(Mark One) | |
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2013 | |
OR | |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to |
Delaware (State or other jurisdiction of incorporation or organization) | 27-2301797 (I.R.S. Employer Identification No.) |
5619 Denver Tech Center Parkway, Suite 1000 Greenwood Village, Colorado (Address of principal executive offices) | 80111 (Zip Code) |
Large accelerated filer x | Accelerated filer ¨ | Non-accelerated filer ¨ (Do not check if a smaller reporting company) | Smaller reporting company ¨ |
- | Part I – Item 1. Financial Statements |
- | Part I – Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
- | Part I – Item 4. Controls and Procedures |
- | Part II – Item 6. Exhibits |
PAGE | |
March 31, 2013 | December 31, 2012 | ||||||
As restated, Note 1A | (Revised) | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 404,834 | $ | 227,790 | |||
Trade accounts receivable, net (Note 2) | 63,147 | 52,430 | |||||
Inventory (Note 5) | 247,453 | 287,376 | |||||
Deferred charges (Note 15) | 6,110 | 9,412 | |||||
Deferred tax assets (Note 15) | 9,438 | 9,789 | |||||
Income tax receivable | 20,318 | 25,087 | |||||
Prepaid expenses and other current assets | 19,911 | 21,794 | |||||
Total current assets | 771,211 | 633,678 | |||||
Non-current assets: | |||||||
Deposits (Note 6) | 26,639 | 26,769 | |||||
Property, plant and equipment, net (Note 7) | 1,645,374 | 1,544,304 | |||||
Inventory (Note 5) | 24,984 | 26,096 | |||||
Intangible assets, net (Note 9) | 441,677 | 450,938 | |||||
Investments | 64,407 | 64,036 | |||||
Deferred tax assets (Note 15) | — | — | |||||
Goodwill (Note 9) | 239,742 | 239,742 | |||||
Other non-current assets | 9,264 | 6,972 | |||||
Total non-current assets | 2,452,087 | 2,358,857 | |||||
Total assets | $ | 3,223,298 | $ | 2,992,535 | |||
March 31, 2013 | December 31, 2012 | ||||||
As restated, Note 1A | (Revised) | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Trade accounts payable | $ | 136,862 | $ | 241,994 | |||
Accrued expenses (Note 12) | 65,457 | 59,013 | |||||
Income tax payable | 15,591 | 15,267 | |||||
Debt and capital lease obligations (Note 14) | 28,788 | 39,604 | |||||
Other current liabilities | 4,589 | 3,539 | |||||
Total current liabilities | 251,287 | 359,417 | |||||
Non-current liabilities: | |||||||
Asset retirement obligation (Note 13) | 17,572 | 18,586 | |||||
Deferred tax liabilities (Note 15) | 136,055 | 160,675 | |||||
Debt and capital lease obligations (Note 14) | 1,338,793 | 1,188,832 | |||||
Derivative liability (Note 23) | 7,028 | 7,816 | |||||
Pension liabilities (Note 24) | 3,338 | 3,292 | |||||
Other non-current liabilities | 2,417 | 2,659 | |||||
Total non-current liabilities | 1,505,203 | 1,381,860 | |||||
Total liabilities | $ | 1,756,490 | $ | 1,741,277 | |||
Commitments and contingencies (Note 19) | |||||||
Stockholders’ equity: | |||||||
Common stock, $0.001 par value; 350,000,000 shares authorized at March 31, 2013 (Note 16) | 189 | 139 | |||||
Preferred stock, $0.001 par value; 5,000,000 shares authorized at March 31, 2013 (Note 16) | 2 | 2 | |||||
Additional paid-in capital | 1,949,662 | 1,691,429 | |||||
Accumulated other comprehensive loss | (12,727 | ) | (9,433 | ) | |||
Deficit | (505,062 | ) | (466,091 | ) | |||
Total Molycorp stockholders’ equity | 1,432,064 | 1,216,046 | |||||
Noncontrolling interests | 34,744 | 35,212 | |||||
Total stockholders’ equity | 1,466,808 | 1,251,258 | |||||
Total liabilities and stockholders’ equity | $ | 3,223,298 | $ | 2,992,535 |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
As restated, Note 1A | |||||||
Revenues | $ | 146,367 | $ | 84,470 | |||
Costs of sales: | |||||||
Costs excluding depreciation and amortization | (136,594 | ) | (50,070 | ) | |||
Depreciation and amortization | (14,309 | ) | (3,373 | ) | |||
Gross (loss) profit | (4,536 | ) | 31,027 | ||||
Operating expenses: | |||||||
Selling, general and administrative | (26,514 | ) | (24,183 | ) | |||
Corporate development | (115 | ) | (3,381 | ) | |||
Depreciation, amortization and accretion | (8,223 | ) | (358 | ) | |||
Research and development | (6,405 | ) | (3,650 | ) | |||
Operating loss | (45,793 | ) | (545 | ) | |||
Other (expense) income: | |||||||
Other income (expense) | 260 | (6,578 | ) | ||||
Foreign exchange (loss) gain, net | (389 | ) | 1,604 | ||||
Interest (expense) income, net of capitalized interest | (11,649 | ) | 85 | ||||
(11,778 | ) | (4,889 | ) | ||||
Loss before income taxes and equity earnings | (57,571 | ) | (5,434 | ) | |||
Income tax benefit | 22,490 | 2,183 | |||||
Equity in results of affiliates | (3,072 | ) | (227 | ) | |||
Net loss | (38,153 | ) | (3,478 | ) | |||
Net income attributable to noncontrolling interest | (818 | ) | — | ||||
Net loss attributable to Molycorp stockholders | $ | (38,971 | ) | $ | (3,478 | ) | |
Net loss | $ | (38,153 | ) | $ | (3,478 | ) | |
Other comprehensive income: | |||||||
Foreign currency translation adjustments | (3,294 | ) | 2,530 | ||||
Comprehensive loss | $ | (41,447 | ) | $ | (948 | ) | |
Comprehensive loss attributable to: | |||||||
Molycorp stockholders | (40,629 | ) | (948 | ) | |||
Noncontrolling interest | (818 | ) | — | ||||
$ | (41,447 | ) | $ | (948 | ) | ||
Loss per share of common stock (Note 17): | |||||||
Basic | $ | (0.27 | ) | $ | (0.07 | ) | |
Diluted | $ | (0.27 | ) | $ | (0.07 | ) |
Common Stock | Series A Mandatory Convertible Preferred Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Total Molycorp Stockholders' Equity | Non controlling interests | Total Stockholders' Equity | ||||||||||||||||||||||||||||||
Shares | $ | Shares | $ | ||||||||||||||||||||||||||||||||||
Balance at December 31, 2012 (Revised) | 138,773,538 | $ | 139 | 2,070,000 | $ | 2 | $ | 1,691,429 | $ | (9,433 | ) | $ | (466,091 | ) | $ | 1,216,046 | $ | 35,212 | $ | 1,251,258 | |||||||||||||||||
Stock-based compensation (Note 18) | (7,749 | ) | — | — | — | (325 | ) | — | — | (325 | ) | — | (325 | ) | |||||||||||||||||||||||
Component of convertible debt (Note 14) | — | — | — | — | 21,815 | — | — | 21,815 | — | 21,815 | |||||||||||||||||||||||||||
Deferred taxes on component of convertible debt | — | — | — | — | (8,508 | ) | — | — | (8,508 | ) | — | (8,508 | ) | ||||||||||||||||||||||||
Conversion of Exchangeable Shares (Note 16) | 10,476 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Issuance of shares for conversion of Debentures | 1,253 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Issuance of Primary Shares (Note 16) | 43,125,000 | 43 | — | — | 248,097 | — | — | 248,140 | — | 248,140 | |||||||||||||||||||||||||||
Issuance of Borrowed Shares (Note 16) | 6,666,666 | 7 | — | — | — | — | — | 7 | — | 7 | |||||||||||||||||||||||||||
Net (loss) income | — | — | — | — | — | — | (38,971 | ) | (38,971 | ) | 818 | (38,153 | ) | ||||||||||||||||||||||||
Preferred dividends | — | — | — | — | (2,846 | ) | — | — | (2,846 | ) | — | (2,846 | ) | ||||||||||||||||||||||||
Distribution to noncontrolling interests | — | — | — | — | — | — | — | — | (1,286 | ) | (1,286 | ) | |||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (3,294 | ) | — | (3,294 | ) | — | (3,294 | ) | ||||||||||||||||||||||||
Balance at March 31, 2013 - As restated, Note 1A | 188,569,184 | $ | 189 | 2,070,000 | $ | 2 | $ | 1,949,662 | $ | (12,727 | ) | $ | (505,062 | ) | $ | 1,432,064 | $ | 34,744 | $ | 1,466,808 |
Three Months Ended March 31, | |||||||
2013 | 2012 | ||||||
As restated, Note 1A | |||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (38,153 | ) | $ | (3,478 | ) | |
Adjustments to reconcile net loss to net cash from operating activities: | |||||||
Depreciation, amortization and accretion | 22,532 | 3,731 | |||||
Deferred income tax benefit | (29,475 | ) | (3,725 | ) | |||
Inventory write-downs | 22,125 | 6,563 | |||||
Release of inventory step-up value | 2,497 | — | |||||
Stock-based compensation (benefit) expense | (325 | ) | 825 | ||||
Unrealized loss on derivatives | — | 6,641 | |||||
Allowance for doubtful accounts | — | 2,500 | |||||
Foreign exchange loss | 2,197 | (1,668 | ) | ||||
Other operating adjustments | (2,149 | ) | 259 | ||||
Net change in operating assets and liabilities (Note 22) | (15,877 | ) | 4,379 | ||||
Net cash (used in) provided by operating activities | (36,628 | ) | 16,027 | ||||
Cash flows from investing activities: | |||||||
Investment in joint ventures | (3,423 | ) | (3,836 | ) | |||
Deposits | — | (459 | ) | ||||
Capital expenditures | (181,103 | ) | (206,463 | ) | |||
Other investing activities | (90 | ) | 2 | ||||
Net cash used in investing activities | (184,616 | ) | (210,756 | ) | |||
Cash flows from financing activities: | |||||||
Capital contributions | — | 390,225 | |||||
Repayments of short-term borrowings—related party | — | (870 | ) | ||||
Repayments of debt | (11,108 | ) | (777 | ) | |||
Net proceeds from sale of common stock | 248,147 | — | |||||
Issuance of 5.50% Convertible Notes | 165,600 | — | |||||
Payments of preferred dividends | (2,846 | ) | (2,846 | ) | |||
Dividend paid to noncontrolling interests | (1,286 | ) | — | ||||
Other financing activities | (79 | ) | (132 | ) | |||
Net cash provided by financing activities | 398,428 | 385,600 | |||||
Effect of exchange rate changes on cash | (140 | ) | 68 | ||||
Net change in cash and cash equivalents | 177,044 | 190,939 | |||||
Cash and cash equivalents at beginning of the period | 227,790 | 418,855 | |||||
Cash and cash equivalents at end of period | $ | 404,834 | $ | 609,794 |
Non-cash financing activities and investing activities: | |||||||
Change in accrued capital expenditures | $ | (82,646 | ) | $ | 55,226 |
(1) | Basis of Presentation |
At March 31, 2013 | |||||||
As originally reported | As restated | ||||||
(In thousands) | |||||||
Inventory | $ | 231,502 | $ | 247,453 | |||
Total current assets | 755,260 | 771,211 | |||||
Total assets | 3,209,239 | 3,223,298 | |||||
Accrued expenses | 63,381 | 65,457 | |||||
Total current liabilities | 249,211 | 251,287 | |||||
Deferred tax liabilities | 135,691 | 136,055 | |||||
Total non-current liabilities | 1,504,839 | 1,505,203 | |||||
Total liabilities | 1,754,050 | 1,756,490 | |||||
Total stockholders' equity | 1,455,189 | 1,466,808 | |||||
Total liabilities and stockholders' equity | 3,209,239 | 3,223,298 |
Three months ended March 31, 2013 | |||||||
As originally reported | As restated | ||||||
(In thousands, except per share amounts) | |||||||
Costs of sales excluding depreciation and amortization | $ | (152,544 | ) | $ | (136,594 | ) | |
Gross loss | (20,486 | ) | (4,536 | ) | |||
Selling, general and administrative expenses | (24,438 | ) | (26,514 | ) | |||
Operating loss | (59,667 | ) | (45,793 | ) | |||
Loss before income taxes and equity earnings | (71,445 | ) | (57,571 | ) | |||
Income tax benefit | 28,112 | 22,490 | |||||
Net loss | (46,405 | ) | (38,153 | ) | |||
Net loss attributable to Molycorp stockholders | (47,223 | ) | (38,971 | ) | |||
Comprehensive loss | (49,699 | ) | (41,447 | ) | |||
Comprehensive loss attributable to Molycorp stockholders | (48,881 | ) | (40,629 | ) | |||
Loss per share of common stock: | |||||||
Basic | (0.33 | ) | (0.27 | ) | |||
Diluted | (0.33 | ) | (0.27 | ) |
(2) | Liquidity and Capital Requirements |
(3) | Segment Information |
Three months ended March 31, 2013 - As restated, Note 1A | Resources | Chemicals and Oxides | Magnetic Materials and Alloys | Rare Metals | Corporate and other(b) (d) | Eliminations(a) | Total Molycorp, Inc. | |||||||||||||||||||||
Revenues: | (In thousands) | |||||||||||||||||||||||||||
External | $ | 14,658 | $ | 49,600 | $ | 54,678 | $ | 27,431 | $ | — | $ | 146,367 | ||||||||||||||||
Intersegment | 2,645 | 14,610 | — | — | (17,255 | ) | — | |||||||||||||||||||||
Total revenues | $ | 17,303 | $ | 64,210 | $ | 54,678 | $ | 27,431 | $ | (17,255 | ) | $ | 146,367 | |||||||||||||||
Depreciation, amortization and accretion | $ | (9,053 | ) | $ | (5,537 | ) | $ | (5,480 | ) | $ | (2,403 | ) | $ | (59 | ) | $ | — | $ | (22,532 | ) | ||||||||
Operating (loss) income | $ | (40,126 | ) | $ | (3,306 | ) | $ | 6,763 | $ | 2,978 | $ | (11,564 | ) | $ | (538 | ) | $ | (45,793 | ) | |||||||||
(Loss) income before income taxes and equity earnings | $ | (39,694 | ) | $ | (2,891 | ) | $ | 16,900 | $ | 3,731 | $ | (35,079 | ) | $ | (538 | ) | $ | (57,571 | ) | |||||||||
Total assets at March 31, 2013 | $ | 1,884,262 | $ | 599,389 | $ | 610,890 | $ | 111,276 | $ | 1,042,315 | $ | (1,024,834 | ) | $ | 3,223,298 | |||||||||||||
Capital expenditures (c) | $ | 92,339 | $ | 2,961 | $ | 1,041 | $ | 2,931 | $ | 74 | $ | — | $ | 99,346 |
Three months ended March 31, 2012 | Resources | Chemicals and Oxides | Magnetic Materials and Alloys | Rare Metals | Corporate and other(b) | Eliminations(a) | Total Molycorp, Inc. | |||||||||||||||||||||
Revenues: | (In thousands) | |||||||||||||||||||||||||||
External | $ | 44,478 | $ | 7,320 | $ | 18,956 | $ | 13,716 | $ | — | $ | 84,470 | ||||||||||||||||
Intersegment | 1,832 | 3,210 | — | — | (5,042 | ) | — | |||||||||||||||||||||
Total revenues | $ | 46,310 | $ | 10,530 | $ | 18,956 | $ | 13,716 | $ | (5,042 | ) | $ | 84,470 | |||||||||||||||
Depreciation, amortization and accretion | $ | (2,114 | ) | $ | (315 | ) | $ | (76 | ) | $ | (1,202 | ) | $ | (24 | ) | $ | — | $ | (3,731 | ) | ||||||||
Operating income (loss) | $ | 17,531 | $ | (13,537 | ) | $ | 145 | $ | 1,392 | $ | (19,843 | ) | $ | 13,767 | $ | (545 | ) | |||||||||||
Income (loss) before income taxes | $ | 17,599 | $ | (12,894 | ) | $ | (137 | ) | $ | 2,230 | $ | (25,999 | ) | $ | 13,767 | $ | (5,434 | ) | ||||||||||
Capital expenditures (c) | $ | 259,438 | $ | 2,501 | $ | 100 | $ | — | $ | — | $ | — | $ | 262,039 |
