UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-34474
CENTURY ALUMINUM COMPANY
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
13-3070826
(IRS Employer Identification No.)
One South Wacker Drive
Suite 1000
Chicago, Illinois
(Address of registrant’s principal offices)
60606
(Zip Code)
Registrant’s telephone number, including area code: (312) 696-3101
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
Name of each exchange on which registered:
Common Stock, $0.01 par value per share
NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or
for such shorter period that the registrant was required to submit and post such files).
Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant’s knowledge, in a definitive proxy or information statement incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in
Rule 12b-2 of the Exchange Act. (Check one)
Large Accelerated
Filer
Accelerated
Filer
Non-Accelerated Filer
(Do not check if a smaller reporting
company)
Smaller Reporting
Company
Emerging Growth
Company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
No
Based upon the closing price of the registrant’s common stock on the NASDAQ Global Select Market on June 30, 2017, the approximate
aggregate market value of the common stock held by non-affiliates of the registrant was approximately $771,000,000. As of February 23,
2018, 87,562,526 shares of common stock of the registrant were issued and outstanding.
Documents Incorporated by Reference:
All or a portion of Items 10 through 14 in Part III of this Form 10-K are incorporated by reference to the Registrant’s definitive proxy statement
on Schedule 14A for its 2018 Annual Meeting of Stockholders, which will be filed within 120 days after the close of the fiscal year covered by
this report on Form 10-K, or if the Registrant’s Schedule 14A is not filed within such period, will be included in an amendment to this Report
on Form 10-K which will be filed within such 120 day period.
TABLE OF CONTENTS
PAGE
PART I
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Item 6.
Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13. Certain Relationships and Related Transactions and Director Independence
Item 14.
Principal Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
Signatures
1
9
18
18
18
18
19
21
22
32
34
83
83
83
84
84
84
84
84
84
89
Forward-Looking Statements
This Annual Report on Form 10-K includes "forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, which are subject to the "safe harbor" created by section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Forward-looking statements are statements about future events and are based on our current expectations. These forward-
looking statements may be identified by the words "believe," "expect," "target," "anticipate," "intend," "plan," "seek,"
"estimate," "potential," "project," "scheduled," "forecast" or words of similar meaning, or future or conditional verbs such as
"will," "would," "should," "could," "might," or "may."
Forward-looking statements in this Annual Report and in our other reports with the Securities and Exchange Commission
(the "SEC"), for example, may include statements regarding:
• Future global and local financial and economic conditions;
• Our assessment of the aluminum market and aluminum prices (including premiums);
• The potential outcome or occurrence of any trade claims to address excess capacity or unfair trade practices in the
aluminum industry;
• Our ability to procure alumina, carbon products and other raw materials and our assessment of pricing and costs and
other terms relating thereto;
• Our assessment of power pricing and our ability to successfully obtain and/or implement long-term competitive
power arrangements for our operations and projects, including at Mt. Holly;
• Our ability to successfully manage transmission issues and market power price risk and to control or reduce power
costs;
• Our plans and expectations with respect to the future operation or potential curtailment of our smelters and our other
operations, including future production restarts or curtailments;
• Our plans and expectations with respect to the sale or other disposition of our 40% interest in BHH;
• The future financial and operating performance of the Company, its subsidiaries and its projects;
• Future inventory, production, sales, cash costs and capital expenditures;
• Future impairment charges or restructuring costs;
• Access to existing or future financing arrangements;
• Our ability to repay debt in the future;
• Estimates of our pension and other postretirement liabilities and future payments, property plant and equipment
impairment, environmental liabilities and other contingent liabilities and contractual commitments;
• Future construction investment and development;
• The anticipated impact of recent accounting pronouncements or changes in accounting principles;
• Our anticipated tax liabilities, benefits or refunds including the realization of U.S. and certain foreign deferred tax
assets and liabilities and the impact of recent tax reform in the U.S.;
• Our assessment of the ultimate outcome of outstanding litigation and environmental matters and liabilities relating
thereto;
• The effect of future laws and regulations;
• Negotiations with labor unions representing certain of our employees; and
• Our future business objectives, plans, strategies and initiatives.
Where we express an expectation or belief as to future events or results, such expectation or belief is expressed in good
faith and believed to have a reasonable basis. However, our forward-looking statements are based on current expectations and
assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from future results
expressed, projected or implied by those forward-looking statements. Important factors that could cause actual results and
events to differ from those described in such forward-looking statements can be found in the risk factors and forward-looking
statements cautionary language contained in Item 1A. Risk Factors in this Annual Report on Form 10-K, our Quarterly Reports
on Form 10-Q and in other filings made with the SEC. Although we have attempted to identify those material factors that
could cause actual results or events to differ from those described in such forward-looking statements, there may be other
factors that could cause actual results or events to differ from those anticipated, estimated or intended. Many of these factors
are beyond our ability to control or predict. Given these uncertainties, the reader is cautioned not to place undue reliance on our
forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether
as a result of new information, future events, or otherwise.
i
PART I
Throughout this Annual Report on Form 10-K, and unless expressly stated otherwise or as the context otherwise requires,
"Century Aluminum Company," "Century Aluminum," "Century," the "Company," "we," "us," and "our" refer to Century
Aluminum Company and its subsidiaries.
Item 1. Business
Overview
Century Aluminum Company is a global producer of primary aluminum and operates aluminum reduction facilities, or
"smelters," in the United States and Iceland. Our primary aluminum facilities produce standard-grade and value-added primary
aluminum products. Our current annual primary production capacity is approximately 1,016,000 tonnes per year ("tpy"). We
produced approximately 749,000 tonnes of primary aluminum in 2017.
In addition to our primary aluminum assets, we also own a carbon anode production facility located in the Netherlands
("Vlissingen") and hold a 40% interest in Baise Haohai Carbon Co., Ltd. ("BHH"), a joint venture that owns and operates a
carbon anode and cathode facility located in China. Carbon anodes are consumed in the production of primary aluminum. Both
BHH and Vlissingen currently supply carbon anodes to our smelter in Grundartangi, Iceland. Each of our smelters in the
United States sources anodes from on-site carbon anode production facilities.
We operate our business through one reportable segment, primary aluminum. Additional information about our segment
reporting and certain geographic information is available in Note 18. Business segments to the consolidated financial statements
included herein.
Century Aluminum Company is a Delaware corporation with principal executive offices located at One South Wacker
Drive, Suite 1000, Chicago, Illinois 60606.
Strategic Objective
Our strategic objective is to maximize the financial returns we generate for our stockholders by: (a) optimizing our safety
and environmental performance; (b) improving the competitiveness of our existing assets by managing costs and improving
productivity and efficiency; (c) pursuing upstream investment opportunities in bauxite mining, alumina refining and the
production of other key operating supplies; and (d) expanding our primary aluminum business by improving and investing in
the facilities we currently own as well as constructing, investing in or acquiring additional capacity.
Primary Aluminum Facilities
Overview of Facilities
We operate three U.S. aluminum smelters, in Hawesville, Kentucky ("Hawesville"), Robards, Kentucky ("Sebree") and
Goose Creek, South Carolina ("Mt. Holly"), and one aluminum smelter in Grundartangi, Iceland ("Grundartangi").
Grundartangi
The Grundartangi facility, located in Grundartangi, Iceland, is a primary aluminum reduction facility owned and operated
by our wholly-owned subsidiary, Nordural Grundartangi ehf, and is our most modern facility. Grundartangi is currently in the
process of a multi-year expansion project that has brought the annual production capacity from 280,000 tonnes to current
capacity of 317,000 tonnes (2017 volume) and is expected to ultimately increase annual production capacity to approximately
325,000 tonnes. Grundartangi produces standard-grade aluminum ingot and a primary foundry alloy product, which is a value-
added product that is sold at a premium to standard-grade aluminum.
Hawesville
Hawesville, located adjacent to the Ohio River near Hawesville, Kentucky, is a primary aluminum reduction facility
owned and operated by our wholly-owned subsidiary, Century Kentucky, Inc. ("CAKY"). Hawesville has an annual production
capacity of approximately 250,000 tonnes. Approximately 60% of Hawesville's capacity has been curtailed since the fourth
quarter of 2015. Hawesville produces standard-grade and high-purity aluminum that can be cast into sow or delivered directly
to nearby customers as molten metal.
1
Hawesville is our largest U.S. smelter and has the capacity to be the largest producer of high purity primary aluminum in
North America. Four of Hawesville's five potlines are capable of producing high purity aluminum which is sold at a premium
to standard-grade aluminum and is used extensively by the defense industry as well as for certain aerospace applications.
Sebree
Sebree, located adjacent to the Green River near Robards, Kentucky, is a primary aluminum reduction facility owned and
operated by our wholly-owned subsidiary, Century Aluminum Sebree LLC ("Century Sebree"). Sebree has an annual
production capacity of approximately 220,000 tonnes. Sebree produces standard-grade aluminum that can be cast into sow and
value-added products, including billet, that are sold at a premium to standard-grade aluminum or delivered directly to nearby
customers as molten metal.
Mt. Holly
Mt. Holly, located in Goose Creek, South Carolina, is a primary aluminum reduction facility owned and operated by our
wholly-owned subsidiary, Century Aluminum of South Carolina, Inc. ("CASC"). Mt. Holly has an annual production capacity
of approximately 229,000 tonnes. The Mt. Holly facility is currently operating at approximately 50% of capacity while CASC
pursues a long-term power solution. See "Key Production Costs — Electrical Power Supply Agreements" below for further
discussion of our power arrangements at Mt. Holly.
Mt. Holly is the most modern primary aluminum smelter in the United States. Mt. Holly produces standard-grade
aluminum that is cast into tee bars as well as several value-added products, including billet and foundry products. These value-
added primary aluminum products are sold at a premium to standard-grade aluminum.
Primary Aluminum Production Capacity
Our primary aluminum smelters and their respective capacities are shown in the following table:
Facility
Grundartangi, Iceland
Hawesville, Kentucky USA
Sebree, Kentucky, USA
Mt. Holly, South Carolina USA
Ownership
Percentage
100%
Operational
1998
100%
100%
100%
1970
1973
1980
Annual
Production
Capacity (tpy) (1)
317,000
250,000
220,000
229,000
1,016,000
Actual 2017
Annual
Production
(tpy)
317,000
99,000
220,000
113,000
749,000
(1) The tonnes per year (tpy) figures in this column reflect each facility’s highest annual production for the last five fiscal
years through and including the fiscal year ended December 31, 2017.
2
Primary Aluminum Shipment Volume
The following table shows our primary aluminum shipment volumes since 2012(1).
(1) Shipment volumes reflect our acquisition of Sebree in June 2013 and the remaining interest in Mt. Holly in December 2014
as well as the partial curtailment of our Hawesville and Mt. Holly operations during the fourth quarter of 2015.
Primary Aluminum Projects
Helguvik project
The Helguvik project is a greenfield project for an aluminum reduction facility in Helguvik, Iceland ("Helguvik" or the
"Helguvik project"), owned by our wholly-owned subsidiary Nordural Helguvik ehf ("Nordural Helguvik"). The Helguvik
project site is located approximately 30 miles from the city of Reykjavik, Iceland. Construction activity and spending on the
project have remained curtailed since 2008 pending our ability to secure power delivery for the project at competitive prices.
See "Key Production Costs — Electrical Power Supply Agreements" below for further discussion of our power arrangements at
Helguvik.
Carbon Products Facilities
In addition to our primary aluminum assets, we also own a carbon anode production facility located in Vlissingen, the
Netherlands, and a 40% interest in BHH, a joint venture that owns and operates a carbon anode and cathode facility located in
the Guangxi Zhuang Autonomous Region of south China.
Vlissingen
Vlissingen is a carbon anode production facility owned and operated by Century Aluminum Vlissingen B.V. Vlissingen
has an annual carbon anode production capacity of 145,000 tonnes.
3
Baise Haohai Carbon Company, Ltd.
BHH is a carbon anode and cathode facility which commenced operations in 2008. BHH is operated as a joint venture
between one of our wholly-owned subsidiaries, which owns a 40% stake in the company, and Guangxi Qiangqiang Carbon Co.,
Ltd., which holds the remaining 60% ownership interest and is the operator of this facility. The BHH facility has an annual
carbon anode production capacity of 180,000 tonnes and an annual cathode baking and graphitization capacity of 20,000
tonnes. Following the completion of the construction of our second furnace at our carbon anode facility in Vlissingen,
Netherlands, we made the decision to pursue an exit from this investment. There is no assurance we will be successful in
exiting this investment on terms that are acceptable to us or at all.
Pricing
Primary aluminum is an internationally traded commodity and its price is effectively determined on the London Metal
Exchange (the "LME") and other exchanges, plus any regional delivery premiums and value-added product premiums. Our
operating results are highly sensitive to changes in the LME price of primary aluminum and the value of regional delivery and
product premiums. As a result, from time to time, we assess the appropriateness of mitigating the effects of fluctuations in the
aluminum price through the use of fixed-price commitments, LME-linked supply contracts and financial instruments. See Item
7A. Quantitative and Qualitative Disclosures about Market Risk.
Customer Base
For the year ended December 31, 2017, we derived approximately 75% of our consolidated net sales from sales to
Glencore plc and its affiliates (together, "Glencore"). Glencore purchases the aluminum we produce for resale.
We have entered into agreements with Glencore pursuant to which Glencore has agreed to purchase a substantial portion
of our aluminum produced from our U.S. and Icelandic operations through 2018 and 2019, respectively. Glencore purchases
aluminum produced at our North American smelters at prices based on the LME price for primary aluminum plus the Midwest
regional delivery premium and any additional market based product premiums. Glencore purchases aluminum produced at our
Grundartangi, Iceland smelter at prices based on the LME plus the European Duty Paid premium and any applicable product
premiums.
Key Production Costs
Alumina, electrical power, calcined petroleum coke and liquid pitch (the key raw materials for carbon anodes), and labor
are the principal components of our cost of production. These components together represented over 75% of our cost of goods
sold for the year ended December 31, 2017. For a description of certain risks related to our raw materials, supplies and labor,
see Item 1A. Risk Factors in this Annual Report on Form 10-K.
Alumina Supply Agreements
A summary of our principal alumina supply agreements is provided below:
Supplier
Glencore (1)
Gramercy Alumina
Quantity
Variable
Term
Through December 31, 2017
Pricing (2)
Variable, API-based
Approximately 600,000 tpy
Through December 31, 2019
Variable, API-based
(1) Both parties are continuing to operate under the terms of this agreement while we negotiate a new agreement. Under the
terms of this agreement, Glencore provides alumina supply for all of Century's requirements net of the other contractual
commitments set forth above.
(2) Pricing is based on a published alumina index ("API").
4
Electrical Power Supply Agreements
The table below summarizes our long-term power supply agreements:
Facility
Supplier
Landsvirkjun
Term
Pricing
Grundartangi
Orkuveita Reykjavíkur ("OR")
Through 2023 - 2036
HS Orka hf ("HS")
Hawesville
Kenergy Corporation ("Kenergy")
Through December 31, 2023
Sebree
Kenergy
Through December 31, 2023
Mt. Holly
South Carolina Public Service Authority
Through December 31, 2018
Variable rate linked to (i) the
LME price for primary
aluminum or (ii) the Nord Pool
power market
Variable rate based on market
prices
Variable rate based on market
prices
Variable rate based in part on a
cost of service charge and in part
on natural gas prices
Helguvik
OR
Approximately 25 years from
the dates of each phase of
power delivery
Variable rate based on the LME
price for primary aluminum
Electrical power represents one of the largest components of our cost of goods sold. From time to time, we may enter into
forward contracts or other hedging arrangements to mitigate our electrical power or natural gas price risk. The paragraphs
below summarize the sources of power and the long-term power arrangements for each of our operations.
Grundartangi. Power is currently supplied to Grundartangi from hydroelectric and geothermal sources under long-term
power purchase agreements with HS, Landsvirkjun and OR at prices indexed to the price of primary aluminum, which provides
a natural hedge of our largest production cost. Beginning in November of 2019, our contract with Landsvirkjun (covering
approximately 30% of our current power requirements at Grundartangi) will be priced linked to the market price for power in
the Nord Pool power market, the trading market for power in the Nordic countries and certain other areas of Europe. We have
entered into financial contracts to fix the forward price of approximately 4% of Grundartangi's total power requirements for the
period from November 1, 2019 through December 31, 2020.
Grundartangi's power purchase agreements expire on various dates from 2023 through 2036 (subject to extension). Each
power purchase agreement contains take-or-pay obligations with respect to a significant percentage of the total committed and
available power under such agreement.
Hawesville. CAKY is party to a power supply arrangement with Kenergy and EDF Trading North America, LLC (“EDF")
which provides market-based power to the Hawesville smelter. Under this arrangement, the power companies purchase power
on the open market and pass it through to Hawesville at Midcontinent Independent System Operator ("MISO") pricing plus
transmission and other costs. The power supply arrangement with Kenergy has an effective term through December 2023. The
arrangement with EDF to act as our market participant with MISO has an effective term through May 2019. Both of these
agreements extend automatically year to year thereafter unless a one year notice of termination is given by either party.
Sebree. Century Sebree is party to a power supply arrangement with Kenergy and EDF which provides market-based
power to the Sebree smelter. Similar to the arrangement at Hawesville, the power companies purchase power on the open
market and pass it through to Sebree at MISO pricing plus transmission and other costs. The power supply arrangement with
Kenergy has an effective term through December 2023. The arrangement with EDF to act as our market participant with MISO
has an effective term through May 2019. Both of these agreements extend automatically year to year thereafter unless a one
year notice of termination is given by either party.
Mt. Holly. CASC is party to a power agreement with the South Carolina Public Service Authority ("Santee Cooper") for
power to the Mt. Holly smelter. Under this contract, 25% of Mt. Holly's electric power requirements is supplied from Santee
Cooper's generation at cost-of-service based rates. The remaining 75% of Mt. Holly's electric power requirements is supplied
from third-party generation at rates based on natural gas prices. Mt. Holly's power agreements expire on December 31, 2018.
Each of these agreements can be terminated by Mt. Holly on 60 days' notice.
5
Mt. Holly's inability to access the open market for 100% of its power requirements significantly impacts its ability to be
competitive in the aluminum industry and puts its continued operation at risk. As a result of such uncompetitive power prices,
Mt. Holly has already curtailed 50% of its production capacity. See Item 1A. Risk Factors — "If we are unable to enter into a
long term, market-based power arrangement for Mt. Holly, we may choose, or be forced, to curtail operations at the plant."
Helguvik. Nordural Helguvik is party to a power agreement with OR for a portion of Helguvik’s expected power
requirements to the Helguvik project. The first stage of power under the OR power purchase agreement (approximately 47.5
MW) became available in the fourth quarter of 2011 and is currently being utilized at Grundartangi. We are in discussions with
OR with respect to the remaining phases.
See Note 14. Commitments and contingencies to the consolidated financial statements included herein for additional
information concerning our power arrangements.
Employees
As of December 31, 2017, we had 1,864 employees.
Labor Agreements
The bargaining unit employees at our Grundartangi, Hawesville and Sebree smelters and our Vlissingen carbon anode
facility, representing approximately 65% of our total workforce, are represented by labor unions. Our employees at Mt. Holly
are not represented by a labor union.
A summary of our key labor agreements is provided below:
Facility
Organization
Term
Grundartangi
Hawesville
Sebree
Vlissingen
Icelandic labor unions
Through December 31, 2019
USW
USW
FME
Through April 1, 2020
Through October 28, 2019
Through June 1, 2018
Approximately 87% of Grundartangi’s workforce is represented by five labor unions, governed by a labor agreement that
establishes wages and work rules for covered employees. The current labor agreement is effective through December 31, 2019.
100% of Vlissingen's workforce is represented by the Federation for the Metal and Electrical Industry (the "FME"). The
FME negotiates working conditions with trade unions on behalf of its members. The current agreement with the FME is
effective through June 1, 2018.
Approximately 52% of our U.S. based workforce is represented by the United Steel, Paper and Forestry, Rubber,
Manufacturing, Energy, Allied Industrial and Service Workers International Union ("USW"). CAKY's Hawesville employees
represented by the USW are under a collective bargaining agreement that expires on April 1, 2020. Century Sebree's employees
represented by USW are under a collective bargaining agreement that expires on October 28, 2019.
Competition
The market for primary aluminum is global, and demand for aluminum varies widely from region to region. We compete
with aluminum producers within the U.S. and internationally as well as with producers of alternative materials such as steel,
copper, carbon fiber, composites, plastic and glass, each of which may be substituted for aluminum in certain applications. Our
competitive position depends, in part, on the availability of electricity, alumina and our other key raw materials to our
operations at competitive prices. We face global competition from companies who may have access to these key production
costs at lower prices. Many of our competitors are also larger than we are and have vertically integrated operations with
superior cost positions. As a result, these companies may be better able to withstand reductions in price or other adverse
industry or economic conditions.
While we face significant competition, we also have several competitive advantages:
6
Access to Markets. Our U.S. facilities benefit from the proximity to our U.S. customer base, allowing us to capture the
Midwest regional delivery premium and providing a competitive advantage in freight costs over our competitors. The
proximity to our customers also allows our Hawesville and Sebree plants to deliver a portion of their production in molten
form, saving casting costs, and providing a competitive advantage over other potential suppliers. In Iceland, our proximity to
European markets provides a competitive advantage for Grundartangi, including logistical benefits compared to our competitors
outside the European Economic Area ("EEA"). As a member of the EEA, Iceland has duty free access to these European
markets.
Access to Power. Our Kentucky operations have benefited over the past several years from market-based power contracts
that have provided electricity to these operations at competitive prices. Currently, all of our power under our power contract for
our Grundartangi plant is indexed to the price of primary aluminum (and after November 2019, 70% of its power will continue
to be indexed to the price of primary aluminum), which provides a natural hedge of our largest production cost.
Diverse Value Added Product Portfolio. We maintain a diverse product portfolio. As noted above, our Hawesville plant
has the capacity to be the largest producer of high purity aluminum in the United States. We also have the ability across our
operations to cast a variety of aluminum products, both in terms of shapes and alloys. These value-added primary aluminum
products are sold at a premium to standard-grade aluminum.
Sustainability. Our Grundartangi plant receives 100% of its power requirements from clean hydroelectric and geothermal
sources, reducing our fossil fuel usage and mitigating the impact of any current or future carbon regulations.
For additional information, see Item 1A. Risk Factors — "We may be unable to continue to compete successfully in the
highly competitive markets in which we operate."
Financial Information about Segments and Geographic Areas
We operate in one reportable segment, primary aluminum. Additional information about our segment reporting and
certain geographic information is available in Note 18. Business segments to the consolidated financial statements included
herein.
Environmental Matters
We are subject to various environmental laws and regulations in the countries in which we operate. We have spent, and
expect to continue to spend, significant amounts for compliance with those laws and regulations. In addition, some of our past
manufacturing activities have resulted in environmental consequences that require remedial measures. Under certain
environmental laws, which may impose liability regardless of fault, we may be liable for the costs of remediation of
contaminated property, including our current and formerly owned or operated properties or adjacent areas, or for the
amelioration of damage to natural resources. We believe, based on currently available information, that our current
environmental liabilities are not likely to have a material adverse effect on Century. However, we cannot predict the
requirements of future environmental laws and future requirements at current or formerly owned or operated properties or
adjacent areas or the outcome of certain existing litigation to which we are a party. Such future requirements or events may
result in unanticipated costs or liabilities that may have a material adverse effect on our financial condition, results of operations
or liquidity. More information concerning our environmental contingencies can be found in Note 14. Commitments and
contingencies to the consolidated financial statements included herein.
Intellectual Property
We own or have rights to use a number of intellectual property rights relating to various aspects of our operations. We do
not consider our business to be materially dependent on any of these intellectual property rights.
Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act
Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (“ITRA”), effective August 10, 2012,
added a new subsection (r) to Section 13 of the Exchange Act, which requires issuers that file periodic reports with the SEC to
disclose in their annual and quarterly reports whether, during the reporting period, they or any of their “affiliates” (as defined in
Rule 12b-2 under the Exchange Act) have knowingly engaged in specified activities or transactions relating to Iran, including
activities not prohibited by U.S. law and conducted outside the U.S. by non-U.S. affiliates in compliance with applicable laws.
Issuers must also file a notice with the SEC if any disclosable activity under ITRA has been included in an annual or quarterly
report.
7
Because the SEC defines the term “affiliate” broadly, our largest stockholder may be considered an affiliate of the
Company despite the fact that the Company has no control over its largest stockholder’s actions or the actions of its affiliates.
As such, pursuant to Section 13(r)(1)(D)(iii) of the Exchange Act, the Company hereby discloses the following information
provided by our largest stockholder regarding transactions or dealings with entities controlled by the Government of Iran (“the
GOI”):
During the year ended December 31, 2017, non-U.S. affiliates of the largest stockholder of the Company (“the
non-U.S. Stockholder Affiliates”) entered into sales and purchase contracts for agricultural products, metals,
minerals and energy products with, or for delivery to or from Iranian entities wholly or majority owned by the
GOI. The non-U.S. Stockholder Affiliates performed their obligations under the contracts in compliance with
applicable sanction laws and, where required, with the necessary prior approvals by the relevant governmental
authorities.
The gross revenue of the non-U.S. Stockholder Affiliates related to the contracts did not exceed the value of
USD $817 million for the year ended December 31, 2017.
At the same time as providing this information to us, the non-U.S Stockholder Affiliates amended the information that
it provided us for the third quarter of 2017 to state that the gross revenue of the non-U.S. Stockholder Affiliates related
to these contracts did not exceed the value of total USD $145 million for the third quarter of 2017 compared to the
USD $144 million previously reported.
The non-U.S. Stockholder Affiliates do not allocate net profit on a country-by-country or activity-by-activity
basis, but estimate that the net profit attributable to the contract would not exceed a small fraction of the gross
revenue from such contract. It is not possible to determine accurately the precise net profit attributable to such
contracts.
The contracts disclosed above do not violate applicable sanctions laws administered by the U.S. Department of
the Treasury, Office of Foreign Assets Control, and are not the subject of any enforcement action under Iran
sanction laws.
In compliance with applicable economic sanctions and in conformity with US secondary sanctions, the non-
U.S. Stockholder Affiliates expect to continue to engage in similar activities in the future.
The Company and its global subsidiaries had no transactions or activities requiring disclosure under ITRA, nor were we
involved in the transactions described in this section. As of the date of this report, the Company is not aware of any other
activity, transaction or dealing by it or any of its affiliates during the year ended December 31, 2017 that requires disclosure in
this report under Section 13(r) of the Exchange Act.
Available Information
Additional information about Century may be obtained from our website, which is located at
www.centuryaluminum.com. Our website provides access to periodic filings we have made through the EDGAR filing system
of the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any
amendments to those reports. We also make available on our website a copy of our code of ethics that applies to all employees
and ownership reports filed on Forms 3, 4 and 5 by our directors, executive officers and beneficial owners of more than 10% of
our outstanding common stock. Reports that we have filed with the SEC are also available on the SEC website at
www.sec.gov. In addition, we will make available free of charge copies of our Forms 10-K, Forms 10-Q and Forms 8-K upon
request. Requests for these documents can be made by contacting our Investor Relations Department by mail at: One South
Wacker Drive, Suite 1000, Chicago, IL 60606, or by phone at: (312) 696-3101. Information contained in our website is not
incorporated by reference in, and should not be considered a part of, this Annual Report on Form 10-K.
8
Item 1A. Risk Factors
The following describes certain of the risks and uncertainties we face that could materially and adversely affect our
business, financial condition and results of operation, and cause our future results to differ materially from our current results
and from those anticipated in our forward-looking statements. These risk factors should be considered together with the other
risks and uncertainties described in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations and elsewhere herein. This list of significant risk factors is not all-inclusive or necessarily in order of importance.
Declines in aluminum prices could have a material adverse effect on our earnings and cash flows.
Our operating results depend on the market for primary aluminum. Primary aluminum is a globally traded commodity
and its price is effectively determined on the London Metal Exchange (the "LME") and other exchanges, plus any regional
delivery premiums and value-added product premiums. Because primary aluminum is a global commodity, the price for
aluminum can be volatile and subject to many factors beyond our control. The LME price is influenced by a number of factors,
including global supply-demand balance, inventory levels, speculative activities by market participants, production activities by
competitors, political and economic conditions, as well as production costs in major production regions. Regional premiums are
generally influenced by the supply-demand balance for a particular region and associated transportation costs. Product
premiums reflect the supply-demand balance for particular shapes and alloys.
Reflecting this volatility, during 2017, the average LME price for primary aluminum was $1,968 per tonne, compared to
$1,604 per tonne in 2016 and $1,663 per tonne in 2015. During 2017, the average U.S. Midwest premium was $199 per tonne,
compared to $169 per tonne in 2016 and $279 per tonne in 2015. During 2017, the average European Duty Paid premium was
$148 per tonne, compared to $132 per tonne in 2016 and $236 in 2015. There can be no assurance that recent volatility in the
price of aluminum will not continue.
