12 |
|
|
Employment Agreement, effective as of January 1, 2002, by
and between Century Aluminum Company and David W. Beckley* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
May 14, 2002 |
|
|
|
|
|
|
|
10.13 |
|
|
First Amendment to Employment Agreement, effective as of
December 9, 2003, by and between Century Aluminum Company
and David W. Beckley* |
|
|
10-K |
|
|
|
000-27918 |
|
|
|
February 26, 2004 |
|
|
|
|
|
|
|
10.14 |
|
|
Second Amendment to Employment Agreement, dated as of
March 22, 2005, by and between Century Aluminum Company and
David W. Beckley* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
May 5, 2005 |
|
|
|
|
|
|
|
10.15 |
|
|
Third Amendment to Employment Agreement, dated as of
June 28, 2005, by and between Century Aluminum Company and
David W. Beckley* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
10.16 |
|
|
Omnibus Amendment Agreement, dated as of December 8, 2005,
by and between Century Aluminum Company and David W. Beckley |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.17 |
|
|
Employment Agreement, effective as October 14, 2003, by and
between Century Aluminum Company and E. Jack Gates* |
|
|
10-K |
|
|
|
000-27918 |
|
|
|
February 26, 2004 |
|
|
|
|
|
|
|
10.18 |
|
|
Amendment Agreement, dated as of December 8, 2005, by and
between Century Aluminum Company and E. Jack Gates. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.19 |
|
|
Employment Agreement, dated as of December 13, 2005, by and
between Century Aluminum Company and Logan W. Kruger* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.20 |
|
|
Amended and Restated Severance Protection Agreement, dated as of
August 1, 2005, by and between Century Aluminum Company and
Gerald J. Kitchen* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
10.21 |
|
|
Amended and Restated Severance Protection Agreement, dated as of
August 1, 2005, by and between Century Aluminum Company and
David W. Beckley* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
Exhibit | |
|
|
|
| |
|
Filed | |
Number | |
|
Description of Exhibit |
|
Form | |
|
File No. | |
|
Filing Date | |
|
Herewith | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
|
10.22 |
|
|
Amended and Restated Severance Protection Agreement, dated as of
August 1, 2005, by and between Century Aluminum Company and
E. Jack Gates* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
10.23 |
|
|
Severance Protection Agreement, dated as of August 1, 2005,
by and between Century Aluminum Company and Daniel J. Krofcheck* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
10.24 |
|
|
Severance Protection Agreement, dated as of December 13,
2005, by and between Century Aluminum Company and Logan W Kruger* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.25 |
|
|
Non-Employee Directors Stock Option Plan* |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
March 28, 1996 |
|
|
|
|
|
|
|
10.26 |
|
|
Century Aluminum Company Incentive Compensation Plan* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 14, 1998 |
|
|
|
|
|
|
|
10.27 |
|
|
Amended and Restated 1996 Stock Incentive Plan* |
|
|
8-K |
|
|
|
000-27918 |
|
|
|
August 16, 2005 |
|
|
|
|
|
|
|
10.28 |
|
|
Form of Non-Qualified Stock Option Agreement Employee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.29 |
|
|
Form of Non-Qualified Stock Option Agreement
Non-Employee Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.30 |
|
|
Form of Incentive Stock Option Agreement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.31 |
|
|
Century Aluminum Company 1996 Stock Incentive Plan
Implementation Guidelines (as amended December 14, 2001)* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.32 |
|
|
Century Aluminum Company Supplemental Retirement Income Benefit
Plan* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
May 14, 2002 |
|
|
|
|
|
|
|