(a) | The net elimination in operating results includes costs of sales eliminations of $16,717 and $18,809 for the three months ended March 31, 2013 and 2012, respectively, which consist of intercompany gross profits as well as eliminations of lower of cost or market adjustments related to intercompany inventory. The total assets elimination is comprised primarily of intercompany investments and intercompany accounts receivable and profits in inventory. |
(b) | Corporate loss before income taxes and equity earnings includes business development costs, personnel and related costs, including stock-based compensation expense, accounting and legal fees, occupancy expense, information technology costs and interest expense. Total corporate assets is comprised primarily of cash and cash equivalents and deferred tax assets. |
(c) | On an accrual basis excluding capitalized interest. |
(d) | First quarter 2013 loss at the Corporate segment includes severance charges of $2,077. See Note 24 for details. |
(4) | Trade Accounts Receivable |
(5) | Inventory |
March 31, 2013 | December 31, 2012 | ||||||
As restated, Note 1A | |||||||
Current: | |||||||
Concentrate stockpiles | $ | 4,743 | $ | 6,393 | |||
Raw materials | 75,540 | 95,248 | |||||
Work in process | 53,134 | 55,229 | |||||
Finished goods | 95,135 | 114,903 | |||||
Materials and supplies | 18,901 | 15,603 | |||||
Total current | $ | 247,453 | $ | 287,376 | |||
Long-term: | |||||||
Concentrate stockpiles | $ | 4 | $ | 4 | |||
Raw materials | 24,980 | 26,092 | |||||
Total long-term | $ | 24,984 | $ | 26,096 |
(6) | Deposits |
March 31, 2013 | December 31, 2012 | ||||||
Land | $ | 12,218 | $ | 12,475 | |||
Land improvements | 66,547 | 63,269 | |||||
Buildings and improvements | 336,867 | 237,379 | |||||
Plant and equipment | 261,183 | 194,934 | |||||
Vehicles | 2,907 | 2,842 | |||||
Computer software | 9,540 | 9,528 | |||||
Furniture and fixtures | 1,119 | 1,116 | |||||
Construction in progress (a) | 956,441 | 1,011,541 | |||||
Capital Lease | 15,658 | 15,658 | |||||
Mineral properties | 24,255 | 24,327 | |||||
Exploration rights | 16,166 | 16,166 | |||||
Property, plant and equipment at cost | 1,702,901 | 1,589,235 | |||||
Less accumulated depreciation | (57,527 | ) | (44,931 | ) | |||
Property, plant and equipment, net | $ | 1,645,374 | $ | 1,544,304 |
(a) | Represents costs incurred at the Molycorp Mountain Pass facility and all other capital projects. See Note 2. |
(8) | Mineral Properties, Development Costs and Exploration Rights |
(9) | Goodwill and Other Intangible Assets |
December 31, 2012 | Additional impairment | March 31, 2013 | ||||||||||
Reported | Adjustment | |||||||||||
(In thousands) | ||||||||||||
Chemicals and Oxides | $ | 125,229 | $ | 16,132 | $ | (16,132 | ) | $ | 125,229 | |||
Magnetic Materials and Alloys | 102,808 | 16,716 | (16,716 | ) | 102,808 | |||||||
Rare Metals | 11,705 | (1,232 | ) | 1,232 | 11,705 | |||||||
Total | $ | 239,742 | $ | 31,616 | $ | (31,616 | ) | $ | 239,742 |
Customer relationships | Rare earth quotas | Patents | Trade names | Land use rights | Other | Total | |||||||||||||||
Gross carrying amount | |||||||||||||||||||||
At December 31, 2012 | $ | 344,774 | 78,300 | 33,252 | $ | 15,586 | 3,568 | 4,420 | $ | 479,900 | |||||||||||
Foreign currency translation adjustment | (90 | ) | — | — | — | — | — | (90 | ) | ||||||||||||
At March 31, 2013 | $ | 344,684 | $ | 78,300 | $ | 33,252 | $ | 15,586 | $ | 3,568 | $ | 4,420 | $ | 479,810 | |||||||
Amortization | |||||||||||||||||||||
At December 31, 2012 | $ | 14,095 | 4,035 | 9,365 | $ | 1,152 | 66 | 249 | $ | 28,962 | |||||||||||
Adjustments | — | — | — | (873 | ) | — | — | (873 | ) | ||||||||||||
Amortization | 4,888 | 1,679 | 3,285 | 16 | 22 | 154 | 10,044 | ||||||||||||||
At March 31, 2013 | 18,983 | 5,714 | 12,650 | 295 | 88 | 403 | 38,133 | ||||||||||||||
Net book value | $ | 325,701 | $ | 72,586 | $ | 20,602 | $ | 15,291 | $ | 3,480 | $ | 4,017 | $ | 441,677 |
(10) | Investments |
• | 25% ownership interest in Ganzhou Keli Rare Earth New Material Co., Ltd. (“Keli”), a company that converts REO into metals for use in Neo Powders™. The purchase allocation attributable to this investment at the time of the Molycorp Canada acquisition was $12.2 million. Molycorp accounts for this ownership interest under the equity method because it has the ability to exercise significant influence over the operating and financial policies of Keli, as evidenced by Molycorp’s ownership share and its proportional voting rights. The condensed consolidated statements of operations and comprehensive income include a loss of $1.0 million for the three months ended March 31, 2013 associated with this equity method ownership interest. |
• | 33% ownership interest in Toda Magnequench Magnetic Materials Co. Ltd. (“TMT”), a company that produces rare earth magnetic compounds with Neo Powders™ supplied by Magnequench (Tianjin) Company Limited in its normal course of business. The purchase allocation attributable to this investment at the time of the Molycorp Canada acquisition was $1.6 million. Molycorp accounts for this ownership interest under the equity method because it has the ability to exercise significant influence over the operating and financial policies of TMT, as evidenced by Molycorp’s ownership share and its proportional voting rights. |
• | 50% ownership interest in Ingal Stade GmbH (“Ingal Stade”), a joint venture facility in Stade, Germany, which extracts gallium metal from alumina smelter bayer liquor with purity level of 5N (99.999%) or higher. The purchase allocation attributable to this investment at the time of the Molycorp Canada acquisition was $4.9 million. Molycorp accounts for this ownership interest under the equity method because it has the ability to exercise significant influence over the operating and financial policies of Ingal Stade, as evidenced by Molycorp’s ownership share and its proportional voting rights. |
• | 19.5% ownership interest in Atlantic Metals & Alloys, LLC, a company which provides refining services for residues and scrap of the rare and platinum group metals. The purchase allocation attributable to this investment at the time of the Molycorp Canada acquisition was $1.4 million. Molycorp accounts for this ownership interest under the cost method. At March 31, 2013, the fair value of this investment was not estimated as there were no identified events or changes in circumstances that may have had a significant adverse effect on the fair value of the investment. |
• | 7% ownership interest in Vive Crop Protection, a company that specializes in the formulation of active ingredients used in crop protection. The purchase allocation attributable to this investment at the time of the Molycorp Canada acquisition was $0.9 million. Molycorp accounts for this ownership interest under the cost method. At March 31, 2013, the fair value of this investment was not estimated as there were no identified events or changes in circumstances that may have had a significant adverse effect on the fair value of the investment. |
(11) | Acquisitions |
Preliminary Allocation of Consideration Transferred as of December 31, 2012 | Measurement Period Adjustments | Final Allocation of Consideration Transferred | |||||||
Purchase consideration: | (In thousands) | ||||||||
Cash consideration | $ | 908,181 | $ | 908,181 | |||||
Fair value of Molycorp common stock and Exchangeable Shares issued | 284,144 | 284,144 | |||||||
Total purchase consideration | $ | 1,192,325 | $ | 1,192,325 | |||||
Estimated fair values of the assets and liabilities acquired: | |||||||||
Cash and cash equivalents | $ | 317,169 | $ | — | $ | 317,169 | |||
Restricted cash | 4,951 | — | 4,951 | ||||||
Accounts receivable | 101,470 | — | 101,470 | ||||||
Inventory | 250,989 | — | 250,989 | ||||||
Prepaid expenses and other current assets | 26,893 | — | 26,893 | ||||||
Property, plant and equipment | 75,745 | — | 75,745 | ||||||
Investments | 21,019 | (1,091 | ) | 19,928 | |||||
Intangibles | 482,234 | — | 482,234 | ||||||
Deferred tax charges | 13,435 | — | 13,435 | ||||||
Deferred tax assets | 11,473 | (1,423 | ) | 10,050 | |||||
Goodwill | 494,809 | 31,616 | 526,425 | ||||||
Other non-current assets | 4,367 | — | 4,367 | ||||||
Accounts payable and accrued expenses | (138,576 | ) | — | (138,576 | ) | ||||
Debt | (255,338 | ) | — | (255,338 | ) | ||||
Other current liabilities | (33,990 | ) | — | (33,990 | ) | ||||
Deferred tax liabilities | (154,309 | ) | 5,880 | (148,429 | ) | ||||
Other non-current liabilities | (14,255 | ) | — | (14,255 | ) | ||||
Non-controlling interests | (15,761 | ) | (34,982 | ) | (50,743 | ) | |||
Total purchase consideration | $ | 1,192,325 | $ | — | $ | 1,192,325 |
(In thousands, except per share amounts) | Revenues | Net Income (Loss) | Net Income (Loss) Attributable To Molycorp | EPS Basic | |||||||||||
Unaudited pro forma January 1, 2012 to March 31, 2012 (combined entity) | $ | 263,322 | $ | 68,298 | $ | 66,506 | $ | 0.73 |
(12) | Accrued Expenses |
March 31, 2013 | December 31, 2012 | ||||||
As restated, Note 1A | |||||||
Defined contribution plan | $ | 1,955 | $ | 1,400 | |||
Professional fees | 4,727 | 4,971 | |||||
Accrued payroll and related benefits | 6,399 | 7,532 | |||||
Sales and use tax | 1,827 | 7,187 | |||||
Bonus accrual | 4,049 | 3,503 | |||||
Interest payable | 28,065 | 15,253 | |||||
Advance from customer | 797 | 1,753 | |||||
Withholding taxes | 3,315 | 2,929 | |||||
Amount payable to noncontrolling shareholder | 9,737 | 9,640 | |||||
Other accrued expenses | 4,586 | 4,845 | |||||
Total accrued expenses | $ | 65,457 | $ | 59,013 |
(13) | Asset Retirement Obligation |
Three Months Ended March 31, 2013 | Year Ended December 31, 2012 | ||||||
Balance at beginning of period | $ | 22,125 | $ | 15,541 | |||
Obligations settled | (308 | ) | (2,954 | ) | |||
Accretion expense | 344 | 1,299 | |||||
Revisions in estimated cash flows | — | 7,872 | |||||
Loss on settlement | — | 367 | |||||
Balance at end of period | $ | 22,161 | $ | 22,125 |
(14) | Debt and Capital Lease Obligations |
March 31, 2013 | December 31, 2012 | ||||||||||||||
Current | Non-Current | Current | Non-Current | ||||||||||||
Bank loans due April 2013 - September 2017 | $ | 28,410 | $ | 3,714 | $ | 39,252 | $ | 4,118 | |||||||
3.25% Convertible Notes, net of discount, due June 2016 | — | 200,734 | — | 198,689 | |||||||||||
6.00% Convertible Notes, net of discount, due June 2017 | — | 335,532 | — | 331,977 | |||||||||||
5.00% Debentures, net of discount, due December 2017 | — | 2,774 | — | 2,774 | |||||||||||
5.50% Convertible Notes, net of discount, due February 2018 | — | 144,549 | — | — | |||||||||||
10% Senior Secured Notes, net of discount, due June 2020 | — | 636,431 | — | 636,111 | |||||||||||
Total debt | 28,410 | 1,323,734 | 39,252 | 1,173,669 | |||||||||||
Capital lease obligations | 378 | 15,059 | 352 | 15,163 | |||||||||||
Total debt and capital lease obligations | $ | 28,788 | $ | 1,338,793 | $ | 39,604 | $ | 1,188,832 |
3.25% Convertible Notes | 6.00% Convertible Notes | 5.50% Convertible Notes | |||||||||||||||||||
At March 31, 2013 | At December 31, 2012 | At March 31, 2013 | At December 31, 2012 | At March 31, 2013 | At December 31, 2012 | ||||||||||||||||
Liability component (a) | $ | 198,412 | $ | 196,702 | $ | 332,942 | $ | 330,177 | $ | 144,357 | n/a | ||||||||||
Equity component | $ | 36,251 | $ | 36,251 | $ | 68,695 | $ | 68,695 | $ | 21,815 | n/a | ||||||||||
Three Months Ended March 31, 2013 | Three Months Ended March 31, 2012 | Three Months Ended March 31, 2013 | Three Months Ended March 31, 2012 | Three Months Ended March 31, 2013 | Three Months Ended March 31, 2012 | ||||||||||||||||
Accretion of liability component | $ | 1,710 | $ | 1,594 | $ | 2,765 | n/a | $ | 573 | n/a | |||||||||||
Interest cost (b) | $ | 3,920 | $ | 3,791 | $ | 9,813 | n/a | $ | 2,297 | n/a | |||||||||||
Capitalized interest | $ | 2,581 | $ | 3,791 | $ | 6,461 | n/a | $ | 1,509 | n/a | |||||||||||
(a) The liability component is the difference between the net proceeds and the equity component of a convertible note that can be settled in a combination of cash and shares of stock at the election of the issuer. The equity component represents the conversion feature of a convertible note and is treated as original issue discount in addition to the underwriting discount. The liability component includes the periodic amortization of the additional discount. | |||||||||||||||||||||
(b) Interest cost includes the coupon interest, the accretion of the liability component, the accretion of the underwriting discount and the amortization of the issuance costs allocated to the liability component. | |||||||||||||||||||||
• | Leasehold interests in real property; |
• | Certain capital leases that constitute permitted liens; |
• | Certain motor vehicles; |
• | Assets owned by foreign subsidiaries or, subject to certain limitations, MMA; |
• | Assets with a fair market value of less than $15.0 million as to which the board of directors determine in good faith (and certify to the collateral agent) that the costs of obtaining or perfecting such security interest are excessive in relation to the practical benefit to the holder of the Notes of the security afforded thereby (based on the value of such asset); |
• | Cash collateral for letters of credit or hedging obligations (up to 105% of the underlying obligations); |
• | Certain deposit accounts; |
• | The equity interests of immaterial subsidiaries and, subject to certain limitations, MMA; |
• | Voting stock of foreign subsidiaries in excess of 65.0% of the voting stock; and |
• | Other pledges of stock of a guarantor to the extent that Rule 3-16 of Regulation S-X under the Securities Act would require the filing of separate financial statements of such guarantor. |
(15) | Income Taxes - As restated, Note 1A |
(16) | Stockholders’ Equity |
(17) | Loss per Share |
Three Months Ended March 31, | |||||||
(In thousands, except share and per share amounts) | 2013 | 2012 | |||||