Declines in the aluminum price have a direct impact on our results of operations. As a result of price declines in 2015, we
curtailed production at our Hawesville smelter, which continues to operate at approximately 40% of capacity, and took other
actions to reduce our cost of production, including deferring certain capital expenditures and maintenance costs and
implementing workforce reductions. Future declines in the aluminum price could result in additional curtailments of our
operations and additional cost cutting measures. Any deferred costs could ultimately result in higher capital expenditures and
maintenance costs than would have been incurred had such costs not been deferred and increase the costs to restore production
to capacity if market forces warrant.
Declines in the market price for aluminum could also reduce our liquidity due to lower borrowing availability under our
asset-based revolving credit facility (caused by lower market value of our inventory and accounts receivable). Declines in
aluminum prices (and regional delivery, product and other premiums) may materially and adversely affect our liquidity, the
amount of cash flow we have available for our capital expenditures and other operating expenses, our ability to access the credit
and capital markets and our results of operations.
Excess capacity and over production of aluminum products may continue to materially disrupt world aluminum markets
causing price deterioration and, in turn, adversely impact our sales, margins and profitability.
World aluminum prices have been significantly depressed in recent years due to large amounts of excess capacity and
over production in China and other regions. Significant portions of world aluminum production would not be possible without
financial and other support from governments and state-owned entities. This oversupply has caused world aluminum prices to
be adversely impacted. Continued over production and the improper export of heavily subsidized aluminum products may
continue to materially disrupt world aluminum markets resulting in depressed prices and, in turn, materially adversely impact
our sales, margins and profitability.
Increases in energy costs adversely affect our business.
Electrical power represents one of the largest components of our cost of goods sold. As a result, the availability of
electricity at competitive prices is critical to the profitability of our operations.
9
Our Hawesville and Sebree plants receive all of their electricity requirements under market-based electricity contracts,
and our Mt. Holly plant receives 75% of its electricity requirements under a market-based contract. Market-based electricity
contracts expose us to market price volatility and fluctuations driven primarily by coal and natural gas prices and weather-
influenced electric loads. In 2017, both coal and natural gas prices were relatively low, weather conditions were moderate and
the energy prices we realized under these agreements were competitive. However, electrical power prices can fluctuate (for
instance, as a result of extreme weather conditions), without any direct relationship to the price of aluminum. There can be no
assurance that our market-based power supply arrangements at our Hawesville, Sebree and Mt. Holly plants will result in
favorable electricity costs.
Power is currently supplied to Grundartangi from hydroelectric and geothermal sources under long-term power purchase
agreements with HS Orka hf ("HS"), Landsvirkjun and Orkuveita Reykjavikur ("OR") at prices indexed to the price of primary
aluminum. Linking the price of power to the price of aluminum provides a natural hedge of our largest production cost.
Beginning in November 2019, one of our contracts (covering approximately 30% percent of our current power requirements at
Grundartangi) will be priced linked to the market price for power in the Nord Pool power market, which will expose us to
market price volatility and fluctuations based on the market price for power in the Nordic countries and certain other areas of
Europe. These markets can fluctuate significantly.
Any increase in our electricity and energy prices could have a material adverse effect on our business, financial position,
results of operations and liquidity.
If we are unable to enter into a long term, market-based, power arrangement for Mt. Holly, we may choose, or be
forced, to further curtail operations at the plant.
Mt. Holly is currently required to purchase 25% of its power requirements from Santee Cooper's generation at a standard
cost-based industrial rate, which is the highest rate paid for power by any U.S. smelter and substantially higher than the rate Mt.
Holly pays for market power. Mt. Holly's inability to access the open market for 100% of its power requirements significantly
impacts its ability to be competitive in the aluminum industry. As a result of such uncompetitive power prices, Mt. Holly has
curtailed 50% of its production capacity. In January 2017, we filed an antitrust lawsuit against Santee Cooper seeking damages
and injunctive relief, including the ability to purchase 100% of Mt. Holly's power from the open market. In October 2017, the
District Court granted Santee Cooper's motion to dismiss this lawsuit and we subsequently appealed the decision of the District
Court to the U.S. Court of Appeals for the Fourth Circuit. As a result of such lawsuit, Santee Cooper may seek to take actions
detrimental to Mt. Holly, including altering the terms and price of its current service to Mt. Holly. There can be no assurance
that we will be successful in our appeal or how long it may take to come to resolution. If we are unable to secure a long term
power arrangement for 100% of Mt. Holly's power requirements on competitive terms, we may choose, or be forced, to further
curtail operations at the plant.
Closure of the Mt. Holly facility would impose various costs on us that could have a material adverse effect on our
business, financial condition, results of operations and liquidity and could cause us to write down the book value of the Mt.
Holly facility. In addition, the ongoing uncertainty regarding the future operation of Mt. Holly may damage our relationships
with our customers, suppliers, employees and other stakeholders and decrease the price we receive for our products, whether or
not Mt. Holly is ultimately closed. Such actions and events could have a material adverse effect on our business, financial
condition, results of operations and liquidity.
Losses caused by disruptions in our supply of power would adversely affect our operations.
We use large amounts of electricity to produce primary aluminum. Any loss or disruption of the power supply which
reduces the amperage to our equipment or causes an equipment shutdown would result in a reduction in the volume of molten
aluminum produced, and prolonged losses of power may result in the hardening or "freezing" of molten aluminum in the pots
where it is produced, which could require an expensive and time consuming restart process. Disruptions in the supply of
electrical power to our facilities can be caused by a number of circumstances, including unusually high demand, blackouts,
equipment or transformer failure, human error, malicious acts, natural disasters or other catastrophic events. Our market-based
power supply arrangements further increase the risk that disruptions in the supply of electrical power to our domestic
operations could occur. Under these arrangements, we have greater exposure to transmission line outages, problems with grid
stability and limitations on energy import capability. An alternative supply of power in the event of a disruption may not be
feasible. If a disruption in the supply of electrical power at one of our facilities were to occur, we may lose production for a
prolonged period of time, experience pot instability that could decrease levels of productivity and incur significant losses.
Such a condition may also force a curtailment of all or part of the production at any of these facilities and could have a material
adverse effect on our business, financial position, results of operations and liquidity.
10
We operate our plants at close to peak amperage. Accordingly, even partial failures of high voltage equipment could
affect our production. We maintain property and business interruption insurance to mitigate losses resulting from catastrophic
events, but are required to pay significant amounts under the deductible provisions of those insurance policies. In addition, the
coverage under those policies may not be sufficient to cover all losses, or may not cover certain events. Certain of our
insurance policies do not cover any losses that may be incurred if our suppliers are unable to provide power under certain
circumstances. Certain losses or prolonged interruptions in our operations may trigger a default under certain of our
outstanding indebtedness and could have a material adverse effect on our business, financial position, results of operations and
liquidity.
Increases in our raw material costs and disruptions in our supply adversely affect our business.
Our business also depends upon the adequate supply of alumina, aluminum fluoride, calcined petroleum coke, pitch,
carbon anodes and cathodes and other materials. The availability of our raw materials at competitive prices is critical to the
profitability of our operations and increases in pricing could have a material adverse effect on our business, financial position,
results of operations and liquidity. Some of our supply agreements have variable pricing and can be subject to factors beyond
our control. For example, the pricing under our current alumina supply contracts is based on a published alumina index. As a
result, our cost structure is exposed to market price volatility and fluctuations. Because we sell our products based on the LME
price for primary aluminum, we would not be able to pass on to our customers any increased costs of raw material that are not
linked to the LME price.
In addition, disruptions to the supply of these production inputs could occur for a variety of reasons, including disruptions
of production at a particular supplier’s facility or power plant. Any supply disruption may require us to purchase these products
on less favorable terms than under our current agreements due to the limited number of suppliers of these products or other
market conditions. In some instances, we may be unable to secure an alternative supply of these resources. Any disruption in
our materials or electricity supply may adversely affect our operating results if we are unable to secure alternate supplies of
materials at comparable prices or at all.
For some of these production inputs, such as alumina and anode supply, we rely on a limited number of suppliers. Many
of our supply agreements are short term or expire in the next few years. We can provide no assurance that we will be able to
renew such agreements at commercially favorable terms, if at all.
Curtailment of aluminum production at our facilities could have a material adverse effect on our business, financial
position, results of operations and liquidity.
The continued operation of our smelters depends on the market for primary aluminum and our underlying cost of
production. Due to significant declines in the aluminum price during 2015, we made the decision to curtail 60% of production
at our Hawesville smelter. We are also currently operating our Mt. Holly smelter at 50% capacity as a result of uncompetitive
power prices. There can be no assurance that continued or future deterioration in the price of aluminum or increases in our
costs of production will not result in additional production curtailments at our smelters.
Curtailing production requires us to incur substantial expenses, both at the time of the curtailment and on an ongoing
basis. Our facilities are subject to contractual and other fixed costs that continue even if we curtail operations at these facilities.
These costs reduce the cost saving advantages of curtailing unprofitable aluminum production. If we are unable to realize the
intended cost saving effects of any production curtailment, we may have to seek bankruptcy protection or be forced to divest
some or all of our assets. The process of restarting production following curtailment is also expensive and time consuming. As
a result, any decision to restart production would likely require market conditions significantly better than the market
conditions at the time the decision to curtail was made. Any curtailments of our operations, or actions taken to seek bankruptcy
protection or divest some or all of our assets, could have a material adverse effect on our business, financial position, results of
operations and liquidity.
11
We may be unable to realize the expected benefits of our capital projects.
From time to time, we undertake strategic capital projects in order to enhance, expand and/or upgrade our
facilities and operational capabilities. For instance, within the past several years, we have undertaken major expansions of our
Grundartangi and Vlissingen facilities. Our ability to complete these projects and the timing and costs of doing so are subject
to various risks, many of which are beyond our control. Additionally, the start-up of operations after such projects have been
completed is also subject to risk. Our ability to achieve the anticipated increased revenues or otherwise realize acceptable
returns on these investments is subject to a variety of market, operational, permitting, and labor-related factors. Any failure to
complete these projects, or any delays or failure to achieve the anticipated results from the implementation of any such projects,
could have a material adverse effect on our business, financial condition, results of operations and liquidity.
Our failure to maintain satisfactory labor relations could adversely affect our business.
The bargaining unit employees at our Grundartangi, Hawesville, Sebree and Vlissingen facilities are represented by labor
unions, representing approximately 65% of our total workforce as of December 31, 2017. If we fail to maintain satisfactory
relations with any labor union representing our employees, our labor contracts may not prevent a strike or work stoppage at any
of these facilities in the future. As part of any negotiation with a labor union, we may reach agreements with respect to future
wages and benefits that may have a material adverse effect on our future business, financial condition, results of operations and
liquidity. In addition, negotiations could divert management attention or result in strikes, lock-outs or other work stoppages.
Any threatened or actual work stoppage in the future or inability to renegotiate our collective bargaining agreements could
prevent or significantly impair our ability to conduct production operations at our facilities subject to these collective
bargaining agreements, which could have a material adverse effect on our business, financial position, results of operations and
liquidity.
Certain of our raw material and services contracts contain "take-or-pay" obligations.
We have obligations under certain contracts to take-or-pay for specified raw materials or services over the term of those
contracts regardless of our operating requirements. To the extent that we curtail production at any of our operations, we may
continue to be obligated to take or pay for goods or services under these contracts as if we were operating at full production,
which reduces the cost savings advantages of curtailing aluminum production. Our financial position and results of operations
may also be adversely affected by the market price for such materials or services as we will continue to incur costs under these
contracts to meet or settle our contractual take-or-pay obligations. If we were unable to use such materials or services in our
operations or sell them at prices consistent with or greater than our contract costs, we could incur significant losses under these
contracts. In addition, these commitments may also limit our ability to take advantage of favorable changes in the market
prices for such materials and may have a material adverse effect on our business, financial position, results of operations and
liquidity.
We have historically derived substantially all of our revenue from a small number of customers, and we could be
adversely affected by the loss of a major customer or changes in the business or financial condition of our major customers.
We have historically derived substantially all of our consolidated net sales from a small number of customers. For the
years ended December 31, 2016 and December 31, 2017, we derived approximately 89% and 75%, respectively, of our
consolidated net sales from Glencore and we currently have agreements in place to sell a substantial portion of our 2018 and
2019 production to Glencore. We expect that the rest of our 2018 customer base will remain fairly concentrated among a small
number of customers under short-term contracts.
Any material non-payment or non-performance by one of these customers, a significant dispute with one of these
customers, a significant downturn or deterioration in the business or financial condition of any of these customers, early
termination of our sales agreement with any of these customers, or any other event significantly negatively impacting the
contractual relationship with one of these customers could adversely affect our financial condition and results of operations. If,
in such an event, we are unable to sell the affected production volume to another customer, or we sell the affected production to
another customer on terms that are materially less advantageous to us, our revenues could be negatively impacted.
International operations expose us to political, regulatory, currency and other related risks.
We receive a significant portion of our revenues and cash flow from our operations in Iceland. These operations expose
us to risks, including unexpected changes in foreign laws and regulations, political and economic instability, challenges in
managing foreign operations, increased costs to adapt our systems and practices to those used in foreign countries, taxes, export
duties, currency restrictions and exchange, tariffs and other trade barriers, and the burdens of complying with a wide variety of
12
foreign laws and regulations. Changes in foreign laws and regulations are generally beyond our ability to control, influence or
predict and future adverse changes in these laws could have a material adverse effect on our business, financial position, results
of operations and liquidity.
In addition, we may be exposed to fluctuations in currency exchange rates. As a result, an increase in the value of foreign
currencies relative to the U.S. dollar could increase our operating expenses which are denominated and payable in those
currencies. To the extent we explore additional opportunities outside the U.S., our currency risk with respect to the Icelandic
krona, the euro and other foreign currencies may increase.
Because we own less than a majority of BHH, we cannot exercise complete control over its operations.
We have a joint venture agreement pursuant to which we hold a 40% stake in BHH, a carbon anode and cathode facility
located in the Guangxi Zhuang Autonomous Region of south China. Because we beneficially own less than a majority of the
ownership interests in BHH, we have limited control of the operations of this facility and we must depend in part on our co-
owner to operate such assets. Our co-owner may have interests, objectives and incentives with respect to such assets that differ
from our own and there can be no assurance that BHH will be operated in accordance with our best interests.
We require substantial resources to pay our operating expenses and fund our capital expenditures.
We require substantial resources to pay our operating expenses and fund our capital expenditures. If we are unable to
generate funds from our operations to pay our operating expenses and fund our capital expenditures and other obligations, our
ability to continue to meet these cash requirements in the future could require substantial liquidity and access to sources of
funds, including from capital and credit markets.
If funding is not available when needed, or is available only on unacceptable terms, we may be unable to respond to
competitive pressures, take advantage of market opportunities or fund operations, capital expenditure or other obligations, any
of which could have a material adverse effect on our business, financial position, results of operations and liquidity.
A deterioration in our financial condition or credit rating could limit our ability to access the credit and capital
markets on acceptable terms or to enter into hedging and financial transactions, and could adversely affect our financial
condition and our business relationships.
Our credit rating has been adversely affected by unfavorable market and financial conditions. Our existing credit rating,
or any future negative actions the credit agencies may take, could increase our borrowing costs, limiting our ability to access
the credit and capital markets, and have an adverse effect on our relationships with customers, suppliers and hedging
counterparties. An inability to access the credit and capital markets when needed in order to refinance our existing debt or
raise new debt or equity could have a material adverse effect on our business, financial position, results of operations and
liquidity.
We require significant cash flow to meet our debt service requirements, which increases our vulnerability to adverse
economic and industry conditions, reduces cash available for other purposes and limits our operational flexibility.
As of December 31, 2017, we had an aggregate of approximately $256 million of outstanding debt and we may incur
additional debt in the future.
The level of our debt could have important consequences, including:
•
•
•
increasing our vulnerability to adverse economic and industry conditions;
reducing cash flow available for other purposes, including capital expenditures, acquisitions, dividends, working
capital and other general corporate purposes; and
limiting our flexibility in planning for, or reacting to, competitive and other changes in our business and the industry in
which we operate.
We have various obligations to make payments in cash, including contractual commitments, pension funding, and certain
contingent obligations, that will reduce the amount of cash available to make interest payments required on our outstanding
debt and for other uses. Our industrial revenue bonds ("IRBs") and any borrowings on our U.S. and Iceland revolving credit
facilities are at variable interest rates, and future borrowings required to fund working capital at our businesses, capital
13
expenditures, acquisitions, or other strategic opportunities may be at variable rates. An increase in interest rates would increase
our debt service obligations under these instruments, further limiting cash flow available for other uses.
Our ability to pay interest on and to repay or refinance our debt and to satisfy other commitments will depend upon our
access to additional sources of liquidity and future operating performance, which is subject to general economic, financial,
competitive, legislative, regulatory, business and other factors, including market prices for primary aluminum, that are beyond
our control. Accordingly, there can be no assurance that our business will generate sufficient cash flow from operations or that
future borrowings will be available to us in an amount sufficient to enable us to pay debt service obligations, refinance our
existing debt or to fund our other liquidity needs. If we are unable to meet our debt service obligations or fund our other
liquidity needs, we could attempt to restructure or refinance our debt or seek additional equity or debt capital. There can be no
assurance that we would be able to accomplish those actions on satisfactory terms, or at all, and if we are unable to ultimately
meet our debt service obligations and fund our other liquidity needs, it may have a material adverse effect on our business,
financial position, results of operations and liquidity.
Despite our substantial level of debt, we may incur more debt, which could exacerbate any or all of the risks described
above.
We may incur substantial additional debt in the future. Although the loan and security agreement governing our U.S.
revolving credit facility and the indenture governing the 7.5% Senior Secured Notes due 2021 (the "2021 Notes") limit our
ability and the ability of certain of our subsidiaries to incur additional debt, these restrictions are subject to a number of
qualifications and exceptions and, under certain circumstances, debt incurred in compliance with these restrictions could be
substantial. In addition, the loan and security agreement governing our U.S. revolving credit facility and the indenture
governing the 2021 Notes do not prevent us from incurring certain obligations that do not constitute debt as defined in these
agreements. To the extent that we incur additional debt or such other obligations, the risks associated with our substantial debt
described above, including our possible inability to service our debt or other obligations, would increase.
Our debt instruments subject us to covenants and restrictions.
Our existing debt instruments contain various covenants that restrict the way we conduct our business and limit our ability
to incur debt, pay dividends and engage in transactions such as acquisitions and investments, among other things, which may
impair our ability to obtain additional liquidity and grow our business. Any failure to comply with those covenants would likely
constitute a breach under such debt instruments which may result in the acceleration of all or a substantial portion of our
outstanding indebtedness and termination of commitments under our revolving credit facility. If our indebtedness is accelerated,
we may be unable to repay the required amounts and our secured lenders could foreclose on any collateral securing our secured
debt. Any of the foregoing actions could have a material adverse effect on our business, financial condition, results of
operations and liquidity.
We depend upon intercompany transfers from our subsidiaries to meet our debt service obligations.
We are a holding company and conduct all of our operations through our subsidiaries. As a holding company, our results of
operations depend on the results of operations of our subsidiaries. Moreover, our ability to meet our debt service obligations
depends upon the receipt of intercompany transfers from our subsidiaries. The ability of our subsidiaries to pay dividends or make
other payments or advances to us will depend on their operating results and will be subject to applicable laws and any restrictions
or prohibitions on intercompany transfers by those subsidiaries contained in agreements governing the debt of such subsidiaries.
The failure of our information technology systems and/or difficulties or delays in implementing new information
technology systems could have a material adverse effect on our business, results of operations and financial position.
We depend on our information technology systems to effectively manage significant aspects of our business including,
without limitation, production process control, metal inventory management, and reporting financial and operational results.
We are currently in the process of a company-wide deployment of a new enterprise resource planning system. Deployment of
new information systems and technologies involves risks and uncertainties. Any disruptions, delays, or deficiencies in the
design, implementation, or transition of such systems could result in increased costs, disruptions in our business, and/or
adversely affect our ability to timely report our financial results.
Our information technology systems may also be vulnerable to damage or interruption from circumstances largely beyond
our control, including, without limitation, fire, natural disasters, power outages, systems failure, security breaches, and cyber-
attacks, which include viruses, malware, and ransom attacks. Cybersecurity incidents, in particular, continue to become more
sophisticated and include, but are not limited to, malicious software, attempts to gain unauthorized access to data and other
14
electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise
protected information and the corruption of data.
We have taken measures to minimize the risks related to information technology systems. However, there is no assurance
that these measures will be adequate. Any failure or interruption of our current information technology systems, and/or any
failure resulting from a transition to new information technology systems, could have a material adverse effect on our business,
results of operations and financial position.
Climate change legislation or environmental regulations may adversely impact our operations.
Climate change and greenhouse gas emissions have been the subject of significant public and scientific attention in the
countries in which we operate. In turn, increasing government attention is being paid to global climate issues and to emissions of
greenhouse gases, including emissions of carbon dioxide from coal combustion by power plants. A number of governments or
governmental bodies in these countries have introduced legislative and regulatory change in response to the potential impacts of
climate change.
For example, in October 2015, the U.S. Environmental Protection Agency (the "EPA") adopted the Clean Power Plan
which would require states to meet significant carbon emission reduction standards. These regulations could have a variety of
adverse effects on our business. Electricity represents our single largest operating cost and the availability of electricity at
competitive prices is critical to the profitability of our operations. Some of the power we purchase in the United States is
generated at coal-based power plants, which are likely to be significantly impacted by these regulations. For example, these
regulations could require permanent closure of significant amounts of coal-based power generation. Replacement generation
would likely be more expensive, including substantial amounts of renewable generation, which additional costs would likely be
passed down to us in the form of higher rates. This could significantly increase our operating costs which would have a
material adverse effect on our business, financial position, results of operations and liquidity. Even small increases in power
prices could have a disproportionate impact on our business if such price increases are not supported by then current aluminum
prices. Certain states have challenged the Clean Power Plan and, in October 2017, the EPA announced its proposal to repeal the
Clean Power Plan in its entirety on the grounds that that the plan is illegal because it goes beyond the government's authority.
The potential impact of these regulations on us will depend on the form in which these regulations are ultimately implemented,
if at all.
In addition, as a member of the European Economic Area and a signatory to the Kyoto Protocol, Iceland has implemented
legislation to abide by the Kyoto Protocol and to prepare to abide by Directive 2003/87/EC of the European Parliament which
establishes a "cap and trade" scheme for greenhouse gas emission allowance trading. Iceland is complying with the Directive
by participating in the European Union ("EU") Emission Trade Scheme from January 1, 2013. Although we will receive
approximately 70% of needed carbon dioxide allowances for the Grundartangi smelter free of charge, the economic impact of
implementing this system is not fully known as cost of allowances could rise.
Implementation of these or other potential regulatory changes is uncertain and may be either voluntary or legislated and
may impact our operations directly or indirectly through customers or our supply chain. We may incur increased capital
expenditures resulting from compliance with such regulatory changes, increased energy costs, costs associated with a "cap and
trade" system, increased insurance premiums and deductibles, a change in competitive position relative to industry peers and
changes to profit or loss arising from increased or decreased demand for goods produced by us and indirectly, from changes in
cost of goods sold. For example, "cap and trade" legislation may impose significant additional costs to our power suppliers that
could lead to significant increases in our energy costs. In addition, the potential physical impacts of climate change on our
operations are highly uncertain and will be particular to the geographic circumstances. These may include changes in rainfall
patterns, shortages of water or other natural resources, changing sea levels, changing storm patterns and intensities, and
changing temperature levels. Any adverse regulatory and physical changes may have a material adverse effect on our business,
financial position, results of operations and liquidity.
We and our suppliers are subject to a variety of environmental laws and regulations that may have a material adverse
effect on our business, financial position, results of operations and liquidity.
We are obligated to comply with various foreign, federal, state and other environmental laws and regulations, including
the environmental laws and regulations of the United States, Iceland, China and the EU. Environmental laws and regulations
may expose us to costs or liabilities relating to our manufacturing operations or property ownership. We incur operating costs
and capital expenditures on an ongoing basis to comply with applicable environmental laws and regulations. We also are
currently, and may in the future be, responsible for the cleanup of contamination at some of our current and former facilities or
for the amelioration of damage to natural resources. If more stringent compliance or cleanup standards under environmental
15
laws or regulations are imposed, previously unknown environmental conditions or damages to natural resources are discovered
or alleged, or if contributions from other responsible parties with respect to sites for which we have cleanup responsibilities are
not available, we may be subject to additional liability, which may have a material adverse effect on our business, financial
condition, results of operations and liquidity. Further, additional environmental matters for which we may be liable may arise in
the future at our present sites where no problem is currently known, with respect to sites previously owned or operated by us,
by related corporate entities or by our predecessors, or at sites that we may acquire or operate in the future. In addition, overall
production costs may become prohibitively expensive and prevent us from effectively competing in price sensitive markets if
future capital expenditures and costs for environmental compliance or cleanup are significantly greater than expected.
In addition, many of our key suppliers are subject to environmental laws and regulations that may affect their costs of
production resulting in an increase in the price of the products that we purchase from them. For instance, some of the power we
purchase in the United States is generated at coal-based power plants, which are subject to significant environmental regulation.
Application of existing and new environmental laws and regulations to us and/or our key suppliers may have a material adverse
effect on our business, financial position, results of operations and liquidity.
Our operations are subject to a variety of laws that regulate the protection of the health and safety of our
employees, and changes in health and safety regulation could result in significant costs, which could have a material
adverse effect on our business, financial position, results of operations and liquidity.
We are subject to various foreign, federal and state laws that regulate the protection of the health and safety of our
workers. Changes in existing laws, possible future laws and regulations or more restrictive interpretations of current laws and
regulations by governmental authorities, could cause additional expense, capital expenditures or impose restrictions on our
operations. For example, we are subject to the requirements of the U.S. Occupational Safety and Health Administration
(“OSHA”). On January 9, 2017, OSHA published a new standard for workplace exposure to beryllium, contained in alumina.
The new standard would, among other things, lower the permissible exposure limits and establish new requirements for
respiratory protection, personal protective clothing and equipment, medical surveillance, hazard communication, and
recordkeeping, among others. Companies are required to comply with certain elements of the new standard by March 12, 2018;
however, we have filed a petition with the U.S. Court of Appeals to review the final rule and are in negotiations with OSHA to
make certain changes to the rule and delay the compliance dates. In the event we are unable to reach an agreement with OSHA,
we will proceed with our petition challenging the rule. Compliance with the new standard in its current form would require
significant capital expenditure and would likely increase our production costs. The ultimate impact, if any, of this new standard
will depend on the nature and extent of the final rule as implemented, the cost of and our ability to meet the new standard, the
potential impact on alumina costs, and other factors. Failure to comply with applicable laws and regulations that regulate the
protection of the health and safety of our workers may result in enforcement actions, including orders issued by regulatory or
judicial authorities causing operations to cease or be curtailed, which may require corrective measures including capital
expenditures, installation of additional equipment or remedial actions. Any such penalties, fines, sanctions or shutdowns could
have a material adverse effect on the our business and results of operations.
Glencore may exercise substantial influence over us, and they may have interests that differ from those of our other
stockholders.
Glencore beneficially owns approximately 42.9% of our outstanding common stock and all of our outstanding Series A
Convertible Preferred stock. In addition, one of our five directors is a Glencore employee. During the year ended December
31, 2017, we derived approximately 75% of our consolidated sales from Glencore and we expect to sell a significant portion of
our production to Glencore in 2018. Century and Glencore enter into various transactions such as the purchase and sale of
primary aluminum, purchase and sale of alumina, tolling agreements and certain forward financial contracts. Because of the
interests described above, Glencore may have substantial influence over our business, and on the outcome of any matters
submitted to our stockholders for approval.
In addition, certain decisions concerning our operations or financial structure may present conflicts of interest between
Glencore and our other stockholders. For example, Glencore may in the future engage in a wide variety of activities in our
industry that may result in conflicts of interest with respect to matters affecting us. In addition, because of the interests
described above, any future agreements or arrangements that we enter into with Glencore may not be comparable to those we
could have negotiated with an unaffiliated third party.
Acquisitions could disrupt our operations and harm our operating results.
We have a history of making acquisitions and we expect to opportunistically seek to make acquisitions in the future. We
are subject to numerous risks as a result of our acquisition strategy, including the following:
16
• we may spend time and money pursuing acquisitions that do not close;
• acquired companies may have contingent or unidentified liabilities;
•
it may be challenging for us to manage our existing business as we integrate acquired operations; and
• we may not achieve the anticipated benefits from our acquisitions.
We are subject to numerous risks following the consummation of any acquisition, including, for example, that we may
incur costs and expenses associated with any unidentified or potential liabilities, we may not achieve anticipated revenue and
cost benefits from the acquisitions and unforeseen difficulties may arise in integrating the acquired operations into our existing
operations. Accordingly, our past or future acquisitions might not ultimately improve our competitive position and business
prospects as anticipated and may subject us to additional liabilities that could have a material adverse effect on our business,
financial position, results of operations and liquidity.
Our ability to utilize certain net operating loss carryforwards to offset future taxable income may be significantly
limited if we experience an "ownership change" under the Internal Revenue Code.
As of December 31, 2017, we had federal net operating loss carryforwards of approximately $1.5 billion which could
offset future taxable income. Our ability to utilize our deferred tax assets to offset future federal taxable income may be
significantly limited if we experience an "ownership change" as defined in Section 382 of the Internal Revenue Code of 1986,
as amended (the "Code"). In general, an ownership change would occur if our "five-percent shareholders," as defined under the
Code, collectively increase their ownership in us by more than fifty percentage points over a rolling three-year period. Future
transactions in our stock that may not be in our control may cause us to experience such an ownership change and thus limit our
ability to utilize net operating losses, tax credits and other tax assets to offset future taxable income.
