Noranda Aluminum Holding Corporation Reports Third Quarter 2009 Results

Noranda Aluminum Holding Corporation (“Noranda”, or the “Company”) announced its consolidated financial results for third quarter 2009.

Important metrics and events include:

* Third quarter 2009 revenues were $218.6 million, operating loss was $4.4 million and net income was $4.3 million.
* Year to date 2009 revenues were $540.6 million, operating loss was $77.2 million, and net income was $36.5 million.
* Operating cash flows provided $230.4 million of cash through September 2009, including $119.7 million from hedge terminations and $36.7 million of cash generated from working capital reductions.
* Adjusted EBITDA was $28.6 million for third quarter 2009 and $69.9 million for the nine months ended September 30, 2009.
* During third quarter 2009, the Company repurchased $81.1 million aggregate principal amount of debt for an aggregate price of $52.2 million, plus fees. These repurchases were funded through the hedge settlement agreement announced in March 2009.
* The Company ended third quarter 2009 with total debt of $1.0 billion, $256.5 million in cash and $191.3 million of locked-in value from offsetting fixed-price aluminum sales and purchase swaps.
* In July 2009, the Company collected the remaining $52.5 million of its $67.5 million insurance settlement related to the previously reported January 2009 pot line freeze at the Company’s New Madrid, Missouri aluminum smelter.
* On August 31, 2009, the Company became the sole owner of the alumina refinery in Gramercy, Louisiana and the bauxite mining operation in St. Ann, Jamaica.
* In September 2009, the Company announced it was increasing production at the Gramercy refinery and the St. Ann bauxite mining operation. Separately, the Company announced it had initiated activities to restart remaining pot lines at New Madrid and expected to return to full capacity for first quarter 2010. The New Madrid smelter was operating above 65% capacity by the end of third quarter 2009.

Gramercy and St. Ann Transaction Completed

As previously reported, on August 31, 2009, the Company completed a transaction with Century Aluminum Company (the “JV Transaction”) through which the Company became the sole owner of Gramercy Alumina LLC (“Gramercy”) and St. Ann Bauxite Limited (“St. Ann”).

The Company’s third quarter 2009 financial statements include the consolidated results of Gramercy and St. Ann in its upstream segment since August 31, 2009. The third quarter 2009 financial statements are based on a preliminary determination of the fair values of assets acquired and liabilities assumed in the JV Transaction. Prior to August 31, 2009, the Company’s financial statements include the Company’s share of Gramercy and St. Ann results under the equity method of accounting for investments. Based on its preliminary valuation of the assets acquired and liabilities assumed, the Company may record a gain on the JV Transaction. However, the Company will not recognize any gain until it finalizes its valuation of the assets acquired and liabilities assumed, which it expects to do in fourth quarter 2009.

Third Quarter 2009 Results

Rising LME prices during third quarter 2009 had a favorable impact on revenues, operating results and net income compared to second quarter 2009. In comparison to third quarter 2008, revenues, operating results and net income for third quarter 2009 reflect the impact of the global economic contraction. In the upstream segment, the average realized Midwest Transaction Price (“MWTP”) per pound was $0.86 in third quarter 2009 compared to $0.70 in second quarter 2009 and $1.34 in third quarter 2008. Value-added premiums in the upstream segment and fabrication premiums in the downstream segment were essentially constant for third quarter 2009, second quarter 2009 and third quarter 2008.

For third quarter 2009, the Company reported a $4.4 million operating loss, compared to operating income of $12.4 million in second quarter 2009 and $32.1 million in third quarter 2008.

* Consolidated sales in third quarter 2009 increased to $218.6 million, 38.6% over second quarter 2009.
o Third quarter 2009 upstream revenues from aluminum sales increased 25.4% over second quarter 2009 on $6.9 million of volume increases and $8.3 million of favorable pricing impact. Third quarter 2009 upstream revenues include $29.4 million related to 104 kilometric tons (“kMt”) of alumina shipped to external customers and $4.4 million related to 145 kMt of bauxite shipped to external customers. Alumina sales include $14.2 million from the resale of alumina inventories in excess of New Madrid’s requirements.
o Third quarter 2009 downstream revenues increased 12.3% from second quarter 2009 on $5.6 million of volume increases and $6.5 million of favorable pricing impact.
* Excluding the $4.7 million impact of purchase accounting for the JV Transaction, third quarter 2009 operating results for both upstream and downstream segments reflects $10.9 million of improvements in sales margin (sales minus cost of sales) compared to second quarter 2009 resulting from improved LME pricing and reduced prices for natural gas and to a lesser degree other raw materials. This offset the effects of seasonal peak power rates in New Madrid.
* Excluding the net impact of insurance settlement proceeds, selling, general and administrative costs increased $3.8 million in third quarter 2009 compared to second quarter 2009.
* Third quarter 2009 operating results include $14.3 million of insurance proceeds, recognized in excess of claim expenses, incurred to date, related to the January 2009 pot line freeze in New Madrid. Second quarter 2009 operating income included a $33.3 million favorable impact from the timing of recognition of insurance recoveries in relationship to expenses, $4.1 million of which was classified as a reduction of selling and general administrative expenses.

For third quarter 2009, net income was $4.3 million, compared to a $12.1 million net loss in second quarter 2009, and a $22.4 million net loss for third quarter 2008. In addition to the operating loss factors discussed above, third quarter 2009 net income reflects the following:

* In third quarter 2009, the Company repurchased $81.1 million aggregate principal amount of debt for an aggregate price of $52.2 million, plus fees. The Company recorded a $28.6 million third quarter gain on these debt repurchases.
* The Company reported $5.7 million of net gains on derivatives in third quarter 2009 compared to $53.2 million in second quarter 2009. In third quarter 2009, the Company reclassified $24.2 million from accumulated other comprehensive income (“AOCI”) to earnings, compared to $69.8 million in second quarter 2009.
* The provision for income taxes resulted in a 73.8% effective tax rate for third quarter 2009 compared to a 140.6% effective rate for second quarter 2009. The second quarter effective tax rate reflected a change from using the estimated annual effective tax rate in first quarter 2009 to using the actual year-to-date effective tax rate to calculate the Company’s year-to-date tax provision at June 30, 2009. However, for third quarter 2009, the Company returned to using the estimated annual effective tax rate.