-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OA73zSzi+2Z1q74Vi8jCsXct3xjqckAqHXaygcpkNoFOAVIiNSfkKD4O+mitBXsD ooF1RhZZAwQuTRxUGtiSAg== 0000891020-00-001039.txt : 20000516 0000891020-00-001039.hdr.sgml : 20000516 ACCESSION NUMBER: 0000891020-00-001039 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLDEN NORTHWEST ALUMINUM INC CENTRAL INDEX KEY: 0001079177 STANDARD INDUSTRIAL CLASSIFICATION: PRIMARY PRODUCTION OF ALUMINUM [3334] IRS NUMBER: 931249606 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-72245 FILM NUMBER: 630878 BUSINESS ADDRESS: STREET 1: 3313 WEST SECOND STREET CITY: DALLAS STATE: OR ZIP: 97058 BUSINESS PHONE: 5412966161 MAIL ADDRESS: STREET 1: 3313 WEST SECOND STREET CITY: DALLES STATE: OR ZIP: 97058 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWEST ALUMINUM SPECIALTIES INC CENTRAL INDEX KEY: 0001079176 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 931019176 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-72245-01 FILM NUMBER: 630879 BUSINESS ADDRESS: STREET 1: 3313 WEST SECOND STREET CITY: DALLAS STATE: OR ZIP: 97058 BUSINESS PHONE: 5412966161 MAIL ADDRESS: STREET 1: 3313 WEST SECOND STREET CITY: DALLES STATE: OR ZIP: 97058 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWEST ALUMINUM CO CENTRAL INDEX KEY: 0001079178 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 930905834 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-72245-02 FILM NUMBER: 630880 BUSINESS ADDRESS: STREET 1: 3313 WEST SECOND STREET CITY: DALLAS STATE: OR ZIP: 97058 BUSINESS PHONE: 5412966161 MAIL ADDRESS: STREET 1: 3313 WEST SECOND STREET CITY: DALLES STATE: OR ZIP: 97058 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWEST ALUMINUM TECHNOLOGIES LLC CENTRAL INDEX KEY: 0001079191 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-72245-03 FILM NUMBER: 630881 BUSINESS ADDRESS: STREET 1: 3313 W SECOND ST CITY: THE DALLES STATE: OR ZIP: 97058 BUSINESS PHONE: 5412966161 MAIL ADDRESS: STREET 1: 3313 W SECOND ST CITY: THE DALLES STATE: OR ZIP: 97058 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLDENDALE HOLDING CO CENTRAL INDEX KEY: 0001079192 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-72245-04 FILM NUMBER: 630882 BUSINESS ADDRESS: STREET 1: 3313 W SECOND ST CITY: THE DALLES STATE: OR ZIP: 97058 BUSINESS PHONE: 5412966161 MAIL ADDRESS: STREET 1: 3313 W SECOND ST CITY: THE DALLES STATE: OR ZIP: 97058 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOLDENDALE ALUMINUM CO CENTRAL INDEX KEY: 0001079194 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-72245-05 FILM NUMBER: 630883 BUSINESS ADDRESS: STREET 1: 3313 W SECOND ST CITY: THE DALLES STATE: OR ZIP: 97058 BUSINESS PHONE: 5412966161 MAIL ADDRESS: STREET 1: 3313 W SECOND ST CITY: THE DALLES STATE: OR ZIP: 97058 10-Q 1 FORM 10-Q FOR THE PERIOD ENDING MARCH 31, 2000 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________to ___________ Commission file number 333-72245 ----------- GOLDEN NORTHWEST ALUMINUM, INC. ----------------------------------- (Exact name of registrant as specified in its charter) Oregon 93-1249606 ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 3313 West Second Street The Dalles, Oregon 97058 --------------------------------------------------- (Address of principal executive offices) (Zip Code) (541) 296-6161 ------------------ (Registrant's telephone number, including area code) 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 [X] NO [ ]. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: CLASS OUTSTANDING AT MAY 10, 2000 ----- --------------------------- Common Stock 1,000. 2 This quarterly report on Form 10-Q also constitutes a quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the following subsidiaries of Golden Northwest Aluminum, Inc.:
- --------------------------------------------------------------------------------------------------- State of I.R.S. Employer Commission file incorporation Identification Company number or organization Number - --------------------------------------------------------------------------------------------------- Goldendale Holding Company 333-72245-04 Delaware 91-1785763 Goldendale Aluminum Company 333-72245-05 Delaware 91-1380241 Northwest Aluminum Company 333-72245-02 Oregon 93-0905834 Northwest Aluminum Specialties, Inc. 333-72245-01 Oregon 93-1019176 Northwest Aluminum Technologies, LLC 333-72245-03 Washington 93-1196863 - ---------------------------------------------------------------------------------------------------
The address of the principal executive offices for each of these entities is 3313 West Second Street, The Dalles, Oregon 97058 and their telephone number is (541) 296-6161. 3 GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share data) ASSETS
DECEMBER 31, MARCH 31, 1999 2000 --------- --------- (UNAUDITED) Current assets: Cash and cash equivalents ........................................... $ 1,929 $ 3,343 Trade accounts receivable, less allowance for doubtful accounts of $100 ................................................. 54,752 51,316 Current portion of receivable due from related company .............. 2,639 2,513 Inventories ......................................................... 65,618 77,597 Intercompany receivable ............................................. 13,106 9,853 Prepaid expenses .................................................... 666 209 Income taxes refundable ............................................. 3,121 1,861 --------- --------- Total current assets ......................................... 141,831 146,692 --------- --------- Property, plant and equipment, net ...................................... 132,961 135,016 Goodwill, net of accumulated amortization of $14,241 and $15,397 ....... 81,348 80,192 Advances to shareholder ................................................. 2,000 2,000 Receivable due from related company, less current portion ............... 1,824 1,537 Other assets, net ....................................................... 