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Acquisition of Sebree aluminum smelter
 6 Months Ended
Jun. 30, 2013
Business Combinations [Abstract]  
Acquisition of Sebree aluminum smelter
Acquisition of Sebree aluminum smelter
Acquisition of Sebree smelter
On June 1, 2013, our wholly owned subsidiary, Century Aluminum Sebree LLC ("Century Sebree"), acquired the Sebree aluminum smelter ("Sebree") from a subsidiary of Rio Tinto Alcan, Inc ("RTA"). Sebree, located in Robards, Kentucky, has an annual hot metal production capacity of 205,000 metric tons of primary aluminum and employs approximately 500 men and women. The purchase price for the acquisition was $61,000 (subject to customary working capital adjustments), of which we have paid $48,000 as of June 30, 2013. The remaining portion of the purchase price will be paid following final determination of the applicable working capital adjustments, which will be determined based on the amount of working capital transferred to Century Sebree at closing versus a target working capital amount of $71,000. As part of the transaction, RTA retained all historical environmental liabilities of the Sebree smelter and has agreed to fully fund the pension plan being assumed by Century.
Purchase Price Allocation
Allocating the purchase price to the acquired assets and liabilities involves management judgment. We allocate the purchase price to the assets acquired, liabilities assumed, and any bargain gain (or goodwill) in accordance with ASC 805, "Business Combinations." Once it has been determined that recognition of an asset or liability in a business combination is appropriate, we measure the asset or liability at fair value in accordance with the principles of ASC 820, "Fair Value Measurements and Disclosures." Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The determination of the fair value of certain intangible assets and/or liabilities require significant management judgment in each of the following areas:
•
Identify the acquired intangible assets or liabilities. In the case of the Sebree acquisition, we assumed a power contract liability as the contract price is in excess of current market prices.
•
Estimate the fair value of the intangible assets and/or liabilities. We consider various approaches to value the acquired intangible assets and/or liabilities. These valuation approaches include the cost approach, which measures the value of an asset based on the cost to reproduce it or replace it with a like asset; the market approach, which values the assets through an analysis of sales and offerings of comparable assets; and the income approach, which measures the value of an asset (or liability) by measuring the present worth of the economic benefits (or costs) it is expected to produce.
The allocation of the purchase price to the assets acquired and liabilities assumed is based on the estimated fair values at the date of acquisition. The purchase price allocation is preliminary and subject to change based on the finalization of the valuation of assets and liabilities. Based on the preliminary purchase price allocation, we recorded a gain on bargain purchase of approximately $2,042. The gain on bargain purchase reflects the current London Metal Exchange (the "LME") market and the market risk associated with the long term power supply for the facility. The following table summarizes the preliminary estimates of fair value of the assets acquired and the liabilities assumed as of the acquisition date:
Consideration:
 
Cash (1)
$
47,373

Assets Acquired:
 
Inventories
58,496

Prepaid and other current assets
363

Property, plant and equipment - net
55,520

Total assets acquired
$
114,379

Liabilities Assumed:
 
Accrued and other current liabilities
$
44,121

Accrued pension benefit costs
5,039

Accrued post retirement benefit costs
6,544

Other liabilities
8,003

Deferred taxes
1,257

Total liabilities assumed
$
64,964

Gain on bargain purchase:
$
2,042


(1)
This amount represents our preliminary estimate of consideration based on our expectation of the working capital adjustments.
Through June 30, 2013, the actual revenue and net loss of Sebree since the acquisition date of June 1, 2013 included in the consolidated statement of operations is as follows:
 
From Acquisition date through
 
June 30, 2013
Sebree revenue
$
38,753

Sebree net loss
(3,456
)

The following unaudited pro forma financial information for the three and six months ended June 30, 2013 reflects our results of continuing operations as if the acquisition of Sebree had been completed on January 1, 2013 or January 1, 2012. This unaudited pro forma financial information is provided for informational purposes only and is not necessarily indicative of what the actual results of operations would have been had the transactions taken place on January 1, 2013 or January 1, 2012, nor is it indicative of the future consolidated results of operations or financial position of the combined companies.
 
Three months ended June 30,
Six months ended June 30,
 
2013
2012
2013
2012
Pro forma revenues
$
413,907

$
444,267

$
861,605

$
890,860

Pro forma earnings from continuing operations
(38,231
)
(5,056
)
(39,183
)
(4,330
)
Loss per common share, basic
(0.43
)
(0.06
)
(0.44
)
(0.05
)
Loss per common share, diluted
(0.43
)
(0.06
)
(0.44
)
(0.05
)