Acquisition of Sebree aluminum smelter

9 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Acquisition of Sebree aluminum smelter

Acquisition of Sebree aluminum smelter

On June 1, 2013, our wholly owned subsidiary, Century Aluminum Sebree LLC ("Century Sebree"), acquired the Sebree aluminum smelter ("Sebree") from a subsidiary of Rio Tinto Alcan, Inc ("RTA"). Sebree, located in Robards, Kentucky, has an annual hot metal production capacity of 205,000 metric tons of primary aluminum and employs approximately 500 people. The purchase price for the acquisition was $61,000 (subject to customary working capital adjustments), of which we have paid approximately $48,000 as of September 30, 2013. The remaining portion of the purchase price will be paid following final determination of the applicable working capital adjustments, which will be determined based on the amount of working capital transferred to Century Sebree at closing versus a target working capital amount of $71,000. As part of the transaction, RTA retained all historical environmental liabilities of the Sebree smelter and funded the pension plan assumed by Century Sebree in accordance with the purchase agreement.

Purchase Price Allocation

Allocating the purchase price to the acquired assets and liabilities involves management judgment. We allocated the purchase price to the assets acquired, liabilities assumed, and the bargain gain in accordance with Accounting Standards Codification ("ASC") 805 "Business Combinations." Once it has been determined that recognition of an asset or liability in a business combination is appropriate, we measure the asset or liability at fair value in accordance with the principles of ASC 820 "Fair Value Measurements and Disclosures." Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The determination of the fair value of certain intangible assets and/or liabilities requires management judgment in each of the following areas:

• Identifying the acquired intangible assets or liabilities. In the case of the Sebree acquisition, we assumed a power contract liability as the contracted power price was in excess of current market prices.

• Estimating the fair value of the intangible assets and/or liabilities. We consider various approaches to value the acquired intangible assets and/or liabilities. These valuation approaches include the cost approach, which measures the value of an asset based on the cost to reproduce it or replace it with a like asset; the market approach, which values the asset through an analysis of sales and offerings of comparable assets; and the income approach, which measures the value of an asset (or liability) by measuring the present worth of the economic benefits (or costs) it is expected to produce.

The allocation of the purchase price to the assets acquired and liabilities assumed is based on the estimated fair values at the date of acquisition. The purchase price allocation is preliminary and subject to change based on the finalization of the valuation of certain assets and liabilities. Based on the preliminary purchase price allocation, we recorded a gain on bargain purchase of approximately $5,253. In connection with the recognition of the bargain purchase gain and related net deferred tax liabilities, we partially released a valuation allowance associated with recorded deferred tax assets of $2,090. The gain on bargain purchase reflects the London Metal Exchange (the "LME") market and the market risk associated with the power supply agreement for the facility at June 1, 2013. We revised our second quarter financial results for 2013 for certain measurement period adjustments, which are reflected in the year-to-date financial statements (and not in the financial statements for the quarter). The measurement period adjustments to date include adjustments to the valuation of the pension liability, asset retirement obligations, certain inventory balances and related tax effects. The following table summarizes the preliminary estimates of fair value of the assets acquired and the liabilities assumed as of the acquisition date:

	Acquisition Date Estimated Fair Value as of June 1, 2013		Measurement Period Adjustments			Acquisition Date Estimated Fair Value as of September 30, 2013
Consideration:
Cash (1)	$	47,373	$	710		$	48,083
Assets Acquired:
Inventories	58,496		522			59,018
Prepaid and other current assets	363		—			363
Property, plant and equipment – net	55,520		—			55,520
Total assets acquired	$	114,379	$	522		$	114,901
Liabilities Assumed:
Accrued and other current liabilities	$	44,121	$	(805	)	$	43,316
Accrued pension benefit costs	5,039		(4,043		)	996
Accrued post retirement benefit costs	6,544		—			6,544
Other liabilities	8,003		(527		)	7,476
Deferred taxes	1,257		1,976			3,233
Total liabilities assumed	$	64,964	$	(3,399	)	$	61,565
Gain on bargain purchase:	$	2,042	$	3,211		$	5,253

(1) This amount represents our preliminary estimate of consideration based on our expectation of the working capital adjustments. The working capital adjustments have not yet been finalized.

Through September 30, 2013, the actual revenue and net loss of Sebree since the acquisition date of June 1, 2013 included in the consolidated statement of operations is as follows:

	Three months ended September 30, 2013			Nine months ended September 30, 2013
Sebree revenue	$	101,531		$	140,284
Sebree net loss	(1,800		)	(2,044		)

The following unaudited pro forma financial information for the nine months ended September 30, 2013 and three and nine months ended September 30, 2012 reflects our results of continuing operations as if the acquisition of Sebree had been completed on January 1, 2012. This unaudited pro forma financial information is provided for informational purposes only and is not necessarily indicative of what the actual results of operations would have been had the transactions taken place on January 1, 2012, nor is it indicative of the future consolidated results of operations or financial position of the combined companies.

	Three months ended September 30,			Nine months ended September 30,
	2012			2013			2012
Pro forma revenues	$	410,009		$	1,261,533		$	1,300,869
Pro forma loss from continuing operations	(12,620		)	(57,853		)	(16,951		)
Loss per common share, basic	(0.14		)	(0.65		)	(0.19		)
Loss per common share, diluted	(0.14		)	(0.65		)	(0.19		)