10,667 11,756 --------- --------- $ 370,631 $ 377,193 ========= ========= LIABILITIES AND SHAREHOLDER'S EQUITY Current liabilities: Current portion of long-term debt ................................... $ 25,279 $ 35,011 Trade accounts payable .............................................. 45,925 41,050 Accrued expenses .................................................... 16,806 20,881 Deferred income taxes ............................................... 1,583 1,661 --------- --------- Total current liabilities .................................... 89,593 98,603 --------- --------- Long-term debt, less current portion .................................... 170,000 170,000 Deferred income taxes ................................................... 13,644 13,658 Deferred compensation notes payable ..................................... 662 486 Other long-term liabilities ............................................. 1,825 1,838 Dividends payable ....................................................... 13,163 14,075 --------- --------- Total liabilities ............................................ 288,887 298,660 --------- --------- Commitments and contingencies (Notes 5 and 6) Preferred stock of subsidiary ........................................... 29,663 29,663 Shareholder's equity: Common stock; 350,000 shares authorized; 1,000 shares issued and outstanding ...................................................... -- -- Additional paid-in capital .......................................... 63,628 65,504 Accumulated deficit ................................................. (11,547) (16,634) --------- --------- Total shareholder's equity ................................... 52,081 48,870 --------- --------- $ 370,631 $ 377,193 ========= =========
The accompanying notes to interim consolidated financial statements are an integral part of these statements. 1 4 GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, ------------------------------- 1999 2000 --------- --------- (IN THOUSANDS, EXCEPT SHARE DATA) Revenues .................................................. $ 102,841 $ 126,010 Cost of revenues .......................................... 100,833 117,405 --------- --------- Gross margin .............................................. 2,008 8,605 General and administrative expenses ....................... 4,142 3,835 --------- --------- Operating income (loss) ................................... (2,134) 4,770 --------- --------- Other income (expense): Interest expense ........................................ (6,174) (6,033) Other income, net ....................................... 327 316 --------- --------- Net other expense ......................................... (5,847) (5,717) --------- --------- Loss before income taxes .................................. (7,981) (947) Income tax expense (benefit) .............................. (1,914) 1,352 --------- --------- Net loss .................................................. $ (6,067) $ (2,299) ========= ========= Net loss .................................................. $ (6,067) $ (2,299) Dividends accrued on preferred stock of subsidiary ........ (912) (912) --------- --------- Net loss available to common shareholder .................. $ (6,979) $ (3,211) ========= ========= Earnings (loss) per share - basic and diluted: Net loss available to common shareholder ............... $ (6,979) $ (3,211) --------- --------- Net loss per share of common stock ..................... $ (6,979) $ (3,211) ========= ========= Weighted average shares of common stock outstanding .... 1,000 1,000 ========= =========
The accompanying notes to interim consolidated financial statements are an integral part of these statements. 2 5 GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
THREE MONTHS ENDED MARCH 31, ------------------------------ 1999 2000 -------- --------- (IN THOUSANDS) Cash flows from operating activities: Net loss ................................................. $ (6,067) $ (2,299) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization .......................... 4,597 6,030 Loss on disposal of assets ............................. -- 15 Deferred income taxes .................................. -- 92 Change in assets and liabilities: Trade accounts receivable .......................... 5,317 3,436 Inventories ........................................ (5,812) (11,979) Prepaid expenses ................................... (148) 457 Other assets ....................................... 2,014 (1,360) Trade accounts payable ............................. 115 (4,875) Accrued expenses ................................... 1,181 4,075 Intercompany receivable ............................ (16,670) 3,253 Income taxes refundable ............................ (1,914) 1,260 Other liabilities .................................. 22 13 -------- -------- Net cash used in operating activities ...................... (17,365) (1,882) -------- -------- Cash flows from investing activities: Acquisition of property, plant and equipment ............. (7,398) (6,673) Net payments from related company ........................ 179 413 -------- -------- Net cash used in investing activities ...................... (7,219) (6,260) -------- -------- Cash flows from financing activities: Borrowings under revolving credit facilities ............. 31,733 91,992 Repayments under revolving credit facilities ............. (28,625) (82,260) Principal repayments of term loan facilities ............. (17,472) -- Intercompany borrowings .................................. 14,364 -- Deferred finance costs ................................... (288) -- Principal payments on deferred compensation notes ........ (83) (176) -------- -------- Net cash provided by (used in) financing activities ........ (371) 9,556 -------- -------- Net increase (decrease) in cash and cash equivalents ....... (24,955) 1,414 Cash and cash equivalents, beginning of quarter ............ 37,633 1,929 -------- -------- Cash and cash equivalents, end of quarter .................. $ 12,678 $ 3,343 ======== ========