We may be unable to continue to compete successfully in the highly competitive markets in which we operate.
We are engaged in a highly competitive industry. Aluminum also competes with other materials, such as steel, copper,
plastics, composite materials and glass, among others, for various applications. Many of our competitors are larger than we are
and have greater financial and technical resources than we do. These larger competitors may be better able to withstand
reductions in price or other adverse industry or economic conditions. Similarly, many of our competitors have vertically
integrated upstream operations with resulting superior cost positions to ours and may be better able to withstand reductions in
price or other adverse industry or economic conditions. If we are not able to compete successfully, our business, financial
position, results of operations and cash flows could be materially and adversely affected.
Unpredictable events may interrupt our operations, which, may adversely affect our business.
Our operations may be susceptible to unpredictable events, including accidents, transportation and supply interruptions, labor
disputes, equipment failure, information system breakdowns, natural disasters, dangerous weather conditions, river conditions,
political unrest and other events. Operational malfunctions or interruptions at one or more of our facilities could result in substantial
losses in our production capacity, personal injury or death, damage to our properties or the properties of others, monetary losses
and potential legal liability.
Iceland, for example, suffered several natural disasters and extreme weather events in 2010, 2011, 2012, 2014 and 2016,
including significant volcanic eruptions and earthquakes which can lead to disruption in power transmission or other impacts to
our operations. Insufficient rain in Iceland has and could in the future lead to low water levels in the reservoirs which has and
may again result in curtailments in power which is provided to our Grundartangi, Iceland smelter from hydroelectric and geothermal
sources.
We accept delivery of necessary raw materials to our operations using public infrastructure such as river systems and seaports.
Deterioration of such infrastructure and/or other adverse conditions could result in transportation delays or interruptions and
increased costs, as occurred during the third quarter of 2017 when lock closures on the Ohio River impacted our alumina supply
and forced us to find alternative means to transport alumina to our Kentucky operations at increased cost. Any delay in the delivery
of raw materials necessary for our production could impact our ability to operate our plants and have a material adverse effect on
our business, financial condition or results of operation.
Future unpredictable events may adversely affect our ability to conduct business and may require substantial capital
expenditures and operating expenses to remediate damage and restore operations at our production facilities. Although we maintain
17
insurance to mitigate losses resulting from such events, our coverage may not be sufficient to cover all losses, may have high
deductibles or may not cover certain events at all. To the extent these losses are not covered by insurance, our financial condition,
results of operations and cash flows could be materially and adversely affected.
Item 1B. Unresolved Staff Comments
We have no unresolved comments from the staff of the SEC.
Item 2. Properties
Our principal executive office is located at 1 South Wacker Drive, Chicago, Illinois 60606. We own and operate
aluminum smelters in the United States and Iceland. We also own a carbon anode production facility located in the
Netherlands and a 40% interest in a carbon anode and cathode facility located in China. We lease certain of our facilities
under long-term operating leases, however we do not believe that this fact materially affects the continued use of these
properties. We believe all of our facilities are suitable and adequate for our current operations. Our significant properties are
listed below. Additional information about the age, location and productive capacity of our facilities is available in the
"Overview" section of Item 1. Business.
Facility
Hawesville
Sebree
Mt. Holly
Grundartangi
Helguvik
Ownership
100% Owned
100% Owned
100% Owned
Long-term ground lease through 2030, renewable at expiration at our option for
successive ten year periods
Long-term ground lease expected to begin on the date of commercial
operations for 50 years with an automatic extension provision for successive 15
year periods
Vlissingen
Long-term 100 year ground lease
Chicago Corporate Office
Long-term office lease that expires in September 2024
Item 3. Legal Proceedings
We are a party from time to time in various legal actions arising in the normal course of business, the outcomes of which,
in the opinion of management, neither individually nor in the aggregate are likely to result in a material adverse effect on our
financial position, operating results and cash flows. For information regarding material legal proceedings pending against us at
December 31, 2017, refer to Note 14. Commitments and contingencies to the consolidated financial statements included herein.
Item 4. Mine Safety Disclosures
Not applicable.
18
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
Our common stock trades on the NASDAQ Global Market under the symbol: CENX. The following table sets forth, on a
quarterly basis, the high and low sales prices of the common stock during the two most recent fiscal years.
Sales prices
First quarter
Second quarter
Third quarter
Fourth quarter
Holders
2017
2016
High
Low
High
Low
$
16.53
$
8.39
$
17.28
20.68
20.30
11.59
12.94
13.00
$
8.94
9.40
8.45
10.69
2.63
5.64
5.53
6.51
As of February 9, 2018, there were 62 holders of record of our common stock, which does not include the number of beneficial
owners whose common stock was held in street name or through fiduciaries.
Dividend Information
We did not declare dividends on our common stock in 2017 or 2016. We do not plan to declare cash dividends in the
foreseeable future. Any declaration of dividends is at the discretion of our Board of Directors.
Our U.S. revolving credit facility and the indenture governing our 2021 Notes contain restrictions which limit our ability
to pay dividends. Additional information about the terms of our long-term borrowing agreements is available at Note 5. Debt to
the consolidated financial statements included herein.
19
Stock Performance Graph
The following line graph compares Century Aluminum Company’s cumulative total return to stockholders with the
cumulative total return of the S&P 500 Index and the Morningstar Aluminum Index. These comparisons assume the investment
of $100 on December 31, 2012 and the reinvestment of dividends.
Comparison of Cumulative Total Return to Stockholders from December 31, 2012 through December 31, 2017
As of December 31,
Century Aluminum Company
Morningstar Aluminum Index
S&P 500 Index
2012
2013
2014
2015
2016
2017
$ 100
$ 119
$ 279
$
100
100
105
132
145
151
50
90
153
$
98
93
171
$ 224
166
208
Issuer Purchases of Equity Securities during the three months ended December 31, 2017
There were no issuer purchases of equity securities during the three months ended December 31, 2017. See Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources -
Other Items for a discussion of the current stock repurchase authorization.
20
Item 6. Selected Financial Data
The following table presents selected consolidated financial data for each of the last five fiscal years and should be read in
conjunction with Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8
Financial Statements and Supplementary Data and notes thereto.
2017
Year Ended December 31,
2015 (2)
(dollars in thousands, except per share amounts)
2014 (3)
2016 (1)
2013 (4)
Net sales
Gross profit (loss)
Operating income (loss)
Net income (loss)
Earnings (loss) per share:
Basic
Diluted
Dividends per common share
Total assets
Total debt (5)
Long-term debt obligations (6)
Other information
Primary aluminum shipments, in tonnes:
Direct
Toll
Average price per tonne:
Direct shipments
Toll shipments
LME
Midwest premium
European Duty Paid premium
$ 1,589,080
128,605
93,858
48,580
$ 1,319,094
(11,042)
(234,213)
(252,415)
$ 1,949,857
$ 1,931,042
$ 1,454,313
41,313
(39,088)
(59,310)
201,799
140,123
126,474
39,523
(36,556)
(40,313)
$
$
$
$
$
$
$
$
0.51
0.51
(2.90) $
(2.90)
(0.68) $
(0.68)
$
1.31
1.30
(0.45)
(0.45)
— $
— $
— $
— $
—
1,581,641
1,540,327
1,752,468
2,025,058
1,810,196
255,968
248,153
255,514
247,699
255,093
247,278
254,703
246,888
262,946
246,528
743,198
—
687,700
46,125
823,751
98,207
728,377
138,748
485,690
278,908
2,126
$
— $
1,968
199
148
$
$
$
1,825
1,172
1,604
169
132
$
$
$
$
$
2,169
1,374
1,663
279
236
$
$
$
$
$
2,333
1,554
1,867
450
424
$
$
$
$
$
2,154
1,448
1,846
244
272
(1)
(2)
(3)
(4)
(5)
(6)
In 2016, the Helguvik project in Iceland was determined to be impaired and charges of $152.2 million were recorded.
In 2015, Ravenswood was permanently closed. Also, in the fourth quarter of 2015, operations at Hawesville and Mt.
Holly were partially curtailed.
In December 2014, the remaining interest in Mt. Holly was acquired.
In June 2013, Sebree was acquired and our corporate offices were relocated to Chicago, Illinois.
Total debt includes all long-term debt obligations and any debt classified as short-term obligations, net of any debt
discounts, including current portion of long-term debt, borrowings under our revolving credit facilities and the IRBs.
Long-term debt obligations are all payment obligations under long-term borrowing arrangements, excluding the current
portion of the long-term debt.
21
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This Management’s Discussion and Analysis (“MD&A”) provides information that management believes is relevant to an
assessment and understanding of the consolidated financial condition and results of operations of Century Aluminum Company
and its subsidiaries (collectively, “Century,” the “Company,” “our” and “we”) and should be read in conjunction with the
accompanying consolidated financial statements and related notes thereto in Item 8. and Risk Factors in Item 1A. This MD&A
contains “forward-looking statements” - See “Forward-Looking Statements” above.
Overview
We are a global producer of primary aluminum with aluminum reduction facilities, or "smelters," in the United States and
Iceland. The key determinants of our results of operations and cash flow from operations are as follows:
•
•
the price of primary aluminum, which is based on the London Metal Exchange (the "LME") and other exchanges,
plus any regional delivery premiums and value-added product premiums;
the cost of goods sold, the principal components of which are electrical power, alumina, carbon products and labor,
which in aggregate exceed 75% of our cost of goods sold; and
• our production volume.
Pricing of aluminum
Primary aluminum is an internationally traded commodity and its price is effectively determined on the LME and other
exchanges, plus any regional delivery premiums and value-added product premiums. Because primary aluminum is a global
commodity, the price for aluminum can be volatile and subject to many factors beyond our control. This price volatility is
influenced primarily by the global supply-demand balance and other factors such as speculative activities by market
participants, production activities by competitors and political and economic conditions, as well as production costs in major
production regions. Increases or decreases in primary aluminum prices result in increases and decreases in our revenues
(assuming all other factors are unchanged). Information regarding financial contracts is included in Note 2. Related party
transactions.
22
The historic volatility of the price of aluminum is reflected in the chart below:
During 2017, the average LME price for primary aluminum was $1,968 per tonne, compared to $1,604 per tonne in 2016,
and $1,663 in 2015. The average U.S. Midwest premium increased from $169 per tonne in 2016 to $199 per tonne in
2017. European Duty Paid Premiums showed similar price increases. The increase in the LME price for primary aluminum in
2017 was driven, in part, by supply side reforms and production curtailments in China. However, the extent to which these
reforms will be enforced and, as a result, whether the curtailed production will continue to remain offline remains unclear.
Continued over production and the improper export of heavily subsidized aluminum products may continue to materially
disrupt world aluminum markets.
Our results generally reflect the average LME price for primary aluminum on a two-month lag basis.
Energy, Key Supplies and Raw Materials
Our operating costs are significantly impacted by changes in the prices of the materials used in the production of
aluminum, including electrical power, alumina and carbon products. Because we sell our products based principally on the
LME price for primary aluminum, regional delivery premiums and value-added product premiums, we cannot pass on increased
production costs to our customers. Although we attempt to mitigate the effects of price fluctuations from time to time through
the use of various fixed-price commitments, financial instruments and also by negotiating LME-based pricing in some of our
raw materials and electrical power contracts, these efforts also limit our ability to take advantage of favorable changes in the
market prices for primary aluminum or raw materials and may affect our financial position, results of operations and cash
flows.
In 2017, increases in costs for certain of our key raw materials largely outpaced the increases in the aluminum price.
The alumina index price, for example, averaged approximately $354 per tonne for 2017 and reached a high of $484 in October
2017. In comparison, the alumina index price averaged approximately $254 per tonne for 2016. We saw similar increases in the
costs of calcined petroleum coke and liquid pitch. There is typically a one-to-three month lag on cost utilization for alumina
and certain of our other key raw materials depending on the terms of our contracts, the timing of shipments and inventory
levels.
23
Electrical power represents our single largest operating cost. As a result, the availability of reliable electrical power at
competitive prices is critical to the profitability of our operations. Currently, our Hawesville and Sebree plants receive all of
their electricity requirements under market-based power agreements and our Mt. Holly plant receives 75% of its electricity
requirements under a market-based contract. Our Grundartangi plant is also currently supplied power at prices linked to the
LME price for aluminum, however, beginning in November of 2019, approximately 30% of our power requirements at
Grundartangi will be priced linked to the market price for power in the Nord Pool power market. Market-based energy prices
are driven in large part by coal and natural gas prices and weather-influenced electric loads. In 2017, both coal and natural gas
prices were relatively low, weather conditions were moderate and the market-based energy prices we realized under these
agreements were substantially below the cost-based utility rate that the smelters would otherwise have paid.
Mt. Holly is currently required to purchase 25% of its power requirements from Santee Cooper at a standard cost-based
industrial rate, which is the highest rate for power paid by any U.S. smelter and substantially higher than the rate Mt. Holly
pays for market power. Mt. Holly's inability to access the open market for 100% of its power requirements significantly
impacts its ability to be competitive in the aluminum industry and puts its continued operation at risk. As a result of such
uncompetitive power prices, Mt. Holly has already curtailed 50% of its production capacity. We are currently in litigation
against Santee Cooper seeking damages and injunctive relief, including the ability to purchase 100% of Mt. Holly's power from
the open market. See Item 1A. Risk Factors — "If we are unable to enter into a long-term, market-based, power arrangement
for Mt. Holly, we may choose, or be forced, to further curtail operations at the plant."
Production/Shipment Volumes
Shipment volume is another key determinant of our financial results. In normal circumstances, our facilities operate at or
near capacity, and fluctuations in volume, other than through acquisitions or expansions, are generally small. Due to significant
declines in the price of aluminum, the Hawesville smelter was curtailed in the fourth quarter of 2015 and continues to operate at
approximately 40% of its capacity. The Mt. Holly smelter has also curtailed approximately 50% of its capacity due to
uncompetitive power prices imposed by the utility in South Carolina.
The following table sets forth, for the periods indicated, the shipment volumes and revenues for primary aluminum shipments:
SHIPMENTS - PRIMARY ALUMINUM
United States
Iceland
Total (1)
Tonnes
Revenue $
Tonnes
Revenue $
Tonnes
Revenue $
(dollars in millions)
2017
2016
2015
425,669
$
422,139
607,715
929.6
799.2
1,345.9
317,529
$
311,686
314,243
650.7
510.2
576.2
743,198
$
733,825
921,958
1,580.3
1,309.4
1,922.1
(1) Excludes scrap aluminum sales
U.S. shipments for 2017 and 2016 were lower than 2015 reflecting the production curtailments at Hawesville and Mt.
Holly. The increase in Iceland production from 2015 to 2017 reflects our multi-year expansion project. Any adverse changes in
the conditions that affect shipment volumes could have a material adverse effect on our results of operations and cash flows.
Results of Operations
The following discussion for the years ended December 31, 2017 and 2016 reflects the operations at Hawesville and Mt.
Holly running at approximately 40% and 50% of full capacity, respectively.
Year Ended December 31, 2017 Compared to Year Ended December 31, 2016
Net sales: Net sales for the twelve months ended December 31, 2017 improved $270.0 million compared to the same
period in 2016, driven by higher price realizations of $264.5 million primarily resulting from increases in the LME price for
primary aluminum, an increase due to a shift from toll to direct sales of $24.4 million and an increase in shipment volumes of
$17.7 million, partially offset by unfavorable product mix and product premiums of $36.6 million reflecting a heavier mix of
sow and molten product in 2017 compared to 2016 and a decrease in value-added product premiums year over year.
24
Gross profit: Gross profit for the twelve months ended December 31, 2017 improved $139.6 million compared to the
same period in 2016, driven primarily by higher price realizations of $264.5 million, favorable operating expenses of $13.6
million and favorable volume of $1.4 million, partially offset by unfavorable raw material prices of $88.2 million, unfavorable
power prices of $35.2 million ($19.6 million of which relates to increases in Iceland power prices, which are linked to the
LME), unfavorable product mix and product premiums of $16.2 million and other of $0.3 million.
Selling, general and administrative expenses: Selling, general and administrative expenses increased $5.2 million
compared to 2016, due primarily to an increase in stock compensation expense of $2.9 million reflecting our higher stock price,
an increase in professional fees of $2.9 million related to spending on several corporate projects including a multi-year upgrade
in our ERP systems and relocating our IT support group to be closer to a large talent pool, partially offset by an other
postretirement benefits ("OPEB") curtailment gain of $0.4 million and other of $0.2 million.
Helguvik (gains) losses: During 2017, we extinguished a portion of our contractual commitments associated with the
construction of the Helguvik project. Such extinguishment resulted in a gain of $7.3 million recognized in Helguvik (gains)
losses in the consolidated statements of operations.
Ravenswood (gains) losses: In 2017, the Ravenswood retiree medical class action lawsuit was settled. As a result, we
recognized a non-cash gain of $5.5 million reflecting the present value discount of the original settlement agreement of $23
million which was recorded in 2016 - see Note 14. Commitments and contingencies. Also in 2016, we recorded an impairment
charge of $3.8 million based on our agreement to sell our net assets in Ravenswood - see Note 3. Helguvik and Ravenswood
gains and losses.
Net (gain) loss on forward and derivative contracts: In 2017, we recognized losses of $16.5 million primarily related to
LME fixed forward financial sales contracts that were entered into in early 2016 for shipments through December 31, 2017; the
losses were driven by the increase in the LME during 2017. In 2016, we recorded gains of $3.5 million primarily related to
LME fixed forward financial sales contracts that were also entered into in early 2016 for shipments through December 31,
2016.
Income tax expense: We have a valuation allowance against all of our U.S. and certain foreign tax assets. The increase in
tax expense primarily relates to an increase in earnings of certain of our foreign entities that are not subject to a valuation
allowance, while entities that are subject to valation allowance are unable to recognize a tax benefit for their losses.
Year Ended December 31, 2016 Compared to Year Ended December 31, 2015
Net sales: Net sales decreased $630.8 million compared to 2015. Net sales were unfavorably impacted by $400.7 million
from decreases in shipment volumes resulting from production curtailments announced in the fourth quarter of 2015. Net sales
were also unfavorably impacted by $230.1 million compared to 2015 due to lower price realization from a significant decrease
in the LME price of aluminum and regional premiums.
Gross profit: Gross profit decreased by $52.4 million compared to 2015. During 2016, gross profit decreased primarily
due to lower price realization of $230.1 million along with a $5.2 million adverse impact from lower shipment volume
associated with curtailed production at Hawesville and Mt. Holly. These factors were partially offset by favorable alumina
pricing of $122.5 million which included the impact of lower of cost or net realizable value ("NRV") adjustments, favorable
carbon costs of $41.0 million primarily related to increases in carbon production at Vlissingen and lower coke prices, the
impact of the labor disruption at Hawesville in 2015 of $13.1 million, favorable power prices of $2.0 million and favorable
plant operating results of $6.3 million primarily related to reductions in pot lining expenses.
Selling, general and administrative expenses: Selling, general and administrative expenses decreased by $1.8 million
compared to 2015, primarily due to decreases in head count and associated employee benefits for 2016.
Helguvik (gains) losses: On November 30, 2016 we received a binding arbitration ruling stating that the Helguvik power
contract with HS was no longer in force. As a result, we concluded that the lack of a power agreement for the entirety of the
project was an indicator of impairment. Further, we concluded that the asset value was no longer recoverable and recorded an
impairment charge of $152.2 million. See Note 3. Helguvik and Ravenswood gains and losses to the consolidated financial
statements included herein for additional information.
Ravenswood (gains) losses: During 2015, we recorded an impairment charge of $30.9 million related to the permanent
closure of our Ravenswood, West Virginia aluminum smelter. During 2016, we recorded an additional impairment charge of
25
$3.8 million based on our agreement to sell essentially all of the Ravenswood assets. Also during 2016, we recorded a $23.0
million charge related to an agreement to settle a Ravenswood retiree medical class action lawsuit - see Note 14. Commitments
and contingencies. See Note 3. Helguvik and Ravenswood gains and losses to the consolidated financial statements included
herein for additional information.
Unrealized gain on fair value of contingent consideration: In 2015, we recorded unrealized gains of $18.3 million on
the fair value of contingent consideration related to our acquisition of Mt. Holly. The contingent consideration was settled in
2016 resulting in the seller paying us $12.5 million.
Income tax expense: We have a valuation allowance against all of our U.S. and certain foreign deferred tax assets. The
period to period differences in income tax expense are primarily due to the change in earnings of certain of our foreign entities
that are not subject to a valuation allowance while the entities that are subject to a valuation allowance are unable to recognize a
tax benefit for their losses.
BHH Impairment: In conjunction with our Vlissingen carbon anode capacity expansion, which we completed in the
fourth quarter of 2015, we made the decision to pursue an exit from our investment in BHH. As a result of this activity, we
determined that the value of our investment in BHH has declined below its carrying value and that this loss in value is other
than a temporary decline. As a result, we recorded a charge of $11.6 million in 2015.
Liquidity and Capital Resources
Our principal sources of liquidity are available cash, cash flow from operations and borrowing capacity under our existing
revolving credit facilities. We have also raised capital in the past through the public equity and debt markets, and we regularly
explore various other financing alternatives. Our principal uses of cash include the funding of operating costs (including post-
retirement benefits), debt service requirements, the funding of capital expenditures, investments in our growth activities and in
related businesses, working capital and other general corporate requirements. We believe that cash provided from operations
and financing activities will be adequate to cover our operations and business needs over the next 12 months.
Available Cash
Our available cash and cash equivalents balance at December 31, 2017 was $167.2 million compared to $132.4 million at
December 31, 2016.
Sources and Uses of Cash
Our statements of cash flows for the twelve months ended December 31, 2017, 2016 and 2015 are summarized below:
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Change in cash and cash equivalents
Twelve months ended December 31,
2017
2016
2015
(dollars in thousands)
$
$
51,759
(17,355)
404
$
38,173
(21,163)
—
$
34,808
$
17,010
$
31,866
(43,363)
(36,352)
(47,849)
Net cash flow provided by operating activities for 2017 was $51.8 million, compared to $38.2 million for 2016. The
increase in cash provided by operating activities was driven by an increase in earnings primarily due to higher realized prices
year-over-year, partially offset by cash used to fund increases in working capital due to higher raw material costs and to support
an increase in trade accounts receivable resulting from longer payment terms as we increased direct sales to customers other
than Glencore.
Net cash flow provided by operating activities for 2016 was $38.2 million, compared to $31.9 million for 2015. The
increase in cash provided by operating activities was driven primarily by the receipt of $12.5 million in 2016 from Alcoa to
settle the earn out provision related to our Mt. Holly acquisition and the pension contribution of $34.6 million in 2015 which
did not repeat and was partially offset by lower earnings excluding non-cash items.
26
Our net cash used in investing activities for 2017 was $17.4 million, compared to $21.2 million for 2016. While 2017
capital expenditures increased $9.9 million over 2016, this was more than offset by $13.6 million of proceeds received in 2017
from the sale of our Ravenswood facility.
Our net cash used in investing activities for 2016 was $21.2 million compared to $43.4 million for 2015. The decrease in
cash used was primarily due to reduced capital spending in 2016 as compared to 2015.
Our net cash provided by financing activities for 2017 and 2016 was essentially flat for both years. In 2015, cash used in
financing activities was $36.4 million and related to our share repurchase program.
Availability Under Our Credit Facilities
We and certain of our direct and indirect subsidiaries are party to a senior secured revolving credit facility, dated May 24,
2013, as amended, with a syndicate of lenders which provides for borrowings of up to $150.0 million in the aggregate,
including up to $110.0 million under a letter of credit sub-facility (the "U.S. revolving credit facility"). Any letters of credit
issued and outstanding under the U.S. revolving credit facility reduce our borrowing availability on a dollar-for-dollar basis.
We have also entered into, through our wholly-owned subsidiary Nordural Grundartangi ehf, a $50.0 million revolving credit
facility, dated November 27, 2013 (the "Iceland revolving credit facility"). Century's U.S. revolving credit facility matures in
June 2020 and our Iceland revolving credit facility matures in November 2020.
The availability of funds under our credit facilities is limited by a specified borrowing base consisting of certain accounts
receivable, inventory and qualified cash deposits which meet the lenders' eligibility criteria. As of December 31, 2017, our
credit facilities had no amounts outstanding and approximately $159.8 million of net availability after consideration of our
outstanding letters of credit. Curtailments of production capacity decrease our borrowing base by reducing our accounts
receivable and inventory balances. We may borrow and make repayments under our credit facilities in the ordinary course
based on a number of factors, including the timing of payments from our customers and payments to our suppliers.
As of December 31, 2017, we had approximately $38 million of letters of credit outstanding under our U.S. revolving
credit facility with 55% related to our domestic power commitments and the remainder securing certain debt and workers’
compensation commitments.
Our credit facilities contain customary covenants, including restrictions on mergers and acquisitions, indebtedness,
affiliate transactions, liens, dividends and distributions, dispositions of collateral, investments and prepayments of indebtedness,
including, in the U.S., a springing financial covenant that requires us to maintain a fixed charge coverage ratio of at least 1.1 to
1.0 any time availability under the U.S. revolving credit facility is less than or equal to $15.0 million. Our Icelandic credit
facility also contains a covenant that requires Grundartangi to maintain a minimum equity ratio. As of December 31, 2017, we
were in compliance with all such covenants.
Senior Secured Notes
We have $250 million in 7.5% senior secured notes payable that will mature on June 1, 2021 ("2021 Notes"). Interest on
the 2021 Notes is payable semi-annually.
The indenture governing the 2021 Notes contains customary covenants which may limit our ability, and the ability of
certain of our subsidiaries, to: (i) incur additional debt; (ii) incur additional liens; (iii) pay dividends or make distributions in
respect of capital stock; (iv) purchase or redeem capital stock; (v) make investments or certain other restricted payments;
(vi) sell assets; (vii) issue or sell stock of certain subsidiaries; (viii) enter into transactions with shareholders or affiliates; and
(ix) effect a consolidation or merger.
Contingent Commitments
We have a contingent obligation in connection with the “unwind” of a contractual arrangement between CAKY, Big
Rivers and a third party and the execution of a long-term cost-based power contract with Kenergy, a member of a cooperative of
Big Rivers, in July 2009. This contingent obligation consists of the aggregate payments made to Big Rivers by the third party
on CAKY’s behalf in excess of the agreed upon base amount under the long-term cost-based power contract with Kenergy. As
of December 31, 2017, the principal and accrued interest for the contingent obligation was $22.4 million, which was fully offset
by a derivative asset. We may be required to make installment payments for the contingent obligation in the future. These
payments are contingent based on the LME price of primary aluminum and the level of Hawesville’s operations. Based on the
27
LME forward market at December 31, 2017 and management’s estimate of the LME forward market beyond the quoted market
period, we have assessed that we will not be required to make payments on the contingent obligation during the term of the
agreement through 2028. There can be no assurance that circumstances will not change thus accelerating the timing of such
payments.
Employee Benefit Plan Contributions
In 2013, we entered into a settlement agreement with the PBGC regarding an alleged "cessation of operations" at our
Ravenswood facility as a result of the 2009 curtailment of operations at the facility. Pursuant to the terms of the agreement, we
will make additional contributions (above any minimum required contributions) to our defined benefit pension plans over the
term of the agreement. Under certain circumstances, in periods of lower primary aluminum prices relative to our cost of
operations, we are able to defer one or more of these payments, but would then be required to provide the PBGC with
acceptable security for deferred payments. We made contributions pursuant to this agreement of $1.1 million in March 2015
and $6.7 million in 2013. We did not make any contributions in 2014, 2016 or 2017. We have elected to defer other payments
under the PBGC agreement and have provided the PBGC with the appropriate security. The remaining contributions under this
agreement are approximately $9.6 million.
Other Items
In 2011, our Board of Directors approved a $60 million common stock repurchase program and subsequently increased
this program by $70 million in the first quarter of 2015. Under the program, Century is authorized to repurchase up to $130
million of our outstanding shares of common stock, from time to time, on the open market at prevailing market prices, in block
trades or otherwise. The timing and amount of any shares repurchased will be determined by our management based on its
evaluation of market conditions, the trading price of our common stock and other factors. Through December 31, 2017, we
have expended approximately $86.3 million under the program. As of February 28, 2017, we had $43.7 million remaining
under the repurchase program authorization. The repurchase program may be expanded, suspended or discontinued by our
Board, in its sole discretion, at any time.
In November 2009, Century Aluminum of West Virginia ("CAWV") filed a class action complaint for declaratory
judgment against the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers
International Union ("USW"), the USW’s local and certain CAWV retirees, individually and as class representatives ("CAWV
Retirees"), seeking a declaration of CAWV’s rights to modify/terminate retiree medical benefits. Later in November 2009, the
USW and representatives of a retiree class filed a separate suit against CAWV, Century Aluminum Company, Century
Aluminum Master Welfare Benefit Plan, and various John Does with respect to the foregoing. On August 18, 2017, the District
Court for the Southern District of West Virginia approved a settlement agreement in respect of these actions. Under the terms of
the settlement agreement, CAWV agreed to make payments into a trust for the benefit of the CAWV Retirees in the aggregate
amount of $23 million over the course of 10 years. Upon approval of the settlement, we paid $5 million to the aforementioned
trust in September 2017 and recognized a gain of $5.5 million to arrive at the then net present value of the $12.5 million. As of
December 31, 2017, we recorded $12.9 million in accrued and other current liabilities as well as other liabilities. CAWV has
agreed to pay the remaining amounts under the settlement agreement in annual increments of $2 million for nine years. We
utilized and expect to continue utilizing cash flows from operations to fund the payments associated with this settlement.