10.33 |
|
|
First Amendment of the Century Aluminum Company Supplemental
Retirement Income Benefit Plan* |
|
|
10-K |
|
|
|
000-27918 |
|
|
|
March 16, 2005 |
|
|
|
|
|
|
|
10.34 |
|
|
Second Amendment of the Century Aluminum Company Supplemental
Retirement Income Benefit Plan* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
10.35 |
|
|
Amended and Restated Asset Purchase Agreement, dated as of
December 13, 1988, by and between Kaiser
Aluminum & Chemical Corporation and Ravenswood
Acquisition Corporation |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
March 28, 1996 |
|
|
|
|
|
|
|
10.36 |
|
|
Acquisition Agreement, dated July 19, 1995, by and between
Virgin Islands Alumina Corporation and St. Croix Alumina, L.L.C |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
March 28, 1996 |
|
|
|
|
|
|
|
10.37 |
|
|
Ravenswood Environmental Services Agreement, dated as of
February 7, 1989, by and between Kaiser Aluminum &
Chemical Corporation and Ravenswood Aluminum Corporation |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
March 28, 1996 |
|
|
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
Exhibit | |
|
|
|
| |
|
Filed | |
Number | |
|
Description of Exhibit |
|
Form | |
|
File No. | |
|
Filing Date | |
|
Herewith | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
|
10.38 |
|
|
Asset Purchase Agreement, dated as of March 31, 2000, by
and between Xstrata Aluminum Corporation and Berkeley Aluminum,
Inc. |
|
|
8-K |
|
|
|
000-27918 |
|
|
|
April 20, 2000 |
|
|
|
|
|
|
|
10.39 |
|
|
Form of Tax Sharing Agreement |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
March 28, 1996 |
|
|
|
|
|
|
|
10.40 |
|
|
Form of Disaffiliation Agreement |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
March 28, 1996 |
|
|
|
|
|
|
|
10.41 |
|
|
Amended and Restated Owners Agreement, dated as of
January 26, 1996, by and between Alumax of South Carolina,
Inc., Berkeley Aluminum, Inc. and Glencore Primary Aluminum
Company LLC |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
March 28, 1996 |
|
|
|
|
|
|
|
10.42 |
|
|
Alumina Supply Contract, dated January 1, 2001, by and
between Century Aluminum of West Virginia and Glencore Ltd. |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
May 14, 2002 |
|
|
|
|
|
|
|
10.43 |
|
|
Alumina Supply Contract, dated January 1, 2001, by and
between Berkeley Aluminum and Glencore AG |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
May 14, 2002 |
|
|
|
|
|
|
|
10.44 |
|
|
Purchase Agreement, dated as of May 17, 2004, among Kaiser
Aluminum & Chemical Corporation, Kaiser Bauxite
Company, Gramercy Alumina LLC and St. Ann Bauxite Limited** |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
November 9, 2004 |
|
|
|
|
|
|
|
10.45 |
|
|
Loan Agreement, dated as of February 10, 2005, among
Nordural ehf., the several lenders from time to time parties
thereto, Landsbanki Islands hf., as administrative agent and
Kaupthing Bank hf., as security trustee |
|
|
S-1/A |
|
|
|
333-121255 |
|
|
|
February 16, 2005 |
|
|
|
|
|
|
|
10.46 |
|
|
Accounts Pledge Agreement, dated as of February 10, 2005,
among Nordural ehf., Kaupthing Bank hf., as security trustee and
Kaupthing Bank hf. and Landsbanki Íslands hf. as account
banks |
|
|
S-4/A |
|
|
|
333-121729 |
|
|
|
February 11, 2005 |
|
|
|
|
|
|
|
10.47 |
|
|
Declaration of Pledge, dated as of February 10, 2005,
between Nordural ehf. and Kaupthing Bank hf., as security trustee |
|
|
S-4/A |
|
|
|
333-121729 |
|
|
|
February 11, 2005 |
|
|
|
|
|
|
|
10.48 |
|
|
Securities Pledge Agreement, dated as of February 10, 2005,
among Nordural Holdings I ehf., Nordural Holdings II ehf.,
Nordural ehf. and Kaupthing Bank hf., as security trustee |
|
|
S-4/A |
|
|
|
333-121729 |
|
|
|
February 11, 2005 |
|
|
|
|
|
|
|
10.49 |
|
|
General Bond, dated as of February 10, 2005, between
