Century Aluminum Reports First Quarter 2004 Net Income of $4.8 million and a Substantial Increase in Operating Income.Business Editors MONTEREY Monterey (mŏntərā`), city (1990 pop. 31,954), Monterey co., W Calif., a port on Monterey Bay; founded 1770, inc. 1850. It is a popular resort, the home of many artists and writers, and one of California's oldest cities. , Calif.--(BUSINESS WIRE)--April 26, 2004 Century Aluminum Company (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :CENX) reported net income of $4.8 million, or $0.20 a share, fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. , for the first quarter of 2004. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased by $28.1 million to $31.6 million for the 2004 first quarter from the comparable quarter in 2003. The 2004 quarter includes net after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. charges of $6.7 million, or $0.31 a share, comprised of: an after-tax charge of $8.2 million, or $0.38 a share, for losses on marking to market Marking to market Settling or reconciling changes in the value of futures contracts on a daily basis. Also refers to the practice of reporting the value of assets on a market rather than book value basis. the 110-million-pound-per-year fixed-price metal delivery contract that remains in place for 2004 and other physical delivery contracts and financial instruments that do not qualify for cash-flow hedge accounting Why is hedge accounting necessary? Many financial institutions and corporate businesses (entities) use derivative financial instruments to hedge their exposure to different risks (eg interest rate risk, foreign exchange risk, commodity risk, etc). ; and an after-tax credit of $1.5 million, or $0.07 a share, for the reduction of lower of cost or market lower of cost or market A method for determining an asset's value such that either the original cost or the current replacement cost, whichever is lowest, is used for financial reporting purposes. inventory reserves. In the first quarter 2003 the company reported net income of $17.6 million, or $0.78 a share, fully diluted. Results for the year-ago quarter included an after-tax gain of $26.9 million, or $1.20 a share, related to the termination The point where a line, channel or circuit ends. See SCSI termination and hybrid. of the last five years (2005 to 2009) of the 110 million-pound-a-year metal delivery contract and marking to market years 2003 and 2004 of the contract. The results also included a net after-tax charge of $5.9 million, $0.26 a share, for the cumulative effect of a change in accounting principle. Sales in the 2004 first quarter were $232.1 million compared with $179.0 million in the year-ago quarter. Shipments of primary aluminum in the first quarter of 2004 were 296.7 million pounds versus 257.0 million pounds in the first quarter of 2003. Financial results for the first quarter of 2003 exclude the results from the acquisition of the 20-percent interest in Century's Hawesville (KY) Operations on April 1, 2003. Commenting on the company's performance, Century Chairman and Chief Executive Officer Craig Craig , Edward Gordon 1872-1966. British theatrical producer, director, and designer whose innovative productions and simplified stage designs influenced modern theater. A. Davis said: "Operating income and cash flow in the first quarter were very strong due to higher aluminum prices and improved operating performance. Our plants met their cost goals while operating at near capacity levels. Market conditions have improved further in 2004 which we expect will continue the positive trend established in the first quarter. We expect to complete the acquisition of the Nordural plant in Iceland Iceland, Icel. Ísland, officially Republic of Iceland, republic (2005 est. pop. 297,000), 39,698 sq mi (102,819 sq km), the westernmost state of Europe, occupying an island in the Atlantic Ocean just S of the Arctic Circle, c. by April 30, 2004. We also plan to begin an expansion that will double its capacity to 180,000 mtpy mtpy Metric Tons Per Year by mid- mid- pref. Middle: midbrain. 2006." Century owns 525,000 metric tons (Transparent Optical Networking Services) A marketing term for providing dark fiber to a customer. The customer is responsible for generating the transmission signal and interpreting it at the other end. See dark fiber. per year (mtpy) of primary aluminum capacity. It owns and operates the 244,000-mtpy plant at Hawesville, KY and the 170,000-mtpy plant at Ravenswood Ravenswood may refer to: Film & Literature
U.S. company, the world's largest producer of aluminum. Established in Pittsburgh, Pa., in 1888, it adopted the name Aluminum Co. of America in 1907. Alcoa introduced aluminum foil in 1910 and found uses for aluminum in the emerging aviation and automobile industries. Inc. owns the remainder and is the operating partner. Century's headquarters are in Monterey, CA. Century's press releases may contain "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. The company cautions that such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties. Actual results may vary.
