XML 60 R9.htm IDEA: XBRL DOCUMENT v2.4.0.8
Acquisition of Sebree aluminum smelter Acquisition of Sebree aluminum smelter (Notes)
 12 Months Ended
Dec. 31, 2013
Business Combinations [Abstract]  
Acquisition of Sebree aluminum smelter
Acquisition of Sebree aluminum smelter
On June 1, 2013, Century Sebree acquired the Sebree aluminum smelter from a subsidiary of RTA. Sebree, located in Robards, Kentucky, has an annualized hot metal production capacity of 205,000 tonnes of primary aluminum and employs approximately 500 people. The purchase price for the acquisition was $61,000 (subject to customary working capital adjustments), of which we have paid approximately $48,000 as of December 31, 2013. The remaining portion of the purchase price, if any, will be paid following final determination of the applicable working capital adjustments. We are working with RTA to resolve our disagreement relating to the working capital amount in accordance with the procedures set forth in the purchase agreement. We expect the matter to be resolved by the second quarter of 2014. The final working capital amount may result in adjustments to the purchase price and change the gain on bargain purchase (which would be recorded as a modified retrospective adjustment to the 2013 consolidated financial statements). As part of the transaction, RTA retained all historical environmental liabilities of the Sebree smelter and funded the pension plan assumed by Century in accordance with the purchase agreement.
Purchase Price Allocation
Allocating the purchase price to the acquired assets and liabilities involves management judgment. We allocated the purchase price to the assets acquired, liabilities assumed, and the bargain gain in accordance with ASC 805 “Business Combinations.” Once it has been determined that recognition of an asset or liability in a business combination is appropriate, we measure the asset or liability at fair value in accordance with the principles of ASC 820 “Fair Value Measurements and Disclosures.” Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The determination of the fair value of certain intangible assets and/or liabilities requires management judgment in each of the following areas:
•
Identifying the acquired intangible assets or liabilities. In the case of the Sebree acquisition, we assumed a power contract liability as the contracted power price was in excess of current market prices.
•
Estimating the fair value of the intangible assets and/or liabilities. We consider various approaches to value the acquired intangible assets and/or liabilities. These valuation approaches include the cost approach, which measures the value of an asset based on the cost to reproduce it or replace it with a like asset; the market approach, which values the asset through an analysis of sales and offerings of comparable assets; and the income approach, which measures the value of an asset (or liability) by measuring the present worth of the economic benefits (or costs) it is expected to produce.
The allocation of the purchase price to the assets acquired and liabilities assumed is based on the estimated fair values at the date of acquisition. We have finalized the purchase price allocation for the assets acquired and liabilities assumed, but the final purchase price and gain on bargain purchase are preliminary and subject to change based on any working capital adjustments.
Based on the purchase price allocation, we recorded a gain on bargain purchase of $5,253. In connection with the recognition of the bargain purchase gain and related net deferred tax liabilities, we partially released a valuation allowance associated with recorded deferred tax assets of $2,090. The gain on bargain purchase reflects the LME market and the risk associated with the power supply agreement for the facility at June 1, 2013. The measurement period adjustments to date include adjustments to the valuation of the pension liability, asset retirement obligations, certain inventory balances and related tax effects.
The following table summarizes the fair value of the assets acquired and the liabilities assumed as of the acquisition date:
 
Acquisition Date Estimated Fair Value as of December 31, 2013
Consideration:
 
Cash
$
48,083

Deferred purchase price
1,910

Assets Acquired:
 
Inventories
59,018

Prepaid and other current assets
2,273

Property, plant and equipment – net
55,520

Total assets acquired
$
116,811

Liabilities Assumed:
 
Accrued and other current liabilities
$
43,316

Accrued pension benefit costs
996

Accrued post retirement benefit costs
6,544

Other liabilities
7,476

Deferred taxes
3,233

Total liabilities assumed
$
61,565

Gain on bargain purchase:
$
5,253

From the acquisition date of June 1, 2013 through December 31, 2013, Sebree's revenue and net income included in the consolidated statements of operations is as follows:
 
Year ended December 31, 2013
Sebree revenue
$
247,178

Sebree net income (1)
8,705

(1) Sebree net income includes a non-recurring gain on bargain purchase of $5,253 and a non-recurring credit for the amortization of the deferred power contract liability of $31,031. As part of the Sebree acquisition, we recorded a $36,625 liability for an unfavorable power contract we assumed. The fair value measurement of the power contract was based on the difference between the forecasted contract rate and estimated market power rates through the contract termination date in January 2014. We will amortize the power contract liability over the remaining period of the contract through January 31, 2014, resulting in a credit to our depreciation and amortization expense within cost of goods sold. The credit reflects the amortization under our ownership from June 1, 2013 through December 31, 2013.
The following unaudited pro forma financial information for the years ended December 31, 2013 and December 31, 2012 reflects our results of continuing operations as if the acquisition of Sebree had been completed on January 1, 2012. This unaudited pro forma financial information is provided for informational purposes only and is not necessarily indicative of what the actual results of operations would have been had the transactions taken place on January 1, 2012, nor is it indicative of the future consolidated results of operations or financial position of the combined companies.
 
Year ended December 31,
 
2013
2012
Pro forma revenues
$
1,662,707

$
1,755,196

Pro forma loss from continuing operations
(83,035
)
(260,505
)
Loss per common share, basic
(0.94
)
(2.94
)
Loss per common share, diluted
(0.94
)
(2.94
)