Nordural ehf. and Kaupthing Bank hf., as security trustee |
|
|
S-4/A |
|
|
|
333-121729 |
|
|
|
February 11, 2005 |
|
|
|
|
|
|
|
10.50 |
|
|
Amended and Restated Toll Conversion Agreement, dated as of
February 10, 2005, by Nordural ehf and Glencore AG |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
Exhibit | |
|
|
|
| |
|
Filed | |
Number | |
|
Description of Exhibit |
|
Form | |
|
File No. | |
|
Filing Date | |
|
Herewith | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
|
10.51 |
|
|
Loan and Security Agreement, dated as of September 19,
2005, by and among Bank of America, N.A., Century Aluminum
Company, Berkeley Aluminum, Inc., Century Aluminum of West
Virginia, Inc., Century Kentucky, Inc., and Century Aluminum of
Kentucky General Partnership |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
November 9, 2005 |
|
|
|
|
|
|
|
10.52 |
|
|
Joinder Agreement, dated as of December 31, 2005, among NSA
General Partnership, the Lenders party thereto, the existing
Borrowers party thereto, and Bank of America, N.A., in its
capacity as Agent under that certain Loan and Security
Agreement, dated as of September 19, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.53 |
|
|
Letter Agreement, dated March 5, 2006, from Integis, Inc.
and Century Aluminum Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
21.1 |
|
|
List of Subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
23.1 |
|
|
Consent of Deloitte & Touche LLP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
24.1 |
|
|
Powers of Attorney |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
31.1 |
|
|
Rule 13a-14(a)/15d-14(a) Certification Chief
Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
31.2 |
|
|
Rule 13a-14(a)/15d-14(a) Certification Chief
Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
32.1 |
|
|
Section 1350 Certifications |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
*
|
|
Management contract or compensatory plan. |
**
|
|
Schedules and exhibits are omitted and will be furnished to the
Securities and Exchange Commission upon request. |
***
|
|
Confidential information was omitted from this exhibit pursuant
to a request for confidential treatment and filed separately
with the Securities and Exchange Commission. |
107
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this Form 10-K to
be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
|
|
|
Michael A. Bless |
|
Executive Vice President |
|
and Chief Financial Officer |
Dated: March 16, 2006
Pursuant to the requirements of the Securities Exchange Act of
1934, this
Form 10-K has been
signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
|
|
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
|
/s/ LOGAN W. KRUGER
Logan W. Kruger |
|
Chief Executive Officer |
|
March 16, 2006 |
|
/s/ MICHAEL A. BLESS
Michael A. Bless |
|
Executive Vice President and Chief Financial Officer (Principal
Financial Officer and Principal Accounting Officer) |
|
March 16, 2006 |
|
*
Craig A. Davis |
|
Chairman |
|
March 16, 2006 |
|
*
Jarl Berntzen |
|
Director |
|
March 16, 2006 |
|
*
Roman A. Bninski |
|
Director |
|
March 16, 2006 |
|
*
Robert E. Fishman |
|
Director |
|
March 16, 2006 |
|
*
John C. Fontaine |
|
Director |
|
March 16, 2006 |
|
*
John P. OBrien |
|
Director |
|
March 16, 2006 |
|
*
Stuart M. Schreiber |
|
Director |
|
March 16, 2006 |
|
*
Willy R. Strothotte |
|
Director |
|
March 16, 2006 |
|
*
Jack E. Thompson |
|
Director |
|
March 16, 2006 |
|
*By: |
|
/s/ GERALD J. KITCHEN
Gerald J. Kitchen, as
Attorney-in-fact |
|
|
|
|
108
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Century Aluminum Company:
We have audited the consolidated financial statements of Century
Aluminum Company and subsidiaries (the Company) as
of December 31, 2005 and 2004, and for each of the three
years in the period ended December 31, 2005,
