Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______.
Commission file number 1-34474
centuryheaderlogoa04.jpg
Century Aluminum Company
(Exact name of registrant as specified in its charter)
Delaware 
(State or other jurisdiction of incorporation or organization)
13-3070826 
(IRS Employer Identification No.)
One South Wacker Drive
Suite 1000
Chicago, Illinoi
s
(Address of principal executive offices)
60606 
(Zip Code)
Registrant’s telephone number, including area code: (312) 696-3101
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
Accelerated filer
x
Non-accelerated filer
(Do not check if a smaller reporting company)
o
Smaller reporting company
o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o Yes x No

The registrant had 87,075,587 shares of common stock outstanding at October 31, 2016.






TABLE OF CONTENTS
 
Page
 

 
 
 



2



PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.

CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
NET SALES:
 
 
 
 
 
 
 
Related parties
$
301,111

 
$
428,018

 
$
871,771

 
$
1,517,428

Third-party customers
32,539

 
26,522

 
107,487

 
48,514

Total net sales
333,650

 
454,540

 
979,258

 
1,565,942

Cost of goods sold
351,262

 
496,963

 
995,357

 
1,505,928

Gross profit (loss)
(17,612
)
 
(42,423
)
 
(16,099
)
 
60,014

Selling, general and administrative expenses
9,733

 
11,566

 
29,303

 
33,549

Ravenswood charges
26,830

 

 
26,830

 
30,850

Other operating expense - net
878

 
1,537

 
2,337

 
6,217

Operating loss
(55,053
)
 
(55,526
)
 
(74,569
)
 
(10,602
)
Interest expense
(5,531
)
 
(5,418
)
 
(16,521
)
 
(16,542
)
Interest income
190

 
45

 
475

 
248

Net gain on forward and derivative contracts
1,275

 
285

 
2,998

 
1,204

Unrealized gain on fair value of contingent consideration

 
1,523

 

 
18,337

Other income (expense) - net
(157
)
 
114

 
(462
)
 
1,261

Loss before income taxes and equity in earnings of joint ventures
(59,276
)
 
(58,977
)
 
(88,079
)
 
(6,094
)
Income tax benefit (expense)
848

 
2,161

 
3,237

 
(12,205
)
Loss before equity in earnings of joint ventures
(58,428
)
 
(56,816
)
 
(84,842
)
 
(18,299
)
Equity in earnings of joint ventures
155

 
704

 
891

 
2,069

Net loss
$
(58,273
)
 
$
(56,112
)
 
$
(83,951
)
 
$
(16,230
)
 
 
 
 
 
 
 
 
Net loss allocated to common stockholders
$
(58,273
)
 
$
(56,112
)
 
$
(83,951
)
 
$
(16,230
)
LOSS PER COMMON SHARE:
 
 
 
 
 
 
 
Basic and diluted
$
(0.67
)
 
$
(0.65
)
 
$
(0.96
)
 
$
(0.19
)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
 
 
 
 
 
 
 
Basic and diluted
87,076

 
86,907

 
87,059

 
87,524


See condensed notes to consolidated financial statements

3




CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(Unaudited)
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
 
2015
 
2016
 
2015
Comprehensive loss:
 
 
 
 
 
 
 
Net loss
$
(58,273
)
 
$
(56,112
)
 
$
(83,951
)
 
$
(16,230
)
Other comprehensive income (loss) before income tax effect:
 
 
 
 
 
 
 
Net loss on foreign currency cash flow hedges reclassified as income
(46
)
 
(46
)
 
(139
)
 
(139
)
Defined benefit plans and other postretirement benefits:
 
 
 
 
 
 
 
Net gain (loss) arising during the period

 
(4,115
)
 

 
12,145

Prior service benefit arising during the period

 

 

 
1,782

Amortization of prior service benefit during the period
(667
)
 
(979
)
 
(2,001
)
 
(2,846
)
Amortization of net loss during the period
1,919

 
1,899

 
5,758

 
6,022

Other comprehensive income (loss) before income tax effect
1,206

 
(3,241
)
 
3,618

 
16,964

Income tax effect
(382
)
 
(383
)
 
(1,147
)
 
(1,148
)
Other comprehensive income (loss)
824

 
(3,624
)
 
2,471

 
15,816

Total comprehensive loss
$
(57,449
)
 
$
(59,736
)
 
$
(81,480
)
 
$
(414
)

See condensed notes to consolidated financial statements














4




CENTURY ALUMINUM COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
 
September 30, 2016
 
December 31, 2015
ASSETS
 
 
 
Cash and cash equivalents
$
117,593

 
$
115,393

Restricted cash
1,046

 
791

Accounts receivable - net
11,187

 
9,475

Due from affiliates
14,271

 
17,417

Inventories
233,288

 
231,872

Prepaid and other current assets
31,828

 
42,412

Assets held for sale
23,239

 
30,697

   Total current assets
432,452

 
448,057

Property, plant and equipment - net
1,185,101

 
1,232,256

Other assets
71,163

 
72,155

   TOTAL
$
1,688,716

 
$
1,752,468

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
LIABILITIES:
 