As restated, Note 1A | |||||||
Net loss attributable to Molycorp stockholders | $ | (38,971 | ) | $ | (3,478 | ) | |
Dividends on Convertible Preferred Stock | (2,846 | ) | (2,846 | ) | |||
Loss attributable to common stockholders | (41,817 | ) | (6,324 | ) | |||
Weighted average common shares outstanding—basic | 153,314,081 | 87,006,460 | |||||
Basic loss per share | $ | (0.27 | ) | $ | (0.07 | ) | |
Weighted average common shares outstanding—diluted | 153,314,081 | 87,006,460 | |||||
Diluted loss per share | $ | (0.27 | ) | $ | (0.07 | ) | |
(18) | Stock-Based Compensation |
Three Months Ended March 31, | |||
2013 | 2012 | ||
Compensation benefit (cost), net of forfeitures | $0.3 | $(0.8) |
PBRSUs | Number of Shares | Weighted Average Grant-Date Price | ||||
Unvested at January 1, 2013 | 29,302 | 30.33 | ||||
Granted | — | $ | — | |||
Forfeited | (8,395 | ) | $ | 30.33 | ||
Vested | — | — | ||||
Unvested at March 31, 2013 | 20,907 | $ | 30.33 |
RSUs | Number of Shares | Weighted Average Grant-Date Price | ||||
Unvested at January 1, 2013 | 181,602 | $ | 32.15 | |||
Granted | 6,399 | $ | 5.81 | |||
Forfeited | (46,380 | ) | $ | 36.77 | ||
Vested* | (5,120 | ) | $ | 5.81 | ||
Unvested at March 31, 2013 | 136,501 | $ | 31.39 |
* | Relates to the deferral and conversion of a portion of fees payable to certain non-employee directors of the Company. |
RSAs | Number of Shares | Weighted Average Grant-Date Price | ||||
Unvested at January 1, 2013 | 39,974 | $ | 40.09 | |||
Granted | — | — | ||||
Forfeited | (7,697 | ) | $ | 39.24 | ||
Vested | — | — | ||||
Unvested at March 31, 2013 | 32,277 | $ | 38.02 |
Stock Options | Number of Shares | Weighted Average Exercise Price | ||||
Outstanding at January 1, 2013 | 35,624 | $ | 48.87 | |||
Granted | — | — | ||||
Exercised | — | — | ||||
Forfeited and expired | (8,238 | ) | 48.87 | |||
Outstanding at March 31, 2013 | 27,386 | $ | 48.87 | |||
Options exercisable at March 31, 2013 | 18,257 | $ | 48.87 |
(19) | Commitments and Contingencies |
(a) | Future Operating Lease Commitments |
(In thousands) | Total | Less Than 1 Year | 1 - 3 Years | 4 - 5 Years | More Than 5 Years | ||||||||||||||
Operating lease obligations | $ | 8,174 | $ | 2,751 | $ | 3,878 | $ | 420 | $ | 1,125 |
(b) | Purchase Commitments |
(In thousands) | Total | Less Than 1 Year | 1 - 3 Years | 4 - 5 Years | More Than 5 Years | ||||||||||||||
Purchase obligations and other commitment | $ | 260,593 | $ | 232,805 | $ | 14,076 | $ | 7,329 | $ | 6,383 |
(c) | Labor Contract |
(d) | Reclamation Surety Bonds |
(e) | Purported Class Action, Derivative Lawsuits and Investigation |
(20) | Concentrations |
(a) | Products |
March 31, 2012 | ||
Lanthanum products | 46 | % |
Neodymium and Praseodymium products | 53 | % |
(b) | Customers |
March 31, 2012 | |||
Hitachi Metals Ltd. | $ | 20.4 | |
W.R. Grace & Co.— Conn. | 17.2 |
(21) | Related-Party Transactions |
(22) | Net Change in Operating Assets and Liabilities |
Three Months Ended March 31, | |||||||
(In thousands) | 2013 | 2012 | |||||
As restated, Note 1A | |||||||
Decrease (increase) in operating assets: | |||||||
Accounts receivable | $ | (10,928 | ) | $ | 25,408 | ||
Inventory | 14,367 | (4,442 | ) | ||||
Prepaid expenses and other assets | 1,850 | 382 | |||||
Increase (decrease) in operating liabilities: | |||||||
Accounts payable | (15,835 | ) | (13,924 | ) | |||
Income tax payable | 5,092 | 1,560 | |||||
Interest payable | (3,746 | ) | — | ||||
Asset retirement obligation | (308 | ) | — | ||||
Accrued expenses | (6,369 | ) | (4,605 | ) | |||
$ | (15,877 | ) | $ | 4,379 |
(23) | Derivative Instruments |
(24) | Employee Benefit Plans and Severance Charges - As restated, Note 1A |
Pension Plan | PBP | Total | |||||||||
Components of net periodic benefit cost: | |||||||||||
Service Cost | $ | — | $ | — | $ | — | |||||
Interest cost | 78 | 2 | 80 | ||||||||
Expected return on plan assets | (68 | ) | — | (68 | ) | ||||||
Amortization of transition obligation/(asset) | — | — | — | ||||||||
Amortization of prior service cost | — | (1 | ) | (1 | ) | ||||||
Amortization of actuarial loss | 63 | (2 | ) | 61 | |||||||
Net periodic benefit cost | $ | 73 | $ | (1 | ) | $ | 72 |
(25) | Subsidiary Guarantor Financial Information |
(1) | any sale, exchange, transfer or other disposition of a majority of the capital stock of (including by way of consolidation or merger) such guarantor by Molycorp or any restricted subsidiary to any person or persons, as a result of which such guarantor is no longer a direct or indirect subsidiary of Molycorp; |
(2) | any sale, exchange, transfer or other disposition of all or substantially all assets of such guarantor that results in such guarantor having no assets; |
(3) | the designation by Molycorp of such guarantor as an unrestricted subsidiary; or |
(4) | defeasance or discharge of the Senior Notes; |
At March 31, 2013 | |||||||||||||||||||
(in thousands) | |||||||||||||||||||
Condensed Consolidating Balance Sheets | Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Molycorp, Inc. consolidated | ||||||||||||||
As restated - Note 1A | |||||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 251,218 | $ | 2,971 | $ | 150,645 | $ | — | $ | 404,834 | |||||||||
Trade accounts receivable, net | — | 9,184 | 53,963 | — | 63,147 | ||||||||||||||
Inventory | — | 51,000 | 196,453 | — | 247,453 | ||||||||||||||
Deferred charges | — | 946 | 5,164 | — | 6,110 | ||||||||||||||
Deferred tax assets | — | — | 11,380 | (1,942 | ) | 9,438 | |||||||||||||
Income tax receivable | — | 20,347 | — | (29 | ) | 20,318 | |||||||||||||
Prepaid expenses and other current assets | — | 7,879 | 12,032 | — | 19,911 | ||||||||||||||
Total current assets | 251,218 | 92,327 | 429,637 | (1,971 | ) | 771,211 | |||||||||||||
Non-current assets: |
Deposits | 1,753 | 24,743 | 143 | — | 26,639 | ||||||||||||||
Property, plant and equipment, net | — | 1,498,403 | 146,971 | — | 1,645,374 | ||||||||||||||
Inventory | — | 24,984 | — | — | 24,984 | ||||||||||||||
Intangible assets, net | — | 491 | 441,186 | — | 441,677 | ||||||||||||||
Investments | — | 46,666 | 17,741 | — | 64,407 | ||||||||||||||
Deferred tax assets | — | 10,980 | — | (10,980 | ) | — | |||||||||||||
Goodwill | — | — | 239,742 | — | 239,742 | ||||||||||||||
Investments in consolidated subsidiaries | 813,729 | 99,038 | — | (912,767 | ) | — | |||||||||||||
Intercompany accounts receivable | 1,713,039 | 104,747 | 794 | (1,818,580 | ) | — | |||||||||||||
Other non-current assets | — | 3,291 | 5,973 | — | 9,264 | ||||||||||||||
Total non-current assets | 2,528,521 | 1,813,343 | 852,550 | (2,742,327 | ) | 2,452,087 | |||||||||||||
Total assets | $ | 2,779,739 | $ | 1,905,670 | $ | 1,282,187 | $ | (2,744,298 | ) | $ | 3,223,298 | ||||||||
Current liabilities: | |||||||||||||||||||
Trade accounts payable | $ | — | $ | 110,923 | $ | 25,939 | $ | — | $ | 136,862 | |||||||||
Accrued expenses | 27,683 | 8,510 | 29,264 | — | 65,457 | ||||||||||||||
Income tax payable | 2,746 | 16 | 15,604 | (2,775 | ) | 15,591 | |||||||||||||
Deferred tax liabilities | — | 1,942 | — | (1,942 | ) | — | |||||||||||||
Debt and capital lease obligations | — | 378 | 28,410 | — | 28,788 | ||||||||||||||
Other current liabilities | — | 4,589 | — | — | 4,589 | ||||||||||||||
Total current liabilities | 30,429 | 126,358 | 99,217 | (4,717 | ) | 251,287 | |||||||||||||
Non-current liabilities: | |||||||||||||||||||
Asset retirement obligation | — | 17,572 | — | — | 17,572 | ||||||||||||||
Deferred tax liabilities | — | 1 | 144,288 | (8,234 | ) | 136,055 | |||||||||||||
Debt and capital lease obligations | 1,317,246 | 15,059 | 6,488 | — | 1,338,793 | ||||||||||||||
Derivative liability | — | — | 7,028 | — | 7,028 | ||||||||||||||
Pension liabilities | — | — | 3,338 | — | 3,338 | ||||||||||||||
Intercompany accounts payable | — | 1,753,926 | 64,654 | (1,818,580 | ) | — | |||||||||||||
Other non-current liabilities | — | 1,153 | 1,264 | — | 2,417 | ||||||||||||||
Total non-current liabilities | 1,317,246 | 1,787,711 | 227,060 | (1,826,814 | ) | 1,505,203 | |||||||||||||
Total liabilities | $ | 1,347,675 | $ | 1,914,069 | $ | 326,277 | $ | (1,831,531 | ) | $ | 1,756,490 | ||||||||
Stockholders’ equity: | |||||||||||||||||||
Common stock | 189 | — | — | — | 189 | ||||||||||||||
Preferred stock | 2 | — | — | — | 2 | ||||||||||||||
Additional paid-in capital | 1,949,662 | 149,857 | 1,283,863 | (1,433,720 | ) | 1,949,662 | |||||||||||||
Accumulated other comprehensive loss | (12,727 | ) | — | (12,727 | ) | 12,727 | (12,727 | ) | |||||||||||
(Deficit) retained earnings | (505,062 | ) | (158,256 | ) | (349,970 | ) | 508,226 | (505,062 | ) | ||||||||||
Total Molycorp stockholders’ equity | 1,432,064 | (8,399 | ) | 921,166 | (912,767 | ) | 1,432,064 | ||||||||||||
Noncontrolling interests | — | — | 34,744 | — | 34,744 | ||||||||||||||
Total stockholders’ equity | 1,432,064 | (8,399 | ) | 955,910 | (912,767 | ) | 1,466,808 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 2,779,739 | $ | 1,905,670 | $ | 1,282,187 | $ | (2,744,298 | ) | $ | 3,223,298 |
At December 31, 2012 | |||||||||||||||||||
(in thousands) | |||||||||||||||||||
(Revised) | |||||||||||||||||||
Condensed Consolidating Balance Sheets | Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Molycorp, Inc. consolidated | ||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 16,560 | $ | 18,020 | $ | 193,210 | $ | — | $ | 227,790 | |||||||||
Trade accounts receivable, net | — | 7,738 | 44,692 | — | 52,430 | ||||||||||||||
Inventory | — | 49,416 | 237,960 | — | 287,376 | ||||||||||||||
Deferred charges | — | 2,203 | 7,209 | — | 9,412 | ||||||||||||||
Deferred tax assets | — | — | 11,731 | (1,942 | ) | 9,789 | |||||||||||||
Income tax receivable | — | 25,087 | — | — | 25,087 | ||||||||||||||
Prepaid expenses and other current assets | — | 9,085 | 12,709 | — | 21,794 | ||||||||||||||
Total current assets | 16,560 | 111,549 | 507,511 | (1,942 | ) | 633,678 | |||||||||||||
Non-current assets: | |||||||||||||||||||
Deposits | 1,752 | 24,862 | 155 | — | 26,769 | ||||||||||||||
Property, plant and equipment, net | — | 1,377,147 | 167,157 | — | 1,544,304 | ||||||||||||||
Inventory | — | 26,096 | — | — | 26,096 | ||||||||||||||
Intangible assets, net | — | 508 | 450,430 | — | 450,938 | ||||||||||||||
Investments | — | 45,241 | 18,795 | 64,036 | |||||||||||||||
Deferred tax assets | — | — | — | — | — | ||||||||||||||
Goodwill | — | — | 239,742 | — | 239,742 | ||||||||||||||
Investments in consolidated subsidiaries | 860,390 | 97,960 | — | (958,350 | ) | — | |||||||||||||
Intercompany accounts receivable | 1,577,466 | 169,446 | 794 | (1,747,706 | ) | — | |||||||||||||
Other non-current assets | — | 885 | 6,087 | — | 6,972 | ||||||||||||||
Total non-current assets | 2,439,608 | 1,742,145 | 883,160 | (2,706,056 | ) | 2,358,857 | |||||||||||||
Total assets | $ | 2,456,168 | $ | 1,853,694 | $ | 1,390,671 | $ | (2,707,998 | ) | $ | 2,992,535 | ||||||||
Current liabilities: | |||||||||||||||||||
Trade accounts payable | $ | — | $ | 191,769 | $ | 50,225 | $ | — | $ | 241,994 | |||||||||
Accrued expenses | 14,872 | 10,087 | 34,054 | — | 59,013 | ||||||||||||||
Income tax payable | 2,746 | — | 15,267 | (2,746 | ) | 15,267 | |||||||||||||
Deferred tax liabilities | — | 1,942 | — | (1,942 | ) | — | |||||||||||||
Debt and capital lease obligations | — | 352 | 39,252 | — | 39,604 | ||||||||||||||
Other current liabilities | — | 3,539 | — | — | 3,539 | ||||||||||||||
Total current liabilities | 17,618 | 207,689 | 138,798 | (4,688 | ) | 359,417 | |||||||||||||
Non-current liabilities: | |||||||||||||||||||
Asset retirement obligation | — | 18,586 | — | — | 18,586 | ||||||||||||||
Deferred tax liabilities | 5,884 | 8,470 | 143,575 | 2,746 | 160,675 | ||||||||||||||
Debt and capital lease obligations | 1,166,777 | 15,163 | 6,892 | — | 1,188,832 | ||||||||||||||
Derivative liability | — | — | 7,816 | — | 7,816 | ||||||||||||||
Pension liabilities | — | — | 3,292 | — | 3,292 | ||||||||||||||
Intercompany accounts payable | 49,843 | 1,577,363 | 120,500 | (1,747,706 | ) | — |
Other non-current liabilities | — | 1,102 | 1,557 | — | 2,659 | ||||||||||||||
Total non-current liabilities | 1,222,504 | 1,620,684 | 283,632 | (1,744,960 | ) | 1,381,860 | |||||||||||||
Total liabilities | $ | 1,240,122 | $ | 1,828,373 | $ | 422,430 | $ | (1,749,648 | ) | $ | 1,741,277 | ||||||||
Stockholders’ equity: | |||||||||||||||||||
Common stock | 139 | — | — | — | 139 | ||||||||||||||
Preferred stock | 2 | — | — | — | 2 | ||||||||||||||
Additional paid-in capital | 1,691,429 | 149,857 | 1,283,863 | (1,433,720 | ) | 1,691,429 | |||||||||||||
Accumulated other comprehensive loss | (9,433 | ) | — | (9,433 | ) | 9,433 | (9,433 | ) | |||||||||||
(Deficit) retained earnings | (466,091 | ) | (124,536 | ) | (341,401 | ) | 465,937 | (466,091 | ) | ||||||||||
Total Molycorp stockholders’ equity | 1,216,046 | 25,321 | 933,029 | (958,350 | ) | 1,216,046 | |||||||||||||
Noncontrolling interests | — | — | 35,212 | — | 35,212 | ||||||||||||||
Total stockholders’ equity | 1,216,046 | 25,321 | 968,241 | (958,350 | ) | 1,251,258 | |||||||||||||
Total liabilities and stockholders’ equity | $ | 2,456,168 | $ | 1,853,694 | $ | 1,390,671 | $ | (2,707,998 | ) | $ | 2,992,535 |
Three Months Ended March 31, 2013 | |||||||||||||||||||
(in thousands) | |||||||||||||||||||
Condensed Consolidating Statements of Operations and Comprehensive Income | Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Molycorp, Inc. consolidated | ||||||||||||||
As restated - Note 1A | |||||||||||||||||||
Revenues | $ | — | $ | 21,609 | $ | 135,116 | $ | (10,358 | ) | $ | 146,367 | ||||||||
Costs of sales: | |||||||||||||||||||
Costs excluding depreciation and amortization | — | (45,329 | ) | (101,623 | ) | 10,358 | (136,594 | ) | |||||||||||
Depreciation and amortization | — | (7,430 | ) | (6,879 | ) | — | (14,309 | ) | |||||||||||