managements assessment of the effectiveness of the
Companys internal control over financial reporting as of
December 31, 2005, and the effectiveness of the
Companys internal control over financial reporting as of
December 31, 2005, and have issued our reports thereon
dated March 14, 2006 (the report on the audit of the
consolidated financial statements expresses an unqualified
opinion and includes an explanatory paragraph as to the change
in method of accounting for inventory and the adoption of
Statement of Financial Accounting Standards No. 143,
Accounting for the Asset Retirement Obligations); such
consolidated financial statements and reports are included
elsewhere in this
Form 10-K. Our
audits also included the consolidated financial statement
schedule of the Company listed in Item 15. This
consolidated financial statement schedule is the responsibility
of the Companys management. Our responsibility is to
express an opinion based on our audits. In our opinion, such
consolidated financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the
information set forth therein.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
March 14, 2006
109
CENTURY ALUMINUM COMPANY
SCHEDULE II VALUATION AND QUALIFYING
ACCOUNTS
|
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|
|
|
|
Balance at | |
|
Charged To | |
|
|
|
Balance at | |
|
|
Beginning | |
|
Cost and | |
|
|
|
End of | |
|
|
of Period | |
|
Expense | |
|
Deductions | |
|
Period | |
|
|
| |
|
| |
|
| |
|
| |
|
|
(Dollars in thousands) | |
YEAR ENDED DECEMBER 31, 2003:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful trade accounts receivable
|
|
$ |
4,053 |
|
|
$ |
|
|
|
$ |
85 |
|
|
$ |
3,968 |
|
YEAR ENDED DECEMBER 31, 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful trade accounts receivable
|
|
$ |
3,968 |
|
|
$ |
279 |
|
|
$ |
3,227 |
|
|
$ |
1,020 |
|
YEAR ENDED DECEMBER 31, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful trade accounts receivable
|
|
$ |
1,020 |
|
|
$ |
|
|
|
$ |
20 |
|
|
$ |
1,000 |
|
110
Exhibit Index
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
Exhibit | |
|
|
|
| |
|
Filed | |
Number | |
|
Description of Exhibit |
|
Form | |
|
File No. | |
|
Filing Date | |
|
Herewith | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
3.1 |
|
|
Restated Certificate of Incorporation of Century Aluminum
Company, as amended |
|
|
8-K |
|
|
|
000-27918 |
|
|
|
August 16, 2005 |
|
|
|
|
|
|
|
3.2 |
|
|
Amended and Restated Bylaws of Century Aluminum Company |
|
|
8-K |
|
|
|
000-27918 |
|
|
|
August 16, 2005 |
|
|
|
|
|
|
|
4.1 |
|
|
Form of Stock Certificate |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
August 8, 1995 |
|
|
|
|
|
|
|
4.2 |
|
|
Purchase Agreement for Century Aluminum Companys
7.5% Senior Notes, dated August 10, 2004, among
Century Aluminum Company, as issuer, the guarantors party
thereto and Credit Suisse First Boston LLC, as representative of
the several purchasers |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
November 9, 2004 |
|
|
|
|
|
|
|
4.3 |
|
|
Registration Rights Agreement for Century Aluminum
Companys 7.5% Senior Notes, dated as of
August 26, 2004, among Century Aluminum Company, the
guarantors party thereto and Credit Suisse First Boston LLC, as
Representative of the Initial Purchasers |
|
|
8-K |
|
|
|
000-27918 |
|
|
|
September 1, 2004 |
|
|
|
|
|
|
|
4.4 |
|
|
Indenture for Century Aluminum Companys 7.5% Senior
Notes, dated as of August 26, 2004, among Century Aluminum
Company, as issuer, the guarantors party thereto and Wilmington
Trust Company, as trustee |
|
|
8-K |
|
|
|
000-27918 |
|
|
|
September 1, 2004 |
|
|
|
|
|
|
|
4.5 |
|
|
Supplemental Indenture No. 1 for Century Aluminum
Companys 7.5% Senior Notes, dated as of July 27,
2005, among Century Aluminum Company, as issuer, Century
Kentucky, LLC, as a guarantor, and Wilmington Trust Company, as