 
 
Accounts payable, trade
$
85,314

 
$
90,489

Due to affiliates
13,105

 
10,045

Accrued and other current liabilities
59,382

 
48,822

Accrued employee benefits costs
9,284

 
10,148

Industrial revenue bonds
7,815

 
7,815

   Total current liabilities
174,900

 
167,319

Senior notes payable
247,590

 
247,278

Accrued pension benefits costs - less current portion
42,433

 
43,999

Accrued postretirement benefits costs - less current portion
125,490

 
125,999

Other liabilities
72,330

 
53,009

Deferred taxes
88,449

 
96,994

   Total noncurrent liabilities
576,292

 
567,279

COMMITMENTS AND CONTINGENCIES (NOTE 11)

 

SHAREHOLDERS’ EQUITY:
 
 
 
Preferred stock (Note 7)
1

 
1

Common stock (Note 7)
942

 
942

Additional paid-in capital
2,514,765

 
2,513,631

Treasury stock, at cost
(86,276
)
 
(86,276
)
Accumulated other comprehensive loss
(110,179
)
 
(112,650
)
Accumulated deficit
(1,381,729
)
 
(1,297,778
)
Total shareholders’ equity
937,524

 
1,017,870

TOTAL
$
1,688,716

 
$
1,752,468


See condensed notes to consolidated financial statements

5




CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)

Nine months ended September 30,

2016

2015
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net loss
$
(83,951
)
 
$
(16,230
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Unrealized gain on fair value of contingent consideration


(18,337
)
Unrealized gain on E.ON contingent obligation
(1,059
)
 
(1,059
)
Lower of cost or market inventory adjustment
1,499

 
31,013

Depreciation and amortization
63,306

 
55,815

Ravenswood impairment
3,830

 
30,850

Pension and other postretirement benefits
1,682

 
(298
)
Deferred income taxes
(8,520
)
 
1,215

Stock-based compensation
1,134

 
1,381

Equity in earnings of joint ventures
(891
)
 
(2,069
)
Change in operating assets and liabilities:
 
 
 
Accounts receivable - net
(1,712
)
 
69,055

Due from affiliates
3,146

 
2,406

Inventories
(1,265
)
 
(46,392
)
Prepaid and other current assets
9,016

 
3,435

Accounts payable, trade
(5,028
)
 
(43,485
)
Due to affiliates
4,628

 
11,395

Accrued and other current liabilities
4,769

 
(8,418
)
Pension contribution - Mt. Holly

 
(34,595
)
Ravenswood retiree legal settlement
23,000

 

Other - net
1,998

 
(3,173
)
Net cash provided by operating activities
15,582

 
32,509

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Purchase of property, plant and equipment
(13,127
)
 
(47,595
)
Purchase of remaining interest in Mt. Holly smelter

 
11,313

Restricted and other cash deposits
(255
)
 
(141
)
Net cash used in investing activities
(13,382
)
 
(36,423
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Borrowings under revolving credit facilities
900

 
1,414

Repayments under revolving credit facilities
(900
)
 