Gross (loss) profit | — | (31,150 | ) | 26,614 | — | (4,536 | ) | ||||||||||||
Operating expenses: | |||||||||||||||||||
Selling, general and administrative | — | (16,901 | ) | (9,613 | ) | — | (26,514 | ) | |||||||||||
Corporate development | — | (115 | ) | — | — | (115 | ) | ||||||||||||
Depreciation, amortization and accretion | — | (1,709 | ) | (6,514 | ) | — | (8,223 | ) | |||||||||||
Research and development | — | (1,960 | ) | (4,445 | ) | — | (6,405 | ) | |||||||||||
Operating (loss) income | — | (51,835 | ) | 6,042 | — | (45,793 | ) | ||||||||||||
Other (expense) income: | |||||||||||||||||||
Other expense | — | — | 260 | — | 260 | ||||||||||||||
Foreign exchange losses, net | — | — | (389 | ) | — | (389 | ) | ||||||||||||
Interest (expense) income, net | (11,139 | ) | (2,060 | ) | 1,550 | — | (11,649 | ) | |||||||||||
Interest income (expense) from intercompany notes | 9,651 | 1,644 | (11,295 | ) | — | — | |||||||||||||
Equity (loss) earnings from consolidated subsidiaries | (43,367 | ) | 1,078 | — | 42,289 | — | |||||||||||||
(44,855 | ) | 662 | (9,874 | ) | 42,289 | (11,778 | ) | ||||||||||||
Loss before income taxes and equity earnings | (44,855 | ) | (51,173 | ) | (3,832 | ) | 42,289 | (57,571 | ) | ||||||||||
Income tax benefit (loss) | 5,884 | 19,450 | (2,844 | ) | 22,490 | ||||||||||||||
Equity in results of affiliates | — | (1,998 | ) | (1,074 | ) | (3,072 | ) | ||||||||||||
Net loss | (38,971 | ) | (33,721 | ) | (7,750 | ) | 42,289 | (38,153 | ) | ||||||||||
Net income attributable to noncontrolling interest | — | — | (818 | ) | — | (818 | ) | ||||||||||||
Net loss attributable to Molycorp stockholders | $ | (38,971 | ) | $ | (33,721 | ) | $ | (8,568 | ) | $ | 42,289 | $ | (38,971 | ) | |||||
Net loss | $ | (38,971 | ) | $ | (33,721 | ) | $ | (7,750 | ) | $ | 42,289 | $ | (38,153 | ) | |||||
Other comprehensive income: | |||||||||||||||||||
Foreign currency translation adjustments | — | — | (3,294 | ) | (3,294 | ) | |||||||||||||
Comprehensive loss | $ | (38,971 | ) | $ | (33,721 | ) | $ | (11,044 | ) | $ | 42,289 | $ | (41,447 | ) | |||||
Comprehensive loss attributable to: | |||||||||||||||||||
Molycorp stockholders | (38,971 | ) | (33,721 | ) | (10,226 | ) | 42,289 | (40,629 | ) | ||||||||||
Noncontrolling interest | — | — | (818 | ) | — | (818 | ) | ||||||||||||
$ | (38,971 | ) | $ | (33,721 | ) | $ | (11,044 | ) | $ | 42,289 | $ | (41,447 | ) |
Three Months Ended March 31, 2012 | |||||||||||||||||||
(in thousands) | |||||||||||||||||||
Condensed Consolidating Statements of Operations and Comprehensive Income | Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Molycorp, Inc. consolidated | ||||||||||||||
Revenues | $ | — | $ | 65,266 | $ | 24,246 | $ | (5,042 | ) | $ | 84,470 | ||||||||
Costs of sales: | |||||||||||||||||||
Costs excluding depreciation and amortization | — | (29,123 | ) | (25,989 | ) | 5,042 | (50,070 | ) | |||||||||||
Depreciation and amortization | — | (1,856 | ) | (1,517 | ) | — | (3,373 | ) | |||||||||||
Gross profit (loss) | — | 34,287 | (3,260 | ) | — | 31,027 | |||||||||||||
Operating expenses: | |||||||||||||||||||
Selling, general and administrative | 37 | (22,697 | ) | (1,523 | ) | — | (24,183 | ) | |||||||||||
Corporate development | (17 | ) | (3,364 | ) | — | — | (3,381 | ) | |||||||||||
Depreciation, amortization and accretion | — | (334 | ) | (24 | ) | — | (358 | ) | |||||||||||
Research and development | — | (3,571 | ) | (79 | ) | — | (3,650 | ) | |||||||||||
Operating loss | 20 | 4,321 | (4,886 | ) | — | (545 | ) | ||||||||||||
Other (expense) income: | |||||||||||||||||||
Other expense | (6,578 | ) | — | — | — | (6,578 | ) | ||||||||||||
Foreign exchange gains, net | — | 1 | 1,603 | — | 1,604 | ||||||||||||||
Interest income (expense), net | 129 | (1 | ) | (43 | ) | — | 85 | ||||||||||||
Interest income (expense) from intercompany notes | — | 98 | (98 | ) | — | — | |||||||||||||
Equity loss from consolidated subsidiaries | 1,642 | (10,677 | ) | — | 9,035 | — | |||||||||||||
(4,807 | ) | (10,579 | ) | 1,462 | 9,035 | (4,889 | ) | ||||||||||||
Loss before income taxes and equity earnings | (4,787 | ) | (6,258 | ) | (3,424 | ) | 9,035 | (5,434 | ) | ||||||||||
Income tax benefit | 1,309 | 874 | — | 2,183 | |||||||||||||||
Equity in results of affiliates | — | (227 | ) | — | (227 | ) | |||||||||||||
Net loss | (3,478 | ) | (5,611 | ) | (3,424 | ) | 9,035 | (3,478 | ) | ||||||||||
Net loss | $ | (3,478 | ) | $ | (5,611 | ) | $ | (3,424 | ) | $ | 9,035 | $ | (3,478 | ) | |||||
Other comprehensive income: | |||||||||||||||||||
Foreign currency translation adjustments | — | — | 2,530 | 2,530 | |||||||||||||||
Comprehensive loss | $ | (3,478 | ) | $ | (5,611 | ) | $ | (894 | ) | $ | 9,035 | $ | (948 | ) |
Three Months Ended March 31, 2013 | |||||||||||||||||||
(in thousands) | |||||||||||||||||||
Condensed Consolidating Statements of Cash Flows | Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Molycorp, Inc. consolidated | ||||||||||||||
Net cash (used in) provided by operating activities | $ | 17,211 | $ | (58,035 | ) | $ | 4,196 | $ | — | $ | (36,628 | ) | |||||||
Cash flows from investing activities: | |||||||||||||||||||
Loans to guarantor | — | — | (40,000 | ) | 40,000 | — | |||||||||||||
Intercompany advances made | (193,454 | ) | — | — | 193,454 | — | |||||||||||||
Loans to non-guarantor | — | (1,300 | ) | — | 1,300 | — | |||||||||||||
Repayments of notes receivable from non-guarantor | — | — | — | — | — | ||||||||||||||
Investment in joint ventures | — | (3,423 | ) | — | — | (3,423 | ) | ||||||||||||
Capital expenditures | — | (174,703 | ) | (6,400 | ) | — | (181,103 | ) | |||||||||||
Other investing activities | — | — | (90 | ) | — | (90 | ) | ||||||||||||
Net cash (used in) provided by investing activities | (193,454 | ) | (179,426 | ) | (46,490 | ) | 234,754 | (184,616 | ) | ||||||||||
Cash flows provided from financing activities: | |||||||||||||||||||
Repayments of debt | — | — | (11,108 | ) | — | (11,108 | ) | ||||||||||||
Net proceeds from sale of common stock | 248,147 | — | — | — | 248,147 | ||||||||||||||
Issuance of 5.50% Convertible Notes | 165,600 | — | — | — | 165,600 | ||||||||||||||
Payments of preferred dividends | (2,846 | ) | — | — | — | (2,846 | ) | ||||||||||||
Dividend paid to noncontrolling interests | — | — | (1,286 | ) | — | (1,286 | ) | ||||||||||||
Borrowings from non-guarantor | — | 40,000 | — | (40,000 | ) | — | |||||||||||||
Borrowing from guarantor | — | — | 1,300 | (1,300 | ) | — | |||||||||||||
Intercompany advances owed | — | 182,491 | 10,963 | (193,454 | ) | — | |||||||||||||
Other financing activities | — | (79 | ) | — | — | (79 | ) | ||||||||||||
Net cash provided by (used in) financing activities | 410,901 | 222,412 | (131 | ) | (234,754 | ) | 398,428 | ||||||||||||
Effect of exchange rate changes on cash | — | — | (140 | ) | — | (140 | ) | ||||||||||||
Net change in cash and cash equivalents | 234,658 | (15,049 | ) | (42,565 | ) | — | 177,044 | ||||||||||||
Cash and cash equivalents at beginning of the period | 16,560 | 18,020 | 193,210 | — | 227,790 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 251,218 | $ | 2,971 | $ | 150,645 | $ | — | $ | 404,834 |
Three Months Ended March 31, 2012 | |||||||||||||||||||
(in thousands) | |||||||||||||||||||
Condensed Consolidating Statements of Cash Flows | Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Molycorp, Inc. consolidated | ||||||||||||||
Net cash (used in) provided by operating activities | $ | (3,250 | ) | $ | 30,777 | $ | (11,500 | ) | $ | — | $ | 16,027 | |||||||
Cash flows from investing activities: | |||||||||||||||||||
Loans to non-guarantor | — | (5,200 | ) | — | 5,200 | — | |||||||||||||
Intercompany advances made | (198,544 | ) | — | — | 198,544 | — | |||||||||||||
Investment in joint ventures | — | (3,836 | ) | — | — | (3,836 | ) | ||||||||||||
Deposits | — | (459 | ) | — | — | (459 | ) | ||||||||||||
Capital expenditures | — | (204,276 | ) | (2,187 | ) | — | (206,463 | ) | |||||||||||
Other investing activities | — | — | 2 | — | 2 | ||||||||||||||
Net cash (used in) provided by investing activities | (198,544 | ) | (213,771 | ) | (2,185 | ) | 203,744 | (210,756 | ) | ||||||||||
Cash flows provided from financing activities: | |||||||||||||||||||
Capital contributions from stockholder | 390,225 | — | — | — | 390,225 | ||||||||||||||
Repayments of short-term borrowings—related party | — | (870 | ) | — | — | (870 | ) | ||||||||||||
Repayments of debt | — | — | (777 | ) | — | (777 | ) | ||||||||||||
Payments of preferred dividends | (2,846 | ) | — | — | — | (2,846 | ) | ||||||||||||
Borrowing from guarantor | — | — | 5,200 | (5,200 | ) | — | |||||||||||||
Intercompany advances owed | — | 189,806 | 8,738 | (198,544 | ) | — | |||||||||||||
Other financing activities | (132 | ) | — | — | — | (132 | ) | ||||||||||||
Net cash provided by (used in) financing activities | 387,247 | 188,936 | 13,161 | (203,744 | ) | 385,600 | |||||||||||||
Effect of exchange rate changes on cash | — | — | 68 | — | 68 | ||||||||||||||
Net change in cash and cash equivalents | 185,453 | 5,942 | (456 | ) | — | 190,939 | |||||||||||||
Cash and cash equivalents at beginning of the period | 407,446 | 10,758 | 651 | — | 418,855 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 592,899 | $ | 16,700 | $ | 195 | $ | — | $ | 609,794 |
(26) | Recent Accounting Pronouncements |
(27) | Subsequent Events |
• | the potential need to secure additional capital to implement our business plans, and our ability to successfully secure any such capital; |
• | our ability to complete our planned capital projects, such as our modernization and expansion efforts, including the achievement of an initial annual run rate of 19,050 mt of rare earth oxides, or REO, at our Molycorp Mountain Pass Rare Earth Facility, which we refer to as the Molycorp Mountain Pass facility, and reach full planned production of REO and other planned downstream products, in each case within the projected time frame; |
• | the success of our cost mitigation efforts in connection with our modernization and expansion efforts at the Molycorp Mountain Pass facility, which if unsuccessful, might cause our costs to exceed budget; |
• | the final costs of our planned capital projects which may differ from estimated costs; |
• | market conditions, including prices and demand for our products; |
• | our ability to control our working capital needs; |
• | risks and uncertainties associated with intangible assets, including any future goodwill impairment charges; |
• | foreign exchange rate fluctuations; |
• | the development and commercialization of new products; |
• | unexpected actions of domestic and foreign governments; |
• | various events which could disrupt operations, including natural events and other risks; |
• | uncertainties associated with our reserve estimates and non-reserve deposit information, including estimated mine life and annual production; |
• | uncertainties related to feasibility studies that provide estimates of expected or anticipated costs, expenditures and economic returns, REO prices, production costs and other expenses for operations, which are subject to fluctuation; |
• | uncertainties regarding global supply and demand for rare earths materials; |
• | uncertainties regarding the results of our exploratory drilling programs; |
• | our ability to enter into additional definitive agreements with our customers and our ability to maintain customer relationships; |
• | our sintered neodymium-iron-boron, or NdFeB, rare earth magnet joint venture’s ability to successfully manufacture magnets within its expected timeframe; |
• | our ability to successfully integrate other acquired businesses; |
• | our ability to maintain appropriate relations with unions and employees; |
• | our ability to successfully implement our vertical integration strategy; |
• | environmental laws, regulations and permits affecting our business, directly and indirectly, including, among others, those relating to mine reclamation and restoration, climate change, emissions to the air and water and human exposure to hazardous substances used, released or disposed of by us; |
• | uncertainties associated with unanticipated geological conditions related to mining; |
• | the outcome of the stockholder class action litigation, derivative litigation and the SEC investigation, including any actions taken by government agencies in connection therewith; and |
• | those other risks discussed and referenced in the section entitled “Risk Factors” described in our Annual Report on Form 10-K for the year ended December 31, 2012. |
Three months ended March 31, 2013 - As restated, Note 1A | Resources | Chemicals and Oxides | Magnetic Materials and Alloys | Rare Metals | Corporate and other(b) (d) | Eliminations(a) | Total Molycorp, Inc. | |||||||||||||||||||||
Revenues: | (In thousands) | |||||||||||||||||||||||||||
External | $ | 14,658 | $ | 49,600 | $ | 54,678 | $ | 27,431 | $ | — | $ | 146,367 | ||||||||||||||||
Intersegment | 2,645 | 14,610 | — | — | (17,255 | ) | — | |||||||||||||||||||||
Total revenues | $ | 17,303 | $ | 64,210 | $ | 54,678 | $ | 27,431 | $ | (17,255 | ) | $ | 146,367 | |||||||||||||||
Depreciation, amortization and accretion | $ | (9,053 | ) | $ | (5,537 | ) | $ | (5,480 | ) | $ | (2,403 | ) | $ | (59 | ) | $ | — | $ | (22,532 | ) | ||||||||
Operating (loss) income | $ | (40,126 | ) | $ | (3,306 | ) | $ | 6,763 | $ | 2,978 | $ | (11,564 | ) | $ | (538 | ) | $ | (45,793 | ) | |||||||||
(Loss) income before income taxes and equity earnings | $ | (39,694 | ) | $ | (2,891 | ) | $ | 16,900 | $ | 3,731 | $ | (35,079 | ) | $ | (538 | ) | $ | (57,571 | ) | |||||||||
Total assets at March 31, 2013 | $ | 1,884,262 | $ | 599,389 | $ | 610,890 | $ | 111,276 | $ | 1,042,315 | $ | (1,024,834 | ) | $ | 3,223,298 | |||||||||||||
