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Century Aluminum Company Reports Operating Results (10-Q)

November 09, 2010 | About:
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10qk

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Century Aluminum Company (CENX) filed Quarterly Report for the period ended 2010-09-30.

Century Aluminum Company has a market cap of $1.36 billion; its shares were traded at around $14.65 with a P/E ratio of 43.1 and P/S ratio of 1.5. CENX is in the portfolios of Chuck Royce of Royce& Associates, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

On July 1, 2010, we and certain of our direct and indirect domestic subsidiaries entered into a new four-year $100 million senior secured revolving credit facility (the "New Credit Facility"). The New Credit Facility replaces our previous credit facility that was scheduled to expire on September 19, 2010. The New Credit Facility, which expires on July 1, 2014, provides for borrowings of up to $100 million in the aggregate, including up to $50 million under a letter of credit sub-facility. See Note 11 Debt for additional information about our new credit facility.

We completed debt-for-debt exchanges in January and March 2010. We issued approximately $4.1 million of 8.0% senior secured notes payable due May 15, 2014 (the “8.0% Notes”) in exchange for approximately $4.3 million of 7.5% senior unsecured notes payable due August 15, 2014 (the “7.5% Notes”). As of September 30, 2010, we had $2.6 million and $249.6 million of aggregate principal amount outstanding of the 7.5% Notes and 8.0% Notes, respectively.

During the three months ended September 30, 2010, higher price realizations, net of LME-based alumina cost and LME-based power cost, increased gross profit by $27.1 million. The volume impact was a $0.8 million decrease to gross profit. In addition, we experienced $13.1 million in net cost increases, relative to the same period in 2009, comprised of: increased power and natural gas costs at our U.S. smelters (primarily attributable to our new power contract at Hawesville), $5.4 million; increased costs for materials, supplies and maintenance, $5.8 million; and other cost increases, $2.7 million; offset by lower depreciation and amortization expense, $0.8 million.

During the nine months ended September 30, 2010, higher price realizations, net of LME-based alumina cost and LME-based power cost, increased gross profit by $213.6 million. Gross profit increased $11.8 million in the current nine month period as a result of lower shipment volumes which were in a gross loss position in 2009. Lower shipment volumes were due to capacity curtailments that occurred in the first quarter of 2009. In addition, we experienced $47.6 million in net cost increases, compared to the same period in 2009, comprised of: increased power and natural gas costs at our U.S. smelters (primarily attributable to our new power contract at Hawesville), $29.2 million; increased costs for materials, supplies and maintenance, $9.6 million; and other cost increases, $18.5 million; offset by lower depreciation and amortization expense, $9.7 million.

Due to the turnover of inventory during the three and nine months ended September 30, 2010 and increased market prices at the end of the third quarter of 2010, the previously recognized lower of cost or market inventory reserves were adjusted to reflect the current value for our September 30, 2010 ending inventory. Relative to the comparable 2009 periods, these adjustments represent a period to period positive swing in gross profit of $5.0 million for the three months ended September 30, 2010 and a period to period negative swing in gross profit of $26.6 million for the nine months ending September, 2010.

During the three and nine months ended September 30, 2009, we recorded a gain of $81.2 million related to our agreement with E.ON that was consummated concurrently with the new long term power contract for Hawesville. In addition, we wrote off the remaining carrying value of the intangible asset associated with the previous power contract that was terminated July 16, 2009. The amount of the write-off was $23.8 million. See Note 2 Long-term power contract for Hawesville for additional information about this contract.

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