Century Aluminum Company
Consolidated Statements of Operations
(in Thousands, Except Per Share Amounts)
(Unaudited)
Three months ended
March 31,
-------------------
2004 2003
--------- ---------
NET SALES:
Third-party customers $192,346 $153,455
Related parties 39,748 25,554
--------- ---------
232,094 179,009
COST OF GOODS SOLD 195,045 171,303
--------- ---------
GROSS PROFIT 37,049 7,706
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 5,408 4,135
--------- ---------
OPERATING INCOME 31,641 3,571
INTEREST INCOME (EXPENSE) - Net (10,607) (10,073)
NET GAIN (LOSS) ON FORWARD CONTRACTS (12,820) 41,693
OTHER INCOME (EXPENSE) (614) 270
--------- ---------
INCOME BEFORE INCOME TAXES 7,600 35,461
INCOME TAX EXPENSE (2,800) (12,974)
--------- ---------
INCOME BEFORE MINORITY INTEREST AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE 4,800 22,487
MINORITY INTEREST - 986
--------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 4,800 23,473
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE, NET OF TAX BENEFIT OF $3.4 MILLION - (5,878)
--------- ---------
NET INCOME 4,800 17,595
PREFERRED DIVIDENDS (500) (500)
--------- ---------
NET INCOME APPLICABLE TO COMMON SHAREHOLDERS $4,300 $17,095
========= =========
EARNINGS (LOSS) PER COMMON SHARE
Basic - Before cumulative effect of change in
accounting principle $0.20 $1.09
Basic - Cumulative effect of change in accounting
principle $- $(0.28)
--------- ---------
Basic - Net income $0.20 $0.81
Diluted - Before cumulative effect of change in
accounting principle $0.20 $1.04
Diluted - Cumulative effect of change in
accounting principle $- $(0.26)
--------- ---------
Diluted - Net income $0.20 $0.78
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 21,195 21,070
Diluted 21,384 22,465
See Notes to Consolidated Statements of Operations
Century Aluminum Company
Notes to Consolidated Statements of Operations
(in Thousands, Except Per Share Amounts)
(Unaudited)
2004
Net (Loss) On Forward Contracts
------------------------------------------------------------
Net Loss on Forward Contracts of $12,820 was a result of
marking-to-market the following items:
The 110 million pound, fixed-price, delivery contract with Glencore
that matures in 2004 - $7,276
The derivative liability associated with the absence of a delivery
premium on the 110 million pound annual delivery contract with
Glencore for the years 2005 through 2009 - $1,706
Certain fixed-price, forward financial sales contracts maturing in
2004 that do not qualify for cash-flow hedge accounting - $3,142
A 45.0 million pound annual delivery contract for years 2004 through
2013 for the U.S. Midwest premium that exceeds the contract cap - $696
Cost Of Goods Sold
------------------------------------------------------------
Cost of Goods Sold includes a credit of $2,273 for net lower of cost
or market inventory adjustments in the quarter.
2003
Net Gain On Forward Contracts
------------------------------------------------------------
In January 2003, Century terminated and settled a 110 million pound
per year above-market, fixed price, physical delivery contract with
Glencore for the years 2005 through 2009. At that time, the parties
entered into a new sales contract that required the Company to deliver
the same quantity of primary aluminum as did the original contract for
these years. However, the new sales contract provided for variable
pricing for the years 2005 through 2009, equal to the quarterly
average price of aluminum as quoted by the LME for the quarter
preceding delivery of the primary aluminum. For the years 2003 through
2004, the sale price of primary aluminum delivered remained at fixed
prices.
Prior to the January 2003 agreement to terminate and settle the
original sale contract for the years 2005 through 2009, the Company
classified and accounted for the contract as a Normal Sales contract
as defined in SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." Accordingly, prior to January 2003, the original
sales contract was recorded on an accrual basis of accounting and
changes in the fair value of the original sales contract were not
recognized.
According to SFAS No. 133, it must be probable that at inception and
throughout its term, a contract classified as "normal" will not result
in a net settlement and will result in physical delivery. Because the
Company and Glencore net settled a significant portion of the original
sales contract in January 2003, it no longer qualified for the
"normal" exemption of SFAS No. 133. requiring the Company to mark the
entire contract to market value.
Accordingly, the Company recorded a derivative asset and a pre-tax
gain of $41,693. Of the total recorded gain, $26,129 related to the
favorable terms of the original sales contract for the years 2005
through 2009, and $15,564 related to the favorable terms of the
original sales contract for 2003 through 2004.