Capital expenditures (c) | $ | 92,339 | $ | 2,961 | $ | 1,041 | $ | 2,931 | $ | 74 | $ | — | $ | 99,346 |
Three months ended March 31, 2012 | Resources | Chemicals and Oxides | Magnetic Materials and Alloys | Rare Metals | Corporate and other(b) | Eliminations(a) | Total Molycorp, Inc. | |||||||||||||||||||||
Revenues: | (In thousands) | |||||||||||||||||||||||||||
External | $ | 44,478 | $ | 7,320 | $ | 18,956 | $ | 13,716 | $ | — | $ | 84,470 | ||||||||||||||||
Intersegment | 1,832 | 3,210 | — | — | (5,042 | ) | — | |||||||||||||||||||||
Total revenues | $ | 46,310 | $ | 10,530 | $ | 18,956 | $ | 13,716 | $ | (5,042 | ) | $ | 84,470 | |||||||||||||||
Depreciation, amortization and accretion | $ | (2,114 | ) | $ | (315 | ) | $ | (76 | ) | $ | (1,202 | ) | $ | (24 | ) | $ | — | $ | (3,731 | ) | ||||||||
Operating income (loss) | $ | 17,531 | $ | (13,537 | ) | $ | 145 | $ | 1,392 | $ | (19,843 | ) | $ | 13,767 | $ | (545 | ) | |||||||||||
Income (loss) before income taxes | $ | 17,599 | $ | (12,894 | ) | $ | (137 | ) | $ | 2,230 | $ | (25,999 | ) | $ | 13,767 | $ | (5,434 | ) | ||||||||||
Capital expenditures (c) | $ | 259,438 | $ | 2,501 | $ | 100 | $ | — | $ | — | $ | — | $ | 262,039 |
(a) | The net elimination in operating results includes costs of sales eliminations of $16,717 and $18,809 for the three months ended March 31, 2013 and 2012, respectively, which consist of intercompany gross profits as well as eliminations of lower of cost or market adjustments related to intercompany inventory. The total assets elimination is comprised primarily of intercompany investments and intercompany accounts receivable and profits in inventory. |
(b) | Corporate loss before income taxes and equity earnings includes business development costs, personnel and related costs, including stock-based compensation expense, accounting and legal fees, occupancy expense, information technology costs and interest expense. Total corporate assets is comprised primarily of cash and cash equivalents and deferred tax assets. |
(c) | On an accrual basis excluding capitalized interest. |
(d) | First quarter 2013 loss at the Corporate segment includes severance charges of $2,077. See Note 24 in Part 1, Item 1 for details. |
China (including Hong Kong) | $ | 115,069 | |
Barbados | 8,345 | ||
Canada | 9,269 | ||
Japan | 2,581 | ||
Germany | 2,991 | ||
United Kingdom | 2,540 | ||
Thailand | 988 | ||
Korea | 553 | ||
Singapore | 724 | ||
Estonia | 456 | ||
Luxembourg | 44 | ||
Total cash and cash equivalents in foreign countries | 143,560 | ||
United States | 261,274 | ||
Total cash and cash equivalents | $ | 404,834 |
Payments Due by Period | |||||||||||||||||||
Contractual Obligations | Total | Less Than 1 Year | 1 - 3 Years | 4 - 5 Years | More Than 5 Years | ||||||||||||||
(In thousands) | |||||||||||||||||||
Operating lease obligations (1) | $ | 8,174 | $ | 2,751 | $ | 3,878 | $ | 420 | $ | 1,125 | |||||||||
Purchase obligations and other commitments (2) | 260,593 | 232,805 | 14,076 | 7,329 | 6,383 | ||||||||||||||
Employee obligations (3) | 2,159 | 2,159 | — | — | — | ||||||||||||||
Asset retirement obligations (4) | 34,766 | 1,993 | 7,780 | 393 | 24,600 | ||||||||||||||
Debt and capital lease obligations, including fixed interest payments | 2,204,055 | 135,920 | 553,129 | 757,215 | 757,791 | ||||||||||||||
Total | $ | 2,509,747 | $ | 375,628 | $ | 578,863 | $ | 765,357 | $ | 789,899 |
(1) | Represents all operating lease payments for office space, land and office equipment. |
(2) | Represents contractual commitments for the purchase of materials and services from vendors. |
(3) | Represents primarily payments due to employees for awards under our annual incentive plan. |
(4) | Under applicable environmental laws and regulations, we are subject to reclamation and remediation obligations resulting from our operations. The amounts presented above represent our estimated future undiscounted cash flows required to satisfy the obligations currently known to us. |
Assay | The analysis of the proportions of metals in ore, or the testing of an ore or mineral for composition, purity, weight, or other properties of commercial interest. |
Bastnasite | Bastnasite is a mixed-lanthanide fluoro-carbonate mineral (Ln F CO3) that currently provides the bulk of the world's supply of the light REEs. Bastnasite and monazite are the two most common sources of cerium and other REEs. Bastnasite is found in carbonatites, igneous carbonate rocks that melt at unusually low temperatures. |
Bonded magnet | Bonded neodymium-magnets are prepared by melt spinning a thin ribbon of the Nd-Fe-B alloy. The ribbon contains randomly oriented Nd2Fe14B nano-scale grains. This ribbon is then pulverized into particles, mixed with a polymer and either compression or injection molded into bonded magnets. Bonded magnets offer less flux than sintered magnets, but can be net-shape formed into intricately shaped parts and do not suffer significant eddy current losses. |
Cerium | Cerium (Ce) is a soft, silvery, ductile metal which easily oxidizes in air. Cerium is the most abundant of the REEs, and is found in a number of minerals, including monazite and bastnasite. Cerium has two relatively stable oxidation states, enabling both the storage of oxygen and its widespread use in catalytic converters. Cerium is also widely used in glass polish. |
Concentrate | A mineral processing product that generally describes the material that is produced after crushing and grinding ore, effecting significant separation of gangue (waste) minerals from the desired metal and/or metal minerals, and discarding the waste minerals. The resulting “concentrate” of minerals typically has an order of magnitude higher content of minerals than the beginning ore material. |
Cut-off grade | The lowest grade of mineralized material that qualifies as ore in a given deposit. The grade above which minerals are considered economically mineable considering the following parameters: estimates over the relevant period of mining costs, ore treatment costs, general and administrative costs, refining costs, royalty expenses, by-product credits, process and refining recovery rates and price. |
Didymium | Didymium is a natural and unseparated combination of neodymium and praseodymium, which is approximately 75% neodymium and 25% praseodymium, depending on the ore. |
Dysprosium | A few percent of Dysprosium (Dy) is often added to high power neodymium iron boron magnets to increase their resistance to demagnetization. A minor use of dysprosium is in the magnetostrictive alloy, based on DyTbFe called terfenol-D. |
Europium | Europium (Eu) is desirable due to its photon emission. Excitation of the europium atom, by absorption of electrons or by UV radiation, results in changes in energy levels that create a visible emission. Almost all practical uses of europium utilize this luminescent behavior. |
Gadolinium | Gadolinium (Gd) absorbs neutrons and therefore is used for shielding and controlling neutron radiography and in nuclear reactors. Because of its paramagnetic properties, solutions of organic gadolinium complexes and gadolinium compounds are popular intravenous contrast enhancing agents for medical Magnetic Resonance Imaging contrast agents in (MRI). Gadolinium is sometimes added to samarium cobalt magnets to make their magnetic properties less temperature dependent. |
Gallium | Elemental gallium is not found in nature, but it is easily obtained by smelting. Very pure gallium metal has a brilliant silvery color and its solid metal fractures conchoidally like glass. Almost all gallium is used for microelectronics. |
Grade | The average REE content, as determined by assay of a metric ton of ore. |
Indium | A rare, very soft, malleable and easily fusible post-transition metal that is chemically similar to gallium and thallium, and shows intermediate properties between these two. Indium's current primary application is to form transparent electrodes from indium tin oxide (ITO) in liquid crystal displays and touchscreens, and this use largely determines its global mining production. It is widely used in thin-films to form lubricated layers. It is also used for making particularly low melting point alloys, and is a component in some lead-free solders. |
Lanthanum | Lanthanum (La) is the first member of the Lanthanide series. Lanthanum is a strategically important rare earth element due to its use in fluid bed cracking catalysts, FCCs, which are used in the production of transportation and aircraft fuel. Lanthanum is also used in fuel cells and batteries. |
Mill | A processing plant that produces a concentrate of the valuable minerals contained in an ore. |
Mineralization | The process or processes by which a mineral or minerals are introduced into a rock, resulting in a valuable or potentially valuable deposit. |
Monazite | Monazite is a reddish-brown phosphate mineral. Monazite minerals are typically accompanied by concentrations of uranium and thorium. This has historically limited the processing of monazite, however this mineral is becoming more attractive because it typically has elevated concentrations of mid-to heavy rare earths. |
Niobium | Niobium is a rare, soft, grey, ductile transition metal found in the minerals pyrochlore, the main commercial source for niobium, and columbite. Niobium is used mostly in alloys, the largest part in special steel such as that used in gas pipelines. Although alloys contain only a maximum of 0.1%, that small percentage of niobium improves the strength of the steel. The temperature stability of niobium-containing superalloys is important for its use in jet and rocket engines. Niobium is used in various superconducting materials. |
Neodymium | Neodymium (Nd) has two major uses. It is key constituent of NdFeB permanent magnets and it is an additive to capacitor dielectrics. NdFeB magnets maximize the power/weight ratio, and are found in a large variety of motors, generators, sensors and hard disk drives. Capacitors containing neodymium are found in cellular telephones, computers and nearly all other electronic devices. A minor application of neodymium is in lasers. |
Ore | That part of a mineral deposit which could be economically and legally extracted or produced at the time of reserve determination. |
Overburden | In surface mining, overburden is the material that overlays an ore deposit. Overburden is removed prior to mining. |
Praseodymium | Praseodymium (Pr) comprises about 4% of the lanthanide content of bastnasite and has a few specific applications, based mainly on its optical properties. It is a common coloring pigment, and is used in photographic filters, airport signal lenses, and welder's glasses. Because it chemically and magnetically is so similar to its neighbors neodymium and lanthanum, it is typically found in small amounts in applications where neodymium and lanthanum are popular, such as NdFeB magnets and catalysts. These latter applications are actually the largest uses for praseodymium because the magnet and catalyst markets are so large. Thus praseodymium plays an important role, in extending the availability of the more popular neodymium and lanthanum. |
Probable reserves | Reserves for which quantity and grade and/or quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation. |
Proven reserves | Reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling; and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well established. |
Recovery | The percentage of contained metal actually extracted from ore in the course of processing such ore. |
Reserves | That part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. Same definition as 'ore' |
Rhenium | It is a silvery-white, heavy, third-row transition metal. With an estimated average concentration of 1 part per billion (ppb), rhenium is one of the rarest elements in the Earth's crust. The free element has the third-highest melting point and highest boiling point of any element. Rhenium resembles manganese chemically and is obtained as a by-product of molybdenum and copper ore's extraction and refinement. Nickel-based superalloys of rhenium are used in the combustion chambers, turbine blades, and exhaust nozzles of jet engines. These alloys contain up to 6% rhenium, making jet engine construction the largest single use for the element, with the chemical industry's catalytic uses being next-most important. |
Samarium | Samarium (Sm) is predominantly used to produce samarium cobalt magnets. Although these magnets are slightly less powerful than NdFeB magnets at room temperature, samarium cobalt magnets can be used over a wider range of temperatures and are less susceptible to corrosion. |
Sintered magnet | Sintered neodymium-magnets are prepared by the raw materials being melted in a furnace, cast into a mold and cooled to form ingots. The ingots are pulverized and milled to tiny particles. This undergoes a process of liquid-phase sintering whereby the powder is magnetically aligned into dense blocks which are then heat-treated, cut to shape, surface treated and magnetized. |
Tantalum | Tantalum is a rare, hard, blue-gray, lustrous transition metal that is highly corrosion resistant. It is part of the refractory metals group, which are widely used as minor component in alloys. The chemical inertness of tantalum makes it a valuable substance for laboratory equipment and a substitute for platinum, but its main use today is in tantalum capacitors in electronic equipment such as mobile phones, DVD players, video game systems and computers. |
Terbium | Terbium (Tb) is used primarily as a phosphor, either in fluorescent lamps or x-ray screens. It can replace dysprosium in NdFeB magnets but usually does not because of its cost. A minor use of terbium is in the magnetostrictive alloy, based on DyTbFe called terfenol-D. |