See Note 14. Commitments and contingencies to the consolidated financial statements included herein for additional
information.
We are also a defendant in several other actions relating to various aspects of our business. While it is impossible to
predict the ultimate disposition of any litigation, we do not believe that any of these lawsuits, either individually or in the
aggregate, will have a material adverse effect on our financial condition, results of operations or liquidity. See Note 14.
Commitments and contingencies to the consolidated financial statements included herein for additional information.
Capital Resources
We intend to finance our future recurring capital expenditures from available cash, cash flow from operations and
available borrowing capacity under our existing revolving credit facilities. For major investment projects we would likely seek
financing from various capital and loan markets, and may potentially pursue the formation of strategic alliances. We may be
unable, however, to issue additional debt or equity securities, or enter into other financing arrangements on attractive terms, or
at all, due to a number of factors including a lack of demand, unfavorable pricing, poor economic conditions, unfavorable
interest rates, or our financial condition or credit rating at the time. Future uncertainty in the U.S. and international markets and
economies may adversely affect our liquidity, our ability to access the debt or capital markets and our financial condition.
28
Capital expenditures for the year ended December 31, 2017 were $31.8 million. We estimate our total capital spending in
2018 will be approximately $30.0 million, primarily related to our ongoing maintenance and investment projects at our
smelters.
Critical Accounting Estimates
Our significant accounting policies are described in Note 1. Summary of significant accounting policies to the
consolidated financial statements. The preparation of the financial statements requires that management make judgments,
assumptions and estimates in applying these accounting policies. Those judgments are normally based on knowledge and
experience about past and current events and on assumptions about future events. Critical accounting estimates require
management to make assumptions about matters that are highly uncertain at the time of the estimate and a change in these
estimates may have a material impact on our financial position or results of operations. Significant judgments and estimates
made by our management include expenses and liabilities related to inventories, pensions and OPEB, deferred tax assets and
property, plant and equipment. Our management has discussed the development and selection of these critical accounting
estimates with the audit committee of our board of directors and the audit committee has reviewed our disclosure.
Inventories
Our inventories are stated at lower of cost or net realizable value.
Our estimate of the market value of our inventories involves establishing a net realizable value for both finished goods
and the components of inventory that will be converted to finished goods, raw materials and work in process. This requires
management to use its judgment when making assumptions about future selling prices and the costs to complete our inventory
during the period in which it will be sold.
Our assumptions are subject to inherent uncertainties given the volatility surrounding the market price for primary
aluminum sales and the market price for one of our major inputs, electrical power.
Although we believe that the assumptions used to estimate the market value of our inventory are reasonable, actual market
conditions at the time our inventory is sold may be more or less favorable than management’s current estimates.
Pension and Other Postretirement Benefit Liabilities
We sponsor several pension and other postretirement benefit plans. Our liabilities under these defined benefit plans are
determined using methodologies that involve several actuarial assumptions, the most significant of which are the discount rate,
health care cost inflation rate and the long-term rate of return on plan assets. We review our actuarial assumptions on an annual
basis and make modifications to the assumptions when appropriate.
Discount Rate Selection
We select a discount rate for purposes of measuring obligations under defined benefit plans by matching cash flows
separately for each plan to the yields on high-quality zero coupon bonds. We use the Ryan Above Median Yield Curve (the
"Ryan Curve"). We believe the projected cash flows used to determine the Ryan Curve rate provide a good approximation of
the timing and amounts of our defined benefit payments under our plans and no adjustment to the Ryan Curve rate has been
made.
Weighted Average Discount Rate Assumption for:
Pension plans
OPEB plans
2017
3.69%
3.66%
2016
4.19%
4.20%
29
A change of a half percentage point in the discount rate for our defined benefit plans would have the following effects on
our obligations under these plans as of December 31, 2017:
Effect of changes in the discount rates on the Projected Benefit Obligations for:
Pension plans
OPEB plans
Medical Trend Rate
50 basis point
increase
50 basis point
decrease
$
(dollars in millions)
(8.3) $
(6.2)
6.1
6.6
Measurement of our postretirement benefit obligations requires the use of several assumptions about factors that will
affect the amount and timing of future benefit payments. The assumed health care cost trend rates are the most critical estimates
for measurement of the postretirement benefit obligation. Changes in the health care cost trend rates have a significant effect
on the amounts reported for the health care benefit obligation.
Medical cost inflation is initially estimated to be 7.0% and 7.75% for pre and post-65 participants, respectively, declining
to 4.5% over thirteen years and thereafter. A one-percentage-point change in the assumed health care cost trend rate would
have had the following effects in 2017:
Effect on total of service and interest cost components
Effect on accumulated postretirement benefit obligation
Long-term Rate of Return on Plan Assets Assumption
1%
Increase
1%
Decrease
(dollars in millions)
$
0.8
$
12.5
(0.7)
(10.6)
Our expected long-term rate of return on plan assets is derived from our asset allocation strategies and anticipated future
long-term performance of individual asset classes. Our analysis gives consideration to recent plan performance and historical
returns; however, the assumptions are primarily based on long-term, prospective rates of return. The weighted average long-
term rate of return on plan assets for our defined benefit pension plans is 6.82% for 2017.
Based on information provided by independent actuaries and other relevant sources, the Company believes that the
assumptions used to estimate expenses, assets and liabilities of pensions and other postretirement benefits are reasonable;
however, changes in these assumptions could impact the Company’s financial position, results of operations or cash flows.
Deferred Income Tax Assets
We regularly assess the likelihood that deferred tax assets will be recovered from future taxable income. To the extent we
believe that it is more likely than not that a deferred tax asset will not be realized, a valuation allowance is established. The
amount of a valuation allowance is based upon our best estimate of our ability to realize the net deferred tax assets. We have a
valuation allowance of $608 million recorded for all of our U.S. deferred tax assets and a portion of our Icelandic deferred tax
assets as of December 31, 2017.
Property, Plant and Equipment Impairment
We review our property, plant and equipment for impairment whenever events or circumstances indicate that the carrying
amount of these assets (asset group) may not be recoverable. The carrying amount of the assets (asset group) is not recoverable
if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the assets (asset
group). In that case, an impairment loss would be recognized for the amount by which the carrying amount exceeds the fair
value of the assets (asset group), with the fair value determined using a discounted cash flow calculation. These estimates of
future cash flows include management’s assumptions about the expected use of the assets (asset group), the remaining useful
life, expenditures to maintain the service potential, market and cost assumptions.
30
Determination as to whether and how much an asset is impaired involves significant management judgment involving
highly uncertain matters, including estimating the future sales volumes, future selling prices and costs, alternative uses for the
asset, and estimated proceeds from the disposal of the asset.
Other Contingencies
We are a defendant in several actions relating to various aspects of our business. While it is impossible to predict the
ultimate disposition of any litigation, we do not believe that any of these lawsuits, either individually or in the aggregate, will
have a material adverse effect on our financial condition, results of operations or liquidity. See Note 14. Commitments and
contingencies to the consolidated financial statements included herein for additional information.
Recently Issued Accounting Standards Updates
Information regarding recently issued accounting pronouncements is included in Note 1. Summary of significant
accounting policies to the consolidated financial statements included herein.
Contractual Obligations
In the normal course of business, we have entered into various contractual obligations that will be settled in cash. These
obligations consist primarily of long-term debt obligations and purchase obligations. The expected future cash flows required
to meet these obligations through the year 2027 are shown in the table below. More information is available about these
contractual obligations in the notes to the consolidated financial statements included herein.
Payments Due by Period
(dollars in millions)
Long-term debt (1)
Estimated interest payments (2)
Operating lease obligations (3)
Purchase obligations (4)
Other long-term liabilities (5)
Total
Total
2018
2019
2020
2021
2022
Thereafter
$
258
$
— $
— $ — $
250
$ — $
66
19
2,778
32
19
2
875
2
19
2
595
13
19
2
403
7
8
2
404
6
—
2
114
3
$ 3,153
$
898
$
629
$
431
$
670
$
119
$
8
1
9
387
1
406
(1) Long-term debt includes principal repayments on our 2021 Notes and the IRBs. Payments are based on the assumption
that all outstanding debt instruments will remain outstanding until their respective due dates. Based on the LME forward
market prices for primary aluminum at December 31, 2017 and management's estimate of the LME forward market for
periods beyond the quoted periods, we have assessed that we will not have any payment obligations for the contingent
obligation through the term of the agreement, which expires in 2028. See "Liquidity and Capital Resources - Contingent
Commitments".
(2) Estimated interest payments on our long-term debt assume that all outstanding debt instruments will remain outstanding
until their respective due dates. Our estimated future interest payments for any debt with a variable rate are based on the
assumption that the December 31, 2017 rate for that debt continues until the respective due date. We assume that no
interest payments on the contingent obligation will be paid through the term of agreement, see above.
(3) Operating leases include long-term leases for land, productive facilities and office space.
(4) Purchase obligations include long-term alumina and power contracts, excluding market-based power and raw material
requirements contracts. For contracts with LME-based pricing provisions, including our long-term Icelandic power
contracts, we assumed a LME price using the LME forward curve as of December 31, 2017.
(5) Other long-term liabilities include asset retirement obligations. Asset retirement obligations are primarily estimated
disposal costs for spent potliner used in the reduction cells of our domestic smelters.
Material Commitments
We also have outstanding commitments related to pension, SERB, OPEB and workers compensation obligations. As of
December 31, 2017, estimated future payments related to these obligations through the year 2027 amount to
approximately $206 million, $17 million, $76 million and $10 million, respectively.
31
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Commodity Price Sensitivity
We are exposed to price risk for primary aluminum. From time to time, we may manage our exposure to fluctuations in
the price of primary aluminum through financial instruments designed to protect our downside price risk exposure. As of
December 31, 2017, we had open LME forward financial sales contracts to fix the forward LME price of approximately 3,960
tonnes of primary aluminum which contracts settle monthly, on a ratable basis, from November 2019 through December 31,
2020. With respect to these LME forward contracts, we were in a liability position at December 31, 2017 with a fair value of
approximately $0.8 million.
From time to time, we also enter into financial contracts to offset fixed price sales arrangements with certain of our
customers. As of December 31, 2017, we had open positions related to such arrangements of 8,964 tonnes of primary aluminum
which settle on various dates up to and including December 2018. These financial contracts have equal and offsetting asset and
liability positions, resulting in a net zero fair value.
We are also exposed to price risk for alumina which is a large component of our cost of goods sold. We may from time to
time manage our exposure to fluctuations in our alumina costs by purchasing certain of our alumina requirements under supply
contracts with prices tied to the same indices as our aluminum sales contracts (the LME price of primary aluminum). Currently,
all of our alumina contracts are priced based on a published alumina index.
Our risk management activities do not include any trading or speculative transactions.
Market-Based Power Price Sensitivity
Market-Based Electrical Power Agreements
Hawesville and Sebree have market-based electrical power agreements pursuant to which EDF and Kenergy purchase
market-based electrical power on the open market and pass it through to Hawesville and Sebree at MISO pricing, plus
transmission and other costs incurred by them. A substantial portion of Mt. Holly's electric power requirements was also
supplied at rates based on natural gas prices. See Part I, Item 1, "Business - Key Production Costs - Electrical Power Supply
Agreements" for additional information about these market-based power agreements.
Power is supplied to Grundartangi from hydroelectric and geothermal sources under long-term power purchase
agreements. These power purchase agreements, which will expire on various dates from 2023 through 2036 (subject to
extension), primarily provide power at LME-based variable rates. However, Grundartangi has agreed to pay for a portion of its
power from November 1, 2019 through December 31, 2023 at prices linked to the price for power in the Nord Pool power
market.
Electrical Power Price Sensitivity
With the movement toward market-based power supply agreements, we have increased our electrical power price risk for
our operations, whether due to fluctuations in the price of power available on the MISO or Nord Pool power markets or the
price of natural gas. Power represents our single largest operating cost, so changes in the price and/or availability of market
power could significantly impact the profitability and viability of our operations. Transmission line outages, problems with grid
stability or limitations on energy import capability could also increase power prices, disrupt production through pot instability
or force a curtailment of all or part of the production at these facilities. In addition, indirect factors that lead to power cost
increases, such as any increasing prices for natural gas or coal, fluctuations in or extremes in weather patterns or new or more
stringent environmental regulations may severely impact our financial condition, results of operations and liquidity.
From time to time, we may manage our exposure to fluctuations in the market price of power through financial
instruments designed to protect our downside risk exposure. During 2017, we entered into financial contracts to fix the forward
price of approximately 4% of Grundartangi's total power requirements for the period November 1, 2019 through December 31,
2020 (the “power price swaps”). As of December 31, 2017, we had an open asset position of 256,200 MWh related to the power
price swaps of $1.3 million.
The consumption shown in the table below is at normal capacity levels and does not reflect partial production
curtailments.
32
Electrical power price sensitivity by location:
Hawesville
Sebree Mt. Holly Grundartangi
Total
Expected average load (in megawatts ("MW"))
482
385
400
537
1,804
Annual expected electrical power usage (in
megawatt hours ("MWh"))
Annual cost impact of an increase or decrease of
$1 per MWh (in thousands)
$
4,222,320
3,372,600
3,504,000
4,701,200
15,800,120
4,200
$
3,400
$
3,500
$
4,700
$
15,800
As of December 31, 2017, the operations at Hawesville and Mt. Holly are running at approximately 40% and 50% of full
capacity, respectively.
Foreign Currency
We are exposed to foreign currency risk due to fluctuations in the value of the U.S. dollar as compared to the Iceland
krona ("ISK"), the euro, the Chinese renminbi and other currencies. Grundartangi’s labor costs, part of its maintenance costs
and other local services are denominated in ISK and a portion of its anode costs are denominated in euros and Chinese
renminbi. We have deposits denominated in ISK in Icelandic banks; in addition, our estimated payments of Icelandic income
taxes and any associated refunds are denominated in ISK. Further, Vlissingen's labor costs, maintenance costs and other local
services are denominated in euros. As a result, an increase or decrease in the value of those currencies relative to the U.S. dollar
would affect Grundartangi’s operating margins.
We may manage our exposure by entering into foreign currency forward contracts or option contracts for forecasted
transactions and projected cash flows for foreign currencies in future periods. As of December 31, 2017, we had no foreign
currency forward contracts outstanding.
Natural Economic Hedges
Any analysis of our exposure to the commodity price of aluminum should consider the impact of natural hedges provided
by certain contracts that contain pricing indexed to the LME price for primary aluminum. In 2017, a substantial portion of
Grundartangi’s electrical power requirements were indexed to the LME price for primary aluminum and provide a natural
hedge for a portion of our production.
Risk Management
Any metals, power, natural gas and foreign currency risk management activities are subject to the control and direction of
senior management within guidelines established by Century’s Board of Directors. These activities are regularly reported to
Century’s Board of Directors.
33
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the Years Ended December 31, 2017, 2016 and 2015
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2017, 2016 and 2015
Consolidated Balance Sheets at December 31, 2017 and 2016
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2017, 2016 and 2015
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015
Notes to the Consolidated Financial Statements
Page
35
37
38
39
40
41
42
34
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Century Aluminum Company
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Century Aluminum Company and subsidiaries (the
“Company”) as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income
(loss), shareholders’ equity, and cash flows, for each of the three years in the period ended December 31, 2017, and the related
notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and
its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles
generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 28, 2018, expressed an unqualified opinion on the Company's internal control over
financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due
to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 28, 2018
We have served as the Company's auditor since 1992.
35
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Century Aluminum Company
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Century Aluminum Company and subsidiaries (the
"Company") as of December 31, 2017, based on criteria established in Internal Control-Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained,
in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established
in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended December 31, 2017, of the Company and our
report dated February 28, 2018, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying management report
on Internal Control over Financial Reporting in Item 9A. Our responsibility is to express an opinion on the Company's internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed 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. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 28, 2018
36
CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
NET SALES:
Related parties
Other customers
Total net sales
Cost of goods sold
Gross profit (loss)
Selling, general and administrative expenses
Helguvik (gains) losses
Ravenswood (gains) losses
Other operating expense - net
Operating income (loss)
Interest expense
Interest income
Net (loss) gain on forward and derivative contracts
Unrealized gain on fair value of contingent consideration
Other (expense) income - net
Income (loss) before income taxes and equity in earnings of joint ventures
Income tax expense
Income (loss) before equity in earnings of joint ventures
BHH impairment
Equity in earnings of joint ventures
Net income (loss)
INCOME (LOSS) PER COMMON SHARE:
Basic
Diluted
Year Ended December 31,
2017
2016
2015
$ 1,198,076
$ 1,178,631
$ 1,867,711
391,004
140,463
82,146
1,589,080
1,319,094
1,949,857
1,460,475
128,605
45,446
(7,310)
(5,500)
2,111
93,858
(22,174)
1,397
(16,549)
—
(1,161)
55,371
(7,583)
47,788
—
792
48,580
1,330,136
(11,042)
40,264
152,220
26,830
3,857
(234,213)
(22,216)
758
3,487
—
1,319
(250,865)
(2,824)
(253,689)
—
1,274
$ (252,415) $
1,908,544
41,313
42,115
—
30,850
7,436
(39,088)
(21,954)
339
1,600
18,337
(356)
(41,122)
(9,276)
(50,398)
(11,584)
2,672
(59,310)
0.51
0.51
$
$
(2.90) $
(2.90) $
(0.68)
(0.68)
$
$
$
See notes to consolidated financial statements.
37
CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
Comprehensive income (loss):
Net income (loss)
Other comprehensive income (loss) before income tax effect:
Foreign currency cash flow hedges reclassified to net income
(loss)
Defined benefit plans and other postretirement benefits:
Net gain (loss) arising during the period
Prior service benefit arising during the period
Amortization of prior service benefit during the period
Amortization of net loss during the period
Other comprehensive income (loss) before income tax effect
Income tax effect
Other comprehensive income (loss)
Total comprehensive income (loss)
Year Ended December 31,
2017
2016
2015
$
48,580
$ (252,415) $ (59,310)
(186)
4,295
(186)
(7,192)
27,396
(4,950)
8,610
23,678
(1,527)
22,151
$
70,731
(9,522)
—
(2,675)
8,190
5,553
1,758
(8,351)
7,794
288
(1,531)
(1,243)
6,568
(1,536)
5,032
$ (253,658) $ (54,278)
See notes to consolidated financial statements.
38
CENTURY ALUMINUM COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
Cash and cash equivalents
Restricted cash
Accounts receivable - net
Due from affiliates
Inventories
Prepaid and other current assets
Assets held for sale
Total current assets
Property, plant and equipment - net
Other assets
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Accounts payable, trade
Due to affiliates
Accrued and other current liabilities
Accrued employee benefits costs
Industrial revenue bonds
Total current liabilities
Senior notes payable
Accrued pension benefits costs - less current portion
Accrued postretirement benefits costs - less current portion
Other liabilities
Deferred taxes
Total noncurrent liabilities
COMMITMENTS AND CONTINGENCIES (NOTE 14)
SHAREHOLDERS’ EQUITY:
Preferred stock (Note 6)
Common stock (Note 6)
Additional paid-in capital
Treasury stock, at cost
Accumulated other comprehensive loss
Accumulated deficit
Total shareholders’ equity
TOTAL
December 31,
2017
2016
$
167,211
$
132,403
848
43,071
10,366
317,469
14,709
—
553,674
971,916
56,051
1,050
12,432
16,651
233,563
22,210
22,313
440,622
1,026,285
73,420
$
1,581,641
$
1,540,327
$
$
89,931
20,369
61,398
11,004
7,815
190,517
248,153
38,929
112,996
57,927
103,476
561,481
94,960
15,368
50,100
10,917
7,815
179,160
247,699
49,493
126,355
72,026
108,939
604,512
1
947
2,517,385
(86,276)
(91,742)
(1,510,672)
829,643
1
944
2,515,131
(86,276)
(113,893)
(1,559,252)
756,655
$
1,581,641
$
1,540,327
See notes to consolidated financial statements.
39
CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands)
Preferred
stock
Common
stock
Additional
paid-in
capital
Treasury
stock, at
cost
Accumulated
other
comprehensive
loss
Accumulated
deficit
Total
shareholders’
equity
Balance, December 31, 2014
$
1
$
939
$ 2,510,261
$ (49,924) $
(117,682) $ (1,247,527) $
1,096,068
Net loss – 2015
Other comprehensive income
Repurchase of common stock
Share-based compensation
expense
Conversion of preferred stock
to common stock
—
—
—
—
—
—
—
—
1
2
—
—
—
—
—
(36,352)
3,372
(2)
—
—
—
(59,310)
(59,310)
5,032
—
—
—
—
—
—
—
5,032
(36,352)
3,373
—
Balance, December 31, 2015
$
1
$
942
$ 2,513,631
$ (86,276) $
(112,650) $ (1,306,837) $
1,008,811
Net loss – 2016
Other comprehensive loss
Share-based compensation
expense
Conversion of preferred stock
to common stock
—
—
—
—
—
—
—
2
—
—
1,502
(2)
—
—
—
—
—
(252,415)
(252,415)
(1,243)
—
—
—
—
—
(1,243)
1,502
—
Balance, December 31, 2016
$
1
$
944
$ 2,515,131
$ (86,276) $
(113,893) $ (1,559,252) $
756,655
Net income – 2017
Other comprehensive income
Share-based compensation
expense
Conversion of preferred stock
to common stock
—
—
—
—
—
—
2
1
—
—
2,255
(1)
—
—
—
—
—
48,580
48,580
22,151
—
—
—
—
—
22,151
2,257
—
Balance, December 31, 2017
$
1
$
947
$ 2,517,385
$ (86,276) $
(91,742) $ (1,510,672) $
829,643
See notes to consolidated financial statements.
40
CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
2016
2015
2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Unrealized gain on fair value of contingent consideration
Unrealized gain on contingent obligation
Lower of cost or NRV inventory adjustment
Depreciation and amortization
Helguvik (gains) losses
Ravenswood (gains) losses
BHH impairment
Pension and other postretirement benefits
Deferred income taxes
Stock-based compensation
Change in operating assets and liabilities:
Accounts receivable - net
Due from affiliates
Inventories
Prepaid and other current assets
Accounts payable, trade
Due to affiliates
Accrued and other current liabilities
Pension contribution - Mt. Holly
Ravenswood retiree legal settlement
Other - net
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment
Purchase of remaining interest in Mt. Holly smelter
Proceeds from sale of property, plant and equipment
Restricted and other cash deposits
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving credit facilities
Repayments under revolving credit facilities
Issuance of common stock
Repurchase of common stock
Net cash provided by (used in) financing activities
CHANGE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
$
48,580
$ (252,415) $
(59,310)
—
(1,411)
(1,073)
84,249
(7,310)
(5,500)
—
(1,772)
(4,610)
1,851
(30,639)
6,285
(67,534)
7,796
4,746
4,833
14,478
—
(5,000)
3,790
51,759
(31,839)
—
14,484
—
(17,355)
1,281
(1,281)
404
—
404
34,808
132,403
167,211
$
—
(1,411)
(660)
84,780
152,220
3,830
—
2,863
(893)
1,502
(2,957)
766
919
18,313
2,271
7,212
(3,900)
—
23,000
2,733
38,173
(21,944)
—
1,040
(259)
(21,163)
1,179
(1,179)
—
—
—
17,010
115,393
132,403
$
(18,337)
(1,411)
7,539
80,117
—
30,850
11,584
(4,991)
(178)
1,844
68,192
14,086
44,896
(144)
(60,583)
(12,216)
(31,540)
(34,595)
—
(3,937)
31,866
(54,700)
11,313
14
10
(43,363)
1,737
(1,737)
—
(36,352)
(36,352)
(47,849)
163,242
115,393
$
See notes to consolidated financial statements.
41
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Summary of significant accounting policies
Organization — Century Aluminum Company ("Century Aluminum," "Century," the "Company", "we", "us", "our" or
"ours") is a holding company, whose principal subsidiaries are Century Kentucky, Inc. (together with its subsidiaries, "CAKY"),
Nordural ehf ("Nordural"), Century Aluminum Sebree LLC ("Century Sebree") and Century Aluminum of South Carolina
("CASC"). CAKY operates a primary aluminum reduction facility in Hawesville, Kentucky ("Hawesville"). Nordural
Grundartangi ehf, a subsidiary of Nordural, operates a primary aluminum reduction facility in Grundartangi, Iceland
("Grundartangi"). Century Sebree operates a primary aluminum reduction facility in Robards, Kentucky ("Sebree"). CASC
operates a primary aluminum reduction facility in Goose Creek, South Carolina ("Mt. Holly"). Nordural Helguvik ehf, a
subsidiary of Nordural, owns a greenfield primary aluminum project in Helguvik, Iceland ("Helguvik" or the "Helguvik
project"), construction of which is currently curtailed.
In addition to our primary aluminum assets, our subsidiary, Century Vlissingen, owns and operates a carbon anode
production facility located in Vlissingen, the Netherlands ("Vlissingen"). We also own a 40% stake in Baise Haohai Carbon
Co., Ltd. ("BHH"), a joint venture that owns and operates a carbon anode and cathode facility located in the Guangxi Zhuang
Autonomous Region of south China. Carbon anodes are used in the production of primary aluminum and both BHH and
Vlissingen currently supply carbon anodes to Grundartangi.
As of December 31, 2017, Glencore owns 42.9% of Century’s outstanding common stock (47.4% on a fully-diluted basis
assuming the conversion of all of the Series A Convertible Preferred Stock) and all of our outstanding Series A Convertible
Preferred stock. See Note 6. Shareholders' equity for a full description of our outstanding Series A Convertible Preferred stock.
From time to time Century and Glencore enter into various transactions for the purchase and sale of primary aluminum,
purchase and sale of alumina, tolling agreements and certain forward financial contracts. See Note 2. Related party
transactions.
Basis of Presentation — The consolidated financial statements include the accounts of Century Aluminum Company and
our subsidiaries, after elimination of all intercompany transactions and accounts. Our interest in the BHH joint venture is
accounted for under the equity method on a one-quarter lag.
The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the
United States ("U.S. GAAP"). The preparation of financial statements in conformity with U.S. GAAP requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Revenue recognition — In connection with our sales agreement with Glencore, we invoice Glencore prior to physical
shipment of goods for substantially all production generated from each of our U.S. domestic smelters. For those sales, revenue
is recognized only when Glencore has specifically requested such treatment and has made a commitment to purchase the
product. The goods must be complete, ready for shipment and separated from other inventory with title and risk of ownership
passing to Glencore. We must retain no performance obligations. For all other shipments, including sales to Glencore from our
smelter in Iceland and our tolling agreement with Glencore (which expired in 2016), revenue is recognized when title and risk
of loss pass to the customer which is upon shipment.
Cash and Cash Equivalents — Cash and cash equivalents are comprised of cash, money market funds and short-term
investments having original maturities of three months or less. The carrying amount of cash equivalents approximates fair
value.
Accounts Receivable and Due from Affiliates — These amounts are net of an allowance for uncollectible accounts and
credit memos of $1,000 at December 31, 2017 and 2016.
Inventories — Our inventories are stated at the lower of cost or net realizable value, using the first-in, first-out ("FIFO")
and the weighted average cost method. Due to the nature of our business, our inventory values are subject to market price
changes and these changes can have a significant impact on cost of goods sold and gross profit in any period. Reductions in net
realizable value below cost basis at the end of a period will have an impact on our cost of goods sold as this inventory is sold in
subsequent periods.
42
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Property, Plant and Equipment — Property, plant and equipment is stated at cost. Additions and improvements are
capitalized. Asset and accumulated depreciation accounts are relieved for dispositions with resulting gains or losses included in
Other income (expense) – net. Maintenance and repairs are expensed as incurred. Depreciation of plant and equipment is
provided for by the straight-line method over the following estimated useful lives:
Building and improvements
Machinery and equipment
Technology and software
10 to 45 years
5 to 35 years
3 to 7 years
Impairment of long-lived assets — We evaluate our property, plant and equipment for potential impairment whenever events
or circumstances indicate that the carrying amount of these assets may not be recoverable. If deemed unrecoverable, an impairment
loss would be recognized for the amount by which the carrying amount exceeds the fair value of the assets. Impairment evaluation
and fair value is based on estimates and assumptions that take into account our business plans and a long-term investment horizon.
See Note 3. Helguvik and Ravenswood gains and losses and Note 2. Related party transactions for impairment losses recognized
in 2015 and 2016.
Income Taxes — We account for income taxes using the asset and liability method, whereby deferred income taxes reflect
the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. In evaluating our ability to realize deferred tax assets, we use judgment to
determine if it is more likely than not that some portion or all of a deferred tax asset will not be realized, and if a corresponding
valuation allowance is required.