On April 1, 2003, the Company received $35,484 from Glencore, $26,129
of which related to the settlement of the original sales contract for
the years 2005 through 2009, and $9,355 of which represented the fair
value of the new sales contract with Glencore for the years 2005
through 2009. The $9,355 initial fair value of the new sales contract
was a derivative liability and represented the present value of the
contract's favorable term to Glencore in that the new sales contract
excluded in its variable pricing an estimated U.S. Midwest Premium,
adjusted for delivery considerations.
Cumulative Effect Of Change In Accounting Principle
------------------------------------------------------------
The Company adopted Financial Accounting Standard No. 143, "Accounting
for Asset Retirement Obligations" during the quarter. The cumulative
effect of adopting this standard was a one-time, after tax, non-cash
charge of $5,878. The standard requires the Company to accrue the
estimated fair value of future removal costs associated with reduction
plant spent pot lining upon asset retirement.
Century Aluminum Company
Consolidated Balance Sheets
(Dollars in Thousands)
(Unaudited)
March 31, December 31,
ASSETS 2004 2003
--------- ------------
Current Assets:
Cash $54,125 $28,204
Accounts receivable - net 61,336 51,370
Due from affiliates 11,893 10,957
Inventories 87,971 89,360
Prepaid and other assets 2,938 4,101
Deferred taxes - current portion 5,528 3,413
--------- ------------
Total current assets 223,791 187,405
Property, Plant and Equipment - net 488,053 494,957
Intangible Asset - net 96,054 99,136
Other Assets 30,149 28,828
--------- ------------
Total $838,047 $810,326
========= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable, trade $35,751 $34,829
Due to affiliates 28,321 27,139
Industrial revenue bonds 7,815 7,815
Accrued and other current liabilities 46,952 30,154
Accrued employee benefits costs - current
portion 8,747 8,934
--------- ------------
Total current liabilities 127,586 108,871
Senior Secured Notes Payable - Net 322,434 322,310
Note Payable - Affiliates 14,000 14,000
Accrued Pension Benefit Costs - Less current
portion 11,225 10,764
Accrued Postretirement Benefits Costs - Less
current portion 80,285 78,218
Other Liabilities 34,432 33,372
Due to Affiliates - Less current portion 9,861 -
Deferred Taxes - Less current portion 54,496 55,094
--------- ------------
Total noncurrent liabilities 526,733 513,758
Shareholders' Equity:
Convertible Preferred Stock (8.0% cumulative,
500,000 shares outstanding) 25,000 25,000
Common Stock (one cent par value,
50,000,000 shares authorized; 21,214,800
shares outstanding at March 31, 2004 and
21,130,839 at December 31, 2003) 212 211
Additional Paid-In Capital 174,188 173,138
Other Comprehensive Income (Loss) (15,042) (5,222)
Accumulated Deficit (630) (5,430)
--------- ------------
Total shareholders' equity 183,728 187,697
--------- ------------
Total $838,047 $810,326
========= ============
Century Aluminum Company
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
Three months
ended
March 31,
-----------------
2004 2003
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $4,800 $17,595
Adjustments to reconcile net income to net cash
provided by operating activities:
Unrealized net (gain) loss on forward contracts 9,750 (15,564)
Depreciation and amortization 11,241 12,711
Deferred income taxes 2,800 9,543
Pension and other postretirement benefits 2,342 3,229
Inventory market adjustment (2,273) (99)
Loss on disposal of assets 626 -
Minority Interest - (986)
Cumulative effect of change in accounting principle - 9,308
Change in operating assets and liabilities:
Accounts receivable - net (9,966) (1,674)
Due from affiliates (935) (36,974)
Inventories 3,663 2,749
Prepaids and other assets 2,037 3,068
Accounts payable, trade 922 (2,183)
Due to affiliates (7,147) 244
Accrued and other current liabilities 9,740 8,294
Other - net (928) 8,612
-------- --------
Net cash provided by operating activities 26,672 17,873
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (1,802) (6,121)
-------- --------
Net cash used in investing activities (1,802) (6,121)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 1,051 -
Dividends - (11)
-------- --------
Net cash provided by (used in)
financing activities 1,051 (11)
-------- --------
NET INCREASE IN CASH 25,921 11,741
CASH, BEGINNING OF PERIOD 28,204 45,092
-------- --------
CASH, END OF PERIOD $54,125 $56,833
======== ========
Century Aluminum Company
Selected Operating Data
(in Thousands, Except Dollars per Pound)
(Unaudited)
SHIPMENTS - PRIMARY ALUMINUM
Direct
----------------------
Pounds $/Pound
---------- ----------
2004
-----------
1st Quarter 296,743 $0.78
2003
-----------
1st Quarter 257,040 $0.70
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