Supplemental Disclosures of Cash Flow Information (Note 7) The accompanying notes to interim consolidated financial statements are an integral part of these statements. 3 6 GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE AMOUNTS) 1. BASIS OF PRESENTATION The foregoing unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, these financial statements do not include all of the disclosures required by generally accepted accounting principles for complete financial statements. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 1999. In the opinion of management, the unaudited interim consolidated financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim periods presented. The preparation of financial statements in accordance with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company's consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of the Company's consolidated financial position and results of operations. Operating results for the three-month period ended March 31, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. 2. OPERATIONS AND PRINCIPLES OF CONSOLIDATION The operations of Golden Northwest Aluminum, Inc. ("Golden" or the "Company") consist primarily of the smelting conversion of alumina to aluminum under tolling arrangements with alumina suppliers, processing of aluminum into primary products, and the sale of those products within one business segment. The operations are located in the Pacific Northwest on the Columbia River. The Company was incorporated in the state of Oregon on June 3, 1998 for the purposes of becoming the holding company of Northwest Aluminum Company, Northwest Aluminum Specialties, Inc. (collectively "Northwest"), Goldendale Holding Company and its wholly owned subsidiary, Goldendale Aluminum Company (collectively "Goldendale"), and Northwest Aluminum Technologies, LLC ("Technologies"). The sole shareholder of the Company also owned all of the outstanding shares of common stock of Northwest, Goldendale and Technologies. The consolidated financial statements include the accounts of Northwest, Goldendale and Technologies. The Company, Goldendale and Technologies report on a December 31 year basis; Northwest reports on a September 30 fiscal year basis. Included in current assets at December 31, 1999 is $13,106 and at March 31, 2000 is $9,853, representing the portion of intercompany advances which do not eliminate due 4 7 GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE AMOUNTS) to the differing year-ends. All other significant intercompany accounts and transactions have been eliminated. 3. EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"), Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 requires companies to recognize all derivative contracts as either assets or liabilities in the balance sheet and to measure them at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized as income in the period of change. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The Company is currently analyzing the financial impact (if any) that the adoption of SFAS No. 133 will have on its consolidated financial statements. 4. INVENTORIES Inventories consist of the following:
DECEMBER 31, MARCH 31, 1999 2000 ----------- --------- Purchased metals and tolling in process .... $42,880 $47,929 Supplies and alloys ........................ 13,619 13,049 Carbon plant materials ..................... 5,414 5,898 Alumina .................................... 3,705 10,721 ------- ------- $65,618 $77,597 ======= =======
5. LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 31, MARCH 31, 1999 2000 ----------- --------- First mortgage notes ................... $150,000 $150,000 Subordinated credit agreement .......... 20,000 20,000 Revolving credit facility .............. 25,279 35,011 -------- -------- Long-term debt ......................... 195,279 205,011 Less current portion ................... 25,279 35,011 -------- -------- Long-term debt less current portion .... $170,000 $170,000 ======== ========
5 8 GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE AMOUNTS) In December 1998, the Company issued $150 million of 12% first mortgage notes due on December 15, 2006. Interest is payable semi-annually on June 15 and December 15, commencing June 15, 1999. Payment of the notes is guaranteed by all of the Company's subsidiaries. The debt is collateralized by substantially all of the real property, plant and equipment of the Company's subsidiaries and by a pledge of all of the issued and outstanding capital stock of the Company's subsidiaries. On or after December 15, 2002 the notes are redeemable at the option of the Company at specified redemption prices. There are no sinking fund requirements. The indenture agreement limits principal payments on subordinated debt, dividends or shareholder distributions, and investments in subsidiaries. In connection with the issuance of the notes, each of the Company's direct and indirect wholly owned subsidiaries has jointly and severally guaranteed the notes on a full and unconditional basis. The Company is a holding company with no independent operations or assets other than those relating to its investments in its subsidiaries. Separate financial statements of the subsidiary guarantors are not included because the guarantees are full and unconditional, the subsidiary guarantors are jointly and severally liable and the separate financial statements and other disclosures concerning the subsidiary guarantors are not deemed material to investors by management of the Company. No restrictions exist on the ability of the subsidiary guarantors to make distributions to the Company, except, however, the obligations of each guarantor under its guarantee are limited to the maximum amount as will result in obligations of such guarantor under its guarantee not constituting a fraudulent conveyance or fraudulent transfer for purposes of bankruptcy law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law (e.g. adequate capital to pay dividends under corporate laws). In December 1998, the Company entered into a $75 million bank revolving credit facility, which matures on December 20, 2003, and is collateralized by inventory, accounts receivable and related intangibles, including a security interest in the Company's tolling agreements. As specified in the credit agreement, borrowings under the credit facility bear interest at a floating base rate plus from 0.50% to 1.00% (9.75% at March 31, 2000) or the LIBOR rate plus from 2.00% to 2.50% (8.38% at March 31, 2000). The additional margin is dependent upon the consolidated ratio of earnings before interest, income taxes, depreciation and amortization to interest expense. The credit facility provides for the payment of a commitment fee of 0.50% per annum based on the unused portion of the credit facility. The credit agreement contains restrictive covenants, including a minimum net worth requirement, a minimum excess availability requirement and limitations on capital expenditures, dividends, additional indebtedness, mergers and other business combinations, assets sales, encumbrances, investments and transactions with affiliates. The Company was in compliance with these covenants at March 31, 2000. Also in December 1998, the Company entered into a subordinated credit agreement with Norsk Hydro USA, Inc. pursuant to which $20 million was borrowed. The debt bears interest at LIBOR plus 2.00% (7.88% at March 31, 2000) and is due in December 2005. The debt is secured by a second lien and a pledge on the collateral securing the first mortgage notes and is guaranteed by the Company's subsidiaries. Except for the collateral security, the guarantees by the Company's subsidiaries are subordinate to the indebtedness under the bank revolving credit facility. The credit agreement provides for additional borrowings of $10 million on or prior to December 31, 2001. 6 9 GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE AMOUNTS) On January 25, 1999, the Company terminated at no cost its existing interest rate swap agreements and entered into a new swap agreement that expires in 2003. The fixed interest rate paid on the new swap is 6.4% and covers $20 million of notional principal amount of floating rate (LIBOR) indebtedness of the Company. Although the Company is exposed to credit loss on the interest rate swap in the event of nonperformance by the counterparties, the Company estimates the likelihood of such nonperformance to be remote. At December 31, 1999, the fair value of the interest rate swap was approximately $1,029, which reflects the estimated amount that the Company would pay to terminate the contract. 6. COMMITMENTS AND CONTINGENCIES The Company, in the regular course of business, is involved in investigations and claims by various regulatory agencies. The Company is also engaged in various legal proceedings incidental to its normal business activities. The Company's management does not believe that the ultimate resolution of these investigations, claims and legal proceedings will have a material effect on its financial position, results of operations or cash flows. The Company has agreed to be contingently liable for the debts of a customer amounting to approximately $956 at March 31, 2000. At March 31, 2000, the Company had a liability of approximately $1,838 ($1,825 at December 31, 1999) for estimated environmental remediation activities at Goldendale's facility. The Company's estimate of this liability is based on a remediation study conducted by independent engineering consultants. The total cost of remediation is estimated at $2,500; however, under a court decree the Company is only responsible for approximately one-half of the total. The remaining cost is the responsibility of prior owners. No accrual has been provided for the Northwest facility as the Company is unaware of any current condition which would give rise to remedial action. The Company has entered into various agreements for the purchase of power, alumina and aluminum. Future estimated minimum payments under these noncancelable agreements are as follows:
YEAR ENDING DECEMBER 31, AMOUNT -------------------------- --------- 2000 ............................................ $ 83,990 2001 ............................................ 90,209 2002 ............................................ 31,429 2003 ............................................ 31,429 2004 ............................................ 31,429 2005 ............................................ 7,857 -------- $276,343 ========
7 10 GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE AMOUNTS) 7. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Supplemental disclosures of cash flow information is as follows:
THREE MONTHS ENDED MARCH 31, --------------------------- 1999 2000 ------ ------ Cash paid during the period for: Interest ...................................... $2,139 $1,631 Income taxes .................................. -- -- Non-cash investing and financing activities: Dividends accrued on preferred stock .......... 912 912
8. NORTHWEST ALUMINUM COMPANY AND NORTHWEST ALUMINUM SPECIALTIES, INC. AND GOLDENDALE HOLDING COMPANY AND SUBSIDIARY Financial statements and financial statement schedules for Northwest Aluminum Company and Northwest Aluminum Specialties, Inc. and Goldendale Holding Company and its subsidiary have been omitted because the 12% first mortgage notes issued by the Company and its subsidiaries and registered under the Securities Act of 1933, of which the subsidiaries are guarantors (thus subjecting them to the reporting requirements under Section 13 or 15(d) of the Securities Exchange Act of 1934) are fully and unconditionally guaranteed by the subsidiaries. Financial information relating to these companies is presented herein in accordance with Staff Accounting Bulletin 53 as an addition to the footnotes to the financial statements of Golden Northwest Aluminum, Inc. Summarized unaudited financial information is as follows: 8 11 GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE AMOUNTS) Northwest Aluminum Company and Northwest Aluminum Specialties, Inc.