Defined Benefit Pension and Other Postretirement Benefits — We sponsor defined benefit pension and OPEB plans for
certain of our domestic hourly and salaried employees and a SERB plan for certain current and former executive officers. Plan
assets and obligations are measured annually or more frequently if there is a re-measurement event, based on the Company’s
measurement date utilizing various actuarial assumptions. We attribute the service costs for the plans over the working lives of
plan participants. The effects of actual results differing from our assumptions and the effects of changing assumptions are
considered actuarial gains or losses. Actuarial gains or losses are recorded in Accumulated other comprehensive income (loss).
We contribute to our defined benefit pension plans based upon actuarial and economic assumptions designed to achieve
adequate funding of the projected benefit obligations and to meet the minimum funding requirements.
Postemployment Benefits — We provide certain postemployment benefits to certain former and inactive employees and
their dependents during the period following employment, but before retirement. These benefits include salary continuance,
supplemental unemployment and disability healthcare. We recognize the estimated future cost of providing postemployment
benefits on an accrual basis over the active service life of the employee.
Derivative and Hedging — As a global producer of primary aluminum, our operating results and cash flows from
operations are subject to risk of fluctuations in the market prices of primary aluminum. We may from time to time enter into
financial contracts to manage our exposure to such risk. Derivative instruments may consist of variable to fixed financial
contracts and back-to-back fixed to floating arrangements for a portion of our sale of primary aluminum, where we receive
fixed and pay floating prices from our customers and to counterparties, including Glencore, respectively. These derivatives are
not designated as cash flow hedges.
Derivative and hedging instruments are recorded in prepaid and other current assets, due from/to affiliates, or other
liabilities in the consolidated balance sheets at fair value. We value our derivative and hedging instruments using quoted
market prices and other significant unobservable inputs.
We recognize changes in fair value and settlements of derivative instruments in net gain (loss) on forward and derivative
contracts in the consolidated statements of operations as they occur.
Foreign Currency – We are exposed to foreign currency risk due to fluctuations in the value of the U.S. dollar as
compared to the euro, the Icelandic krona ("ISK") and the Chinese renminbi. Grundartangi and Vlissingen use the U.S. dollar
as their functional currency, as contracts for sales and purchases of alumina and power are denominated in U.S. dollar. BHH
uses the renminbi as its functional currency. Transactions denominated in currencies other than the functional currency are
recorded based on exchange rates at the time such transactions arise and any transaction gains and losses are reflected in Other
income (expense) – net in the consolidated statements of operations.
43
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Financial Instruments — Receivables, certain life insurance policies, payables, borrowings under revolving credit
facilities and debt related to industrial revenue bonds ("IRBs") are carried at amounts that approximate fair value.
Earnings per share — Basic earnings (loss) per share ("EPS") amounts are calculated by dividing earnings (loss) available
to common stockholders by the weighted average number of common shares outstanding. Diluted EPS amounts assume the
issuance of common stock for all potentially dilutive common shares outstanding. Because our capital structure consists of
common stock and participating convertible preferred stock, we use the two-class method to calculate basic EPS, and
incorporate the use of such method to determine diluted EPS.
Our Series A Convertible Preferred Stock is a non-cumulative perpetual participating convertible preferred stock with no
set dividend preferences. In periods where we report net losses, we do not allocate these losses to the convertible preferred
stock for the computation of basic or diluted EPS.
Asset Retirement Obligations — We are subject to environmental regulations which create certain legal obligations related
to the normal operations of our domestic primary aluminum smelter operations. Our asset retirement obligations ("AROs")
consist primarily of costs associated with the disposal of spent pot liner used in the reduction cells of our domestic facilities.
AROs are recorded on a discounted basis at the time the obligation is incurred (when the pot liner is put in service) and accreted
over time for the change in the present value of the liability. We capitalize the asset retirement costs by increasing the carrying
amount of the related long-lived assets and depreciating these assets over their remaining useful lives.
Certain conditional asset retirement obligations ("CAROs") relate to the remediation of our primary aluminum facilities
for hazardous material, such as landfill materials and asbestos which have not been recorded because they have an
indeterminate settlement date. CAROs are a legal obligation to perform an asset retirement activity in which the timing and
(or) method of settlement are conditional on a future event that may or may not be within our control.
Concentrations of Credit Risk — Financial instruments, which potentially expose us to concentrations of credit risk,
consist principally of trade receivables. Our limited customer base increases our concentrations of credit risk with respect to
trade receivables. We routinely assess the financial strength of our customers and collectability of our trade receivables.
Share-Based Compensation — We measure the cost of employee services received in exchange for an award of equity
instruments based on the fair value of the award on the grant date. We recognize the cost over the period during which an
employee is required to provide service in exchange for the award. We issue shares to satisfy the requirements of our share-
based compensation plans. At this time, we do not plan to issue treasury shares to support our share-based compensation plans,
but we may in the future. We award performance units to certain officers and employees. The performance units may be
settled in cash or common stock at the discretion of the Board. We have not issued any stock options since 2009.
Recently Issued Accounting Standards
ASU 2014-09 "Revenue From Contracts with Customers (Topic 606)" by the FASB, outlines a single comprehensive
model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue
recognition guidance, including industry-specific guidance. The ASU is effective for Century beginning January 1, 2018.
To date, we have reviewed our revenue contracts with customers that will become effective beginning January 1, 2018,
including newly executed, drafts, and amendments to existing arrangements. Based on assessment completed to date, other
than the additional disclosure requirements, we do not expect the adoption of ASU 2014-09 to significantly change our business
processes, controls and systems, or change the timing or amount of revenue recognized. We continue to monitor modifications,
clarifications or interpretations undertaken by the FASB and the Securities and Exchange Commission and changes in our
business and new arrangements, which may impact our current conclusions. We will adopt the standard on a modified
retrospective basis.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which supersedes all existing guidance on
accounting for leases in Accounting Standards Codification ("ASC") Topic 840. ASU 2016-02 is intended to provide enhanced
transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the
balance sheet. ASU 2016-02 will continue to classify leases as either finance or operating, with classification affecting the
pattern of expense recognition in the statement of income. ASU 2016-02 is effective for Century beginning January 1, 2019.
We continue to gather and assess our contracts for the effects of adopting the provisions of ASU No. 2016-02. We expect
most existing operating lease commitments will be recognized as operating lease liabilities and right-of-use assets upon
44
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
adoption. We are unable to estimate the impact, if any, of adopting this standard for our other-than-operating lease
commitments. However, we do not anticipate such adoption to impact our cash flows. We expect to adopt this standard on a
modified retrospective basis.
2. Related party transactions
The significant related party transactions occurring during the years ended December 31, 2017, 2016 and 2015 are
described below. We believe all of our transactions with Glencore and BHH were at prices that approximate market.
Glencore ownership
As of December 31, 2017, Glencore plc and its affiliates (together "Glencore") beneficially owned 42.9% of Century’s
outstanding common stock (47.4% on a fully-diluted basis assuming the conversion of all of the Series A Convertible Preferred
Stock) and all of our outstanding Series A Convertible Preferred stock. See Note 6. Shareholders' equity for a full description of
our outstanding Series A Convertible Preferred stock. From time to time Century and Glencore enter into various transactions
for the purchase and sale of primary aluminum, purchase and sale of alumina, tolling agreements and certain forward financial
contracts.
Sales to Glencore
For the year ended December 31, 2017, we derived approximately 75% of our consolidated sales from Glencore. Glencore
purchases the aluminum we produce for resale.
Glencore purchased substantially all of the aluminum produced at our North American smelters in 2015 and 2016 and
purchased certain aluminum products produced at our North American smelters in 2017. Glencore purchased substantially all of
the primary aluminum produced at Grundartangi in 2015, 2016 and 2017. We have entered into agreements with Glencore
pursuant to which Glencore has agreed to purchase aluminum produced from our U.S. and Icelandic operations through 2018
and 2019, respectively. Glencore purchases aluminum produced at our North American smelters at prices based on the LME
plus the Midwest regional delivery premium and any additional negotiated product premiums. Glencore purchases aluminum
produced at our Grundartangi, Iceland smelter at prices based on the LME plus the European Duty Paid premium and any
applicable product premiums.
We received tolling fees from Glencore under a tolling agreement that provided for delivery of primary aluminum
produced at Grundartangi through June 2016. The fee paid by Glencore under this tolling agreement was based on the LME
price for primary aluminum plus a portion of the European Duty Paid premium.
Purchases from Glencore
We purchase a portion of our alumina requirements from Glencore under a long-term supply agreement and on a spot
basis at prices based on a published alumina index.
Financial contracts with Glencore
During 2017, we entered into certain financial contracts with Glencore. See Note 19. Derivatives regarding these forward
financial sales contracts.
Transactions with BHH
We own a 40% stake in BHH and had an agreement to purchase carbon anodes from them for use in our manufacturing
operations through 2017. In the fourth quarter of 2015, we completed the construction of a second furnace at our carbon anode
facility in Vlissingen, Netherlands. This investment increased our capacity to produce carbon anodes and reduced our need to
source carbon anodes from BHH. As a result, in the fourth quarter of 2015, we made the decision to pursue an exit from our
investment in BHH. In connection with our exit plan, we concluded that our investment in BHH was other than temporarily
impaired and recorded a charge of $11,584. Fair value for the investment was based on a proposed sale transaction for a portion
of the investment.
45
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Summary
A summary of the aforementioned significant related party transactions for the years ended December 31, 2017, 2016 and
2015 is as follows:
Net sales to Glencore
Purchases from Glencore
Purchases from BHH
3. Helguvik and Ravenswood gains and losses
Helguvik
Year Ended December 31,
2017
2016
2015
$ 1,198,076
$ 1,178,631
$ 1,867,711
253,044
15,763
231,850
10,127
393,158
46,592
In November 2016, the arbitration panel in the proceedings between Nordural Helguvik ehf and HS concluded that our
agreement with HS was no longer in force. We determined that the lack of a power agreement for the entirety of the project
requirements represented an indicator of impairment associated with the Helguvik project.
Our analysis of the project indicated the undiscounted cash flows did not exceed the carrying value of the Helguvik project.
Discounted cash flows were utilized to reduce the carrying value of the Helguvik project to fair value. We considered future
development plans for the project, the lack of a power agreement for the entirety of the project requirements and long-term
forward prices of LME and EDPP along with alumina and power costs. As a result, we recorded an impairment loss of
$152,220 representing the net book value of the Helguvik project as of December 31, 2016.
We have classified the aforementioned fair value within Level 3 of the fair value hierarchy, as the significant inputs are
not observable.
During 2017, we extinguished a portion of our contractual commitments associated with the construction of the Helguvik
project. Such extinguishment resulted in a gain of $7,310 recognized in Helguvik (gains) losses in the consolidated statements
of operations.
Ravenswood
In July 2015, we announced the permanent closure of our Ravenswood, West Virginia aluminum smelter
("Ravenswood"). Ravenswood had been idled since February 2009. The decision to permanently close Ravenswood was based
on the inability to secure a competitive power contract for the smelter, compounded by challenging aluminum market
conditions largely driven by increased exports of aluminum from China.
In June 2015, we recorded an impairment charge of $30,850 to write down the asset values related to Ravenswood. Based
on an asset purchase agreement for the sale of assets entered into in 2016, we recorded an additional impairment charge of
$3,830, included in Ravenswood (gains)/losses in the consolidated statements of operations for the year ended December 31,
2016. In January 2017, we completed our sale of the Ravenswood facility and assets for $13,585 in net proceeds from the
buyer.
4. Fair value measurements
We measure certain of our assets and liabilities at fair value. Fair value represents 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.
In general, reporting entities should apply valuation techniques to measure fair value that maximize the use of observable
inputs and minimize the use of unobservable inputs. Observable inputs are developed using market data and reflect assumptions
that market participants would use when pricing the asset or liability. Unobservable inputs are developed using the best
information available about the assumptions that market participants would use when pricing the asset or liability.
46
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The fair value hierarchy provides transparency regarding the inputs we use to measure fair value. We categorize each fair
value measurement in its entirety into the following three levels, based on the lowest level input that is significant to the entire
measurement:
• Level 1 Inputs – quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity
can access at the measurement date.
• Level 2 Inputs – quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly.
• Level 3 Inputs – unobservable inputs for the asset or liability.
Recurring Fair Value Measurements
As of December 31, 2017
ASSETS:
Cash equivalents
Trust assets (1)
Surety bonds
Derivative instruments
TOTAL
LIABILITIES:
Contingent obligation – net (2)
Derivative instruments
TOTAL
Level 1
Level 2
Level 3
Total
$
142,819
$
— $
— $
142,819
1,757
1,618
—
—
—
—
—
—
1,724
1,757
1,618
1,724
146,194
$
— $
1,724
$
147,918
— $
—
— $
— $
—
— $
1,200
— $
1,200
$
—
1,200
1,200
$
$
$
Recurring Fair Value Measurements
As of December 31, 2016
ASSETS:
Cash equivalents
Trust assets (1)
Surety bonds
Derivative instruments
TOTAL
LIABILITIES:
Contingent obligation – net (2)
Derivative instruments
TOTAL
Level 1
Level 2
Level 3
Total
$
79,014
$
— $
— $
79,014
3,147
1,874
—
—
—
—
84,035
$
— $
—
—
925
925
3,147
1,874
925
$
84,960
— $
—
— $
— $
—
— $
— $
253
253
$
—
253
253
$
$
$
(1) Trust assets are currently invested in money market funds. These trust assets are held to fund the non-qualified
supplemental executive pension benefit obligations for certain of our officers.
(2) See Note 5 Debt for additional information about the contingent obligation.
47
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following section describes the valuation techniques and inputs used for fair value measurements categorized within
Level 2 or Level 3 of the fair value hierarchy:
Level 2 and Level 3 Fair Value Measurements:
Asset / Liability
Fixed for floating
swaps
Power price swap
Contingent
obligation
Level Valuation Techniques
Discounted cash flows
3
Inputs
Quoted LME forward market, management's
estimates of future U.S. Midwest premium
3
3
Discounted cash flows
Quoted Nordpool forward market, discount rate
Discounted cash flows
Quoted LME forward market, management’s
estimates of the LME forward market prices for
periods beyond the quoted periods, management’s
estimate of future level of operations and discount
rate
There were no transfers between Level 1 and 2 during the periods presented. There were no transfers into or out of Level
3 during the periods presented. It is our policy to recognize transfers into and transfers out of Level 3 as of the date of the event
or change in circumstances that caused the transfer.
5. Debt
Debt classified as current liabilities:
Hancock County industrial revenue bonds ("IRBs") due 2028, interest payable quarterly
(variable interest rates (not to exceed 12%)) (1)
$
7,815
$
7,815
Debt classified as non-current liabilities:
7.5% senior secured notes due June 1, 2021, net of debt discount of $1,847 and $2,301,
respectively, interest payable semiannually
248,153
247,699
December 31,
2017
2016
Total
(1) The IRBs are classified as current liabilities because they are remarketed weekly and could be required to be repaid upon
$ 255,514
$ 255,968
demand if there is a failed remarketing. The IRB interest rate at December 31, 2017 was 1.91%.
U.S. Revolving Credit Facility
General. We and certain of our direct and indirect domestic subsidiaries (together with Century, the "Borrowers") and Wells
Fargo Capital Finance, LLC, as lender and agent, and Credit Suisse AG and BNP Paribas, as lenders, are parties to the Amended
and Restated Loan and Security Agreement, dated May 24, 2013 (as amended from time to time, the "U.S. revolving credit facility").
The U.S. revolving credit facility has a term through June 26, 2020 and provides for borrowings of up to $150,000 in the aggregate,
including up to $110,000 under a letter of credit sub-facility. Any letters of credit issued and outstanding under the U.S. revolving
credit facility reduce our borrowing availability on a dollar-for-dollar basis. At December 31, 2017, there were no outstanding
borrowings under our U.S. revolving credit facility. Principal payments, if any, are due upon maturity of the U.S. revolving credit
facility in June 2020.
Status of our U.S. revolving credit facility:
Credit facility maximum amount
Borrowing availability
Outstanding letters of credit issued
Outstanding borrowings
Borrowing availability, net of outstanding letters of credit and borrowings
December 31, 2017
$
$
150,000
147,706
37,857
—
109,849
Borrowing Base. The availability of funds under the U.S. revolving credit facility is limited by a specified borrowing base
consisting of accounts receivable and inventory of the Borrowers which meet the eligibility criteria.
48
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Guaranty. The Borrowers' obligations under the U.S. revolving credit facility are guaranteed by certain of our domestic
subsidiaries and secured by a continuing lien upon and a security interest in all of the Borrowers' accounts receivable, inventory
and certain bank accounts. Each Borrower is liable for any and all obligations under the U.S. revolving credit facility on a joint
and several basis.
Interest Rates and Fees. Any amounts outstanding under the U.S. revolving credit facility will bear interest, at our option,
at LIBOR or a base rate, plus, in each case, an applicable interest margin. The applicable interest margin is determined based on
the average daily availability for the immediately preceding quarter. In addition, we pay an unused line fee on undrawn
amounts, less the amount of our letters of credit exposure. For standby letters of credit, we are required to pay a fee on the face
amount of such letters of credit that varies depending on whether the letter of credit exposure is cash collateralized.
Prepayments. We can make prepayments of amounts outstanding under the U.S. revolving credit facility, in whole or in
part, without premium or penalty, subject to standard LIBOR breakage costs, if applicable. We may be required to apply the
proceeds from sales of collateral accounts, other than sales of inventory in the ordinary course of business, to repay amounts
outstanding under the revolving credit facility and correspondingly reduce the commitments there under.
Covenants. The U.S. revolving credit facility contains customary covenants, including restrictions on mergers and
acquisitions, indebtedness, affiliate transactions, liens, dividends and distributions, dispositions of collateral, investments and
prepayments of indebtedness, as well as a covenant that requires the Borrowers to maintain certain minimum liquidity or
availability requirements.
Events of Default. The U.S. revolving credit facility also includes customary events of default, including nonpayment,
misrepresentation, breach of covenant, bankruptcy, change of ownership, certain judgments and certain cross defaults. Upon the
occurrence of an event of default, commitments under the U.S. revolving credit facility may be terminated and amounts
outstanding may be accelerated and declared immediately due and payable.
Iceland Revolving Credit Facility
General. Our wholly-owned subsidiary, Nordural Grundartangi ehf ("Grundartangi"), has entered into a Committed
Revolving Credit Facility agreement with Landsbankinn hf., dated November 27, 2013 as amended (the "Iceland revolving
credit facility"). Under the terms of the Iceland revolving credit facility, when Grundartangi borrows funds it will designate a
repayment date, which may be any date prior to the maturity of the Iceland revolving credit facility. The Iceland revolving
credit facility has a term through November 27, 2020.
Status of our Iceland revolving credit facility:
Credit facility maximum amount
Borrowing availability
Outstanding letters of credit issued
Outstanding borrowings
Borrowing availability, net of outstanding letters of credit and borrowings
December 31, 2017
$
$
50,000
50,000
—
—
50,000
Borrowing Base. The availability of funds under the Iceland revolving credit facility is limited by a specified borrowing base
consisting of inventory and accounts receivable of Grundartangi.
Security. Grundartangi's obligations under the Iceland revolving credit facility are secured by a general bond under which
Grundartangi's inventory and accounts receivable are pledged to secure full payment of the loan.
Interest Rates and Fees. Any amounts outstanding under the Iceland revolving credit facility will bear interest at LIBOR
plus a margin per annum.
Prepayments. Any outstanding borrowings may be prepaid without penalty or premium (except incurred breakage costs)
in whole or in part.
49
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Covenants. The Iceland revolving credit facility contains customary covenants, including restrictions on mergers and
acquisitions, dispositions of assets, compliance with permits, laws and payment of taxes, as well as a covenant that requires
Grundartangi to maintain a certain minimum equity ratio.
Events of Default. The Iceland revolving credit facility also includes customary events of default, including nonpayment,
loss of license, cessation of operations, unlawfulness, breach of covenant, bankruptcy, change of ownership, certain judgments
and certain cross defaults. Upon the occurrence of an event of default, commitments under the Iceland revolving credit facility
may be terminated and amounts outstanding may be accelerated and declared immediately due and payable.
2021 Notes
General. On June 4, 2013, we issued $250,000 of our 7.5% Notes due June 1, 2021 (the "2021 Notes") in a private
offering exempt from the registration requirements of the Securities Act. The 2021 Notes were issued at a discount and we
received proceeds of $246,330, prior to payment of financing fees and related expenses. The interest rate at 7.5% per annum on
the principal amount, payable semi-annually in arrears in cash on June 1st and December 1st of each year. The Notes are senior
secured obligations of Century, ranking equally in right of payment with all existing and future senior indebtedness of Century,
but effectively senior to unsecured debt to the extent of the value of the collateral. The maturity date for the payment of
principal is June 1, 2021.
Fair Value. Fair value for our 7.5% Notes due 2021 was based on the latest trading data available and was $258,328 and
$234,220, as of December 31, 2017 and 2016, respectively. Although we use quoted market prices for identical debt
instruments, the markets on which they trade are not considered to be active and are therefore considered Level 2 fair value
measurements.
Guaranty. Our obligations under the 2021 Notes are guaranteed by all of our existing and future domestic restricted
subsidiaries (the "Guarantor Subsidiaries"), except for foreign owned holding companies and any domestic restricted subsidiary
that owns no assets other than equity interests or other investments in foreign subsidiaries, which guaranty shall in each case be
a senior secured obligation of such Guarantor Subsidiaries, ranking equally in right of payment with all existing and future
senior indebtedness of such Guarantor Subsidiaries but effectively senior to unsecured debt.
Collateral. Our obligations under the 2021 Notes due and the Guarantor Subsidiaries' obligations under the guarantees are
secured by a pledge of and lien on (subject to certain exceptions):
all of our and the Guarantor Subsidiaries' property, plant and equipment;
(i)
(ii) all equity interests in domestic subsidiaries directly owned by us and the Guarantor Subsidiaries and 65% of equity
interests in foreign subsidiaries or foreign holding companies directly owned by us and the Guarantor Subsidiaries;
(iii) intercompany notes owed by any non-guarantor to us or any Guarantor Subsidiary to us; and
(iv) proceeds of the foregoing.
Under certain circumstances, we may incur additional debt that also may be secured by liens on the collateral that are
equal to or have priority over the liens securing the 2021 Notes.
Redemption Rights. We may redeem the 2021 Notes, in whole or in part, during the twelve-month period beginning on
June 1 of the years indicated below, at the following redemption prices plus accrued and unpaid interest:
Year - Redemption rights
2018
2019 and thereafter
Percentage
101.875%
100.000%
Upon a change of control (as defined in the indenture governing the 2021 Notes), we will be required to make an offer to
purchase the 2021 Notes at a purchase price equal to 101% of the outstanding principal amount of the 2021 Notes on the date
of the purchase, plus accrued interest to the date of purchase.
Covenants. The indenture governing the 2021 Notes contains customary covenants which may limit our ability, and the
ability of certain of our subsidiaries, to: (i) incur additional debt; (ii) incur additional liens; (iii) pay dividends or make
distributions in respect of capital stock; (iv) purchase or redeem capital stock; (v) make investments or certain other restricted
50
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
payments; (vi) sell assets; (vii) issue or sell stock of certain subsidiaries; (viii) enter into transactions with shareholders or
affiliates; and (ix) effect a consolidation or merger.
Contingent obligation
General. We have a contingent obligation in connection with the “unwind” of a contractual arrangement between CAKY,
Big Rivers and a third party and the execution of a long-term cost-based power contract with Kenergy, a member of a
cooperative of Big Rivers, in July 2009. This contingent obligation consists of the aggregate payments made to Big Rivers by
the third party on CAKY’s behalf in excess of the agreed upon base amount under the long-term cost-based power contract
with Kenergy. Our obligation to make repayments is contingent upon certain operating criteria for Hawesville and the LME
price of primary aluminum. When the conditions for repayment are met, and for so long as those conditions continue to be met,
we will be obligated to make principal and interest payments, in up to 72 monthly payments. Interest accrues at an annual rate
equal to 10.94% and the term of the agreement is through December 31, 2028.
Based on the LME forward market prices for primary aluminum at December 31, 2017 and management's estimate of the
LME forward market for periods beyond the quoted periods, we recognized a derivative asset which offsets our contingent
obligation. As a result, our net liability decreased and we recorded gains of $1,411 and $1,411 in net gain (loss) on forward and
derivative contracts for the years ended December 31, 2017 and 2016. These amounts are exactly offset by interest expense on
the contingent obligation which is recorded in interest expense. In addition, we believe that we will not have any payment
obligations for the contingent obligation through the term of the agreement, which expires in 2028. However, future increases
in the LME forward market may result in a partial or full derecognition of the derivative asset and a corresponding recognition
of a loss.
The following table provides information about the balance sheet location and gross amounts offset:
Offsetting of financial instruments and
derivatives
Contingent obligation – principal
Contingent obligation – accrued interest
Contingent obligation – derivative asset
Balance sheet
location
Other liabilities
Other liabilities
Other liabilities
December 31,
2017
December 31,
2016
$
$
(12,902) $
(9,524)
22,426
— $
(12,902)
(8,113)
21,015
—
Industrial Revenue Bonds
General. As part of the purchase price for our acquisition of the Hawesville facility, we assumed industrial revenue bonds
("IRBs") which were issued in connection with the financing of certain solid waste disposal facilities constructed at the
Hawesville facility. The IRBs bear interest at a variable rate not to exceed 12% per annum determined weekly based upon
prevailing rates for similar bonds in the industrial revenue bond market and interest on the IRBs is paid quarterly. The IRBs are
secured by a letter of credit issued under our revolving credit facility and mature on April 1, 2028.
6. Shareholders' equity
Common Stock
As of December 31, 2017 and 2016, we had 195,000,000 shares of common stock, $0.01 cent par value, authorized under
our Restated Certificate of Incorporation, of which 94,731,298 shares were issued and 87,544,777 shares were outstanding at
December 31, 2017; 94,437,418 shares were issued and 87,250,897 shares were outstanding at December 31, 2016.
The rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by,
the rights of the holders of shares of any series of our preferred stock which are currently outstanding, including our Series A
Convertible Preferred Stock, or which we may designate and issue in the future.
Preferred Stock
As of December 31, 2017 and 2016, we had 5,000,000 shares of preferred stock, $0.01 cent par value per share,
authorized under our Restated Certificate of Incorporation. Our Board of Directors may issue preferred stock in one or more
series and determine for each series the dividend rights, conversion rights, voting rights, redemption rights, liquidation
51
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
preferences, sinking fund terms and the number of shares constituting that series, as well as the designation thereof. Depending
upon the terms of preferred stock established by our Board of Directors, any or all of the preferred stock could have preference
over the common stock with respect to dividends and other distributions and upon the liquidation of Century. In addition,
issuance of any shares of preferred stock with voting powers may dilute the voting power of the outstanding common stock.
Series A Convertible Preferred Stock
Shares Authorized and Outstanding. In 2008, we issued 160,000 shares of our Series A Convertible Preferred
Stock. Glencore holds all of the issued and outstanding Series A Convertible Preferred Stock. At December 31, 2017 and
December 31, 2016, 74,364 shares and 75,625 were outstanding, respectively.
The issuance of common stock under our stock incentive programs, debt exchange transactions and any stock offering that
excludes Glencore participation triggers anti-dilution provisions of the preferred stock agreement and results in the automatic
conversion of Series A Convertible Preferred Stock shares into shares of common stock. The conversion of preferred to
common shares is 100 shares of common for each share of preferred stock. Our Series A Convertible Preferred Stock has a par
value of $0.01 per share.
The Common and Preferred Stock Activity table below contains additional information about preferred stock conversions
during 2017, 2016 and 2015:
Common and Preferred Stock Activity:
(in shares)
Balance as of December 31, 2014
Repurchase of common stock
Conversion of convertible preferred stock
Issuance for share-based compensation plans
Beginning balance as of December 31, 2015
Repurchase of common stock
Conversion of convertible preferred stock
Issuance for share-based compensation plans
Beginning balance as of December 31, 2016
Repurchase of common stock
Conversion of convertible preferred stock
Issuance for share-based compensation plans
Ending balance as of December 31, 2017
Preferred stock
Series A
Convertible
Common stock
Treasury
Outstanding
78,141
—
(1,602)
—
76,539
—
(914)
—
75,625
—
(1,261)
—
74,364
4,786,521
2,400,000
—
—
7,186,521
—
—
—
89,064,582
(2,400,000)
160,162
213,306
87,038,050
—
91,362
121,485
7,186,521
87,250,897
—
—
—
—
126,098
167,782
7,186,521
87,544,777
Dividend Rights. So long as any shares of our Series A Convertible Preferred Stock are outstanding, we may not pay or
declare any dividend or make any distribution upon or in respect of our common stock or any other capital stock ranking on a
parity with or junior to the Series A Convertible Preferred Stock in respect of dividends or liquidation preference, unless we, at
the same time, declare and pay a dividend or distribution on the shares of Series A Convertible Preferred Stock (a) in an amount
equal to the amount such holders would receive if they were the holders of the number of shares of our common stock into
which their shares of Series A Convertible Preferred Stock are convertible as of the record date fixed for such dividend or
distribution, or (b) in the case of a dividend or distribution on other capital stock ranking on a parity with or junior to the
Series A Convertible Preferred Stock in such amount and in such form as (based on the determination of holders of a majority
of the Series A Convertible Preferred Stock) will preserve, without dilution, the economic position of the Series A Convertible
Preferred Stock relative to such other capital stock.