trustee |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
4.6 |
|
|
Supplemental Indenture No. 2 for Century Aluminum
Companys 7.5% Senior Notes dated as of December 29,
2005, among Century Aluminum Company, NSA General Partnership,
as a Guarantor and Wilmington Trust Company, as Trustee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
4.7 |
|
|
Purchase Agreement for Century Aluminum Companys
1.75% Convertible Senior Notes, dated as of July 30,
2004, between Century Aluminum Company and Credit Suisse First
Boston LLC, as representative of the several purchasers |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
November 9, 2004 |
|
|
|
|
|
|
|
4.8 |
|
|
Registration Rights Agreement for Century Aluminum
Companys 1.75% Convertible Senior Notes, dated as of
August 9, 2004, between Century Aluminum Company and Credit
Suisse First Boston LLC, as representative of the initial
purchasers set forth therein |
|
|
S-1 |
|
|
|
333-121255 |
|
|
|
December 14, 2004 |
|
|
|
|
|
111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
Exhibit | |
|
|
|
| |
|
Filed | |
Number | |
|
Description of Exhibit |
|
Form | |
|
File No. | |
|
Filing Date | |
|
Herewith | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
|
4.9 |
|
|
Indenture for Century Aluminum Companys
1.75% Convertible Senior Notes, dated as of August 9,
2004, between Century Aluminum Company, as issuer, and
Wilmington Trust Company, as trustee |
|
|
8-K |
|
|
|
000-27918 |
|
|
|
November 1, 2004 |
|
|
|
|
|
|
|
4.10 |
|
|
Supplemental Indenture No. 1 for Century Aluminum
Companys 1.75% Convertible Senior Notes, dated as of
October 26, 2004, among Century Aluminum Company, as
issuer, and Wilmington Trust Company, as trustee |
|
|
8-K |
|
|
|
000-27918 |
|
|
|
November 1, 2004 |
|
|
|
|
|
|
|
4.11 |
|
|
Supplemental Indenture No. 2 for Century Aluminum
Companys 1.75% Convertible Senior Notes, dated as of
October 26, 2004, among Century Aluminum Company, as
issuer, the guarantors party thereto and Wilmington Trust
Company, as trustee |
|
|
8-K |
|
|
|
000-27918 |
|
|
|
November 1, 2004 |
|
|
|
|
|
|
|
4.12 |
|
|
Supplemental Indenture No. 3 for Century Aluminum
Companys 1.75% Convertible Senior Notes, dated as of
July 27, 2005, among Century Aluminum Company, as issuer,
Century Kentucky, LLC, as a guarantor, and Wilmington Trust
Company, as trustee |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
4.13 |
|
|
Supplemental Indenture No. 4 for Century Aluminum
Companys 1.75% Convertible Senior Notes, dated as of
December 29, 2005, among Century Aluminum Company, NSA
General Partnership, as a Guarantor and Wilmington Trust
Company, as Trustee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.1 |
|
|
Agreement, dated June 12, 1992, by and between Ravenswood
Aluminum Corporation and United Steelworkers of America AFL-
CIO, Local 5668 |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
March 28, 1996 |
|
|
|
|
|
|
|
10.2 |
|
|
Agreement, dated November 30, 1994, by and between
Ravenswood Aluminum Corporation and United Steelworkers of
America AFL-CIO, Local 5668 |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
March 28, 1996 |
|
|
|
|
|
|
|
10.3 |
|
|
Extension of Labor Agreement, dated February 21, 2002, by
and between Century Aluminum of West Virginia, Inc. and the
United Steelworkers of America AFL-CIO |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
May 14, 2002 |
|
|
|
|
|
|
|
10.4 |
|
|
Collective Bargaining Agreement, effective April 2, 2001,
by and between Century Aluminum of Kentucky, LLC and the United
Steelworkers of America, AFL-CIO-CLC |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 14, 2001 |
|
|
|
|
|
|
|
10.5 |
|
|
Amended and Restated Employment Agreement, effective as of
December 9, 2003, by and between Century Aluminum Company
and Craig A. Davis* |