Yttrium | Yttrium (Y), although not a lanthanide series element, is often considered to be a rare earth element and its behavior is similar to heavy rare earth elements. It is predominantly utilized in lighting applications and ceramics. Other uses include resonators, lasers, microwave communication devices and other electronic devices. |
Zirconium oxide | A white amorphous powder that is insoluble in water and highly refractory, used as a pigment for paints, a catalyst, and an abrasive. |
• | Re-training the accounting staff at our Mountain Pass operation on the performance of controls for the preparation, execution and review of the calculation of inventory and costs of sales, and controls that are intended to ensure that all accounting reconciliations and journal entries are appropriately prepared and reviewed; |
• | Replacing the Operations Controller at our Mountain Pass operation; and |
• | Supplementing our accounting department with personnel having an appropriate level of accounting knowledge, experience and training commensurate with our financial reporting requirements, and training them on our control procedures that are intended to ensure that all accounting reconciliations and journal entries are appropriately prepared and reviewed. |
MOLYCORP, INC. | ||
August 14, 2013 | By: | /s/ Constantine E. Karayannopoulos |
Constantine E. Karayannopoulos President and Chief Executive Officer (Principal Executive Officer) | ||
August 14, 2013 | By: | /s/ Michael F. Doolan |
Michael F. Doolan Chief Financial Officer (Principal Financial Officer) |
3.1 | * | Amended and Restated Certificate of Incorporation of Molycorp, Inc., as amended (incorporated by reference to Exhibit 3.1 to Molycorp, Inc.'s Quarterly Report on Form 10-Q (File No. 001-34827) for the quarterly period ended June 30, 2012) | |
3.2 | * | Bylaws of Molycorp, Inc., amended as of August 3, 2010 (incorporated by reference to Exhibit 3.2 to Molycorp, Inc.’s Current Report on Form 8-K (File No. 001-34827) filed with the Securities and Exchange Commission on August 6, 2010 | |
4.1 | ** | Second Supplemental Indenture by and between the Company and Wells Fargo Bank, National Association, as Trustee (including Form of Note) | |
10.1 | * | Share Lending Agreement, dated as of January 24, 2013, by and between the Company, as Lender, and Morgan Stanley Capital Services LLC, as Borrower (incorporated by reference to Exhibit 10.1 to Molycorp, Inc.'s Current Report on Form 8-K (File No. 001-34827) filed with the Securities and Exchange Commission on January 30, 2013) | |
10.2 | ** | Amended severance policy for senior management in certain salary grades who are not also parties to an employment agreement with the Company, dated March 7, 2013 | |
10.3 | ** | Separation Agreement and General Release, dated March 22, 2013, between Molycorp, Inc. and John F. Ashburn, Jr. | |
10.4 | ** | Consulting Agreement, dated March 22, 2013, between Molycorp, Inc. and John F. Ashburn, Jr. | |
10.5 | ** | Separation Agreement and General Release, dated March 22, 2013, between Molycorp, Inc. and John L. Burba, PhD | |
10.6 | ** | Consulting Agreement, dated March 22, 2013, between Molycorp, Inc. and John L. Burba, PhD | |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32.1 | Certification pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
95.1 | ** | Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. | |
101.INS | XBRL Instance Document | ||
101.SCH | XBRL Taxonomy Extension Schema Document | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | ||
* | Previously filed as indicated and incorporated herein by reference. | ||
** | Previously filed. |
1. | I have reviewed this Amendment No.1 of this quarterly report on Form 10-Q/A of Molycorp, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ CONSTANTINE E. KARAYANNOPOULOS | |
Constantine E. Karayannopoulos President and Chief Executive Officer (Principal Executive Officer) |
1. | I have reviewed this Amendment No.1 of this quarterly report on Form 10-Q/A of Molycorp, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ MICHAEL F. DOOLAN | |
Michael F. Doolan Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
/s/ CONSTANTINE E. KARAYANNOPOULOS | |
Constantine E. Karayannopoulos President and Chief Executive Officer (Principal Executive Officer) | |
August 14, 2013 | |
/s/ MICHAEL F. DOOLAN | |
Michael F. Doolan Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | |
August 14, 2013 |
Subsequent Events (Details) (Subsequent Event, USD $)
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0 Months Ended |
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May 09, 2013
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Subsequent Event
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Subsequent Events | |
Cash dividend declared (in dollars per share) | $ 1.375 |
Concentrations (Details) (USD $)
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3 Months Ended | |
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Mar. 31, 2013
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Mar. 31, 2012
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Concentrations | ||
Sales, net of intercompany transactions | $ 146,367,000 | $ 84,470,000 |
Product Concentration | Customers Concentration
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Concentrations | ||
Sales, net of intercompany transactions | 0 | |
Product Concentration | Customers Concentration | Hitachi Metals Ltd.
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Concentrations | ||
Sales, net of intercompany transactions | 20,400,000 | |
Product Concentration | Customers Concentration | W.R. Grace & Co.— Conn.
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Concentrations | ||
Sales, net of intercompany transactions | 17,200,000 | |
Product Concentration | Customers Concentration | Magnetic Materials and Alloys | Santoku
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Concentrations | ||
Sales, net of intercompany transactions | $ 16,600,000 | |
Product Concentration | Resources | Lanthanum products
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Concentrations | ||
Entity-wide revenue, major customers | 46.00% | |
Product Concentration | Resources | Neodymium and Praseodymium products
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Concentrations | ||
Entity-wide revenue, major customers | 53.00% | |
Product Concentration | Chemicals and Oxides | Cerium products
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Concentrations | ||
Entity-wide revenue, major customers | 11.60% | |
Product Concentration | Magnetic Materials and Alloys | Neo Powders
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Concentrations | ||
Entity-wide revenue, major customers | 34.00% | |
Product Concentration | Magnetic Materials and Alloys | NdFeB Alloys
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Concentrations | ||
Entity-wide revenue, major customers | 19.00% | |
Product Concentration | Rare Metals | Tantalum Metal [Member]
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Concentrations | ||
Entity-wide revenue, major customers | 16.00% |
Net Change in Operating Assets and Liabilities (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | |
---|---|---|
Mar. 31, 2013
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Mar. 31, 2012
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Decrease (increase) in operating assets: | ||
Accounts receivable | $ (10,928) | $ 25,408 |
Inventory | 14,367 | (4,442) |
Prepaid expenses and other assets | 1,850 | 382 |
Increase (decrease) in operating liabilities: | ||
Accounts payable | (15,835) | (13,924) |
Income tax payable | 5,092 | 1,560 |
Interest payable | (3,746) | 0 |
Asset retirement obligation | (308) | 0 |
Accrued expenses | (6,369) | (4,605) |
Net change in operating assets and liabilities | $ (15,877) | $ 4,379 |
Investments
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3 Months Ended | ||||||||||||||||||||
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Mar. 31, 2013
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||
Investments | Investments Boulder Wind Power, Inc. On September 13, 2011, the Company invested $20.0 million into Boulder Wind Power, Inc. Series B convertible preferred stock, which is accounted for at cost. At March 31, 2013, the fair value of this investment was not estimated as there were no identified events or changes in circumstances that may have had a significant adverse effect on the fair value of the investment. Intermetallics Japan Joint Venture In January 2012, Molycorp, Daido Steel Co., Ltd. (“Daido”) and Mitsubishi Corporation (“Mitsubishi”) entered into a definitive shareholders agreement for the purpose of funding a new joint venture, Intermetallics Japan ("IMJ"), to manufacture sintered NdFeB permanent rare earth magnets. The capital contribution ratio of IMJ is 30.0% by Molycorp, 35.5% by Daido and 34.5% by Mitsubishi. During the first quarter of 2013, Molycorp contributed $3.4 million in cash to complete the acquisition of its proportional ownership in IMJ. Total contributions by Molycorp to IMJ from the signing of the definitive shareholders agreement were $31.1 million. Molycorp accounts for this investment under the equity method because it has the ability to exercise significant influence over the operating and financial policies of IMJ, as evidenced by Molycorp’s ownership share and its proportional voting rights and representation in the Board of Directors of IMJ. The condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2013 and 2012 include a loss of $2.0 million and $0.2 million, respectively, associated with this equity method interest. Molycorp Canada Investments As a result of the acquisition of Neo Material Technologies Inc., formerly referred to as Neo or Neo Materials and now Molycorp Minerals Canada ULC or Molycorp Canada, in June 2012, Molycorp acquired the following investments:
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Segment Information
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Mar. 31, 2013
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information In the third quarter of 2012, management reorganized the Company's operations into four new reportable segments to better reflect its primary activities as a global producer of custom engineered, advanced rare earth materials: Resources; Chemicals and Oxides; Magnetic Materials and Alloys; and Rare Metals. The new composition of the Company's reportable segments is based on a combination of product lines and technologies aligned with its current strategy. The Resources segment includes the Company's operations at its Molycorp Mountain Pass facility where it conducts rare earth minerals extraction to produce: rare earth concentrates; REO, including lanthanum, cerium, neodymium, praseodymium and yttrium; heavy rare earth concentrates, which include samarium, europium, gadolinium, terbium, dysprosium, and others; and SorbXTM, a line of proprietary rare earth-based water treatment products. The Chemicals and Oxides segment includes: production of REO at the Company's operations in Sillamäe, Estonia ("Molycorp Silmet"); heavy rare earth oxides from the Company's facilities in Jiangyin, Jiangsu Province, China; and production of REO, salts of REEs, zirconium-based engineered materials and mixed rare earth/zirconium oxides from the Company's facilities in Zibo, Shandong Province, China. Rare earths products and zirconium-based engineered products are primarily supplied to the automotive catalyst, electronics, ceramic, clean technology and glass industries. The Magnetic Materials and Alloys segment includes: the production of neodymium-iron-boron ("NdFeB") magnet powders ("Neo Powders™") through Molycorp's wholly-owned manufacturing facilities in Tianjin, China and Korat, Thailand, under the Molycorp Magnequench brand. Neo Powders™ are used to make bonded magnets for a variety of electronic and mechanical products such as micro motors, precision motors, sensors and other applications requiring high levels of magnetic strength, flexibility, small size and reduced weight. This reporting segment also includes manufacturing of neodymium and samarium magnet alloys, other specialty alloy products and rare earth metals at Molycorp Metals and Alloys ("MMA") in Tolleson, Arizona. The Rare Metals segment comprises: Molycorp's production of gallium, indium, tantalum and rhenium from its operations in Quapaw, Oklahoma; Blanding, Utah; Peterborough, Ontario; Napanee, Ontario; Sagard, Germany; and Hyeongok Industrial Zone in South Korea. This operating segment also includes tantalum and niobium from the Company's operations in Sillamäe, Estonia. Rare metals are primarily used in the wireless, light-emitting diode, flat panel display, turbine, solar and catalyst industries. The asset retirement obligation is recognized only within the Resources segment. In addition, the annual profit earned from the Estonian operations is not taxed. In accordance with the Estonian Income Tax Act, only distribution of annual profit is subject to income tax in Estonia. Intersegment sales and transfers are based on similar arms-length transactions with third parties at the time of the sale. Prior to the third quarter of 2012, the basis of segmentation of the Company's activities was the location of its operations. As a result of the changes in the composition of the Company's reportable segments discussed above, the prior period reporting segments presentation has been revised for comparative purposes.
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Loss per Share
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loss per Share | Loss per Share For the three months ended March 31, 2013 and 2012, the dividends on the Convertible Preferred Stock were subtracted from net loss attributable to Molycorp stockholders for the purpose of computing the basic and diluted earnings per share.