THREE MONTHS ENDED DECEMBER 31, ------------------------------- 1999 2000 --------- --------- CONDENSED STATEMENT OF OPERATIONS: Revenues: Customers ....................................... $ 66,472 $ 72,946 Parent and related companies .................... 44 62 --------- --------- 66,516 73,008 Cost of revenues ................................ 62,205 72,207 General and administrative expenses ............. 1,668 1,380 --------- --------- Operating income (loss) ......................... 2,643 (579) Net other expense ............................... (1,948) (2,673) --------- --------- Net income (loss) ............................... $ 695 $ (3,252) ========= ========= CONDENSED BALANCE SHEET: Current assets .................................. $ 73,896 $ 94,436 Non-current assets .............................. 42,947 44,309 --------- --------- Total assets .................................. $ 116,843 $ 138,745 ========= ========= Current liabilities ............................. $ 32,876 $ 68,863 Non-current liabilities ......................... 66,856 66,872 Shareholder's equity ............................ 17,111 3,010 --------- --------- Total liabilities and shareholder's equity .... $ 116,843 $ 138,745 ========= =========
9 12 GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE AMOUNTS) Goldendale Holding Company and Subsidiary
THREE MONTHS ENDED MARCH 31, ------------------------------- 1999 2000 --------- --------- CONDENSED STATEMENT OF OPERATIONS: Revenues: Customers ....................................... $ 36,369 $ 53,064 Parent and related companies .................... - 378 --------- --------- 36,369 53,442 Cost of revenues ................................ 38,868 45,638 General and administrative expenses ............. 2,490 2,350 --------- --------- Operating income (loss) ......................... (4,989) 5,454 Net other expense ............................... (1,627) (2,683) Income tax expense (benefit) .................... (1,914) 1,352 --------- --------- Net income (loss) ............................... $ (4,702) $ 1,419 ========= ========= CONDENSED BALANCE SHEET: Current assets .................................. $ 42,530 $ 43,579 Non-current assets .............................. 172,915 179,675 --------- --------- Total assets ................................. $ 215,445 $ 223,254 ========= ========= Current liabilities ............................. $ 26,953 $ 35,248 Non-current liabilities ......................... 131,788 108,385 Stockholder's equity ............................ 56,704 79,621 --------- --------- Total liabilities and stockholder's equity .... $ 215,445 $ 223,254 ========= =========
10 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section should be read in conjunction with the financial statements in Item 1, Part I, of this report. OVERVIEW The aluminum industry is highly cyclical, with market prices fluctuating widely based on global supply and demand factors, most of which are beyond our control. As shown below, for 1999, the average price per pound of aluminum on the London Metal Exchange was approximately the same as for 1998, which was lower than the average price in any of the three previous years. The average three-month LME prices per pound of aluminum in each of the last five years were as follows:
Price Per Year Ended December 31, Pound ---------------------- --------- 1995............................. $ 0.83 1996............................. $ 0.70 1997............................. $ 0.74 1998............................. $ 0.63 1999............................. $ 0.63
The timing and magnitude of any increase or decrease in aluminum prices is uncertain. As of March 31, 2000, the three-month LME price per pound of aluminum was $.70, and more recently LME prices have fluctuated around $.67 per pound. Accordingly, we believe our cash flow and earnings in the near term will be somewhat higher than amounts reported for comparable prior periods. Our cash flow and earnings are highly sensitive to aluminum prices because production costs are largely fixed. At low market aluminum prices, we are able to reduce some variable costs, but most of the production costs of primary aluminum are constant in the short term (alumina, labor, carbon, power), and therefore declines in market prices will cause declines in earnings. Conversely, increased market aluminum prices will cause increases in earnings. For these reasons we strive to maintain full plant utilization, which reduces the average cost per pound of aluminum. We do not actively hedge our production. To reduce our reliance on market-priced primary aluminum and to improve overall profitability, we have pursued a strategy of increasing both our "tolled" and "non-tolled" value-added production through specialty casting and processing operations. Through these operations, we are able to realize premiums over market LME prices, the amount of which varies with the degree of value-added content of the product and uniqueness of the product in the marketplace. Our volume of value-added production has increased significantly over the past decade relative to the volume of our primary production. Our continued investment in value-added production operations is designed to further increase our value-added production capabilities. As a consequence of this strategy, our volume of non-tolled value-added production at Northwest has grown