Voting Rights. The Series A Convertible Preferred Stock has no voting rights for the election of directors or on other
matters where the shares of common stock have voting rights. However, we may not change the powers, preferences, or rights
given to the Series A Convertible Preferred Stock, or authorize, create or issue any additional shares of Series A Convertible
Preferred Stock without the affirmative vote of the holders of a majority of the shares of Series A Convertible Preferred Stock
then outstanding (voting separately as a class).
52
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Liquidation Rights. Upon any liquidation, dissolution, or winding-up of Century, the holders of shares of Series A
Convertible Preferred Stock are entitled to receive a preferential distribution of $0.01 per share out of the assets available for
distribution. In addition, upon any liquidation, dissolution or winding-up of Century, if our assets are sufficient to make any
distribution to the holders of the common stock, then the holders of shares of Series A Convertible Preferred Stock are also
entitled to share ratably with the holders of common stock in the distribution of Century’s assets (as though the holders of
Series A Convertible Preferred Stock were holders of that number of shares of common stock into which their shares of Series A
Convertible Preferred Stock are convertible). However, the amount of any such distribution will be reduced by the amount of
the preferential distribution received by the holders of the Series A Convertible Preferred Stock.
Transfer Restrictions. Glencore is prohibited from transferring shares of Series A Convertible Preferred Stock to any
party other than an affiliate who agrees to become bound by certain agreements associated with these shares.
Automatic Conversion. The Series A Convertible Preferred Stock automatically converts, without any further act of
Century or any holders of Series A Convertible Preferred Stock, into shares of common stock, at a conversion ratio of 100
shares of common stock for each share of Series A Convertible Preferred Stock, upon the occurrence of any of the following
automatic conversion events:
•
•
If we sell or issue shares of common stock or any other stock that votes generally with our common stock, or the
occurrence of any other event, including a sale, transfer or other disposition of common stock by Glencore, as a result
of which the percentage of voting stock held by Glencore decreases, an amount of Series A Convertible Preferred
Stock will convert to common stock to restore Glencore to its previous ownership percentage;
If shares of Series A Convertible Preferred Stock are transferred to an entity that is not an affiliate of Glencore, such
shares of Series A Convertible Preferred Stock will convert to shares of our common stock, provided that such
transfers may only be made pursuant to an effective registration statement;
• Upon a sale of Series A Convertible Preferred Stock by Glencore in a Rule 144 transaction in which the shares of
Series A Convertible Preferred Stock and our common stock issuable upon the conversion thereof are not directed to
any purchaser, such shares of Series A Convertible Preferred Stock sold will convert to shares of our common
stock; and
•
Immediately prior to and conditioned upon the consummation of a merger, reorganization or consolidation to which
we are a party or a sale, abandonment, transfer, lease, license, mortgage, exchange or other disposition of all or
substantially all of our property or assets, in one or a series of transactions where, in any such case, all of our
common stock would be converted into the right to receive, or exchanged for, cash and/or securities, other than any
transaction in which the Series A Convertible Preferred Stock will be redeemed.
Optional Conversion. Glencore has the option to convert the Series A Convertible Preferred Stock in a tender offer or
exchange offer, at the same conversion ratio as above, in which a majority of the outstanding shares of our common stock have
been tendered by the holders thereof and not duly withdrawn at the expiration time of such tender or exchange offer, so long as
the Series A Convertible Preferred Stock is tendered or exchanged in such offer.
Stock Combinations – Adjustments. If, at any time while the Series A Convertible Preferred Stock is outstanding, Century
combines outstanding common stock into a smaller number of shares, then the number of shares of common stock issuable on
conversion of each share of Series A Convertible Preferred Stock will be decreased in proportion to such decrease in the
aggregate number of shares of common stock outstanding.
Redemptions or Repurchases of Common Stock. We may not redeem or repurchase our common stock unless we redeem
or repurchase, or otherwise make a payment on, a pro rata number of shares of the Series A Convertible Preferred Stock. These
restrictions do not apply to our open market repurchases or our repurchases pursuant to our employee benefit plans.
Right of Redemption. The Series A Convertible Preferred Stock will be redeemed by Century if any of the following
events occur (at a redemption price based on the trading price of our common stock prior to the announcement of such event)
and Glencore votes its shares of our common stock in opposition to such events:
• We propose a merger, reorganization or consolidation, sale, abandonment, transfer, lease, license, mortgage, exchange
or other disposition of all or substantially all of our property or assets where any of our common stock would be
converted into the right to receive, or exchanged for, assets other than cash and/or securities traded on a national stock
exchange or that are otherwise readily marketable, or
53
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
• We propose to dissolve and wind up operations and any assets, other than cash and/or securities traded on a national
stock exchange or that are otherwise readily marketable, are to be distributed to the holders of our common stock.
Stock Repurchase Program
In 2011, our Board of Directors authorized a $60 million stock repurchase program and during the first quarter of 2015,
our Board of Directors increased the size of the program by $70 million. Under the program, Century is authorized to
repurchase up to $130 million of our outstanding shares of common stock, from time to time, on the open market at prevailing
market prices, in block trades or otherwise. The timing and amount of any shares repurchased will be determined by our
management based on its evaluation of market conditions, the trading price of our common stock and other factors. The stock
repurchase program may be suspended or discontinued at any time.
Shares of common stock repurchased are recorded at cost as treasury stock and result in a reduction of shareholders’
equity in the consolidated balance sheets. From time to time, treasury shares may be reissued as contributions to our employee
benefit plans and for the conversion of convertible preferred stock. When shares are reissued, we use an average cost method
for determining cost. The difference between the cost of the shares and the reissuance price is added to or deducted from
additional paid-in capital.
Through December 31, 2017, we repurchased 7,186,521 shares of common stock for an aggregate purchase price of
$86,276. We have made no repurchases since April 2015 and have approximately $43,724 remaining under the repurchase
program authorization as of December 31, 2017.
7. Inventories
Inventories, at December 31, consist of the following:
Raw materials
Work-in-process
Finished goods
Operating and other supplies
Inventories
8. Property, plant and equipment
Property, plant and equipment, at December 31, consist of the following:
Land and improvements
Buildings and improvements
Machinery and equipment
Construction in progress
Less accumulated depreciation
Property, plant and equipment - net
2017
2016
$ 106,210
$
59,415
49,584
40,852
35,539
26,613
120,823
111,996
$ 317,469
$ 233,563
2017
2016
$
41,823
331,735
$
42,654
330,254
1,398,687
1,374,551
22,517
21,106
1,794,762
(822,846)
$ 971,916
1,768,565
(742,280)
$1,026,285
For the years ended December 31, 2017, 2016 and 2015, we recorded depreciation and amortization expense of $84,249,
$84,780 and $80,117, respectively. See Note 3. Helguvik and Ravenswood gains and losses regarding impairment of our
Helguvik project.
54
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Accumulated Other Comprehensive Loss ("AOCL")
Components of AOCL
Defined benefit plan liabilities
Gain (loss) on financial instruments
Other comprehensive loss before income tax effect
Income tax effect (1)
Accumulated other comprehensive loss
2017
2016
$ (102,053) $ (125,917)
2,860
(123,057)
9,164
$ (91,742) $ (113,893)
2,673
(99,380)
7,638
(1) The allocation of the income tax effect to the components of other comprehensive loss is as follows:
Defined benefit plan liabilities
Gain (loss) on financial instruments
2017
2016
$
$
8,173
(535)
9,736
(572)
The following table summarizes the changes in the accumulated balances for each component of AOCL:
Defined benefit
plan and other
postretirement
liabilities
Gain (loss) on
financial
instruments
Total, net of
tax
(117,682)
7,311
(2,279)
(112,650)
(9,521)
8,278
(113,893)
20,204
1,947
(91,742)
$
(1,830) $
—
(153)
(1,983)
—
4,271
2,288
—
(150)
2,138
Balance, December 31, 2014
Other comprehensive income (loss) before reclassifications
Net amount reclassified to net loss
Balance, December 31, 2015
Other comprehensive income before reclassifications
Net amount reclassified to net loss
Balance, December 31, 2016
Other comprehensive income before reclassifications
Net amount reclassified to net income
Balance, December 31, 2017
$
$
(115,852) $
7,311
(2,126)
(110,667)
(9,521)
4,007
(116,181)
20,204
2,097
(93,880) $
55
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Reclassifications out of AOCL were included in the consolidated statements of operations as follows:
AOCL Components
Defined benefit plan and other
postretirement liabilities
Location
2017
2016
2015
Cost of goods sold
$
3,075
$
3,464
$
(1,696)
Gains (Losses) Reclassified from
AOCL to the Consolidated
Statements of Operations
Selling, general and administrative
expenses
Other operating expense, net
Income tax expense
Net of tax
Gain (loss) on financial instruments
Cost of goods sold
Helguvik impairment
Income tax benefit
Net of tax
10. Pension and other postretirement benefits
Pension Benefits
(429)
1,015
(1,564)
2,097
$
465
1,585
(1,507)
4,007
$
235
904
(1,569)
(2,126)
(186) $
—
36
(150) $
(185) $
4,480
(24)
4,271
$
(186)
—
33
(153)
$
$
$
We maintain noncontributory defined benefit pension plans for certain domestic hourly and salaried employees. For the
eligible domestic salaried employees, plan benefits are based primarily on years of service and average compensation during
the later years of employment. For hourly employees, plan benefits are based primarily on a formula that provides a specific
benefit for each year of service. Our funding policy is to contribute amounts based upon actuarial and economic assumptions
designed to achieve adequate funding of the projected benefit obligations and to meet the minimum funding requirements of
the Employee Retirement Income Security Act of 1974 ("ERISA"). In addition, we maintain the SERB plan for certain current
and former executive officers which is frozen to future accruals.
Plan Mergers
In 2015, the South Carolina Plan was merged into the Century Aluminum Employee Retirement Plan. The participants in
the South Carolina component of the merged Plan are not affected by the partial plan freeze and the plan is still open to new
hourly employees. In 2017, the Century Aluminum Employee Retirement Plan was merged into the CAWV Hourly Employees
Pension Plan. The participants in the Century Aluminum Employee Retirement Plan are not affected by this merger.
PBGC settlement
In 2013, we entered into a settlement agreement with the Pension Benefit Guaranty Corporation ("PBGC") regarding an
alleged "cessation of operations" at our Ravenswood facility as a result of the 2009 curtailment of operations at the facility.
Pursuant to the terms of the agreement, we would make additional contributions (above any minimum required contributions)
to our defined benefit pension plans totaling approximately $17,400 over the term of the agreement, which runs through 2016.
However, under certain circumstances, in periods of lower primary aluminum prices relative to our cost of operations, we are
able to defer one or more of these payments, but would then be required to provide the PBGC with acceptable security for
deferred payments. We made contributions pursuant to this agreement of $1,100 in 2015 and $6,700 in 2013. We did not make
any contribution during 2014, 2016 or 2017. We have elected to defer other payments under the PBGC agreement and have
provided the PBGC with the appropriate security. The remaining contributions under this agreement are approximately $9,600.
Other Postretirement Benefits (OPEB)
In addition to providing pension benefits, we provide certain healthcare and life insurance benefits for certain domestic
retired employees. We accrue the estimated cost of providing postretirement benefits during the working careers of those
employees who could become eligible for such benefits when they retire. We fund these benefits as the retirees submit claims.
56
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Retiree medical welfare changes
Under the current Hawesville labor agreement, employees who retire during the term of the labor agreement have been
divided into sub-groups based on attributes such as Medicare eligibility, hire date, age and years of service. Levels of benefits
are defined for the sub-groups and range from no substantive change from the benefits provided under the previous labor
agreement to replacement of the defined retiree medical benefit program with individual health reimbursement accounts for
each eligible participant. The health reimbursement accounts will be funded by CAKY based on established rates per hour
worked by each eligible participant. Eligible participants will be able to withdraw from their health reimbursement accounts to
fund their own retiree medical coverage.
During 2017, the Company amended its non-union retiree medical and life insurance benefits to align the Company’s
benefits with the market and achieve a uniform retiree medical benefit design across the Company’s U.S. locations. Effective
January 1, 2018, non-union retiree medical and life insurance benefits are restricted to current participants who meet the
eligibility criteria as of January 1, 2018. Additionally, effective January 1, 2019, Century will no longer administer non-union
retiree medical insurance plans and instead will make fixed health retirement account contributions. The amendment decreased
the projected benefit obligations by approximately $18,768 and a curtailment benefit of $1,364 was recorded in 2017.
Obligations and Funded Status
The change in benefit obligations and change in plan assets as of December 31 are as follows:
Change in benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Plan amendments
Actuarial loss (gain)
Medicare Part D
Benefits paid
Benefit obligation at end of year
Pension
OPEB
2017
2016
2017
2016
$ 328,047
$ 326,571
$ 133,856
$ 132,550
4,384
13,310
—
4,651
13,892
—
18,523
12,761
801
5,317
(27,395)
14,698
1,003
5,595
—
1,919
—
(20,156)
$ 344,108
—
(29,828)
$ 328,047
406
(6,919)
$ 120,764
38
(7,249)
$ 133,856
Pension
OPEB
2017
2016
2017
2016
Change in plan assets:
Fair value of plan assets at beginning of year
$ 276,741
$ 280,862
$
Actual return on plan assets
Employer contributions
Medicare Part D subsidy received
Benefits paid
Fair value of assets at end of year
45,027
1,755
23,932
1,775
—
(20,156)
$ 303,367
—
(29,828)
$ 276,741
57
— $
—
6,513
406
(6,919)
$
— $
—
—
7,211
38
(7,249)
—
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Funded status of plans:
Funded status
Amounts recognized in the Consolidated Balance Sheets:
Current liabilities
Non-current liabilities
Net amount recognized
Amounts recognized in accumulated other comprehensive loss
(pre-tax):
Net loss
Prior service cost (benefit)
Total
Pension Plans That Are Not Fully Funded
Pension
OPEB
2017
2016
2017
2016
$ (40,741) $ (51,306)
$ (120,764) $ (133,856)
(1,812)
(38,929)
(1,813)
(49,493)
$ (40,741) $ (51,306)
(7,459)
(113,305)
(7,501)
(126,355)
$ (120,764) $ (133,856)
$
$
71,199
$
83,451
998
1,104
72,197
$
84,555
$
$
$
58,434
(28,935)
47,957
(6,595)
29,499
$
41,362
At December 31, 2017, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets for
pension plans with accumulated benefit obligations in excess of plan assets were $344,108, $339,381 and $303,367,
respectively.
At December 31, 2016, the projected benefit obligation, accumulated benefit obligation and fair value of plan assets for
pension plans with accumulated benefit obligations in excess of plan assets were $328,047, $322,356 and $276,741,
respectively.
Components of net periodic benefit cost and other amounts recognized in other comprehensive loss:
Net Periodic Benefit Cost:
Service cost
Interest cost
Year Ended December 31,
Pension
2017
2016
2015
2017
OPEB
2016
$
4,384
$
4,651
$
6,346
$
801
$
1,003
$
13,310
13,892
Expected return on plan assets
(18,997)
(18,774)
Amortization of prior service costs
Amortization of net loss
Curtailment cost (benefit)
106
4,745
—
106
4,666
—
13,388
(21,241)
110
3,980
1,235
5,317
—
(3,692)
3,865
(1,364)
4,927
5,595
—
(2,781)
3,537
—
$
7,354
$
Net periodic benefit cost
$
3,548
$
4,541
$
3,818
$
58
2015
1,970
5,985
—
(3,728)
3,814
(4,266)
3,775
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Loss (pre-tax):
Net loss (gain)
Prior service cost (benefit)
Amortization of net loss, including recognition due to
settlement
Amortization of prior service benefit (cost), including
recognition due to curtailment
Total amount recognized in other comprehensive loss
Net periodic benefit cost
Total recognized in net periodic benefit cost and other
comprehensive loss
Year Ended December 31,
Pension
OPEB
2017
2016
2017
2016
$
(7,507) $
—
7,603
$
—
14,699
(27,396)
$
1,919
—
(4,745)
(4,666)
(3,865)
(3,537)
(106)
(12,358)
3,548
(106)
2,831
4,541
5,056
(11,506)
4,927
$
(8,810) $
7,372
$
(6,579) $
2,781
1,163
7,354
8,517
Amounts in accumulated other comprehensive loss expected to be recognized as components of net
periodic benefit cost during 2018
Amortization of net loss
Amortization of prior service cost (benefit)
Pension
OPEB
$
5,966
$
106
3,722
(7,258)
Weighted average assumptions used to determine benefit obligations at December 31:
Discount rate (1)
Rate of compensation increase (2)
Measurement date
Pension
OPEB
2017
3.69%
3%/4%
2016
4.19%
3%/4%
2017
3.66%
3%/4%
2016
4.20%
3%/4%
12/31/2017
12/31/2016
12/31/2017
12/31/2016
Weighted average assumptions used to determine net periodic benefit cost for the years ended December 31:
2017
Pension
2016
2015
2017
OPEB
2016
2015
Measurement date
12/31/2016
12/31/2015
12/31/2014
12/31/2016
12/31/2015
12/31/2014
Fiscal year end
Discount rate (1)
Rate of compensation increase (2)
Expected return on plan assets (3)
12/31/2017
12/31/2016
12/31/2015
12/31/2017
12/31/2016
12/31/2015
4.15%
3%/4%
6.82%
4.44%
3%/4%
7.10%
4.05%
3%/4%
7.16%
4.05%
3%/4%
—
4.50%
3%/4%
—
4.00%
3%/4%
—
(1) We use the Ryan Curve to determine the discount rate.
(2) For 2017, the rate of compensation increase is 3% per year for the first two years and 4% per year for year three and
thereafter. For 2016, the rate of compensation increase is 3% per year for the first three years and 4% per year for year
four and thereafter. For 2015, the rate of compensation increase is 3% per year for the first four years and 4% per year
for year five and thereafter.
(3) The rate for each of our defined benefit plans was selected by taking into account our expected asset mix and is based
on historical performance as well as expected future rates of return on plan assets.
For measurement purposes, medical cost inflation is initially estimated to be 7.00%, and 7.75% for pre and post-65
participants, respectively, declining to 4.50% over thirteen years and thereafter.
59
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care benefit
obligations. A one-percentage-point change in the assumed health care cost trend rate would have had the following effects in
2017:
Effect on total of service and interest cost
Effect on accumulated postretirement benefit obligation
Benefit Plan Assets
Pension Plan Investment Strategy and Policy
1% Increase
$
784
12,461
$
1% Decrease
(653)
(10,611)
The Pension Plans’ assets are invested in a prudent manner for the exclusive purpose of providing benefits to participants.
Other objectives are to:
•
Provide a total return that, over the long term, provides sufficient assets to fund the pension plan liabilities subject to
a level of risk, contributions and pension expense deemed appropriate by the company.
• Minimize, where possible, pension expense volatility, and inclusion of liability driven investing as an investment
strategy when appropriate. As the funding ratio improves, the objectives will evolve to minimize the funded status
volatility.
• Diversify investments within asset classes to reduce the impact of losses in single investments.
The assets of the Pension Plans are invested in compliance with ERISA, as amended, and any subsequent applicable
regulations and laws.
Performance
Our performance objective is to outperform the return of weighing passive investment alternatives by the policy target
allocations after fees at a comparable level of risk. This investment objective is expected to be achieved over the long term and
is measured over rolling multi-year periods. Peer-relative performance comparisons will also be considered especially when
performance deviates meaningfully from market indexes. Investment objectives for each asset class are included below.
Asset Allocation Policy
Asset allocation policy is the principal method for achieving the Pension Plans' investment objectives stated above. The
Pension Plans’ weighted average long-term strategic asset allocation policy targets are as follows:
Equities:
U.S. equities
International equities
Fixed income
Pension Plan Asset Allocation
2017
Target
December 31,
2017
December 31,
2016
29%
26%
45%
29%
26%
45%
100%
34%
22%
44%
100%
U.S. and international equities are held for their long-term expected return premium over fixed income investments and
inflation. Fixed income is held for diversification relative to equities.
The strategic role of U.S. and international equities is to:
•
Provide higher expected returns of the major asset classes.
60
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
• Maintain a diversified exposure within the U.S. and international stock markets through the use of multi-manager
portfolio strategies.
• Achieve returns in excess of passive indexes through the use of active investment managers and strategies.
The strategic role of fixed income is to:
• Diversify the Pension Plans’ equity exposure by investing in fixed income securities that exhibit a low correlation to
equities, thereby lowering the overall return volatility of the entire investment portfolio.
• Maintain a diversified exposure within the U.S. fixed income market through the use of multi-manager portfolio
strategies.
• Achieve returns in excess of passive indexes through the use of active investment managers and strategies.
The long-term strategic asset allocation policy is reviewed regularly or whenever significant changes occur to Century’s
or the Pension Plans' financial position and liabilities.
Fair Value Measurements of Pension Plan assets
The following table sets forth by level the fair value hierarchy our Pension Plans' assets. These assets are classified in
their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the
significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value
assets and liabilities and the placement within the fair value hierarchy levels.
Fair Value of Pension Plans’ assets included under the fair value hierarchy:
As of December 31, 2017
Equities:
U.S. equities
International equities
Fixed income
Total
As of December 31, 2016
Equities:
U.S. equities
International equities
Fixed income
Total
Level 1
Level 2
Level 3
Total
$ 86,513
$
— $
— $ 86,513
79,120
137,734
—
—
—
79,120
— 137,734
$ 303,367
$
— $
— $ 303,367
$ 93,773
$
— $
— $ 93,773
61,453
121,515
—
—
—
61,453
— 121,515
$ 276,741
$
— $
— $ 276,741
Our Pension Plans’ assets are held in certain mutual funds. The fair value of the mutual funds is based on the Net Asset
Value ("NAV") which is calculated every business day. The value of the underlying securities within the mutual funds are
determined as follows:
• U.S. listed equities; equity and fixed income options: Last sale price; last bid price if no last sale price;
• U.S. over-the-counter equities: Official closing price; last bid price if no closing price;
•
Foreign equities: Official closing price, where available, or last sale price; last bid price if no official closing price;
and
• Municipal bonds, US bonds, Eurobonds/foreign bonds: Evaluated bid price; broker quote if no evaluated bid price.
Our other postretirement benefit plans are unfunded. We fund these benefits as the retirees submit claims.
61
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Pension and OPEB Cash Flows
During 2017 and 2016, we made contributions of approximately $1,755 and $1,775, respectively, to the qualified defined
benefit and SERB plans we sponsor.
We expect to make the following contributions for 2018:
Expected pension plan contributions
Expected OPEB benefits payments
Estimated Future Benefit Payments
$
2018
1,812
7,459
The following table provides the estimated future benefit payments for the pension and other postretirement benefit plans:
2018
2019
2020
2021
2022
2023 – 2027
Pension
Benefits
OPEB
Benefits
$
20,261
$
20,802
21,057
21,030
21,382
7,459
7,559
7,625
7,847
7,876
101,437
38,085
Participation in Multi-employer Pension Plans
The union-represented employees at Hawesville are part of a United Steel, Paper and Forestry, Rubber, Manufacturing,
Energy, Allied Industrial and Service Workers International Union ("USWA") sponsored multi-employer plan. Our
contributions to the plan are determined at a fixed rate per hour worked. Currently, we do not have any plans to withdraw from
or curtail participation in this plan. The risks of participating in a multi-employer plan are different from single-employer plans
in the following respects:
• Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of
other participating employers.
•
•
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the
remaining participating employers.
If a participating employer chooses to stop participating in a multi-employer plan, the employer may be required to
pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
Century’s participation in the plan for the year ended December 31, 2017, is outlined in the table below.
Fund
EIN / PN
Pension Protection Act Zone Status 2017 (1)
Pension Protection Act Zone Status 2016 (1)
Subject to Financial Improvement/Rehabilitation Plan
Contributions of Century Aluminum 2017
Contributions of Century Aluminum 2016
Contributions of Century Aluminum 2015
Withdrawal from Plan Probable
Surcharge Imposed
Steelworkers Pension Trust
23-6648508/499
Green
Green
No
$767
$788
$1,618
No
No
Expiration Date of Collective Bargaining Agreement
April 1, 2020
62
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(1) The most recent Pension Protection Act zone status available in 2017 and 2016 is for the plan's year-end December 31,
2016 and December 31, 2015, respectively. The zone status is based on information that Century received from the plan
as well as publicly available information per the Department of Labor and is certified by the plan’s actuary. Among other
factors, plans in the green zone are at least 80 percent funded.
Century 401(k) Plans
We sponsor a tax-deferred savings plan under which eligible domestic employees may elect to contribute specified
percentages of their compensation with Century. We match a portion of participants' contributions to the savings
plan. Employee and matching contributions are considered fully vested immediately upon participation in the plan.
Concurrent with the 2014 amendment to the Salaried Pension Plan that eliminated future accruals for participants who are
under age 50 as of January 1, 2015 and closed the plan to new entrants, the Company increased the proportional match of
contributions made by those affected by the amendment. The expense related to the plan was $4,505, $3,945, and $5,446 for
2017, 2016, and 2015, respectively.
11. Share-based compensation
Amended and Restated Stock Incentive Plan — We award restricted share units and grant qualified incentive and
nonqualified stock options to our salaried officers, non-employee directors, and other key employees from our Amended and
Restated Stock Incentive Plan (the "Stock Incentive Plan"). The Stock Incentive Plan has 10,000,000 shares authorized for
issuance with approximately 6,273,000 shares remaining at December 31, 2017. Our share-based compensation consists of
service-based and performance-based share awards that typically vest over a period of three years from the date of grant,
provided that the recipient is still our employee at the time of vesting. Our independent non-employee directors receive annual
grants of service-based share awards that vest following 12 months of service. In the past, we have granted stock options that
have a term of 10 years and typically vest one-third on the grant date and an additional one-third on the first and second
anniversary dates of the grant. Our most recent grant of stock options was in 2009.
As of December 31, 2017, options to purchase 166,757 shares of common stock and 845,408 service-based share awards
were outstanding.
A summary of activity under our Stock Incentive Plan during the year ended December 31, 2017 is presented below:
Options
Outstanding at January 1, 2017
Exercised
Forfeited/expired
Weighted
Average
Remaining
Contractual
Term
(years)
Aggregate
Intrinsic
Value
Weighted
Average
Exercise
Price
$
24.95
51.00
Number
359,570
(61,648)
(131,165)
Outstanding, fully vested and exercisable at December 31,
2017 (1)
166,757
$
11.02
1.24
$
1,954
(1) As the result of actions in 2011 that were determined to be a "change of control" under the Stock Incentive Plan, all
options will remain exercisable for their respective remaining term, regardless of whether the awardees remain
employees of Century. Of the 166,757 outstanding options at December 31, 2017 there are 149,257 options with an
exercise price of $6.55 per share that expire in May 2019.
Long-Term Incentive Plan — We also grant annual long-term incentive awards under our Amended and Restated Long-
Term Incentive Plan (the "LTIP"). The LTIP is designed to provide senior-level employees the opportunity to earn long-term
incentive awards through the achievement of performance goals and to align compensation with the interests of our
stockholders by linking compensation to share price appreciation and total stockholder return over a multi-year period. Awards
made under the LTIP are granted subject to the Stock Incentive Plan to the extent the award is deliverable in stock. We provide
two types of LTIP awards: time-vested share units and performance units.
63
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Time-vested share units are stock-settled awards which do not contain any performance-based vesting
requirements. Performance units can be settled in cash or stock and vest based on the achievement of pre-determined
performance metrics at the discretion of the Board. Our performance unit liability was approximately $7,481 and $5,511 as of
December 31, 2017 and 2016, respectively. Both the performance units and time-vested share units vest, in their entirety, after
three years.
Service-based share awards
Outstanding at January 1, 2017
Granted
Vested
Forfeited
Outstanding at December 31, 2017
Service-based share awards
Number
741,036
337,951
(172,526)
(61,053)
845,408
Year ended December 31,
2017
2016
2015
Weighted average per share fair value of service-based share grants
$
8.92
$
7.14
$
Total intrinsic value of option exercises
624
—
4.21
—
Fair Value Measurement of Share-Based Compensation Awards – We estimate the fair value of each stock option award
using the Black-Scholes model on the date of grant. We have not granted any stock options since 2009. For our service-based
awards, fair value is equal to the closing stock price on the date of grant. For our performance-based awards, fair value is equal
to the closing stock price at each reporting period end.
The following table summarizes the compensation cost recognized for the years ended December 31, 2017, 2016 and
2015 for all options, service-based and performance-based share awards. The compensation cost is included as part of selling,
general and administrative expenses in our Consolidated Statements of Operations.
Share-based compensation expense reported:
Performance-based share expense
Service-based share expense
Total share-based compensation expense before income tax
Income tax
Year ended December 31,
2017
2016
2015
$
3,968
$
2,402
$
3,433
7,401
—
2,105
4,507
—
2,645
428
3,073
—
Total share-based compensation expense, net of income tax
$
7,401
$
4,507
$
3,073
No share-based compensation cost was capitalized during these periods and there were no significant modifications of any
share-based awards in 2017, 2016 and 2015. As of December 31, 2017, we had unrecognized compensation cost of $3,560
before taxes. This cost will be recognized over a weighted average period of two years.
