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Business acquisitions | 6 Months Ended
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Jun. 30, 2015
Business Combinations [Abstract] |
Business acquisitions | Business acquisitions Acquisition of Mt. Holly aluminum smelter On October 23, 2014, our wholly-owned subsidiary, Berkeley Aluminum Inc. ("Berkeley") entered into a stock purchase agreement (the "Stock Purchase Agreement") with Alumax Inc. ("Alumax"), a wholly-owned subsidiary of Alcoa Inc. ("Alcoa"), to acquire Alcoa’s 50.3% stake in Mt. Holly. Upon closing of the transaction on December 1, 2014, Century owns 100% of Mt. Holly. Mt. Holly, located in Goose Creek, South Carolina, employed approximately 600 people and had an annual production capacity of 231,000 tonnes of primary aluminum as of the acquisition date. Pursuant to the terms of the Stock Purchase Agreement, Berkeley agreed to acquire all of the issued and outstanding shares of capital stock of Alumax of South Carolina Inc. ("Alumax of SC"), a wholly-owned subsidiary of Alumax, for $67,500 in cash subject to working capital and other similar adjustments, of which we have paid $53,831 as of December 31, 2014 net of certain amounts owed by Alumax to Mt. Holly. The acquisition was funded with available cash on hand. We incurred $1,087 of acquisition-related costs through December 31, 2014 and $417 during 2015. All acquisition-related costs were expensed to selling, general and administrative expenses in the period that they were incurred. In April 2015, we made an additional payment of $38,162, which was primarily related to pension funding obligations, economic adjustment, working capital and other adjustments, net of certain amounts owed by Alumax to Mt. Holly pursuant to the Stock Purchase Agreement. Contingent Consideration - Earn-out provision The Stock Purchase Agreement provides for a post-closing cash payment to be made following December 31, 2015 based on (i) changes in the Midwest Transaction Price for aluminum between July 2, 2014 and December 31, 2015 and (ii) the aggregate cast house production of Mt. Holly from October 1, 2014 through December 31, 2015. The maximum amount of this post-closing cash payment by (i) Century Aluminum of South Carolina, Inc. ("CASC") to Alumax is $22,500 and (ii) Alumax to CASC is $12,500, which we estimate will be paid in the first quarter of 2016. We measured the fair value of the contingent consideration and recognized a $13,780 liability at December 1, 2014. Each period, until the end of the measurement period on December 31, 2015, we will remeasure the fair value of the contingent consideration with any changes in the fair value recognized in earnings. We classified the contingent consideration within Level 3 of the fair value hierarchy as its fair value was determined with inputs that are not readily observable in the market. For the three and six months ended June 30, 2015, we recognized $10,287 and $16,814, respectively, in unrealized gain on fair value of contingent consideration, primarily related to decreases in the Midwest premium and the forward curve of the LME price of primary aluminum. Economic Adjustment, working capital and other adjustments The Stock Purchase Agreement provides for an economic adjustment that was established to put the parties in the same economic position as if the closing date for the acquisition had occurred on September 30, 2014. The related adjustments include metal off-take and aluminum sales agreements, cash funding and management fee adjustments, as well adjustments for inventory and transition services. Based on our estimates at the closing date, excluding alumina purchases which were recognized separately from the acquisition, we received $11,189 from Alcoa for the economic adjustment. The Stock Purchase Agreement also contained provisions for working capital and other adjustments. The working capital adjustment was based on actual working capital at closing compared to established working capital targets. Based on amounts agreed to by Alcoa and Century, we received $124 from Alcoa for the working capital adjustments. Other adjustments include amounts due to Century for expected future post-employment benefit payments and business interruption premium share. The amounts were negotiated as part of the Stock Purchase Agreement and we received $2,400 from Alcoa for these adjustments at closing. In addition, a $200 reimbursement is due to Alcoa related to the election of certain tax positions for the acquisition. The following table summarizes all of the elements of consideration for the transaction, including the preliminary estimated fair value of contingent consideration.