from 153.7 million pounds in 1993 to 245.3 million pounds in 1999. As a result of this growth, Northwest purchased at market prices more primary aluminum for further processing into non-tolled value-added products than Northwest 11 14 produced for Glencore under the tolling contract. The Glencore tolling contract allowed us to operate our smelter at The Dalles at full capacity while we were developing value-added products. The success of Northwest's non-tolled products, however, reduced the importance of this contract, and it was not renewed in December 1999. The effect of this non-renewal will be to eliminate the revenue and gross margin Northwest derived from tolling aluminum for Glencore. This may be more than offset by an increase in gross margin from the sale of non-tolled products, because the underlying cost for primary aluminum will be Northwest's own production cost rather than the market price. We do not assure you however, that we will be able to realize any such increased gross margin. RESULTS OF OPERATIONS The following table sets forth the combined statement of income data as a percentage of revenues for the three months ended March 31, 1999 and 2000.
THREE MONTHS ENDED MARCH 31, -------------------------- 1999 2000 ------ ------ Revenues .................................. 100.0% 100.0% Cost of revenues .......................... 98.0% 93.2% ------ ------ Gross margin .............................. 2.0% 6.8% General and administrative expenses ....... 4.0% 3.0% ------ ------ Operating income (loss) ................... (2.0)% 3.8% Interest expense .......................... (6.1)% (4.8)% Other income, net ......................... 0.3% 0.3% ------ ------ Net other expenses ........................ (5.8)% (4.5)% ------ ------ Loss before income taxes .................. (7.8)% (0.7)% ------ ------ Income tax expense (benefit) .............. (1.9)% 1.1% ------ ------ Net loss .................................. (5.9)% (1.8)% ------ ------
THE THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2000 Primary and value-added aluminum produced under tolling contracts increased from 125.6 million pounds for the three months ended March 31, 1999 to 136.7 million pounds for the three months ended March 31, 2000 due primarily to the cyclical nature of our cell relining activity. Shipments of non-tolled value-added aluminum products were 64.9 million pounds and 71.6 million pounds for corresponding periods in 1999 and 2000, respectively, an increase of 10.3% due primarily to the strengthening of the commodity billet market. Revenues increased from $102.8 million in the three months ended March 31, 1999 to $126.0 million in the three months ended March 31, 2000, an increase of $23.2 million, or 22.6%. Revenues from tolling contracts increased 32.1% from $55.8 million in the three months ended March 31, 1999 to $73.7 million in the three months ended March 31, 2000. This increase was due primarily to the increase in average effective LME aluminum prices from $.60 per pound to $.70 per pound for the corresponding 12 15 periods in 1999 and 2000. Sales of non-tolled value-added products increased from $47.0 million in the three months ended March 31, 1999 to $52.3 million in the three months ended March, 31, 2000, due primarily to the increase in shipments and the increase in LME price from 1999 to 2000. Tolling revenues earned in the corresponding periods in 1999 and 2000 under the Company's Hydro and Glencore tolling contracts were $36.4 million and $53.0 million, and $19.4 million and $20.7 million, respectively. Cost of revenues increased from $100.8 million in the three months ended March 31, 1999 to $117.4 million in the three months ended March 31, 2000, an increase of $16.6 million, or 16.5%. As a percentage of revenues, cost of revenues declined from 98.0% to 93.2%. The increase in cost of revenues resulted primarily from increases in market aluminum prices and power costs in 2000. Gross margin increased from $2.0 million in the three months ended March 31, 1999 to $8.6 million in the three months ended March 31, 2000, an increase of 330.0%. As a percentage of revenues, gross margin rose from 2.0% to 6.8%. The increase in gross margin resulted primarily from an increase in revenues of $23.2 million, offset by an increase in cost of revenues of $16.6 million. General and administrative expenses decreased slightly from $4.1 million in the three months ended March 31, 1999 to $3.8 million in the three months ended March 31, 2000. As a percentage of revenues, general and administrative expenses decreased from 4.0% in 1999 to 3.0% in 2000. Interest expense decreased slightly from $6.2 million in the three months ended March 31, 1999 to $6.0 million in the three months ended March 31, 2000 due primarily to the elimination of extended terms with Northwest's alumina supplier, offset by increased borrowings under our revolving credit facility. Income tax benefit decreased from $1.9 million in the three months ended March 31, 1999 to an income tax expense of $1.4 million in the three months ended March 31, 2000 due primarily to the decrease in net loss before income taxes in the corresponding periods in 1999 and 2000. As a result of the foregoing factors, we reported a net loss of $2.3 million in the three months ended March 31, 2000 versus a net loss of $6.1 million in the three months ended March 31, 1999. LIQUIDITY