12. Earnings (loss) per share
Basic EPS amounts are calculated by dividing net income (loss) allocated to common stockholders by the weighted
average number of common shares outstanding. Diluted EPS amounts assume the issuance of common stock for all potentially
dilutive common shares outstanding.
64
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table shows the basic and diluted earnings (loss) per share for 2017, 2016, and 2015:
Net income
Amount allocated to common stockholders
Basic EPS:
Net income allocated to common stockholders
Effect of dilutive securities:
Stock options
Service-based share awards
Diluted EPS:
Net loss
Amount allocated to common stockholders
Basic and Diluted EPS:
Net loss allocated to common stockholders
Net loss
Amount allocated to common stockholders
Basic and Diluted EPS:
Net loss allocated to common stockholders
For the year ended December 31, 2017
Net income
Shares (000)
Per Share
48,580
92%
44,714
87,295
$
0.51
101
624
44,714
88,020
$
0.51
For the year ended December 31, 2016
Net loss
Shares (000)
Per Share
(252,415)
100%
(252,415)
87,064
$
(2.90)
For the year ended December 31, 2015
Net income
Shares (000)
Per Share
(59,310)
100%
(59,310)
87,375
$
(0.68)
$
$
$
$
$
$
$
Securities excluded from the calculation of diluted EPS:
Stock options (1)
Service-based share awards (1)
2017
2016
2015
83,083
496,036
105,453
840,402
356,634
608,914
(1)
In periods when we report a net loss, all share-based compensation awards are excluded from the calculation of diluted
weighted average shares outstanding because of their antidilutive effect on earnings (loss) per share.
13. Income taxes
On December 22, 2017, the President of the United States signed into law tax reform legislation (informally known as
the Tax Cuts and Jobs Act (the “Act”)) that makes significant changes to various areas of U.S. federal income tax law. The new
tax legislation contains several key tax provisions including the reduction of the corporate income tax rate effective January 1,
2018 as well as a variety of other changes including a one-time transition tax, new territorial tax system, acceleration of
expensing of certain business assets and reductions in the amount of executive pay that could qualify as a tax deduction.
ASC 740 requires us to recognize the effect of the tax law changes in the period of enactment. However, the SEC staff
issued Staff Accounting Bulletin (SAB) 118 which will allow us to record provisional amounts during a measurement period
which is similar to the measurement period used when accounting for business combinations. As of December 31, 2017, in
accordance with SAB 118, the Company has made a reasonable estimate of: (i) the one-time transition tax, and (ii) the effects
on the Company’s existing deferred tax balances, but has not completed its full accounting for the tax effects of enactment of
the Act.
65
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Based on an initial assessment of the Act, the Company recorded no provision for the transition tax, and a tax benefit of
approximately $1 million on the Company’s consolidated financial statements for the reduction of deferred tax liabilities related
to indefinite lived intangible assets. While other deferred assets and liabilities will also be reduced, such reduction is offset by
changes to the Company’s valuation allowance.
In January 2018, the FASB released guidance on the accounting for tax on the global intangible low-taxed income
("GILTI") provisions of the Act. The GILTI provisions impose a tax on foreign income in excess of a deemed return on
tangible assets of foreign corporations. The guidance indicates that either accounting for deferred taxes related to GILTI
inclusions or to treat any taxes on GILTI inclusions as period cost are both acceptable methods subject to an accounting policy
election. The Company is still evaluating the GILTI provisions and has not yet elected an accounting policy for GILTI.
The Company expects that the Act will not have a significant impact on its financial statements or its future operational
results. We will continue to assess the impact of the recently enacted tax law on our business and our consolidated financial
statements through the measurement period allowed under SAB 118. Adjustments to provisional amounts, if any, that are
identified during the measurement period will be recorded in the reporting period in which the adjustment is determined.
The components of pre-tax book income (loss) consist of the following:
U.S.
Foreign
Total
Significant components of the income tax expense consist of the following:
Current:
U.S. federal current expense (benefit)
State current expense (benefit)
Foreign current expense
Total current expense
Deferred:
U.S. federal deferred benefit
State deferred benefit
Foreign deferred tax expense
Total deferred benefit
Total income tax expense
Year Ended December 31,
2017
26,823
28,548
55,371
$
2016
(86,545)
(164,320)
$ (250,865)
2015
(62,203)
21,081
(41,122)
$
$
Year Ended December 31,
2017
2016
2015
$
(106)
1,244
12,305
13,443
(2,522)
(14)
(3,324)
(5,860)
7,583
$
(231)
(130)
5,726
5,365
(1,564)
—
(977)
(2,541)
2,824
$
$
—
(706)
13,473
12,767
(1,564)
—
(1,927)
(3,491)
9,276
$
$
$
$
66
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A reconciliation of the statutory U.S. Federal income tax rate to the effective income tax rate on income (loss) is as follows:
Federal Statutory Rate
Permanent differences
State taxes, net of Federal benefit
Rate change
Foreign earnings taxed at different rates than U.S.
Valuation allowance
Changes in uncertain tax reserves
Other
Effective tax rate
2017
2016
2015
35.0%
57.5
(6.6)
370.5
(40.5)
(401.4)
3.8
(4.6)
13.7%
35.0 %
35.0 %
7.7
6.1
(4.2)
(13.5)
(27.5)
(1.0)
(3.7)
1.9
(16.0)
—
3.0
(56.6)
(4.2)
14.3
(1.1)%
(22.6)%
Upon enactment of the Act, the Company’s U.S. deferred tax asset and related valuation allowance decreased by
$205,150. As the U.S. deferred tax asset has a full valuation allowance, this change in rates had no impact on the Company’s
financial position or results of operations. The increase in permanent differences is a result of tax law changes related to our
foreign operations. The effect of earnings of foreign subsidiaries includes the difference between the U.S. statutory rate and
local jurisdiction tax rates.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes.
The significant components of our deferred tax assets and liabilities as of December 31 are as follows:
Deferred tax assets:
Accrued postretirement benefit cost
$
39,417
$
69,725
2017
2016
Accrued liabilities
Share-based compensation
Goodwill
Net operating losses and tax credits
Foreign basis differences
Ravenswood retiree legal settlement
Other
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Tax over financial statement depreciation
Unremitted foreign earnings
Total deferred tax liabilities
Net deferred tax liability
3,125
1,319
1,996
551,098
13,875
3,089
3,091
4,679
6,071
5,539
739,712
13,929
8,683
5,747
617,010
(607,813)
9,197
$
854,085
(839,082)
15,003
$
$ (109,733)
—
(109,733)
$ (100,536)
$ (119,378)
(808)
(120,186)
$ (105,183)
We regularly assess the likelihood that deferred tax assets will be recovered from future taxable income. To the extent we
believe that it is more likely than not that a deferred tax asset will not be realized, a valuation allowance is established. When a
valuation allowance is established or increased, an income tax charge is included in the consolidated statement of operations
and net deferred tax assets are adjusted accordingly. Future changes in tax laws, statutory tax rates and taxable income levels
could result in actual realization of the deferred tax assets being materially different from the amounts provided for in the
consolidated financial statements. If the actual recovery amount of the deferred tax asset is less than anticipated, we would be
required to write-off the remaining deferred tax asset and increase the tax provision.
67
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
We have a valuation allowance of $607,813 recorded for all of our U.S. deferred tax assets, and a portion of our Icelandic
deferred tax assets as of December 31, 2017. The Company is subject to the provisions of ASC 740-10, Income Taxes, which
requires that the effect on deferred tax assets and liabilities of a change in tax rates be recognized in the period the tax rate change
was enacted. The overall reduction in deferred tax assets, and the related valuation allowances, are primarily a result of the enactment
of the Act in 2017 and a reduction in the corporate tax rate from 35% to 21%.
The changes in the valuation allowance are as follows:
Beginning balance, valuation allowance
Remeasurement of deferred tax assets
Release of valuation allowance
Other change in valuation allowance
Ending balance, valuation allowance
2017
2016
2015
$ 839,082
(205,150)
—
(26,119)
$ 607,813
$ 768,764
$ 748,283
—
(6,007)
76,325
—
—
20,481
$ 839,082
$ 768,764
The significant components of our net operating loss carryforwards ("NOLs") are as follows:
Federal (1)
State (2)
Foreign (3)
2017
2016
$1,514,243
2,480,523
$1,510,558
1,901,554
532,582
540,819
(1) The federal NOL begins to expire in 2028.
(2) The state NOLs begin to expire in 2027.
(3) The Icelandic NOL begins to expire in 2017; the Netherlands NOL begins to expire in 2022.
Our ability to utilize our deferred tax assets to offset future federal taxable income may be significantly limited if we
experience an "ownership change" as defined in the Code. In general, an ownership change would occur if our "five-percent
shareholders," as defined under the Code, collectively increase their ownership in us by more than 50 percentage points over a
rolling three-year period. Future transactions in our stock that may not be in our control may cause us to experience such an
ownership change and thus limit our ability to utilize net operating losses, tax credits and other tax assets to offset future
taxable income.
A reconciliation of the beginning and ending amounts of gross unrecognized tax positions (excluding interest) is as
follows:
Balance as of January 1,
Additions based on tax positions related to the current year
Decreases due to lapse of applicable statute of limitations
Settlements
Balance as of December 31,
2017
2016
2015
$
$
6,400
2,100
(100)
—
$
3,800
2,700
(100)
—
2,000
1,800
—
—
$
8,400
$
6,400
$
3,800
Included in the above balances are tax positions whose tax characterization is highly certain but for which there is
uncertainty about the timing of tax return inclusion. Because of the impact of deferred tax accounting, other than interest and
penalties, the timing would not impact the annual effective tax rate but could accelerate the payment of cash to the taxing
authority to an earlier period. The remaining amounts of unrecognized tax positions would affect our effective tax rate if
recognized. It is our policy to recognize potential accrued interest and penalties related to unrecognized tax positions in income
tax expense.
68
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The components of our unrecognized tax positions are as follows:
Highly certain tax positions
Other unrecognized tax benefits
Gross unrecognized tax benefits
Accrued interest and penalties related to unrecognized tax positions
2017
2016
2015
$
$
$
8,300
100
8,400
40
$
$
$
6,300
100
6,400
$
$
— $
3,700
100
3,800
—
We do not expect a significant change in the balance of unrecognized tax benefits within the next twelve months.
Century and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions,
and several foreign jurisdictions.
Our federal income tax returns have been reviewed by the IRS through 2010. However, we have NOLs beginning in 2008
that are available for carryforward to future years. Under U.S. tax law, NOLs may be adjusted by the IRS until the statute of
limitations expires for the year in which the NOL is used. Accordingly, our 2008 and later NOLs may be reviewed until they
are used or expire. Material state and local income tax matters have been concluded for years through 2006. The majority of
our state returns beginning in 2008 are subject to examination.
Our Icelandic tax returns are subject to examination beginning with the 2012 tax year.
As of December 31, 2017 and 2016 we had income taxes payable of $12,186 and $5,745, respectively. The income taxes
payable are included within accrued and other current liabilities in our Consolidated Balance Sheets.
14. Commitments and contingencies
Environmental Contingencies
Based upon all available information, we believe our current environmental liabilities do not have, and are not likely to
have, a material adverse effect on our financial condition, results of operations or liquidity. However, because of the inherent
uncertainties in estimating environmental liabilities primarily due to unknown facts and circumstances and changing
governmental regulations and legal standards regarding liability, there can be no assurance that future capital expenditures and
costs for environmental compliance at currently or formerly owned or operated properties will not result in liabilities that may
have a material adverse effect on our financial condition, results of operations or liquidity.
It is our policy to accrue for costs associated with environmental assessments and remedial efforts when it becomes
probable that a liability has been incurred and the costs can be reasonably estimated. The aggregate environmental-related
accrued liabilities were $1,104 and $998 at December 31, 2017 and 2016, respectively. All accrued amounts have been
recorded without giving effect to any possible future recoveries. Costs for ongoing environmental compliance, including
maintenance and monitoring are expensed as incurred.
Vernon
In July 2006, we were named as a defendant, together with certain affiliates of Alcan Inc., in a lawsuit brought by Alcoa
Inc. seeking to determine responsibility for certain environmental indemnity obligations related to the sale of a cast aluminum
plate manufacturing facility located in Vernon, California, which we purchased from Alcoa Inc. in December 1998, and sold to
Alcan Rolled Products-Ravenswood LLC in July 1999. The complaint also seeks costs and attorney fees. The matter was
stayed by the court in 2008 to allow for the remediation of environmental areas at the site. On June 30, 2016 the court ordered
the stay lifted and reopened the case. The matter is in a preliminary stage in the U.S. District Court for the District of Delaware,
and we cannot predict the ultimate outcome of this action or estimate a range of possible losses related to this matter at this
time.
Matters relating to the St. Croix Alumina Refining Facility
We are a party to a United States Environmental Protection Agency Administrative Order on Consent (the "Order")
pursuant to which certain past and present owners of an alumina refining facility at St. Croix, Virgin Islands (the "St. Croix
Alumina Refinery") have agreed to carry out a Hydrocarbon Recovery Plan to remove and manage hydrocarbons floating on
69
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
groundwater underlying the facility. Pursuant to the Hydrocarbon Recovery Plan, recovered hydrocarbons and groundwater are
delivered to the adjacent petroleum refinery where they are received and managed. Through December 31, 2017, our affiliate
Virgin Islands Alumina Corporation LLC, has expended approximately $1,085 on the Hydrocarbon Recovery Plan. At this
time, we are not able to estimate the amount of any future potential payments under this indemnification to comply with the
Order, but we do not anticipate that any such amounts will have a material adverse effect on our financial condition, results of
operations or liquidity, regardless of the final outcome.
In December 2010, Century was among several defendants named in a lawsuit filed by plaintiffs who either worked,
resided or owned property in the area downwind from the St. Croix Alumina Refinery. In March 2011, Century was also named
a defendant in a nearly identical suit brought by certain additional plaintiffs. The plaintiffs in both suits allege damages caused
by the presence of red mud and other particulates coming from the alumina facility and are seeking unspecified monetary
damages, costs and attorney fees as well as certain injunctive relief. We tendered indemnity and defense to St. Croix Alumina
LLC and Alcoa Alumina & Chemical LLC under the terms of an acquisition agreement relating to the facility and have filed
motions to dismiss plaintiffs’ claims. In August 2015, the Superior Court of the Virgin Islands, Division of St. Croix denied the
motions to dismiss but ordered all plaintiffs to refile individual complaints. At this time, it is not possible to predict the ultimate
outcome of or to estimate a range of possible losses for any of the foregoing actions relating to the St. Croix Alumina Refinery.
Legal Contingencies
In addition to the foregoing matters, we have pending against us or may be subject to various lawsuits, claims and
proceedings related primarily to employment, commercial, stockholder, safety and health matters. While the results of such
litigation matters and claims cannot be predicted with certainty, we believe that the final outcome of such matters will not have
a material adverse impact on our financial condition, results of operations or liquidity. However, because of the nature and
inherent uncertainties of litigation, should the outcome of these actions be unfavorable, our business, financial condition, results
of operations and liquidity could be materially and adversely affected.
In evaluating whether to accrue for losses associated with legal contingencies, it is our policy to take into consideration
factors such as the facts and circumstances asserted, our historical experience with contingencies of a similar nature, the
likelihood of our prevailing and the severity of any potential loss. For some matters, no accrual is established because we have
assessed our risk of loss to be remote. Where the risk of loss is probable and the amount of the loss can be reasonably
estimated, we record an accrual, either on an individual basis or with respect to a group of matters involving similar claims,
based on the factors set forth above.
When we have assessed that a loss associated with legal contingencies is reasonably possible, we determine if estimates of
possible losses or ranges of possible losses are in excess of related accrued liabilities, if any. Based on current knowledge,
management has ascertained estimates for losses that are reasonably possible and management does not believe that any
reasonably possible outcomes in excess of our accruals, if any, either individually or in aggregate, would be material to our
financial condition, results of operations, or liquidity. We reevaluate and update our assessments and accruals as matters
progress over time.
Ravenswood Retiree Medical Benefits changes
In November 2009, Century Aluminum of West Virginia ("CAWV") filed a class action complaint for declaratory
judgment against the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers
International Union ("USW"), the USW’s local and certain CAWV retirees, individually and as class representatives ("CAWV
Retirees"), seeking a declaration of CAWV’s rights to modify/terminate retiree medical benefits. Later in November 2009, the
USW and representatives of a retiree class filed a separate suit against CAWV, Century Aluminum Company, Century
Aluminum Master Welfare Benefit Plan, and various John Does with respect to the foregoing.
On August 18, 2017, the District Court for the Southern District of West Virginia approved a settlement agreement in
respect of these actions. Under the terms of the settlement agreement, CAWV agreed to make payments into a trust for the
benefit of the CAWV Retirees in the aggregate amount of $23,000 over the course of 10 years. Upon approval of the
settlement, we paid $5,000 to the aforementioned trust in September 2017 and recognized a gain of $5,500 to arrive at the-then
net present value of the $12,500. As of December 31, 2017, $12,856 was recorded in accrued and other current liabilities as
well as other liabilities. CAWV has agreed to pay the remaining amounts under the settlement agreement in annual increments
of $2,000 for nine years.
PBGC Settlement
In 2013, we entered into a settlement agreement with the Pension Benefit Guarantee Corporation (the "PBGC") regarding
an alleged "cessation of operations" at our Ravenswood facility. Pursuant to the terms of the agreement, we agreed to make
70
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
additional contributions (above any minimum required contributions) to our defined benefit pension plans totaling
approximately $17,400. Under certain circumstances, in periods of lower primary aluminum prices relative to our cost of
operations, we are able to defer one or more of these payments, provided that we provide the PBGC with acceptable security for
such deferred payments. We made contributions pursuant to this agreement of $1,100 in 2015 and $6,700 in 2013. We did not
make any contributions during 2014, 2016 or 2017. We have elected to defer certain payments under the PBGC agreement and
have provided the PBGC with the appropriate security. The remaining contributions under this agreement are approximately
$9,600.
Power Commitments and Contingencies
Hawesville
Hawesville has a power supply arrangement with Kenergy and EDF Trading North America, LLC (“EDF") which
provides market-based power to the Hawesville smelter. Under this arrangement, the power companies purchase power on the
open market and pass it through to Hawesville at Midcontinent Independent System Operator ("MISO") pricing plus
transmission and other costs. The power supply arrangement with Kenergy has an effective term through December 2023. The
arrangement with EDF to act as our market participant with MISO has an effective term through May 2019. Each of these
agreements provides for automatic extension on a year-to-year basis unless a one year notice is given by either party.
Sebree
Sebree has a power supply arrangement with Kenergy and EDF which provides market-based power to the Sebree
smelter. Similar to the arrangement at Hawesville, the power companies purchase power on the open market and pass it through
to Sebree at MISO pricing plus transmission and other costs. The power supply arrangement with Kenergy has an effective term
through December 2023. The arrangement with EDF to act as our market participant with MISO has an effective term through
May 2019. Each of these agreements provides for automatic extension on a year-to-year basis unless a one year notice is given
by either party.
Mt. Holly
Mt. Holly has a power supply arrangement pursuant to which 25% of the Mt. Holly load is served from the South
Carolina Public Service Authority’s ("Santee Cooper") generation at a cost-based industrial rate and 75% of the Mt. Holly load
is sourced from a supplier that is outside Santee Cooper’s service territory at market prices that are tied to natural gas prices.
The agreement with Santee Cooper has a term through December 31, 2018. The agreement with the other power supplier has a
term through December 31, 2018. Both of these agreements may be terminated by Mt. Holly on 60 days' notice.
Grundartangi
Grundartangi has power purchase agreements for approximately 525 MW with HS Orka hf ("HS"), Landsvirkjun and
Orkuveita Reykjavikur ("OR") to provide power to its Grundartangi smelter. These power purchase agreements expire on
various dates from 2019 through 2036 (subject to extension). The power purchase agreements with HS and OR both provide
power at LME-based variable rates for the duration of these agreements. The power purchase agreement with Landsvirkjun for
161MW provides power at LME-based variable rates through October 2019 and rates linked to the Nord Pool power market
from November 2019 through the expiration of the agreement on December 31, 2023.
Helguvik
Nordural Helguvik ehf ("Helguvik") has a power purchase agreement with OR to provide a portion of the power
requirements to the Helguvik project. The agreement would provide power at LME-based variable rates and contain take-or-pay
obligations with respect to a significant percentage of the total committed and available power under such agreement. The first
phase of power under the OR purchase agreement (approximately 47.5MW) became available in the fourth quarter of 2011 and
is currently being utilized at Grundartangi. The agreement also contains certain conditions to OR’s obligations with respect to
the remaining phases and OR has alleged that certain of these conditions have not been satisfied. We are in discussions with
OR with respect to such conditions and other matters pertaining to this agreement.
71
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Other Commitments and Contingencies
Labor Commitments
The bargaining unit employees at our Grundartangi, Vlissingen, Hawesville and Sebree facilities are represented by labor
unions, representing approximately 65% of our total workforce.
Approximately 87% of Grundartangi’s work force is represented by five labor unions, governed by a labor agreement
which is effective through December 31, 2019 that establishes wages and work rules for covered employees. 100% of
Vlissingen's work force is represented by the Federation for the Metal and Electrical Industry ("FME") by a labor agreement
that is effective to June 1, 2018. The FME negotiates working conditions with trade unions on behalf of its members.
Approximately 52% of our U.S. based work force is represented by USW. The labor agreement for CAKY's Hawesville
employees is effective through April 1, 2020. Century Sebree's labor agreement with the USW for its employees is effective
through October 28, 2019. Mt Holly employees are not represented by a labor union.
15. Asset retirement obligations ("ARO")
The reconciliation of the changes in the asset retirement obligations is presented below:
Beginning balance, ARO liability
Additional ARO liability incurred
ARO liabilities settled
Accretion expense
Adjustments
Ending balance, ARO liability
16. Supplemental cash flow information
Cash paid for:
Interest
Income/withholding taxes, net (1)
Non-cash investing and financing activities:
Year ended December 31,
2017
2016
$
35,418
$
1,354
(9,900)
1,924
(278)
28,518
$
$
35,165
1,272
(1,930)
1,903
(992)
35,418
Year Ended December 31,
2017
2016
2015
$
19,529
$
19,511
$
18,781
5,561
13,904
24,125
Accrued capital costs
(1) We paid withholding taxes in Iceland on intercompany dividends of $8,388 during the year ended December 31, 2015
(there were none for the years ended December 31, 2017 and 2016). Such withholding taxes are then refunded to us in
the following year.
3,018
777
553
$
$
$
72
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
17. Quarterly information (Unaudited)
Financial results by quarter for the years ended December 31, 2017 and 2016 are as follows:
Net sales
Gross profit
(loss)
Net income
(loss)
Net income (loss)
allocated to
common
stockholders
Basic
earnings (loss)
per share
Diluted
earnings (loss)
per share
$ 433,847
$
47,892
$
35,805
$
32,963
$
400,645
388,802
365,786
41,402
22,460
16,851
20,783
7,131
(15,139)
$ 339,836
$
5,057
333,650
326,754
318,854
(17,612)
5,582
(3,052)
$ (168,464) $
(58,273)
(9,515)
(16,163)
19,132
6,563
(15,139)
(168,464) $
(58,273)
(9,515)
(16,163)
$
0.38
0.22
0.08
(0.17)
(1.93) $
(0.67)
(0.11)
(0.19)
0.37
0.22
0.07
(0.17)
(1.93)
(0.67)
(0.11)
(0.19)
2017
4th Quarter (1)
3rd Quarter
2nd Quarter
1st Quarter (2)
2016
4th Quarter (3)
3rd Quarter (4)
2nd Quarter
1st Quarter
(1) The fourth quarter of 2017 was favorably impacted by a $7,310 gain on the extinguishment of a portion of our
contractual commitments associated with the construction of the Helguvik project.
(2) The first quarter of 2017 was unfavorably impacted by net losses on forward and derivative contracts of $16,137.
(3) The fourth quarter of 2016 was unfavorably impacted by a $152,200 impairment charge for Helguvik.
(4) The third quarter of 2016 was unfavorably impacted by a $23,000 charge related to the Ravenswood retiree medical
proposed settlement.
18. Business segments
Century Aluminum is a producer of primary aluminum, which trades as a global commodity. We are organized as a
holding company with each of our operating primary aluminum smelters managed and operated as a separate facility reporting
to our corporate headquarters. Each of our operating primary aluminum smelters meets the definition of an operating segment.
We evaluated the similar economic and other characteristics, including nearly identical products, production processes,
customers and distribution and have aggregated our four operating segments into one reportable segment, primary aluminum,
based on these factors. In addition, all of our primary aluminum smelters share several key economic factors inherent in their
common products and production processes. For example, all of our facilities' revenue is based on the LME price for primary
aluminum.
A reconciliation of our consolidated assets to the total of primary aluminum segment assets is provided below.
Segment assets (1)
Primary
Corporate, unallocated
Total assets
2017
2016
2015
$ 1,530,975
$ 1,492,964
$ 1,706,032
50,666
47,363
46,436
$ 1,581,641
$ 1,540,327
$ 1,752,468
(1) Segment assets include accounts receivable, due from affiliates, prepaid and other current assets, inventory, intangible
assets and property, plant and equipment — net; the remaining assets are unallocated corporate assets.
73
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Geographic information
Included in the consolidated financial statements are the following amounts related to geographic locations:
Net sales:
United States
Iceland
Long-lived assets: (1)
United States
Iceland
Other
2017
2016
2015
$
938,333
$
808,912
$ 1,373,714
650,747
510,182
576,143
$
370,029
$
395,107
$
408,722
582,981
74,957
625,897
78,701
801,268
94,421
(1)
Includes long-lived assets other than financial instruments and deferred taxes.
Major customer information
Over the last three years, only sales revenue from Glencore exceeded 10% of our net sales. A loss of this customer could
have a material adverse effect on our results of operations. The net sales revenue related to Glencore is as follows:
Year Ended December 31,
2016
2017
2015
Glencore
19. Derivatives
$ 1,198,076
$ 1,178,631
$ 1,867,711
At December 31, 2017, we had an open position of 3,090 tonnes related to LME forward financial sales contracts, all of
which are with Glencore, to fix the forward LME price (the "Forward Financial Sales Contracts"). These Forward Financial Sales
Contracts are expected to settle between November 1, 2019 and December 31, 2020. We also have financial contracts with various
counterparties including Glencore to offset fixed price sales arrangements with certain of our customers (the "fixed for floating
swaps") to remain exposed to the LME price. At December 31, 2017 we had an open position related to such arrangements of
8,964 tonnes settling at various dates through December 2018.
We have also entered into financial contracts to fix the forward price of approximately 4% of Grundartangi's total power
requirements for the period November 1, 2019 through December 31, 2020 (the "power price swaps"). The power price swaps are
not designated as cash flow hedges. At December 31, 2017 we had an open position of 256,200 MWh related to the power price
swaps.
At December 31, 2017, we had a derivative asset and liability of $1,724 and $1,200, respectively, in the consolidated
balance sheets. In 2017, we recognized a loss of $16,549 related to our derivative instruments in the consolidated statements of
operations, substantially all of which related to transactions with Glencore. The impact of the derivative instruments on the
consolidated balance sheets and consolidated statements of operations was not material for the corresponding prior periods
presented.
20. Condensed consolidating financial information
Our 2021 Notes are guaranteed by each of our material existing and future domestic subsidiaries (The "Guarantor
Subsidiaries"), except for Nordural US LLC, Century Aluminum Development LLC and Century Aluminum of West Virginia,
Inc. The Guarantor Subsidiaries are 100% owned by Century. All guarantees are full and unconditional; all guarantees are joint
and several. These notes are not guaranteed by our foreign subsidiaries (such foreign subsidiaries, Nordural US LLC, Century
Aluminum Development LLC and Century Aluminum of West Virginia, Inc., collectively the "Non-Guarantor Subsidiaries").
We allocate corporate expenses or income to our subsidiaries and charge interest on certain intercompany balances.
74
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following summarized condensed consolidating statements of comprehensive income (loss) for the twelve months
ended December 31, 2017, 2016 and 2015, condensed consolidating balance sheets as of December 31, 2017 and December 31,
2016 and the condensed consolidating statements of cash flows for the twelve months ended December 31, 2017, 2016 and
2015 present separate results for Century, the Guarantor Subsidiaries, the Non-Guarantor Subsidiaries, consolidating
adjustments and total consolidated amounts.