|
|
10-K |
|
|
|
000-27918 |
|
|
|
February 26, 2004 |
|
|
|
|
|
112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
Exhibit | |
|
|
|
| |
|
Filed | |
Number | |
|
Description of Exhibit |
|
Form | |
|
File No. | |
|
Filing Date | |
|
Herewith | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
|
10.6 |
|
|
Amendment to Employment Agreement, dated as of June 28,
2005, by and between Century Aluminum Company and Craig A. Davis* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
10.7 |
|
|
Employment Agreement, effective as of January 1, 2002, by
and between Century Aluminum Company and Gerald J. Kitchen* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
May 14, 2002 |
|
|
|
|
|
|
|
10.8 |
|
|
Amendment to Employment Agreement, effective as of
December 9, 2003, by and between Century Aluminum Company
and Gerald J. Kitchen* |
|
|
10-K |
|
|
|
000-27918 |
|
|
|
February 26, 2004 |
|
|
|
|
|
|
|
10.9 |
|
|
Second Amendment to Employment Agreement, dated as of
June 28, 2005, by and between Century Aluminum Company and
Gerald J. Kitchen* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
10.10 |
|
|
Omnibus Amendment Agreement, dated as of December 8, 2005,
by and between Century Aluminum Company and Gerald J. Kitchen |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.11 |
|
|
Consulting Agreement, effective as of April 1, 2006, by and
between Century Aluminum Company and Gerald J. Kitchen (as
modified by Omnibus Agreement) |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
10.12 |
|
|
Employment Agreement, effective as of January 1, 2002, by
and between Century Aluminum Company and David W. Beckley* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
May 14, 2002 |
|
|
|
|
|
|
|
10.13 |
|
|
First Amendment to Employment Agreement, effective as of
December 9, 2003, by and between Century Aluminum Company
and David W. Beckley* |
|
|
10-K |
|
|
|
000-27918 |
|
|
|
February 26, 2004 |
|
|
|
|
|
|
|
10.14 |
|
|
Second Amendment to Employment Agreement, dated as of
March 22, 2005, by and between Century Aluminum Company and
David W. Beckley* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
May 5, 2005 |
|
|
|
|
|
|
|
10.15 |
|
|
Third Amendment to Employment Agreement, dated as of
June 28, 2005, by and between Century Aluminum Company and
David W. Beckley* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
10.16 |
|
|
Omnibus Amendment Agreement, dated as of December 8, 2005,
by and between Century Aluminum Company and David W. Beckley |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.17 |
|
|
Employment Agreement, effective as October 14, 2003, by and
between Century Aluminum Company and E. Jack Gates* |
|
|
10-K |
|
|
|
000-27918 |
|
|
|
February 26, 2004 |
|
|
|
|
|
|
|
10.18 |
|
|
Amendment Agreement, dated as of December 8, 2005, by and
between Century Aluminum Company and E. Jack Gates. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
Exhibit | |
|
|
|
| |
|
Filed | |
Number | |
|
Description of Exhibit |
|
Form | |
|
File No. | |
|
Filing Date | |
|
Herewith | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
|
10.19 |
|
|
Employment Agreement, dated as of December 13, 2005, by and
between Century Aluminum Company and Logan W. Kruger* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.20 |
|
|
Amended and Restated Severance Protection Agreement, dated as of
August 1, 2005, by and between Century Aluminum Company and
Gerald J. Kitchen* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
10.21 |
|
|
Amended and Restated Severance Protection Agreement, dated as of
August 1, 2005, by and between Century Aluminum Company and
David W. Beckley* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
10.22 |
|
|
Amended and Restated Severance Protection Agreement, dated as of
August 1, 2005, by and between Century Aluminum Company and