Diluted earnings per share reflect the dilutive impact of potential common stock and unvested restricted shares of common stock in the weighted average number of common shares outstanding during the period, if dilutive. For this purpose, the “treasury stock method” and “if-converted method,” as applicable, are used. Under the treasury stock method, assumed proceeds upon the exercise of stock options are considered to be used to purchase common stock at the average market price of the shares during the period. Also under the treasury stock method, fixed awards and non-vested shares, such as restricted stock units, are deemed options for purposes of computing diluted earnings per share. At March 31, 2013 and 2012, all potential common stock under the treasury stock method were antidilutive in nature; consequently, the Company did not have any adjustments between earnings per share and diluted earnings per share related to stock options and restricted stock units. In applying the if-converted method, conversion is not assumed for purposes of computing diluted earnings per share if the effect would be antidilutive. Convertible preferred stock is antidilutive whenever the amount of the dividend declared in or accumulated for the current period per common share obtainable on conversion, including the deemed dividend in the period from a beneficial conversion feature, exceeds basic earnings per share. Molycorp's Convertible Preferred Stock was antidilutive at March 31, 2013 and 2012. Also, under the if-converted method, convertible debt is antidilutive whenever its interest per common share obtainable on conversion, including any deemed interest from a beneficial conversion feature and nondiscretionary adjustments, net of tax, exceeds basic earnings per share. At March 31, 2013 and 2012, all of the Company's convertible notes were antidilutive. |
Inventory (Details) (USD $)
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3 Months Ended | ||
---|---|---|---|
Mar. 31, 2013
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Mar. 31, 2012
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Dec. 31, 2012
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Current: | |||
Concentrate stockpiles | $ 4,743,000 | $ 6,393,000 | |
Raw materials | 75,540,000 | 95,248,000 | |
Work in process | 53,134,000 | 55,229,000 | |
Finished goods | 95,135,000 | 114,903,000 | |
Materials and supplies | 18,901,000 | 15,603,000 | |
Total current | 247,453,000 | 287,376,000 | |
Long-term: | |||
Concentrate stockpiles | 4,000 | 4,000 | |
Raw materials | 24,980,000 | 26,092,000 | |
Total long-term | 24,984,000 | 26,096,000 | |
Production costs expensed that would have been allocated to additional tons produced, assuming operations at normal production rates | 22,000,000 | 3,000,000 | |
Write-down of inventory as a result of production or purchase costs in excess of net realizable value | 19,700,000 | 6,600,000 | |
Write-down of work-in-process inventory and stockpile based on estimated REO quantities | $ 2,400,000 | $ 0 |
Acquisitions
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Mar. 31, 2013
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | Acquisitions Molycorp Canada On June 11, 2012, Molycorp completed the acquisition of all of the outstanding equity of Molycorp Canada's predecessor company pursuant to the terms of an arrangement agreement (the "Arrangement Agreement") for an aggregate purchase price of approximately $1,192.3 million. Pursuant to the Arrangement Agreement, Molycorp Canada's former shareholders elected to receive: (a) cash consideration equal to Canadian dollars ("Cdn") $11.30 per share of Molycorp Canada's predecessor company's common stock; or (b) share consideration of 0.4242 shares of Molycorp common stock or 0.4242 shares (the "Exchangeable Shares") issued by MCP Exchangeco Inc., Molycorp's wholly-owned Canadian subsidiary, which are exchangeable for shares of Molycorp's common stock on a one-for-one basis, per each share of Molycorp Canada's predecessor company's common stock; or (c) a combination of cash and shares of Molycorp common stock or Exchangeable Shares, all subject to the proration mechanics set forth in the Arrangement Agreement. The consideration paid to Molycorp Canada's former shareholders was comprised of approximately $908.2 million in cash, exclusive of realized losses on the contingent forward contract to purchase $870.0 million Canadian dollars, accounted for as a separate transaction apart from the business combination, as further discussed in Note 25. Additionally, 13,534,950 shares of Molycorp common stock and 507,203 Exchangeable Shares were issued and collectively valued at $284.1 million based on the closing price of the Company's common stock on the acquisition date in accordance with the relevant accounting guidance. The Exchangeable Shares have no par value. A preliminary allocation of the consideration transferred to the net assets of Molycorp Canada was made as of June 11, 2012. During the second quarter of 2013, the Company further adjusted the preliminary values assigned to certain assets and liabilities of Molycorp Canada in order to reflect additional information obtained since June 11, 2012. As a result of the additional goodwill recognized during the final allocation of the consideration transferred to the net assets of Molycorp Canada, the goodwill impairment the Company recognized in the fourth quarter of 2012 has increased by $31.6 million to $287.9 million. The measurement period adjustments described in the table below have been reflected in the opening balance sheet; however, since these adjustments did not have a significant impact on the Company's condensed consolidated statements of operations and comprehensive income or cash flows in any period, those statements were not retrospectively adjusted. The following table summarizes the determination of the fair value of identifiable assets acquired and liabilities assumed in the Molycorp Canada acquisition:
Goodwill associated with the Molycorp Canada acquisition arose primarily because of Molycorp Canada's proven leadership in the development, processing, and distribution of technically advanced rare earth products; greater exposure to the world’s largest and fastest-growing rare earths consuming market, China; deferred tax liabilities; and expected synergies that do not qualify for separate recognition. The goodwill is not amortized and is not deductible for tax purposes. During the fourth quarter of 2012, after giving effect to the final purchase price adjustments as noted above, the Company recognized a goodwill impairment of $287.9 million, and an impairment of patents of $6.0 million related to the Molycorp Canada acquisition. The revenues, earnings and earnings per share of the combined entity had the acquisition date been January 1, 2011, were as follows:
The unaudited pro forma amounts are not necessarily indicative of the operating results that would have occurred if the Molycorp Canada acquisition had taken place on January 1, 2011. The unaudited pro forma revenues, earnings and earnings per share of the combined entity above are adjusted: a) to eliminate the effect of sales and costs that occurred previous to the business combination between the Company and Molycorp Canada; b) to reflect the net incremental depreciation and amortization expense as a result of the allocation of the purchase price to certain depreciable and amortizable assets with useful lives ranging from two to 30 years; c) the tax effect of unaudited pro forma adjustments using the Molycorp federal, state and international statutory tax rates based on the applicable tax jurisdictions; and d) the estimated net increase of interest expense associated with the issuance of the Company's Senior Notes (as defined below) as part of the acquisition. The unaudited pro forma earnings of the combined entity for the three months ended March 31, 2012 were also adjusted to exclude $115.2 million of non-recurring direct transaction costs. The weighted average number of shares outstanding utilized in the EPS basic calculation have been adjusted to reflect the additional shares issued pursuant to the acquisition of Molycorp Canada and the Molibdenos y Metales S.A. equity financing. |
Net Change in Operating Assets and Liabilities (Tables)
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Mar. 31, 2013
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Schedule of changes in operating assets and liabilities, net of the effects of acquisitions and dispositions | Net change in operating assets and liabilities, net of the effects of acquisitions and dispositions, consisted of the following:
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Employee Benefit Plans (Narrative) (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
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Mar. 31, 2013
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Mar. 31, 2012
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Compensation and Retirement Disclosure [Abstract] | ||
Company matching contribution as a percentage of the first 3.0% compensation contributed by each eligible employee | 100.00% | |
Percentage of each employee's compensation eligible for Compoany match of 100% in defined contribution plan | 3.00% | |
Company matching contribution as a percentage of the next 2.0% of compensation contributed by each eligible employee | 50.00% | |
Percentage of each employee's compensation eligible for Company match of 50% in defined contribution plan | 2.00% | |
Safe harbor matching contribution vesting percentage | 100.00% | |
Vesting percentage of discretionary matching contribution after 3 years of service | 100.00% | |
Period of service after which employees vest in Company contributions | 3 years | |
Expenses related to defined contribution plan | $ 0.8 | $ 1.1 |
Estimated future employer contributions in 2013 | $ 0.1 |
Deposits (Details) (USD $)
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Mar. 31, 2013
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Dec. 31, 2012
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Deposits [Line Items] | ||
Deposits | $ 26,639,000 | $ 26,769,000 |
Deposits related to construction insurance program | 1,500,000 | |
Other restricted cash requirements related to deposits | 4,500,000 | |
Kern River Gas Transmission Company
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Deposits [Line Items] | ||
Escrow deposit | $ 20,600,000 |
Property, Plant and Equipment, net (Tables)
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Mar. 31, 2013
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of property, plant and equipment | March 31, 2013 and December 31, 2012, property, plant and equipment consisted of the following (in thousands):
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Concentrations
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Risks and Uncertainties [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||
Concentrations | Concentrations
There were no significant sales by product during the first quarter of 2013 at the Resources segment. For the corresponding prior period, significant sales by product, as percentage of consolidated revenues, were as follows at the Resources segment:
The Chemicals and Oxides segment includes sales of REO, zirconium-based engineered materials and mixed rare earth/zirconium oxides from the Molycorp Canada acquisition on June 11, 2012. Sales of cerium products within the Chemicals and Oxides segment accounted for approximately 11.6% of consolidated revenues in the first quarter of 2013. Within the Magnetic Materials and Alloys segment, sales of Neo Powders™ were approximately 34% of consolidated revenues for the three-month period ended March 31, 2013. The Neo Powders™ were introduced into Molycorp's product mix with the Molycorp Canada acquisition. Sales of NdFeB alloys during the first quarter of 2012, were approximately 19% of consolidated revenues in the Magnetic Materials and Alloys segment. Sales of Tantalum at the Rare Metals segment were approximately 16% of consolidated revenues during the first quarter of 2013.
There were no significant sales to individual customers relative to consolidated revenues at any of the Company's segments during the three months ended March 31, 2013. In the corresponding prior period, the Resources segment had the following significant sales by customer (in millions):
Sales from the Magnetic Materials and Alloys segment to Santoku Corporation in the first quarter of 2012 were $16.6 million. |
Commitments and Contingencies
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies
The Company has certain operating leases for office space, trailers and certain equipment. Remaining annual minimum payments under these leases at March 31, 2013 were as follows:
In connection with the Molycorp Mountain Pass facility modernization and expansion and future operations, the Company entered into contractual commitments for the purchase of materials and services from various vendors. Future payments for all purchase commitments at March 31, 2013 were as follows:
Certain Molycorp Mountain Pass facility employees are covered by a collective bargaining agreement with the United Steelworkers of America that expires on March 15, 2015. At March 31, 2013, 234 employees, or approximately 61% of the Company’s workforce at the Molycorp Mountain Pass facility, were covered by this collective bargaining agreement. At March 31, 2013, 174 employees, or approximately 29% of the workforce at the Company’s Molycorp Silmet facility, were unionized employees. The contract with the labor union in Estonia was renewed in February 2012.
At March 31, 2013, Molycorp had placed $28.8 million of surety bonds with California state and regional agencies to secure its Mountain Pass facility closure and reclamation obligations.
In February 2012, a purported class action lawsuit captioned, Angelo Albano, Individually and on Behalf of All Others Similarly Situated v. Molycorp, Inc., et al., was filed against the Company and certain of its executive officers in the U.S. District Court for the District of Colorado. This federal court action alleges, among other things, that the Company and those officers violated Section 10(b) of the Securities Exchange Act of 1934 in connection with statements relating to its third quarter fiscal 2011 financial results and fourth quarter 2011 production guidance that the Company had filed with or furnished to the SEC, or otherwise made available to the public. In July 2012, the plaintiffs filed an amended consolidated class action complaint against the Company, certain of its officers and directors, certain of its private equity investors, and certain underwriters involved in our public offerings in 2011. The amended complaint alleges, among other things, that some or all of the defendants violated Sections 10(b), 20(a) and 20A of the Securities Exchange Act of 1934 as well as Sections 11, 12(a)(2) and 15 of the Securities Act . The plaintiffs are seeking unspecified damages and other relief. In October 2012, the defendants filed a motion to dismiss all the claims in the amended complaint. The motion has been fully briefed and is pending. No hearing date has been set. The Company believes the allegations are without merit and that it has valid defenses to such allegations. The Company intends to defend this action vigorously. The Company is unable to provide meaningful quantification of how the final resolution of these claims may impact its future consolidated financial position or results of operations. Seven stockholder derivative lawsuits have been filed in three different jurisdictions purportedly on behalf of Molycorp, Inc., against certain of its directors and officers, and certain of its private equity investors. These cases have been filed in the Delaware Court of Chancery, the U.S. District Court in Colorado, and the District Court in Arapahoe County, Colorado. They are captioned: Gaines v. Smith et al., Case No. 7282 (Del. Ch. Feb. 12, 2012); Paskowitz v. Smith et al., Case No. 7319 (Del. Ch. Mar. 9, 2012); Wilson v. Smith et al., No. 7395-VCN (Del. Ch. April 4, 2012); Wells v. Smith et al., No. 1:12-cv-00447-WJM (D. Colo. Feb. 21, 2012); Swaggerty v. Smith et al., No. 12-cv-00589-CMA-KLM (D. Colo. Mar. 7, 2012); Clem v. Smith et al., No. 12 CV 392 (Arapahoe Cnty., Colo. Feb. 24, 2012); and Nationwide Consulting, Inc. v. Smith et al., No. 12 CV 448 (Arapahoe Cnty., Colo. Mar. 5, 2012). The Clem and Nationwide cases, which were previously consolidated under the caption Clem v. Smith et al., No. 12 CV 392 (Arapahoe Cnty., Colo.), have been voluntarily dismissed without prejudice. The Wells and Swaggerty cases have both been dismissed without prejudice in favor of the lawsuits proceeding in the Delaware Court of Chancery. As a result, plaintiffs in the Wells and Swaggerty cases filed notices of appeal before the 10th Circuit. The defendants have filed a responsive brief in the 10th Circuit in the Wells and Swaggerty cases. The 10th Circuit case has been fully briefed and the court has heard oral argument. The court has not yet ruled on the appeal. The derivative cases have been consolidated and are proceeding in the Delaware Court of Chancery. In August 2012, a consolidated amended shareholder derivative complaint was filed with the Delaware Court of Chancery challenging, among other things, certain sales of stock by officers, directors and private equity firms, and certain Molycorp corporate acquisitions during 2011. The amended complaint asserts causes of action for: (1) alleged breaches of fiduciary duty, including the duties of loyalty and due care; (2) alleged breach of fiduciary duty not to trade on or misuse material non-public information; (3) alleged unjust enrichment; and (4) alleged aiding and abetting a breach of fiduciary duty against controlling stockholders. On behalf of Molycorp, the plaintiffs in the derivative actions seek, among other things, monetary damages, restitution, an accounting, and certain changes to corporate governance procedures. The defendants filed motions to dismiss and motions to stay the consolidated Delaware derivative action in October 2012, which are pending. Oral argument on the motion to stay is scheduled for May 15, 2013. Briefing of the motion to dismiss has been stayed pending resolution of the motion to stay the action. On October 22, 2012, the defendants filed motions to dismiss and motions to stay the derivative case with the Delaware Court of Chancery. Defendants filed their opening briefs in support of the Motions to Stay on November 5, 2012. The parties agreed that all briefing on defendants' Motions to Dismiss should be stayed pending resolution of defendants' Motions to Stay. In August 2012, the staff of the SEC notified the Company that a formal order of investigation had been issued regarding, among other things, the accuracy of the Company's public disclosures. The Company is cooperating with the staff of the SEC in connection with the investigation. The Company cannot predict the length, scope or results of the investigation or the impact, if any, of the investigation on the Company's results of operations. |
Commitments and Contingencies Commitments and Contingencies (Tables)
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of future minimum rental payments for operating leases | The Company has certain operating leases for office space, trailers and certain equipment. Remaining annual minimum payments under these leases at March 31, 2013 were as follows:
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Schedule of minimum payments for purchase obligations | Future payments for all purchase commitments at March 31, 2013 were as follows:
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Subsequent Events
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Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events Preferred stock dividend In May 2013, the Company declared a cash dividend of $1.375 per share on the Convertible Preferred Stock to be paid on June 1, 2013 to holders of record at the close of business on May 15, 2013. |
Acquisitions (Tables)
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summarizes the purchase prices and opening balance sheets for the acquisitions |
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Summary of actual and pro forma information | The revenues, earnings and earnings per share of the combined entity had the acquisition date been January 1, 2011, were as follows:
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Employee Benefit Plans (Tables)
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Benefit Costs | The components of the net periodic pension expense for the three months ended March 31, 2013 for the Pension Plan and PBP are set forth below (in thousands):
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Employee Benefit Plans