AND CAPITAL RESOURCES Historically, our cash and capital requirements have been satisfied through cash generated from operating activities and borrowings under our primary credit facilities. Our credit facility with Fleet Capital (previously BankBoston) is a $75.0 million senior secured revolving credit facility collateralized by all of the inventory, accounts receivable and other rights to payment of our subsidiaries. Availability under the revolving line of credit is controlled by a borrowing base formula based on eligible receivables and inventory, and there must always be at least $15 million available for borrowing at any given time. Based on this formula, the net availability under the revolving line of credit was approximately $62.6 million at March 31, 2000. We had $35.0 million outstanding under this credit facility at March 31, 2000. 13 16 Our liquidity and capital needs relate primarily to payment of principal and interest on borrowings, capital expenditures, including our facilities investment program, and distributions to our sole shareholder to pay income taxes. Subject to reasonable market aluminum prices, we will require approximately $9.9 million in 2000 for our facilities investment program. The first stage of the facilities investment program consisting of an expansion of the Goldendale casthouse and a 34-cell demonstration of new cell line technology should be substantially completed by the end of 2000. Our liquidity and capital needs also relate to working capital and other general corporate requirements, including the incremental working capital needs in connection with the termination of the Glencore tolling agreement in December 1999. Additionally, the Goldendale preferred stock became redeemable at our discretion after December 31, 1998. We anticipate that the funds necessary to redeem the Goldendale preferred stock would be drawn from our revolving credit facility with Fleet Capital. Furthermore, we are subject to a number of contingencies and uncertainties. Our statement of cash flows for the periods indicated are summarized below:
THREE MONTHS ENDED MARCH 31, ----------------------------- 1999 2000 -------- -------- Net cash used in operating activities ....... $(17,365) $ (1,882) Net cash used in investing activities ....... (7,219) (6,260) Net cash provided by (used in) financing activities ................................ (371) 9,556 Increase (decrease) in cash ................. (24,955) 1,414
Net cash used in operating activities was $17.4 million and $1.9 million for the three months ended March 31, 1999 and March 31, 2000, respectively. The net cash used in operating activities during the three months ended March 31, 2000 of $1.9 million was primarily attributable to cash provided by our net loss, as adjusted for non-cash charges, of $3.8 million, and $12.6 million attributable to decreases in accounts receivable and intercompany receivable and increases in accrued expenses and income taxes refundable, offset by cash used in operating activities of $18.3 million, attributable to increases in inventories and other assets and a decrease in accounts payable. The increases in inventories and accounts payable were primarily due to Northwest's transition from tolling to non-tolling operations. Of the net cash used in operating activities during the three months ended March 31, 1999, $1.5 million was attributable to our net loss, as adjusted for non-cash charges. Also attributing was a decrease in accounts receivable and other assets of $7.3 million and an increase in accrued expenses of $1.2 million, offset by an increase in inventories of $5.8 million and a decrease in intercompany payable and income taxes payable of $18.6 million. Net cash used in investing activities was $6.3 million in the three months ended March 31, 2000, compared to net cash used in investing activities of $7.2 million in the three months ended March 31, 1999. Cash used in investing activities in the three months ended March 31, 2000 was primarily attributable to capital expenditures of $6.7 million. Cash used in investing activities in the three months ended March 31, 1999 was primarily attributable to capital expenditures of $7.4 million. 14 17 Net cash provided by financing activities was $9.6 million in the three months ended March 31, 2000, compared to net cash used in financing activities of $0.4 million in the three months ended March 31, 1999. Net cash provided by financing activities in the three months ended March 31, 2000 was primarily attributable to net borrowings of $9.8 million under our credit facility. We believe cash flow from operations, available borrowings under our revolving credit facility and under our note purchase agreement with Hydro and cash on hand will provide adequate funds for our foreseeable working capital needs, planned capital expenditures and debt service and other obligations through 2001. Our ability to fund operations, make planned capital expenditures, such as our facilities investment program, make principal and interest payments on the notes, and remain in compliance with all of the financial covenants under our debt agreements will be dependent on our future operating performance. Our future operating performance is dependent on a number of factors, including aluminum prices, many of which are beyond our control. These factors include prevailing economic conditions and