E. Jack Gates* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
10.23 |
|
|
Severance Protection Agreement, dated as of August 1, 2005,
by and between Century Aluminum Company and Daniel J. Krofcheck* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
10.24 |
|
|
Severance Protection Agreement, dated as of December 13,
2005, by and between Century Aluminum Company and Logan W Kruger* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.25 |
|
|
Non-Employee Directors Stock Option Plan* |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
March 28, 1996 |
|
|
|
|
|
|
|
10.26 |
|
|
Century Aluminum Company Incentive Compensation Plan* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 14, 1998 |
|
|
|
|
|
|
|
10.27 |
|
|
Amended and Restated 1996 Stock Incentive Plan* |
|
|
8-K |
|
|
|
000-27918 |
|
|
|
August 16, 2005 |
|
|
|
|
|
|
|
10.28 |
|
|
Form of Non-Qualified Stock Option Agreement Employee |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.29 |
|
|
Form of Non-Qualified Stock Option Agreement
Non-Employee Director |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.30 |
|
|
Form of Incentive Stock Option Agreement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.31 |
|
|
Century Aluminum Company 1996 Stock Incentive Plan
Implementation Guidelines (as amended December 14, 2001)* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.32 |
|
|
Century Aluminum Company Supplemental Retirement Income Benefit
Plan* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
May 14, 2002 |
|
|
|
|
|
|
|
10.33 |
|
|
First Amendment of the Century Aluminum Company Supplemental
Retirement Income Benefit Plan* |
|
|
10-K |
|
|
|
000-27918 |
|
|
|
March 16, 2005 |
|
|
|
|
|
|
|
10.34 |
|
|
Second Amendment of the Century Aluminum Company Supplemental
Retirement Income Benefit Plan* |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
Exhibit | |
|
|
|
| |
|
Filed | |
Number | |
|
Description of Exhibit |
|
Form | |
|
File No. | |
|
Filing Date | |
|
Herewith | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
|
10.35 |
|
|
Amended and Restated Asset Purchase Agreement, dated as of
December 13, 1988, by and between Kaiser
Aluminum & Chemical Corporation and Ravenswood
Acquisition Corporation |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
March 28, 1996 |
|
|
|
|
|
|
|
10.36 |
|
|
Acquisition Agreement, dated July 19, 1995, by and between
Virgin Islands Alumina Corporation and St. Croix Alumina, L.L.C |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
March 28, 1996 |
|
|
|
|
|
|
|
10.37 |
|
|
Ravenswood Environmental Services Agreement, dated as of
February 7, 1989, by and between Kaiser Aluminum &
Chemical Corporation and Ravenswood Aluminum Corporation |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
March 28, 1996 |
|
|
|
|
|
|
|
10.38 |
|
|
Asset Purchase Agreement, dated as of March 31, 2000, by
and between Xstrata Aluminum Corporation and Berkeley Aluminum,
Inc. |
|
|
8-K |
|
|
|
000-27918 |
|
|
|
April 20, 2000 |
|
|
|
|
|
|
|
10.39 |
|
|
Form of Tax Sharing Agreement |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
March 28, 1996 |
|
|
|
|
|
|
|
10.40 |
|
|
Form of Disaffiliation Agreement |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
March 28, 1996 |
|
|
|
|
|
|
|
10.41 |
|
|
Amended and Restated Owners Agreement, dated as of
January 26, 1996, by and between Alumax of South Carolina,
Inc., Berkeley Aluminum, Inc. and Glencore Primary Aluminum
Company LLC |
|
|
S-1 |
|
|
|
33-95486 |
|
|
|
March 28, 1996 |
|
|
|
|
|
|
|
10.42 |
|
|
Alumina Supply Contract, dated January 1, 2001, by and
between Century Aluminum of West Virginia and Glencore Ltd. |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
May 14, 2002 |
|
|
|
|
|
|
|
10.43 |
|
|
Alumina Supply Contract, dated January 1, 2001, by and
