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. 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.

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

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. We 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 nine months ended September 30, 2015, we recognized $1,523 and $18,337, 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. We received $11,189 from Alcoa for the economic adjustment in April 2015.

The Stock Purchase Agreement also contained provisions for working capital adjustments. The working capital adjustment was based on actual working capital at closing compared to established working capital targets. We received $124 from Alcoa for the working capital adjustments in April 2015.

Other adjustments include amounts due to Century for expected future post-employment benefit payments. We received $2,400 from Alcoa for these other adjustments at closing.

Step Acquisition

We accounted for this transaction as a step acquisition which required that we remeasure our prior 49.7% ownership interest, which was previously accounted for as an equity method investment, to fair value. The fair value of our interest in Mt. Holly was $47,700, resulting in a non-cash pre-tax gain of $15,956. $14,638 of that gain was recorded retroactively to the closing date resulting in an adjustment to Accumulated Deficit in the Consolidated Balance Sheets as of December 31, 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 ($67,767) and the fair value of the previous equity investment ($47,700) 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.



	Preliminary estimate of the acquisition date fair value as of December 1, 2014		Measurement period adjustments			Adjusted preliminary estimate of the acquisition date fair value as of December 1, 2014
Assets Acquired:
Inventories	$	26,105	$	(2,126	)	$	23,979
Due from Alumax	20,786		(9,517		)	11,269
Prepaid and other current assets	2,527		—			2,527
Intangible asset	2,580		—			2,580
Pension asset	30,842		—			30,842
Property, plant and equipment – net	127,089		15,748			142,837
Total assets acquired	$	209,929	$	4,105		$	214,034
Liabilities Assumed:
Accounts payable, trade	$	41,471	$	—		$	41,471
Accrued and other current liabilities	8,335		255			8,590
Accrued pension benefit costs	—		34,595			34,595
Accrued postretirement benefit costs	2,857		—			2,857
Asset retirement obligations	8,213		—			8,213
Deferred taxes	4,804		(2,118		)	2,686
Total liabilities assumed	$	65,680	$	32,732		$	98,412
Goodwill	$	4,804	$	(4,804	)	$	—

We have adjusted the purchase price allocation to appropriately reflect the liability for the pension funding obligations that we assumed as of the acquisition date, pursuant to the Stock Purchase Agreement. Additionally, we have revised the Consolidated Statements of Cash Flows related to payments made in the second quarter of 2015 to satisfy the pension obligation as well as certain alumina purchases out of investing activities and into operating activities.

Pension funding obligations

Pursuant to the Stock Purchase Agreement, Alcoa spun-off the pension plan assets for the current and former Mt. Holly employees into a qualified defined benefit plan established by Century. Alcoa and Century agreed to fund their proportionate share of the underfunded Mt. Holly pension plan benefit obligations, measured in accordance with generally accepted accounting principles in the United States ("GAAP") using agreed upon assumptions as of the transaction date. In addition, Century agreed to fund any additional amount needed to bring the Mt. Holly pension benefit obligations to fully funded status on a termination basis under IRS Code Section 414(l) (the "414(l) liability"). In April 2015, Century contributed a total of $34,595 to satisfy its pension plan funding obligations under the Stock Purchase Agreement. The Pension Benefit Guaranty Corporation (the "PBGC") assumptions used for termination basis funding are more conservative than those used for GAAP purposes and resulted in the recognition of a pension asset for the over funded plan.

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 at closing.

The following unaudited pro forma financial information for the three and nine months ended September 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 September 30,		Nine months ended September 30,
	2014		2014
Pro forma revenues	$	573,230	$	1,575,842
Pro forma earnings from continuing operations	58,050		53,824
Pro forma earnings per common share, basic	0.60		0.56
Pro forma earnings per common share, diluted	0.60		0.55

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 $14,880 of alumina inventory 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.