financial, competitive, regulatory and other factors affecting our business and operations, and may be dependent on the availability of borrowings under our revolving credit facility or other borrowings. We do not assure you our cash flow from operations, together with other sources of liquidity, will be adequate: - - to make required payments of principal and interest on the notes and our other debt; - - to finance anticipated capital expenditures; - - to fund working capital requirements; or - - to fund the possible redemption of all outstanding shares of the Goldendale preferred stock. If we do not have sufficient available resources to repay any of our indebtedness when it becomes due and payable, we may need to refinance the indebtedness. We do not assure you refinancing will be available or available on reasonable terms. SEASONALITY AND INFLATION Our results of operations can be affected by seasonal factors, such as substantial increases in the cost of electricity in the fall and winter. We do not believe inflation has had a material effect on the combined financial statements for the periods presented. EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"), Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 requires companies to recognize all derivative contracts as either assets or liabilities in the balance sheet and to measure them at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is 15 18 recognized as income in the period of change. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. We are currently analyzing the financial impact, if any, that the adoption of SFAS No. 133 will have on our consolidated financial statements. FORWARD-LOOKING STATEMENTS This report contains statements which constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this report (see, for example, "Overview," "Results of Operations," and "Liquidity and Capital Resources"). Such statements can be identified by the use of forward looking terminology such as "believes," "expects," "may," "estimates," "will," "should," "plans," or "anticipates" or comparable terminology, or by discussions of strategy. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors. These factors include the following: - - fluctuations in the price of primary aluminum; - - servicing our substantial indebtedness; - - the incurrence of future indebtedness; - - restrictions on our ability to operate our business imposed by the terms of our indebtedness; - - the effects of federal and state environmental laws and regulations; - - the continued viability of the technology used in our smelters; - - fluctuations in the cost of electricity; - - our ability to operate effectively without tolling agreements, including the Glencore tolling agreement; - - retaining and recruiting key personnel; and - - changes in labor relations with the unions representing our employees. Other factors include the effectiveness of management's strategies and decisions, general economic and business conditions, developments in technology, new or modified statutory or regulatory requirements, and changing prices and market conditions. No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements. 16 19 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We manage interest rate risk through the strategic use of fixed and variable interest rate debt and, to a limited extent, interest rate derivatives. At March 31, 2000, our derivative instrument consisted of an interest rate swap agreement which expires in 2003 and effectively fixes our interest rate at 6.4% on a notional principal amount of $20.0 million on our floating rate long-term debt. The agreement requires quarterly cash settlements for interest rate fluctuation outside of the fixed rate. 17 20 PART II OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 3.1 Articles of Incorporation of Registrant. Incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-4, as amended (Registration No. 333-72245). 3.2 Bylaws of Registrant. Incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-4, as amended (Registration No. 333-72245). 27.1 Financial Data Schedule. (b) Reports on form 8-K. No reports on Form 8-K were filed during the period. 18 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GOLDEN NORTHWEST ALUMINUM, INC. NORTHWEST ALUMINUM COMPANY NORTHWEST ALUMINUM SPECIALTIES, INC. Date: May 11, 2000 By: /s/ WILLIAM R. REID -------------------------------------- William R. Reid Chief Accounting Officer GOLDENDALE HOLDING COMPANY GOLDENDALE ALUMINUM COMPANY NORTHWEST ALUMINUM TECHNOLOGIES, LLC Date: May 11, 2000 By: /s/ JESSIE CASSWELL -------------------------------------- Jessie Casswell Chief Accounting Officer 19 22 EXHIBIT INDEX 3.1 Articles of Incorporation of Registrant. Incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-4, as amended (Registration No. 333-72245). 3.2 Bylaws of Registrant. Incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-4, as amended (Registration No. 333-72245). 27.1 Financial Data Schedule.
EX-27.1 2 EXHIBIT 27.1 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE GOLDEN NORTHWEST ALUMINUM, INC. FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 3,343 0 51,316 100 77,597 146,692 135,016 0 377,193 98,603 170,000 0 29,663 0 65,504 377,193 126,010 126,010 117,405 117,405 3,835 0 6,033 (947) 1,352 (2,299) 0 0 0 (2,299) (2,299) (2,299)
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