| Preliminary as of December 1, 2014
Purchase price | $ | 67,500 |
Contingent consideration | 13,780 |
Economic, working capital and other closing adjustments | (13,513 | )
Total consideration transferred | $ | 67,767 |
Pension funding obligations Alcoa and Century agreed to fully fund the Mt. Holly pension plan benefit obligations, measured in accordance with generally accepted accounting principles in the United States ("GAAP") using agreed upon assumptions, in proportion to their respective ownership percentage. In addition, Century agreed to fund the Mt. Holly pension benefit obligations based on termination basis under IRS Code Section 414(l) (the "414(l) liability"). Pursuant to the Stock Purchase Agreement, our pension funding requirements for the acquisition were $34,595, which consisted of $3,753 for our share of the unfunded GAAP pension liability and $30,842 for 414(l) liability in excess of GAAP pension liability. In April 2015, we made a payment which settled our pension funding obligations related to the acquisition, as well as certain other amounts due to Alcoa. Alcoa spun-off the pension plan assets for the Mt. Holly employees and former employees into a qualified defined benefit pension plan established by Century. The Mt. Holly pension plan was fully funded using Pension Benefit Guaranty Corporation (the "PBGC") assumptions and measured on a termination basis under IRS Code Section 414(l), which are more conservative than the assumptions we use to measure our defined benefit obligations, and resulted in the recognition of a pension asset at closing. Step Acquisition We accounted for this transaction as a step acquisition which required that we remeasure our existing 49.7% ownership interest, which was previously accounted for as an equity method investment, to fair value. The preliminary estimate of the fair value of our interest in Mt. Holly was $56,723 at closing, resulting in a non-cash pre-tax gain of $1,318 included in gain on remeasurement of equity investment on our consolidated statements of operations for 2014. Our previously recorded equity method investment in Mt. Holly and the proportionally consolidated property, plant and equipment was derecognized from our consolidated balance sheets. Since the date of the step acquisition, the financial results of Mt. Holly and all of its operating assets have been included within our consolidated financial statements. The allocation of the purchase price and the fair value of the previous equity investment to all of the assets acquired and liabilities assumed is based on the estimated fair values at the date of acquisition. The following purchase price allocation is preliminary and subject to change based on the finalization of the valuation of acquired assets and liabilities and the fair value of the previously held equity investment and proportionally consolidated assets. The amounts presented below represent our estimates of the fair value based on a preliminary valuation of the assets and liabilities in connection with the acquisition.
| Preliminary estimate of the acquisition date fair value as of December 1, 2014
Assets Acquired: |
Inventories | $ | 26,105 |
Due from Alumax | 20,786 |
Prepaid and other current assets | 2,527 |
Intangible asset | 2,580 |
Pension asset | 30,842 |
Property, plant and equipment – net | 127,089 |
Total assets acquired | $ | 209,929 |
Liabilities Assumed: |
Accounts payable, trade | $ | 41,471 |
Accrued and other current liabilities | 6,045 |
Accrued postretirement benefit costs | 2,857 |
Asset retirement obligations | 10,503 |
Deferred taxes | 4,804 |
Total liabilities assumed | $ | 65,680 |
Goodwill | $ | 4,804 |
The following unaudited pro forma financial information for the three and six months ended June 30, 2014 reflects our results of continuing operations as if the acquisition of the remaining interest in Mt. Holly had been completed on January 1, 2014. 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, 2014, 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,
| 2014 | 2014
Pro forma revenues | $ | 528,457 |  | $ | 1,002,612 |
Pro forma earnings (loss) from continuing operations | 20,640 |  | (3,577 | )
Pro forma earnings (loss) per common share, basic | 0.21 |  | (0.04 | )
Pro forma earnings (loss) per common share, diluted | 0.21 |  | (0.04 | )
Settlement of amounts due from Alumax Prior to the closing date, the Mt. Holly partnership had amounts due from Alumax for metal off-take, capital, plant administrative, standard cost true-ups and various other costs. These amounts totaling $11,269 were received, net of certain excluded items at closing. Transactions Recognized Separately from the Mt. Holly acquisition As part of the acquisition, we recognized certain transactions as separate and apart from the business combination with Mt. Holly. The Mt. Holly smelter tolled alumina for its partners and so had no alumina supply of its own. Upon the purchase, we negotiated with Alcoa to purchase alumina under two separate alumina supply agreements. We believe the price paid under these agreements was equivalent to a market rate that would be paid by a market participant. Contract prices were based on published alumina price indexes.
Amounts Recognized Separately from the Acquisition: | Line item | Amount recognized
Alumina Supply Agreements | Inventory | $ | 14,880 |

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