Condensed Consolidating Statements of Comprehensive Income (Loss)
For the year ended December 31, 2017
The
Company
Combined
Guarantor
Subsidiaries
Combined
Non-
Guarantor
Subsidiaries
Consolidating
Adjustments
Total
Consolidated
$
— $
547,458
$
650,618
$
— $
1,198,076
Selling, general and administrative
expenses
27,846
12,905
NET SALES:
Related parties
Other customers
Total net sales
Cost of goods sold
Gross profit
Helguvik (gains)
Ravenswood (gains)
Other operating expense - net
Operating income (loss)
Interest expense - third parties
Interest income (expense) - affiliates
Interest income - third parties
Net gain (loss) on forward and
derivative contracts
Other income (expense) - net
Income (loss) before income taxes
and equity in earnings of subsidiaries
and joint ventures
Income tax (expense) benefit
Income (loss) before equity in
earnings of subsidiaries and joint
ventures
Equity in earnings of subsidiaries
and joint ventures
—
—
—
—
390,875
938,333
888,176
50,157
—
—
—
(27,846)
(20,397)
37,184
482
—
986
—
—
—
37,252
(1,554)
8,760
—
(17,073)
2,976
129
650,747
572,299
78,448
4,695
(7,310)
(5,500)
2,111
84,452
(223)
(45,944)
915
524
(5,123)
(9,591)
457
30,361
972
34,601
(9,012)
(9,134)
31,333
25,589
57,714
2,703
792
Net income
$
48,580
$
34,036
$
26,381
$
Other comprehensive income before
income tax effect
Income tax effect
Other comprehensive income
23,678
(1,527)
22,151
12,722
—
12,722
1,457
37
1,494
Total comprehensive income
$
70,731
$
46,758
$
27,875
$
75
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(60,417)
(60,417) $
(14,179)
(37)
(14,216)
(74,633) $
391,004
1,589,080
1,460,475
128,605
45,446
(7,310)
(5,500)
2,111
93,858
(22,174)
—
1,397
(16,549)
(1,161)
55,371
(7,583)
47,788
792
48,580
23,678
(1,527)
22,151
70,731
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statements of Comprehensive Income (Loss)
For the year ended December 31, 2016
The
Company
Combined
Guarantor
Subsidiaries
Combined
Non-
Guarantor
Subsidiaries
Consolidating
Adjustments
Total
Consolidated
$
— $
668,486
$
510,145
$
— $
1,178,631
Selling, general and administrative
expenses
20,704
9,853
NET SALES:
Related parties
Other customers
Total net sales
Cost of goods sold
Gross profit (loss)
Helguvik losses
Ravenswood losses
Other operating expense - net
Operating loss
Interest expense - third parties
Interest income (expense) - affiliates
Interest income - third parties
Net gain on forward and derivative
contracts
Other income (expense) - net
Loss before income taxes and equity
in earnings (loss) of subsidiaries and
joint ventures
Income tax (expense) benefit
Income (loss) before equity in
earnings (loss) of subsidiaries and
joint ventures
Equity in earnings (loss) of
subsidiaries and joint ventures
Net loss
Other comprehensive income before
income tax effect
Income tax effect
Other comprehensive income (loss)
37
510,182
467,504
42,678
9,707
152,220
26,830
3,857
(149,936)
(179)
(47,318)
566
—
(138)
—
—
—
—
140,426
808,912
862,632
(53,720)
—
—
—
(63,573)
(1,659)
8,107
10
3,487
218
—
—
—
(20,704)
(20,378)
39,211
182
—
1,239
(450)
1,925
(53,410)
—
(197,005)
(4,749)
1,475
(53,410)
(201,754)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
140,463
1,319,094
1,330,136
(11,042)
40,264
152,220
26,830
3,857
(234,213)
(22,216)
—
758
3,487
1,319
(250,865)
(2,824)
(253,689)
(253,890)
$
(252,415) $
12,463
(40,947) $
1,274
(200,480) $
241,427
241,427
$
1,274
(252,415)
288
(1,531)
(1,243)
1,868
—
1,868
(39,079) $
5,134
(24)
5,110
(195,370) $
(7,002)
24
(6,978)
234,449
$
288
(1,531)
(1,243)
(253,658)
Total comprehensive loss
$
(253,658) $
76
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statements of Comprehensive Income (Loss)
For the year ended December 31, 2015
The
Company
Combined
Guarantor
Subsidiaries
Combined
Non-
Guarantor
Subsidiaries
Consolidating
Adjustments
Total
Consolidated
NET SALES:
Related parties
Other customers
Total net sales
Cost of goods sold
Gross profit (loss)
$
— $ 1,277,474
$
632,597
$
—
—
—
—
82,327
1,359,801
1,388,400
(28,599)
(42,360) $
(224)
(42,584)
(44,236)
1,652
1,867,711
82,146
1,949,857
1,908,544
41,313
43
632,640
564,380
68,260
5,317
30,850
7,436
24,657
(186)
(37,626)
270
189
—
2,356
Selling, general and administrative
expenses
Ravenswood losses
Other operating expense - net
Operating income (loss)
Interest expense - third parties
Interest income (expense) - affiliates
Interest income - third parties
Net gain on forward and derivative
contracts
Unrealized gain on fair value of
contingent consideration
28,000
—
—
(28,000)
(20,201)
37,626
65
—
—
Other income (expense) - net
1,356
8,798
—
—
(37,397)
(1,567)
—
4
1,411
18,337
(658)
Loss before income taxes and equity
in earnings (loss) of subsidiaries and
joint ventures
Income tax (expense) benefit
Loss before equity in earnings (loss)
of subsidiaries and joint ventures
BHH impairment
Equity in earnings (loss) of
subsidiaries and joint ventures
(9,154)
2,140
(19,870)
—
(10,340)
(11,416)
(19,870)
—
(21,756)
(11,584)
(7,014)
—
(52,296)
—
—
—
1,652
—
—
—
—
—
(3,410)
(1,758)
—
(1,758)
—
—
(19,870) $
2,672
(30,668) $
52,296
50,538
$
14,754
—
14,754
(5,116) $
(1,114)
33
(1,081)
(31,749) $
(13,640)
(33)
(13,673)
36,865
$
42,115
30,850
7,436
(39,088)
(21,954)
—
339
1,600
18,337
(356)
(41,122)
(9,276)
(50,398)
(11,584)
2,672
(59,310)
6,568
(1,536)
5,032
(54,278)
Net loss
$
(59,310) $
Other comprehensive income (loss)
before income tax effect
Income tax effect
Other comprehensive income (loss)
6,568
(1,536)
5,032
Total comprehensive loss
$
(54,278) $
77
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Balance Sheet
As of December 31, 2017
The
Company
Combined
Guarantor
Subsidiaries
Combined
Non-
Guarantor
Subsidiaries
Consolidating
Adjustments
Total
Consolidated
Cash & cash equivalents
$
64,384
$
(132) $
102,959
$
— $
167,211
Restricted cash
Accounts receivable - net
Due from affiliates
Inventories
Prepaid and other current assets
Total current assets
Property, plant and equipment - net
Investment in subsidiaries
Due from affiliates - long term
Other assets
TOTAL
—
—
42
181
3,330
67,937
19,381
751,820
513,328
27,954
$ 1,380,420
6,297
421
15,973
1,917
—
24,608
248,153
Accounts payable, trade
$
Due to affiliates
Accrued and other current liabilities
Accrued employee benefits costs
Industrial revenue bonds
Total current liabilities
Senior notes payable
Accrued pension benefits costs - less
current portion
Accrued postretirement benefits costs -
less current portion
Other liabilities
Due to affiliates - long term
Deferred taxes
801
42,792
10,312
205,156
754
259,683
295,865
53,942
349,572
34,162
993,224
51,394
2,563
19,301
8,263
7,815
89,336
—
$
$
47
279
12
112,132
10,625
226,054
656,670
—
9,430
—
—
—
—
—
—
—
(805,762)
(872,330)
848
43,071
10,366
317,469
14,709
553,674
971,916
—
—
25,915
918,069
(31,980)
56,051
$ (1,710,072) $ 1,581,641
32,240
$
— $
17,385
26,124
824
—
76,573
—
—
—
—
—
—
—
89,931
20,369
61,398
11,004
7,815
190,517
248,153
$
$
39,462
18,303
13,144
(31,980)
38,929
879
3,523
234,137
15
110,394
31,991
53,812
1,748
1,723
22,413
584,381
101,713
723,374
—
59
118,063
118,122
—
—
(872,330)
—
(904,310)
—
(60)
(805,702)
(805,762)
112,996
57,927
—
103,476
561,481
1
947
828,695
829,643
$ (1,710,072) $ 1,581,641
Total noncurrent liabilities
526,169
216,248
Preferred stock
Common stock
Other shareholders' equity
Total shareholders' equity
1
947
828,695
829,643
—
1
687,639
687,640
TOTAL
$ 1,380,420
$
993,224
$
918,069
78
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Balance Sheet
As of December 31, 2016
The
Company
Combined
Guarantor
Subsidiaries
Combined
Non-
Guarantor
Subsidiaries
Consolidatin
g
Adjustments
Total
Consolidated
Cash & cash equivalents
$
36,670
$
(255) $
95,988
$
— $
132,403
Restricted cash
Accounts receivable - net
Due from affiliates
Inventories
Prepaid and other current assets
Assets held for sale
Total current assets
Property, plant and equipment - net
Investment in subsidiaries
Due from affiliates - long term
Other assets
TOTAL
—
167
42
180
6,838
—
43,897
12,311
702,659
529,873
28,215
$ 1,316,955
6,125
417
11,950
1,932
—
20,424
247,699
Accounts payable, trade
$
Due to affiliates
Accrued and other current liabilities
Accrued employee benefits costs
Industrial revenue bonds
Total current liabilities
Senior notes payable
Accrued pension benefits costs - less
current portion
Accrued postretirement benefits costs -
less current portion
Other liabilities
Due to affiliates - long term
Deferred taxes
794
11,883
16,606
146,689
5,699
—
181,416
328,069
51,240
346,893
49,331
956,949
52,921
9,641
17,744
8,317
7,815
96,438
—
$
$
256
382
3
86,694
9,673
22,313
215,309
685,905
—
1,792
—
—
—
—
—
—
—
—
(753,899)
(878,558)
1,050
12,432
16,651
233,563
22,210
22,313
440,622
1,026,285
—
—
27,596
930,602
(31,722)
73,420
$ (1,664,179) $ 1,540,327
35,914
$
— $
5,310
20,406
668
—
62,298
—
—
—
—
—
—
—
94,960
15,368
50,100
10,917
7,815
179,160
247,699
$
$
46,390
20,167
14,658
(31,722)
49,493
4,380
4,160
237,247
—
120,242
30,920
42,609
2,735
1,733
36,946
598,702
106,204
758,243
—
59
110,002
110,061
—
—
(878,558)
—
(910,280)
—
(60)
(753,839)
(753,899)
126,355
72,026
—
108,939
604,512
1
944
755,710
756,655
$ (1,664,179) $ 1,540,327
Total noncurrent liabilities
539,876
216,673
Preferred stock
Common stock
Other shareholders' equity
Total shareholders' equity
1
944
755,710
756,655
—
1
643,837
643,838
TOTAL
$ 1,316,955
$
956,949
$
930,602
79
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Cash Flows
For the year ended December 31, 2017
Net cash provided by (used in)
operating activities
Purchase of property, plant and
equipment
Proceeds from sale of property, plant
and equipment
Intercompany transactions
Net cash provided by (used in) investing
activities
Borrowings under revolving credit
facilities
Repayments under revolving credit
facilities
Issuance of common stock
Intercompany transactions
Net cash provided by (used in)
financing activities
CHANGE IN CASH AND CASH
EQUIVALENTS
Cash and cash equivalents, beginning
of period
Cash and cash equivalents, end of
period
The
Company
Combined
Guarantor
Subsidiaries
Combined
Non-
Guarantor
Subsidiaries
Consolidating
Adjustments
Total
Consolidated
$
(34,417) $
(6,993) $
96,123
$
(2,954) $
51,759
(10,889)
(8,111)
(12,839)
—
(31,839)
—
75,726
899
6,081
13,585
(7,638)
—
(74,169)
14,484
—
64,837
(1,131)
(6,892)
(74,169)
(17,355)
1,281
(1,281)
404
(3,110)
—
—
—
8,247
—
—
—
(82,260)
—
—
—
77,123
(2,706)
8,247
(82,260)
77,123
1,281
(1,281)
404
—
404
27,714
36,670
123
6,971
(255)
95,988
—
—
34,808
132,403
$
64,384
$
(132) $
102,959
$
— $
167,211
80
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Cash Flows
For the year ended December 31, 2016
Net cash provided by (used in)
operating activities
Purchase of property, plant and
equipment
Proceeds from sale of property, plant
and equipment
Restricted and other cash deposits
Intercompany transactions
Net cash provided by (used in) investing
activities
Borrowings under revolving credit
facilities
Repayments under revolving credit
facilities
Intercompany transactions
Net cash provided by (used in)
financing activities
CHANGE IN CASH AND CASH
EQUIVALENTS
Cash and cash equivalents, beginning
of period
Cash and cash equivalents, end of
period
The
Company
Combined
Guarantor
Subsidiaries
Combined
Non-
Guarantor
Subsidiaries
Consolidating
Adjustments
Total
Consolidated
$
(63,446) $
19,019
$
82,600
$
— $
38,173
(1,425)
(7,807)
(12,712)
—
—
27,761
—
(3)
(15,305)
1,040
(256)
(937)
—
—
—
(11,519)
(21,944)
1,040
(259)
—
26,336
(23,115)
(12,865)
(11,519)
(21,163)
1,179
(1,179)
15,359
—
—
7,488
—
—
(34,366)
—
—
11,519
1,179
(1,179)
—
15,359
7,488
(34,366)
11,519
—
(21,751)
3,392
35,369
58,421
(3,647)
60,619
—
—
17,010
115,393
$
36,670
$
(255) $
95,988
$
— $
132,403
81
CENTURY ALUMINUM COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Condensed Consolidating Statement of Cash Flows
For the year ended December 31, 2015
Net cash provided by operating
activities
Purchase of property, plant and
equipment
Purchase of remaining interest in Mt.
Holly smelter
Proceeds from sale of property, plant
and equipment
Restricted and other cash deposits
Intercompany transactions
Net cash used in investing activities
Borrowings under revolving credit
facilities
Repayments under revolving credit
facilities
Repurchase of common stock
Intercompany transactions
Net cash used in financing activities
CHANGE IN CASH AND CASH
EQUIVALENTS
Cash and cash equivalents, beginning
of period
Cash and cash equivalents, end of
period
The
Company
Combined
Guarantor
Subsidiaries
Combined
Non-
Guarantor
Subsidiaries
Consolidating
Adjustments
Total
Consolidated
$
25,423
$
30,890
$
65,085
$
(89,532) $
31,866
(8,574)
(21,477)
(24,209)
(440)
(54,700)
11,313
—
—
—
(4,072)
(1,333)
1,737
(1,737)
(36,352)
—
(36,352)
14
(4)
—
(21,467)
—
—
—
(11,883)
(11,883)
—
—
14
—
(24,195)
—
—
—
(74,017)
(74,017)
(12,262)
(2,460)
(33,127)
70,683
(1,187)
93,746
—
—
—
4,072
3,632
—
—
—
85,900
85,900
—
—
11,313
14
10
—
(43,363)
1,737
(1,737)
(36,352)
—
(36,352)
(47,849)
163,242
$
58,421
$
(3,647) $
60,619
$
— $
115,393
82
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
As of December 31, 2017, we carried out an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer, also the principal financial officer, of the effectiveness of our disclosure
controls and procedures. Based upon that evaluation, our management, including the Chief Executive Officer, also the principal
financial officer, concluded that our disclosure controls and procedures were effective.
Internal Control over Financial Reporting
Management is responsible for establishing and maintaining an adequate system of internal control over financial
reporting for the Company. This system is designed 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. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable
assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal
control over financial reporting may vary over time. Our system of internal control contains self-monitoring mechanisms, and
actions are taken to correct deficiencies as they are identified.
As required by Section 404 of the Sarbanes-Oxley Act, management conducted an evaluation of the effectiveness of the
system of internal control over financial reporting for the year ended December 31, 2017. Management’s evaluation was based
on the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
(COSO) of the Treadway Commission. Based on this evaluation, management concluded that our system of internal control
over financial reporting was effective as of December 31, 2017. The effectiveness of our internal control over financial
reporting has been audited by Deloitte & Touche LLP, an independent registered public accounting firm.
Changes in Internal Control over Financial Reporting
During the three months ended December 31, 2017, there were no changes in our internal control over financial reporting
that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
83
PART III
Item 10. Directors, Executive Officers and Corporate Governance
This Item is incorporated by reference to our definitive proxy statement on Schedule 14A, which will be filed by May 1,
2018, or if our proxy statement is not filed by that date, will be included in an amendment to this Report on Form 10-K, which
will be filed by May 1, 2018.
Item 11. Executive Compensation
This Item is incorporated by reference to our definitive proxy statement on Schedule 14A, which will be filed by May 1,
2018, or if our proxy statement is not filed by that date, will be included in an amendment to this Report on Form 10-K, which
will be filed by May 1, 2018.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
This Item is incorporated by reference to our definitive proxy statement on Schedule 14A, which will be filed by May 1,
2018, or if our proxy statement is not filed by that date, will be included in an amendment to this Report on Form 10-K, which
will be filed by May 1, 2018.
Item 13. Certain Relationships and Related Transactions and Director Independence
This Item is incorporated by reference to our definitive proxy statement on Schedule 14A, which will be filed by May 1,
2018, or if our proxy statement is not filed by that date, will be included in an amendment to this Report on Form 10-K, which
will be filed by May 1, 2018.
Item 14. Principal Accountant Fees and Services
This Item is incorporated by reference to our definitive proxy statement on Schedule 14A, which will be filed by May 1,
2018, or if our proxy statement is not filed by that date, will be included in an amendment to this Report on Form 10-K, which
will be filed by May 1, 2018.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) (1) List of Financial Statements
The following consolidated financial statements of Century Aluminum Company and the Independent Auditors’ Reports
are included in Part II, Item 8 of this Form 10-K:
Reports of Independent Registered Public Accounting Firm
Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2017, 2016 and 2015
Consolidated Balance Sheets as of December 31, 2017 and 2016
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015
Notes to the consolidated financial statements
84
(a) (2) List of financial Statement Schedules
None. All required information has been included in the consolidated financial statements or notes thereto.
(a) (3) List of Exhibits
Exhibit Index
Exhibit
Number
3.1
3.2
3.3
4.1
4.2
4.3
4.4
4.5
10.1
10.2
10.3
Incorporated by Reference
Description of Exhibit
Amended and Restated Certificate of Incorporation of
Century Aluminum Company.
Amended and Restated Bylaws of Century Aluminum
Company.
Amendment No. 1 to Amended and Restated Bylaws of
Century Aluminum Company.
Form File No.
10-Q 001-34474
8-K 001-34474
8-K 001-34474
Filing Date
November 9,
2012
September 18,
2012
December 14,
2015
Filed
Herewith
Form of Stock Certificate.
Certificate of Designation, Preferences and Rights of Series
A Convertible Preferred Stock of Century Aluminum
Company, dated July 7, 2008.
Indenture for Century Aluminum Company's 7.5% Senior
Secured Notes due 2021, dated as of June 4, 2013, by and
among Century Aluminum Company, as issuer and
Wilmington Trust, National Association, as trustee and
Noteholder Collateral Agent.
First Supplemental Indenture, dated December 18, 2014, for
Century Aluminum Company's 7.5% Senior Secured Notes
due 2021, by and among Century Aluminum Company, as
issuer and Wilmington Trust, National Association, as
trustee and Noteholder Collateral Agent.
Form of Note for the Indenture for Century Aluminum
Company's 7.5% Senior Secured Notes due 2021, dated as
of June 4, 2013, between Century Aluminum Company, as
issuer, and Wilmington Trust Company, as trustee and
Noteholder Collateral Agent.
Loan and Security Agreement, dated as of May 24, 2013,
among Century Aluminum Company, Berkeley Aluminum,
Inc., Century Aluminum of West Virginia, Inc., Century
Aluminum of Kentucky General Partnership, NSA General
Partnership and Century Aluminum Sebree LLC, as
borrowers, and Wells Fargo Capital Finance, LLC, as agent
and lender.
First Amendment to Loan and Security Agreement, dated as
of August 16, 2013, among Century Aluminum Company,
Berkeley Aluminum, Inc., Century Aluminum of West
Virginia, Inc., Century Aluminum of Kentucky General
Partnership, NSA General Partnership and Century
Aluminum Sebree LLC, as borrowers, and Wells Fargo
Capital Finance, LLC, as agent and lender.
Second Amendment to Loan and Security Agreement, dated
as of January 15, 2014, among Century Aluminum
Company, Berkeley Aluminum, Inc., Century Aluminum of
West Virginia, Inc., Century Aluminum of Kentucky
General Partnership, NSA General Partnership and Century
Aluminum Sebree LLC, as borrowers, and Wells Fargo
Capital Finance, LLC, as agent and lender.
8-K 000-27918
July 8, 2008
X
8-K 001-34474
June 10, 2013
10-K 001-34474 March 2, 2015
8-K 001-34474
June 10, 2013
8-K 001-34474 May 28, 2013
10-K 001-34474 March 2, 2015
10-K 001-34474 March 2, 2015
85
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
Third Amendment to Loan and Security Agreement, dated
as of October 23, 2014, among Century Aluminum
Company, Berkeley Aluminum, Inc., Century Aluminum of
West Virginia, Inc., Century Aluminum of Kentucky
General Partnership, NSA General Partnership and Century
Aluminum Sebree LLC, as borrowers, and Wells Fargo
Capital Finance, LLC, as agent and lender.
Fourth Amendment to Loan and Security Agreement, dated
as of December 1, 2014, among Century Aluminum
Company, Berkeley Aluminum, Inc., Century Aluminum of
West Virginia, Inc., Century Aluminum of Kentucky
General Partnership, NSA General Partnership and Century
Aluminum Sebree LLC, as borrowers, and Wells Fargo
Capital Finance, LLC, as agent and lender.
Fifth Amendment dated as of June 26, 2015, among Century
Aluminum Company, Century Aluminum of South
Carolina, Inc., Century Aluminum of West Virginia, Inc.,
Century Aluminum of Kentucky General Partnership, NSA
General Partnership and Century Aluminum Sebree LLC, as
borrowers, and Wells Fargo Capital Finance, LLC, as agent
and lender.
Sixth Amendment dated as of December 31, 2015, among
Century Aluminum Company, Century Aluminum of South
Carolina, Inc., Century Aluminum of West Virginia, Inc.,
Century Aluminum of Kentucky General Partnership, NSA
General Partnership and Century Aluminum Sebree LLC, as
borrowers, and Wells Fargo Capital Finance, LLC, as agent
and lender.
Seventh Amendment dated as of March 14, 2017, among
Century Aluminum Company, Century Aluminum of South
Carolina, Inc., Century Aluminum of West Virginia, Inc.,
Century Aluminum of Kentucky General Partnership, NSA
General Partnership and Century Aluminum Sebree LLC, as
borrowers, and Wells Fargo Capital Finance, LLC, as agent
and lender.
Second Lien Pledge and Security Agreement, dated as of
June 4, 2013, by and among Century Aluminum Company,
the other Grantors (as defined therein) and Wilmington
Trust, National Association, as collateral agent of the 7.5%
Senior Secured Notes.
Collateral Agency Agreement, dated as of June 4, 2013, by
and among Century Aluminum Company, the other
Grantors and Wilmington Trust, National Association, as
trustee and collateral agent.
Revolving Credit Facility, dated November 27, 2013,
between Nordural Grundartangi ehf, as borrower, and
Landsbankinn hf.
Amendment to Revolving Credit Facility, dated April 14,
2016, between Nordural Grundartangi ehf, as borrower, and
Landsbankinn hf.
Amendment to Revolving Credit Facility, dated December
15, 2017, between Nordural Grundartangi ehf, as borrower,
and Landsbankinn hf
Amendment Agreement to General Bond, dated as of
November 27, 2013, by and between Nordural Grundartangi
ehf and Landsbankinn hf.
Stock Purchase Agreement, dated as of July 7, 2008, by and
between Century Aluminum Company and Glencore
Investment Pty Ltd.
Standstill and Governance Agreement, dated as of July 7,
2008, by and between Century Aluminum Company and
Glencore AG.
86
8-K 001-34474 October 24, 2014
10-K 001-34474 March 2, 2015
8-K 001-34474
July 1, 2015
10-K 001-34474 March 7, 2016
10-Q 001-34474
May 9, 2017
8-K 001-34474
June 10, 2013
8-K 001-34474
June 10, 2013
10-K 001-34474 March 14, 2014
8-K 011-34474
April 15, 2016
X
10-K 001-34474 March 14, 2014
8-K 000-27918
July 8, 2008
8-K 000-27918
July 8, 2008
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
Amendment to Standstill and Governance Agreement, dated
January 27, 2009, by and between Century Aluminum
Company and Glencore AG.
Registration Rights Agreement, dated as of July 7, 2008, by
and between Century Aluminum Company and Glencore
Investment Pty Ltd.
Amended and Restated Aluminum Purchase Agreement,
dated as of February 23, 2015, by and between Century
Aluminum Company, NSA General Partnership, Century
Aluminum Sebree LLC, Century Aluminum of South
Carolina, Inc., Century Aluminum of West Virginia, Inc.
and Glencore Ltd.**
Century Aluminum Company Amended and Restated
Executive Severance Plan, adopted June 23, 2014.*
Century Aluminum Company Amended and Restated
Supplemental Retirement Income Benefit Plan.*
First Amendment of the Century Aluminum Company
Amended and Restated Supplemental Retirement Income
Benefit Plan.*
Second Amendment of the Century Aluminum Company
Amended and Restated Supplemental Retirement Income
Benefit Plan, adopted June 23, 2014.*
Century Aluminum Company Annual Incentive Plan
(Amended and Restated Effective January 1, 2008).*
Century Aluminum Company Amended and Restated 1996
Stock Incentive Plan.*
Century Aluminum Company Amended and Restated Stock
Incentive Plan, adopted June 23, 2014.*
Century Aluminum Company Amended and Restated Long-
Term Incentive Plan, adopted June 23, 2014.*
Century Aluminum Company Amended and Restated Long-
Term Incentive Plan, adopted March 22, 2016.*
10-K 001-34474 March 16, 2010
8-K 000-27918
July 8, 2008
10-Q 001-34474
May 1, 2015
8-K 001-34474
June 27, 2014
10-Q 000-27918 August 10, 2009
10-K 001-34474 March 16, 2010
8-K 001-34474
June 27, 2014
10-K 001-34474 March 2, 2015
8-K 001-34474 March 25, 2013
8-K 001-34474
June 27, 2014
8-K 001-34474
June 27, 2014
8-K 001-34474 March 24, 2016
Century Aluminum Company Restoration Plan, adopted
December 8, 2015.*
8-K 001-34474
December 14,
2015
Form of Time-Vesting Performance Share Unit Award
Agreement.*
Form of Performance Unit Award Agreement for the
January 1, 2014 to December 31, 2016 performance period
and the January 1, 2015 to December 31, 2017 performance
period.*
Form of Performance Unit Award Agreement for the
January 1, 2016 to December 31, 2018 performance
period.*
8-K 001-34474
June 27, 2014
8-K 001-34474
June 27, 2014
8-K 001-34474 March 24, 2016
10.33
Form of Stock Option Agreement - Employee.*
10-K 000-27918 March 16, 2006
10.34
10.35
10.36
10.37
10.38
Form of Amendment No. 1 to the Stock Option Agreement -
Employee.*
10-Q 001-34474 August 9, 2011
Amended and Restated Non-Employee Directors Stock
Option Plan.*
Form of Stock Option Agreement - Non-Employee
Director.*
Form of Independent Non-Employee Director Annual
Retainer Fee Payment Time-Vesting Performance Share
Unit Award Agreement.*
Form of Independent Non-Employee Director Annual
Equity-Grant Time-Vesting Performance Share Unit Award
Agreement.*
8-K 000-27918 August 16, 2005
10-K 000-27918 March 16, 2006
10-K 001-34474 March 7, 2016
10-K 001-34474 March 7, 2016
87
10.39
Form of Indemnification Agreement.*
8-K 001-34474
December 5,
2014
21.1
23.1
24.1
31.1
List of Subsidiaries
Consent of Deloitte & Touche LLP
Powers of Attorney
Rule 13a-14(a)/15d-14(a) Certification of the Principal
Executive Officer and Principal Financial Officer
32.1
Section 1350 Certification (pursuant to Sarbanes-Oxley
Section 906) by Principal Executive Officer and Principal
Financial Officer
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase
X
X
X
X
X
X
X
X
X
X
X
*
**
Management contract or compensatory plan.
Confidential Information was omitted from this exhibit pursuant to a request for confidential treatment filed
separately with the SEC.
88
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Century Aluminum Company
By:
/s/ MICHAEL A. BLESS
Michael A. Bless
President and Chief Executive Officer (Principal Executive Officer and
Principal Financial Officer)
Dated: February 28, 2018
89
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the date indicated.
Signature
Title
Date
/s/ MICHAEL A. BLESS
Michael A. Bless
*
Terence Wilkinson
*
Jarl Berntzen
*
Errol Glasser
*
Wilhelm van Jaarsveld
President and Chief Executive Officer and Director
(Principal Executive Officer and Principal Financial
Officer)
February 28, 2018
Chairman
February 28, 2018
Director
Director
Director
February 28, 2018
February 28, 2018
February 28, 2018
/s/ STEPHEN K. HEYROTH
Stephen K. Heyroth
Vice President and Chief Accounting Officer
(Principal Accounting Officer)
February 28, 2018
*By: /s/ JESSE E. GARY
Jesse E. Gary, as Attorney-in-fact
90