between Berkeley Aluminum and Glencore AG |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
May 14, 2002 |
|
|
|
|
|
|
|
10.44 |
|
|
Purchase Agreement, dated as of May 17, 2004, among Kaiser
Aluminum & Chemical Corporation, Kaiser Bauxite
Company, Gramercy Alumina LLC and St. Ann Bauxite Limited** |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
November 9, 2004 |
|
|
|
|
|
|
|
10.45 |
|
|
Loan Agreement, dated as of February 10, 2005, among
Nordural ehf., the several lenders from time to time parties
thereto, Landsbanki Islands hf., as administrative agent and
Kaupthing Bank hf., as security trustee |
|
|
S-1/A |
|
|
|
333-121255 |
|
|
|
February 16, 2005 |
|
|
|
|
|
|
|
10.46 |
|
|
Accounts Pledge Agreement, dated as of February 10, 2005,
among Nordural ehf., Kaupthing Bank hf., as security trustee and
Kaupthing Bank hf. and Landsbanki Íslands hf. as account
banks |
|
|
S-4/A |
|
|
|
333-121729 |
|
|
|
February 11, 2005 |
|
|
|
|
|
|
|
10.47 |
|
|
Declaration of Pledge, dated as of February 10, 2005,
between Nordural ehf. and Kaupthing Bank hf., as security trustee |
|
|
S-4/A |
|
|
|
333-121729 |
|
|
|
February 11, 2005 |
|
|
|
|
|
115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incorporated by Reference | |
|
|
Exhibit | |
|
|
|
| |
|
Filed | |
Number | |
|
Description of Exhibit |
|
Form | |
|
File No. | |
|
Filing Date | |
|
Herewith | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
|
10.48 |
|
|
Securities Pledge Agreement, dated as of February 10, 2005,
among Nordural Holdings I ehf., Nordural Holdings II ehf.,
Nordural ehf. and Kaupthing Bank hf., as security trustee |
|
|
S-4/A |
|
|
|
333-121729 |
|
|
|
February 11, 2005 |
|
|
|
|
|
|
|
10.49 |
|
|
General Bond, dated as of February 10, 2005, between
Nordural ehf. and Kaupthing Bank hf., as security trustee |
|
|
S-4/A |
|
|
|
333-121729 |
|
|
|
February 11, 2005 |
|
|
|
|
|
|
|
10.50 |
|
|
Amended and Restated Toll Conversion Agreement, dated as of
February 10, 2005, by Nordural ehf and Glencore AG |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
August 9, 2005 |
|
|
|
|
|
|
|
10.51 |
|
|
Loan and Security Agreement, dated as of September 19,
2005, by and among Bank of America, N.A., Century Aluminum
Company, Berkeley Aluminum, Inc., Century Aluminum of West
Virginia, Inc., Century Kentucky, Inc., and Century Aluminum of
Kentucky General Partnership |
|
|
10-Q |
|
|
|
000-27918 |
|
|
|
November 9, 2005 |
|
|
|
|
|
|
|
10.52 |
|
|
Joinder Agreement, dated as of December 31, 2005, among NSA
General Partnership, the Lenders party thereto, the existing
Borrowers party thereto, and Bank of America, N.A., in its
capacity as Agent under that certain Loan and Security
Agreement, dated as of September 19, 2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
10.53 |
|
|
Letter Agreement, dated March 5, 2006, from Integis, Inc.
and Century Aluminum Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
21.1 |
|
|
List of Subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
23.1 |
|
|
Consent of Deloitte & Touche LLP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
24.1 |
|
|
Powers of Attorney |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
31.1 |
|
|
Rule 13a-14(a)/15d-14(a) Certification Chief
Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
31.2 |
|
|
Rule 13a-14(a)/15d-14(a) Certification Chief
Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
32.1 |
|
|
Section 1350 Certifications |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X |
|
|
|
|
*
|
|
Management contract or compensatory plan. |
**
|
|
Schedules and exhibits are omitted and will be furnished to the
Securities and Exchange Commission upon request. |
***
|
|
Confidential information was omitted from this exhibit pursuant
to a request for confidential treatment and filed separately
with the Securities and Exchange Commission. |
116