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Century Reports Fourth Quarter 2016 Financial Results

/EIN News/ -- CHICAGO, Feb. 23, 2017 (GLOBE NEWSWIRE) -- Century Aluminum Company (NASDAQ:CENX) reported a net loss of $168.5 million ($1.93 per share) for the fourth quarter of 2016.  Results were negatively impacted by a $152.2 million ($1.75 per share) impairment charge related to the Helguvik project in Iceland.  In addition, we incurred an unfavorable $6.9 million ($0.08 per share) charge related to discrete tax items recorded during the quarter which was partially offset by a favorable $2.1 million ($0.02 per share) lower of cost or market inventory adjustment.  The fourth quarter adjusted net loss was $11.5 million ($0.12 per share).

For the fourth quarter of 2015, Century reported a net loss of $43.1 million ($0.50 per share).  Results were favorably impacted by a $23.5 million ($0.25 per share) lower of cost or market inventory adjustment and $3.4 million ($0.04 per share) related to non-cash, non-recurring post-retirement benefits.  Results were negatively impacted by a $3.5 million charge ($0.04 per share) related to the partial curtailment of operations at Hawesville and Mt. Holly, a $5.0 million charge ($0.05 per share) for depreciation related to Mt. Holly purchase accounting and an $11.6 million impairment charge ($0.12 per share) at BHH.

Sales for the fourth quarter of 2016 were $339.8 million compared with $383.9 million for the fourth quarter of 2015.  Shipments of primary aluminum for the fourth quarter of 2016 were 183,210 tonnes compared with 211,710 tonnes shipped in the fourth quarter of 2015.  The decrease in sales and shipment volume was primarily due to curtailment actions taken in the fourth quarter of 2015.

Net cash provided by operating activities in the fourth quarter of 2016 was $22.6 million.  Our cash position at quarter end was $132.4 million and we had $100.1 million of revolver availability.

For the full year 2016, Century reported a net loss of $252.4 million ($2.90 per share).  Results were negatively impacted by the $152.2 million impairment charge related to the Helguvik project ($1.75 per share) and a $26.8 million ($0.31 per share) charge related to the closure of the Ravenswood facility, including settlement costs associated with the retiree medical class action lawsuit.  Additionally, we incurred a $6.9 million ($0.08 per share) charge related to discrete tax items and a favorable $0.7 million ($0.01 per share) lower of cost or market inventory adjustment.

For the full year 2015, Century reported a net loss of $59.3 million ($0.68 per share).  Results were favorably impacted by $12.6 million related to purchase accounting for the Mt. Holly acquisition and $3.4 million related to non-cash, non-recurring post-retirement benefits.  Results were negatively impacted by a $31.2 million charge related to the permanent closure of Ravenswood, $13.1 million in costs related to the labor disruption at Hawesville, $7.6 million due to partial curtailments of operations at Hawesville and Mt. Holly, $11.6 million related to the impairment at BHH, $1.6 million for signing bonuses related to a new labor agreement in Iceland, $1.0 million related to the separation of a former senior executive and a $7.5 million lower of cost or market inventory adjustment.

Sales for the full year 2016 were $1,319.1 million compared with $1,949.9 million for 2015.  Shipments of primary aluminum for 2016 were 733,825 tonnes compared with 921,958 tonnes shipped in 2015.  The decrease in sales and shipment volume was primarily due to curtailment actions taken in the second half of 2015 combined with lower market prices for primary aluminum.

"All operations performed well during the quarter, with key performance indicators and financial results at expected levels," commented Michael Bless, President and Chief Executive Officer.  "We are proud of the safety performance our people have achieved under difficult conditions; we believe our focus on the identification of behaviors that can lead to safety risk, as well as the prevention of serious and life changing injuries, is paying dividends.  Conversion costs remained in line during the quarter and cash flow was strong relative to the depressed market conditions.  The company's financial condition, which remained robust through the significant commodity price weakness of late 2015 into 2016, has only improved."