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Compensation and Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Benefit Plans | Employee Benefit Plans and Severance Charges - As restated, Note 1A Employee Benefit Plans Defined Contribution Retirement Plans The Company maintains defined contribution retirement plans for all U.S. employees. The Company currently makes Safe Harbor Matching Contributions in an amount equal to 100% of the first 3% contributed and 50% of the next 2% contributed by each eligible employee. In addition, the Company may determine to make discretionary matching or nonelective employer (profit sharing) contributions in an amount designated by the Company. Discretionary matching contributions, if any, will be based on a percentage of employee contributions to the defined contribution plans each year, as designated by the Company. The Company's Safe Harbor Matching Contributions will always be 100% vested. Employees become 100% vested in Company discretionary matching contributions and/or nonelective employer contributions, if any, after 3 years of service. Expenses related to this plan totaled $0.8 million and $1.1 million for the three months ended March 31, 2013 and 2012, respectively. Defined Benefit Pension Plan and Other Post-Retirement Benefits In accordance with the terms of the Arrangement Agreement, the Company maintained the terms of the benefit plans for Molycorp Canada’s current and former employees. Molycorp Canada's predecessor company had a defined benefit pension plan (“Pension Plan”), which covered all hourly employees employed as of September 30, 1995, and all hourly employees subsequently hired by Molycorp Canada's predecessor company up to 2003 at its former U.S. manufacturing facility in Anderson, Indiana. A December 31 measurement date is used for the Pension Plan. The Company also maintained the terms of Molycorp Canada postretirement medical and life insurance benefits plan for certain employees from the Anderson, Indiana manufacturing facility. The measurement date for this postretirement benefit plan (“PBP”) is December 31. The actuarial valuation for funding purposes of the Pension Plan and PBP is January 1 of each year. The Company's total contribution to the Pension Plan and PBP is expected to be approximately $0.1 million in 2013. The components of the net periodic pension expense for the three months ended March 31, 2013 for the Pension Plan and PBP are set forth below (in thousands):
Severance Charges - As restated, Note 1A In the first quarter of 2013, the Company took a number of actions throughout the organization as part of its continuing effort to contain costs and increase the efficiency of its operations. As a result, the Company reduced a portion of its workforce, primarily within the Corporate group, and recognized employee severance and benefit costs of $2.1 million, which were included in "Selling, general and administrative” expense in the condensed consolidated statement of operations and comprehensive income for the current interim period. As of March 31, 2013, none of these severance benefits were paid. Starting in the latter part of fiscal 2011 and all through fiscal 2012, there was a significant deterioration in prices of rare earth products. In addition, delays in ramping up the Molycorp Mountain Pass facility to its initial planned annual run rate in 2012 deferred the Company's ability to enter into longer-term contracts and generate the anticipated synergies, including positive cash flows, expected from the Molycorp Canada acquisition, which was completed in June 2012. Although the Company's long-term strategy remains in place, such as achieving full-scale commercial production at its Molycorp Mountain Pass facility in 2013 and targeting the downstream markets that, according to management, have the potential for stronger rare earth products demand later in 2013, the weaker-than-expected financial performance of the last few quarters, attributable mainly to the operational and economic factors described above, required the Company to make certain adjustments to its short-term strategy to conserve cash and minimize costs. |
Asset Retirement Obligation (Details) (USD $)
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3 Months Ended | 12 Months Ended |
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Mar. 31, 2013
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Dec. 31, 2012
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Asset retirement obligation activity | ||
Balance at beginning of period | $ 22,125,000 | $ 15,541,000 |
Obligations settled | (308,000) | (2,954,000) |
Accretion expense | 344,000 | 1,299,000 |
Revisions in estimated cash flows | 0 | 7,872,000 |
Loss on settlement | 0 | 367,000 |
Balance at end of period | 22,161,000 | 22,125,000 |
Asset Retirement Obligation [Abstract] | ||
Asset retirement obligation, current | 4,600,000 | 3,500,000 |
Financial assurance requirement satisfied with surety bonds | 28,800,000 | |
Resources
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Asset retirement obligation activity | ||
Revisions in estimated cash flows | 3,800,000 | |
Demolition and Reclamation of the Old Mill and Mineral Recovery Areas at the Molycorp Mountain Pass Facility
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Asset retirement obligation activity | ||
Revisions in estimated cash flows | $ 4,100,000 |
Stock Option Activity (Details) (USD $)
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3 Months Ended |
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Mar. 31, 2013
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Number of Shares | |
Outstanding at beginning of period (in shares) | 35,624 |
Granted (in shares) | 0 |
Exercised (in shares) | 0 |
Forfeited and expired (in shares) | (8,238) |
Outstanding at end of period (in shares) | 27,386 |
Options exercisable at period end (in shares) | 18,257.3333333333 |
Weighted Average Exercise Price | |
Outstanding at beginning of period (in dollars per share) | $ 48.87 |
Granted (in dollars per share) | $ 0.00 |
Exercised (in dollars per share) | $ 0.00 |
Forfeited and expired (in dollars per share) | $ 48.87 |
Outstanding at end of period (in dollars per share) | $ 48.87 |
Options exercisable at period end (in dollars per share) | $ 48.87 |
Accrued Expenses (Details) (USD $)
In Thousands, unless otherwise specified |
Mar. 31, 2013
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Dec. 31, 2012
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Accrued Expenses | ||
Defined contribution plan | $ 1,955 | $ 1,400 |
Professional fees | 4,727 | 4,971 |
Accrued payroll and related benefits | 6,399 | 7,532 |
Sales and use tax | 1,827 | 7,187 |
Bonus accrual | 4,049 | 3,503 |
Interest payable | 28,065 | 15,253 |
Advance from customer | 797 | 1,753 |
Withholding taxes | 3,315 | 2,929 |
Amount payable to noncontrolling shareholder | 9,737 | 9,640 |
Other accrued expenses | 4,586 | 4,845 |
Total accrued expenses | $ 65,457 | $ 59,013 |
Debt and Capital Lease Obligations (Tables)
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Mar. 31, 2013
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments | The following table provides a summary of the current and non-current portions of Molycorp's debt outstanding at March 31, 2013 and December 31, 2012 (in thousands):
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Schedule of Long-term Debt Conversions | Additional detail on the convertible debt instruments that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer's economic interest cost is as follows (in thousands):
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Loss per Share (Details) (USD $)
In Thousands, except Share data, unless otherwise specified |
3 Months Ended | |
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Mar. 31, 2013
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Mar. 31, 2012
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Earnings Per Share [Abstract] | ||
Net loss attributable to Molycorp stockholders | $ (38,971) | $ (3,478) |
Dividends on Convertible Preferred Stock | (2,846) | (2,846) |
Loss attributable to common stockholders | $ (41,817) | $ (6,324) |
Weighted average common shares outstanding—basic | 153,314,081 | 87,006,460 |
Basic loss per share (in dollars per share) | $ (0.27) | $ (0.07) |
Weighted average common shares outstanding—diluted | 153,314,081 | 87,006,460 |
Diluted loss per share (in dollars per share) | $ (0.27) | $ (0.07) |
Stock-Based Compensation
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Mar. 31, 2013
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation Molycorp has stock-based compensation plans for executives, eligible employees and non-employee directors. Stock-based awards issued under these plans include stock options to purchase shares of the Company’s common stock, restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and, starting in the first quarter of 2012, performance-based restricted stock units ("PBRSUs"). Quarterly amounts recognized in total for all stock-based awards were as follows (in millions):
The compensation benefit in the first quarter of 2013 was attributable to the recognition of forfeiture amounts in excess of stock-based compensation expenses for the period, which were in total approximately $0.8 million for all stock-based awards outstanding at March 31, 2013. During the first quarter of 2013 and 2012, the Company granted RSUs to certain non-employee directors who elected to convert a portion of their quarterly cash retainer into restricted stock. These converted RSUs are fully vested because they relate to services already rendered by the non-employee directors. The same non-employee directors who elected to convert their cash retainer into RSUs, received additional RSUs as matching contributions by the Company equal to 25% of the converted units. The matching RSUs vest on the third anniversary of the grant date. The following tables summarize the activity related to restricted stock and stock options for the three months ended March 31, 2013:
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Restatement
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Mar. 31, 2013
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Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restatement | Restatement On August 6, 2013, the Company determined that its unaudited Condensed Consolidated Financial Statements for the three months ended March 31, 2013 contained an error with respect to the reconciliation of its physical inventory to the general ledger during the first quarter of 2013, which resulted in a cumulative overstatement of costs of sales and understatement of current inventory of approximately $16.0 million. This error also caused the income tax benefit in the first quarter of 2013 to be overstated by approximately $6.5 million. The inventory reconciliation error also involved errors in determining the proper inventory valuation and related write-downs of inventory attributable to abnormal costs and net realizable value calculations, resulting in the previously disclosed consolidated assessment of normal production levels to be understated by approximately $17.4 million, and the consolidated total write-down of inventory to be overstated by $18.0 million. The misstatement had no effect on the net cash used in operating activities or cash and cash equivalent at the end of the first quarter of 2013. In addition, the Company determined that its unaudited Condensed Consolidated Financial Statements for the three months ended March 31, 2013 contained an error with respect to the accrual of certain severance charges, which resulted in an understatement of accrued expenses and selling, general and administrative expense of approximately $2.1 million. This error also caused the income tax benefit in the first quarter of 2013 to be understated by approximately $0.8 million. The misstatement had no effect on the net cash used in operating activities or cash and cash equivalent at the end of the first quarter of 2013. Both errors described above affected the financial position and results of operations of the Resources segment. The following tables reflect the impact of correcting the affected line items of the Company’s unaudited Condensed Consolidated Financial Statements at and for the three months ended March 31, 2013:
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Trade Accounts Receivable
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3 Months Ended |
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Mar. 31, 2013
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Receivables [Abstract] | |
Trade Accounts Receivable | Trade Accounts Receivable Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company reviews the need for an allowance for doubtful accounts quarterly based on historical experience with each customer and the specifics of each arrangement. At March 31, 2013 and December 31, 2012, the allowance for doubtful accounts was $2.6 million. |
Commitments and Contingencies Operating Leases (Details) (Office space, trailers and certain equipment, USD $)
In Thousands, unless otherwise specified |
Mar. 31, 2013
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Office space, trailers and certain equipment
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Remaining annual minimum payments under operating leases | |
Operating lease obligations, total minimum payments | $ 8,174 |
Operating lease obligations, Less Than 1 Year | 2,751 |
Operating lease obligations, 1 -3 Years | 3,878 |
Operating lease obligations, 4 - 5 Years | 420 |
Operating lease obligations, More Than 5 Years | $ 1,125 |
Capital Requirements
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3 Months Ended |
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Mar. 31, 2013
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CapitalRequirements | |
Capital Requirements | Capital Requirements Total capital expenditures for the modernization and expansion efforts and certain other capital projects at the Molycorp Mountain Pass Rare Earth Facility (the "Molycorp Mountain Pass facility") are expected to total approximately $1.54 billion. This updated projection includes certain expenditures that are expected to be deferred until 2014, including discretionary expenditures required only to expand production beyond the initial planned annual run rate of 19,050 metric tons ("mt") of rare earth oxides ("REO"), if and when market demand, product pricing, capital availability and financial returns will justify such production. Of the $1.54 billion projected capital expenditures and certain other capital projects at the Molycorp Mountain Pass facility, the total amount the Company had spent on a cash basis through June 30, 2013 was approximately $1.3 billion, excluding capitalized interest. As of June 30, 2013, the Company estimates cash expenditures totaling approximately $150 million through December 31, 2013 and approximately $85 million in 2014 to fund remaining capital expenditures for the modernization and expansion efforts and certain other capital expenditures at the Molycorp Mountain Pass facility. Additionally, the Company expects to spend approximately $17 million on other maintenance and expansion capital expenditures across all operating segments during the second half of 2013, the majority of which is discretionary. Other cash requirements for the remainder of 2013 include the final payment of approximately $6.0 million to the noncontrolling shareholder of the Company's majority owned Jiangyin Jia Hua Advanced Material Resources Co. Ltd. facility in Jiangyin, China, and preferred stock dividend payments of approximately $5.6 million, if and after they are declared by the Board of Directors of the Company to be paid in cash. Given the combination of ramping up toward the initial planned run rate of 19,050 mt of REO per year at the Molycorp Mountain Pass facility, and the declining pricing environment of rare earth elements ("REEs"), the Company anticipates significantly lower than previously expected revenues and cash flow from operations through the remainder of 2013. The Company plans to fund its capital expenditures primarily from its consolidated cash balances of $264.2 million as of June 30, 2013, and cash generated from operations. While the Company's cash balances as of June 30, 2013 will fund a substantial portion of its capital needs, the full funding of the Company's planned capital expenditures continues to be dependent on (i) its cost estimates for capital expenditures being accurate, (ii) its ability to ramp up run rates at its Molycorp Mountain Pass facility pursuant to its expectations without delays, (iii) its ability to generate sufficient cash flow from its operating segments, under variable market conditions that continue to be weaker than anticipated, to meet other cash needs (the Company estimates that a 15% drop in market prices for all REEs would reduce its estimated consolidated cash balance as of December 31, 2013 by approximately $8 million and that a 15% drop in volumes would reduce its estimated consolidated cash balance as of December 31, 2013 by approximately $30 million), (iv) its ability to sell its entire production of REO and (v) the absence of any payments on current and future contingent liabilities. If these assumptions prove inaccurate, its estimates could prove incorrect and it may need additional financing. As part of its cash management procedures, the Company continues to pursue other sources of liquidity, including potential proceeds from revolving credit facilities, equity issuances, and lease and loan financing for certain equipment. There can be no assurance that the Company will be successful in securing access to additional cash proceeds through the revolving credit facilities that it is currently pursuing, or other forms of financing on commercially acceptable terms, or at all. Accordingly, if necessary, the Company believes it has the ability to curtail capital expenditures and revise its current business plan to the extent necessary to preserve adequate liquidity sufficient to sustain operations. |
Accrued Expenses (Tables)
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Mar. 31, 2013
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Schedule of accrued expenses | Accrued expenses at March 31, 2013 and December 31, 2012 consisted of the following (in thousands):
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Related-Party Transactions
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3 Months Ended |
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Mar. 31, 2013
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Related Party Transactions [Abstract] | |
Related-Party Transactions | Related-Party Transactions Transactions with equity method investees: TMT, Keli and Ingal Stade The Company supplies Neo Powders™ to TMT to produce rare earth magnetic compounds. Molycorp then purchases these compounds back from TMT in its normal course of business. Additionally, Keli processes rare earth oxides into metals for inclusion in the Neo Powders™. For the three months ended March 31, 2013, the Company sold $1.0 million of Neo Powders™ to TMT and purchased $0.5 million worth of compounds from TMT. The Company purchased metals and received services from Keli for a total of $9.6 million during the first quarter of 2013. Ingal Stade sells gallium to the Company's facilities located in Ontario, Canada and to some of its facilities in the United States. For the three months ended March 31, 2013, the Company purchased $1.2 million of gallium metal from Ingal Stade. |
Subsidiary Guarantor Financial Information
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Mar. 31, 2013
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subsidiary Guarantor Financial Information |
The Senior Notes are jointly, severally and unconditionally guaranteed by all of Molycorp, Inc.'s existing and future domestic material subsidiaries, as defined in the indenture governing the Senior Notes. The Senior Notes guarantee of a guarantor will automatically terminate, and the obligations of such guarantor under the Senior Notes guarantee will be unconditionally released and discharged, upon (all terms as defined in the indenture governing the Senior Notes):
provided that any such event occurs in accordance with all other applicable provisions of the indenture. Presented below are the condensed consolidating financial statements of Molycorp, Inc. (“Parent”) as issuer, its combined guarantor subsidiaries and its combined non-guarantor subsidiaries, which are presented as an alternative to providing separate financial statements for the guarantors. The accounts of the Parent, the guarantor and non-guarantor subsidiaries are presented using the equity method of accounting for investments in subsidiaries for purposes of these condensed consolidating financial statements only. Certain of the prior periods separate financial information has been reclassified to conform to the presentation of the most recent period herein disclosed.
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Inventory (Tables)
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3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2013
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of inventory | At March 31, 2013 and December 31, 2012, inventory consisted of the following (in thousands):
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Allocation of Recognized Period Costs (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | |
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Mar. 31, 2013
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Mar. 31, 2012
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Excess of forfeiture amounts over stock-based compensation expenses recognized in the period | $ 0.3 | $ (0.8) |
Allocated share-based compensation expense | $ 0.8 | |
RSUs
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Matching contribution by entity as percentage of converted restricted stock | 25.00% |
Trade Accounts Receivable (Details) (USD $)
In Millions, unless otherwise specified |
Mar. 31, 2013
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Receivables [Abstract] | |
Allowance for Doubtful Accounts Receivable | $ 2.6 |