"We've seen important developments in our markets over the last several months," continued Bless.  "The U.S. government recently filed a WTO complaint accusing China of illegally subsidizing its primary aluminum sector.  The assertions made in this case are consistent with the data our extensive research has uncovered.  We are gratified to see that the industry is strongly supportive of this action.  The EU, Canada, Japan and the Russian Federation have joined this effort and we believe other producing countries are planning on joining.  This development confirms the global breadth and recognition of the problem.  The first step in the proceedings will begin with consultations and we are hopeful that by the end of the proceedings China will have addressed its excess capacity problems; we believe such action would inure to the benefit of the industry and society in China as well as to the broader global market.  Given aluminum's strong demand profile, a supply environment consistent with global trade laws would, we believe, produce a rational and healthy long-term market for producers and consumers."

Bless concluded, "We have progressed on several strategic fronts.  We completed the sale of the remaining assets at Century’s original operating smelter in Ravenswood, W.V.  In South Carolina, after a last attempt to find a mutually acceptable solution, we reluctantly filed an antitrust lawsuit against the monopoly power supplier; we simply cannot afford to operate this otherwise excellent plant at an uncompetitive power price.  While we await the market rationalization the WTO process is designed to produce, we will continue to invest prudently in modest high return projects not dependent upon the price of the commodity.  We continue to believe excellent opportunities exist for Century in our markets in the U.S. and Europe, and we will continue to develop our business in this respect.”

About Century Aluminum

Century Aluminum Company owns primary aluminum capacity in the United States and Iceland.  Century's corporate offices are located in Chicago, IL. Visit www.centuryaluminum.com for more information.

Non-GAAP Financial Measures

Adjusted net income (loss) and adjusted earnings (loss) per share are non-GAAP financial measures that management uses to evaluate Century's financial performance.  These non-GAAP financial measures facilitate comparisons of this period’s results with prior periods on a consistent basis by excluding items that management does not believe are indicative of Century’s ongoing operating performance and ability to generate cash.  Management believes these non-GAAP financial measures enhance an overall understanding of Century’s performance and our investors’ ability to review Century’s business from the same perspective as management.  The table below, under the heading "Reconciliation of Non-GAAP Financial Measures," provides a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure.  Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, Century's reported results prepared in accordance with GAAP.  In addition, because not all companies use identical calculations, adjusted net income (loss) and adjusted earnings (loss) per share included in this press release may not be comparable to similarly titled measures of other companies.  Investors are encouraged to review the reconciliation in conjunction with the presentation of these non-GAAP financial measures.

Cautionary Statement

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements are statements about future events and are based on our current expectations.  These forward-looking statements may be identified by the words "believe," "expect," "hope," "target," "anticipate," "intend," "plan," "seek," "estimate," "potential," "project," "scheduled," "forecast" or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," "might," or "may."  Our forward-looking statements include, without limitation, statements with respect to: future global and local financial and economic conditions; our assessment of the aluminum market and aluminum prices (including premiums); the potential outcome or occurrence of any trade claims to address excess capacity or unfair trade practices; our assessment of the ultimate outcome of our outstanding litigation; our assessment of power pricing and our ability to successfully obtain and/or implement long-term competitive power arrangements for our operations and projects; our ability to procure alumina, carbon products and other raw materials and our assessment of pricing and costs and other terms relating thereto; the future operation or potential curtailment of our U.S. assets; the future financial and operating performance of Century, its subsidiaries and its projects; future earnings, operating results and liquidity; future inventory, production, sales, cash costs and capital expenditures; future impairment charges or restructuring costs; our business objectives, strategies and initiatives, including our ability to achieve productivity improvements or cost reductions.

Where we express an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis.  However, our forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from future results expressed, projected or implied by those forward-looking statements.  Important factors that could cause actual results and events to differ from those described in such forward-looking statements can be found in the risk factors and forward-looking statements cautionary language contained in our Annual Report on Form 10-K, quarterly reports on Form 10-Q and in other filings made with the Securities and Exchange Commission.  Although we have attempted to identify those material factors that could cause actual results or events to differ from those described in such forward-looking statements, there may be other factors that could cause results or events to differ from those anticipated, estimated or intended.  Many of these factors are beyond our ability to control or predict.  Given these uncertainties, the reader is cautioned not to place undue reliance on our forward-looking statements.  We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

 
CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
 
  Three months ended
December 31,
  Twelve months ended
December 31,
  2016   2015   2016   2015
NET SALES:              
Related parties $ 306,860     $ 350,283     $ 1,178,631     $ 1,867,711  
Third-party customers 32,976     33,632     140,463     82,146  
Total net sales 339,836     383,915     1,319,094     1,949,857  
Cost of goods sold 334,779     402,616     1,330,136     1,908,544  
Gross profit (loss) 5,057     (18,701 )   (11,042 )   41,313  
Selling, general and administrative expenses 10,961     8,566     40,264     42,115  
Helguvik impairment 152,220         152,220      
Ravenswood charges         26,830     30,850  
Other operating expense – net 1,520     1,219     3,857     7,436  
Operating loss (159,644 )   (28,486 )   (234,213 )   (39,088 )
Interest expense (5,695 )   (5,412 )   (22,216 )   (21,954 )
Interest income 283     91     758     339  
Net gain on forward and derivative contracts 489     396     3,487     1,600  
Unrealized gain on fair value of contingent consideration             18,337  
Other income (expense) – net 1,781     (1,617 )   1,319     (356 )
Loss before income taxes and equity in earnings of joint ventures (162,786 )   (35,028 )   (250,865 )   (41,122 )
Income tax benefit (expense) (6,061 )   2,929     (2,824 )   (9,276 )
Loss before equity in earnings of joint ventures (168,847 )   (32,099 )   (253,689 )   (50,398 )
BHH impairment     (11,584 )       (11,584 )
Equity in earnings of joint ventures 383     603     1,274     2,672  
Net loss $ (168,464 )   $ (43,080 )   $ (252,415 )   $ (59,310 )
               
Net loss allocated to common stockholders $ (168,464 )   $ (43,080 )   $ (252,415 )   $ (59,310 )
LOSS PER COMMON SHARE:              
Basic and diluted $ (1.93 )   $ (0.50 )   $ (2.90 )   $ (0.68 )
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:              
Basic and diluted 87,079     86,933     87,064     87,375  


CENTURY ALUMINUM COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
(Unaudited)
 
    December 31, 2016   December 31, 2015
ASSETS        
Cash and cash equivalents   $ 132,403     $ 115,393  
Restricted cash   1,050     791  
Accounts receivable – net   12,432     9,475  
Due from affiliates   16,651     17,417  
Inventories   233,563     231,872  
Prepaid and other current assets   22,210     42,412  
Assets held for sale   22,313     30,697  
Total current assets   440,622     448,057  
Property, plant and equipment - net   1,026,285     1,232,256  
Other assets   73,420     72,155  
TOTAL   $ 1,540,327     $ 1,752,468  
LIABILITIES AND SHAREHOLDERS’ EQUITY        
LIABILITIES:        
Accounts payable, trade   $ 94,960     $ 90,489  
Due to affiliates   15,368     10,045  
Accrued and other current liabilities   50,100     48,822  
Accrued employee benefits costs   10,917     10,148  
Industrial revenue bonds   7,815     7,815  
Total current liabilities   179,160     167,319  
Senior notes payable   247,699     247,278  
Accrued pension benefits costs - less current portion   49,493     43,999  
Accrued postretirement benefits costs - less current portion   126,355     125,999  
Other liabilities   72,026     53,009  
Deferred taxes   108,939     106,053  
Total noncurrent liabilities   604,512     576,338  
         
SHAREHOLDERS’ EQUITY:        
Series A Preferred stock (one cent par value, 5,000,000 shares authorized;
160,000 issued and 75,625 outstanding at December 31, 2016; 160,000
issued and 76,539 outstanding at December 31, 2015)
  1     1  
Common stock (one cent par value, 195,000,000 authorized;  94,437,418
issued and 87,250,897 outstanding at December 31, 2016; 94,224,571
issued and 87,038,050 outstanding at December 31, 2015)
  944     942  
Additional paid-in capital   2,515,131     2,513,631  
Treasury stock, at cost   (86,276 )   (86,276 )
Accumulated other comprehensive loss   (113,893 )   (112,650 )
Accumulated deficit   (1,559,252 )   (1,306,837 )
Total shareholders’ equity   756,655     1,008,811  
TOTAL   $ 1,540,327     $ 1,752,468  
                 


CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
  Twelve months ended December 31,
  2016   2015
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net loss $ (252,415 )   $ (59,310 )
Adjustments to reconcile net loss to net cash provided by operating activities:      
Unrealized gain on fair value of contingent consideration     (18,337 )
Unrealized gain on E.ON contingent obligation (1,411 )   (1,411 )
Lower of cost or market inventory adjustment (660 )   7,539  
Depreciation and amortization 84,780     80,117  
Helguvik impairment 152,220      
Ravenswood impairment 3,830     30,850  
BHH impairment     11,584  
Pension and other postretirement benefits 2,863     (4,991 )
Deferred income taxes (893 )   (178 )
Stock-based compensation 1,502     1,844  
Equity in earnings of joint ventures
(367 )   (806 )
Change in operating assets and liabilities:      
Accounts receivable - net (2,957 )   68,192  
Due from affiliates 766     14,086  
Inventories 919     44,896  
Prepaid and other current assets 18,313     (144 )
Accounts payable, trade 2,271     (60,583 )
Due to affiliates 7,212     (12,216 )
Accrued and other current liabilities (3,900 )   (31,540 )
Pension contribution - Mt. Holly     (34,595 )
Ravenswood charges 23,000      
Other – net 3,100     (3,131 )
Net cash provided by operating activities 38,173     31,866  
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchase of property, plant and equipment (21,944 )   (54,700 )
Purchase of remaining interest in Mt. Holly smelter     11,313  
Proceeds from sale of property, plant and equipment 1,040     14  
Restricted and other cash deposits (259 )   10  
Net cash used in investing activities (21,163 )   (43,363 )
CASH FLOWS FROM FINANCING ACTIVITIES:      
Borrowings under revolving credit facilities 1,179     1,737  
Repayments under revolving credit facilities (1,179 )   (1,737 )
Repurchase of common stock     (36,352 )
Net cash used in financing activities     (36,352 )
CHANGE IN CASH AND CASH EQUIVALENTS 17,010     (47,849 )
Cash and cash equivalents, beginning of period 115,393     163,242  
Cash and cash equivalents, end of period $ 132,403     $ 115,393  
               


CENTURY ALUMINUM COMPANY
SELECTED OPERATING DATA
(Unaudited)
 
SHIPMENTS - PRIMARY ALUMINUM        
           
  Direct (1)   Toll
  United States   Iceland   Iceland
  Tonnes   Sales $ (000)   Tonnes   Sales $ (000)   Tonnes   Sales $ (000)
2016                      
4th Quarter 103,186     $ 198,202     80,024     $ 141,090         $  
3rd Quarter 106,890     $ 201,973     75,539     $ 130,177         $  
2nd Quarter 106,974     $ 204,173     54,968     $ 92,707     23,625     $ 27,944  
1st Quarter 105,089     $ 194,826     55,030     $ 92,151     22,500     $ 26,115  
Total 422,139     $ 799,174     265,561     $ 456,125     46,125     $ 54,059  
                       
                       
2015                      
4th Quarter 131,849     $ 247,895     59,074     $ 101,497     20,787     $ 24,281  
3rd Quarter 149,187     $ 304,948     60,939     $ 116,919     20,914     $ 26,226  
2nd Quarter 157,373     $ 371,898     50,056     $ 110,083     26,521     $ 37,858  
1st Quarter 169,306     $ 421,141     45,967     $ 112,662     29,985     $ 46,617  
Total 607,715     $ 1,345,882     216,036     $ 441,161     98,207     $ 134,982  
                       

(1) Excludes scrap aluminum sales.

 
CENTURY ALUMINUM COMPANY
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in millions, except per share amounts)
(Unaudited)
 
    Three months ended
    December 31, 2016
    $MM   EPS
Net loss as reported   $ (168.5 )   $ (1.93 )
         
Helguvik impairment   152.2     1.75  
Discrete tax item   6.9     0.08  
Lower of cost or market inventory adjustment   (2.1 )   (0.02 )
Adjusted net loss   $ (11.5 )   $ (0.12 )


Contact
Peter Trpkovski
(Investors and media)
312-696-3112

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