(1,414
)
Repurchase of common stock

 
(36,352
)
Net cash used in financing activities

 
(36,352
)
CHANGE IN CASH AND CASH EQUIVALENTS
2,200

 
(40,266
)
Cash and cash equivalents, beginning of period
115,393

 
163,242

Cash and cash equivalents, end of period
$
117,593

 
$
122,976


See condensed notes to consolidated financial statements

6



CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements
Three and nine months ended September 30, 2016 and 2015
(amounts in thousands, except share and per share amounts)
(Unaudited)
1.
General
The accompanying unaudited interim consolidated financial statements of Century Aluminum Company should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2015. In management’s opinion, the unaudited interim consolidated financial statements reflect all adjustments, which are of a normal and recurring nature, that are necessary for a fair presentation of financial results for the interim periods presented. Operating results for the first nine months of 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. Throughout this Form 10-Q, and unless expressly stated otherwise or as the context otherwise requires, "Century Aluminum," "Century," the "Company", "we," "us," "our" and "ours" refer to Century Aluminum Company and its consolidated subsidiaries.
2.
Related party transactions
Our significant related party transactions occurring during the three and nine months ended September 30, 2016 and 2015 are described below. We believe that all of the transactions with our related parties were at prices that approximate market.
Glencore ownership
As of September 30, 2016, Glencore plc and its affiliates (together "Glencore") owned 42.9% of Century’s outstanding common stock and all of our outstanding Series A Convertible Preferred stock resulting in 47.5% ownership in Century Aluminum.
Sales to Glencore
We are party to an agreement with Glencore pursuant to which we agreed to sell, and Glencore agreed to purchase, substantially all of our primary aluminum production in North America for 2015 and 2016 on a take-or-pay basis at prices determined by reference to the Midwest Transaction Price plus additional negotiated product premiums. The current term of the agreement continues through December 31, 2016. In addition, we have agreed to sell approximately 24,500 tonnes of molten aluminum to Glencore during 2017 at prices based on the Midwest Transaction Price.
We sell primary aluminum produced at our Grundartangi, Iceland smelter ("Grundartangi") under a long-term sales contract through 2017 with Glencore at prices based on the London Metal Exchange ("LME") price for primary aluminum plus the European Duty Paid premium and any applicable product premiums. We also received tolling fees from Glencore under a tolling agreement that provided for delivery of primary aluminum produced at our Grundartangi facility through June 2016. The fee paid by Glencore under this tolling agreement was based on the LME price for primary aluminum plus a portion of the European Duty Paid premium.
Glencore purchases the aluminum we produce for resale.
Purchases from Glencore
We purchase alumina from Glencore under a long-term supply agreement and on a spot basis. Pursuant to our current agreement, Glencore has agreed to supply us with alumina through 2017 at prices indexed to the LME price of primary aluminum. In 2015 and 2016, upon mutual agreement, all of our purchases from Glencore under this agreement were priced based on a published alumina index.
Financial contracts with Glencore
During 2016, we entered into certain financial contracts with Glencore. Refer to Note 15 Derivative instruments to the consolidated financial statements included herein. Settlements of financial contracts with Glencore are not material to the
consolidated financial statements for all periods presented.

7

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands, except share and per share amounts)
(Unaudited)



Transactions with Baise Haohai Carbon Co., Ltd. ("BHH")
We own a 40% stake in BHH, a joint venture that owns a carbon anode and cathode facility located in the Guangxi Zhuang Autonomous Region of south China.  We purchase carbon anodes from BHH.  In the fourth quarter of 2015, we completed the construction of a second furnace at our carbon anode facility in Vlissingen, Netherlands. This investment increased our capacity to produce carbon anodes and significantly reduced the quantity of carbon anodes that we source from BHH. As a result, in the fourth quarter of 2015, we made the decision to pursue an exit from our investment in BHH and recorded an $11,584 impairment loss.
Summary
A summary of the aforementioned significant related party transactions for the three and nine months ended September 30, 2016 and 2015 is as follows: 
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
2015
 
2016
2015
Net sales to Glencore
$
301,111

$
428,018

 
$
871,771

$
1,517,428

Purchases from Glencore
62,317

86,664

 
156,507

328,120

Purchases from BHH
2,568

13,515

 
7,666

41,768


3.
Ravenswood impairment

On July 27, 2015, we announced the immediate and permanent closure of our Ravenswood, West Virginia aluminum smelter ("Ravenswood"). Ravenswood has been idled since February 2009. The decision to permanently close Ravenswood was based on the inability to secure a competitive power contract for the smelter, compounded by challenging aluminum market conditions largely driven by increased exports of aluminum from China.

At June 30, 2015, we recorded an impairment charge of $30,850 related to Ravenswood. Based on a tentative agreement for the sale of the assets, we recorded an additional impairment charge of $3,830, included in Ravenswood charges in the consolidated statements of operations for the quarter ended September 30, 2016.

We classified the estimated salvage value of the property, plant and equipment within Level 3 of the fair value hierarchy as its fair value was determined based on recent comparable transactions with inputs that are not readily observable in the market.

4.
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"), pursuant to which Berkeley acquired all of the issued and outstanding shares of Alumax of South Carolina, Inc. ("Alumax of SC") and thereby acquired Alcoa’s 50.3% stake in Mt. Holly. Berkeley had previously owned 49.7% of Mt. Holly. Immediately following the consummation of the transaction on December 1, 2014, Berkeley merged with and into Alumax of SC with Alumax of SC surviving and changing its name to Century Aluminum of South Carolina, Inc. ("CASC"). Following the consummation of the transaction, CASC owned 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 acquired all of the issued and outstanding shares of capital stock of Alumax of SC for $67,500 in cash subject to a contingent earn-out payment, working capital and other similar adjustments. The acquisition was funded with available cash on hand.

8

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands, except share and per share amounts)
(Unaudited)


We accounted for this transaction as a step acquisition and this resulted in a non-cash pre-tax gain of $15,955 at closing. Acquisition-related costs for Mt. Holly of $1,539 were expensed to selling, general and administrative expenses in the period that they were incurred.
The following table summarizes all of the elements of purchase consideration for the transaction as of December 1, 2014.
Purchase price
$
67,500

Contingent consideration
13,780

Economic, working capital and other closing adjustments
(13,513
)
  Total consideration
$
67,767

We received payments from Alcoa of $12,500 in settlement of the contingent consideration in March 2016, $11,313 for economic and working capital adjustments in April 2015 and $2,400 at closing which was primarily for post-employment benefits.
We recognized gains on contingent consideration of $1,523 and $18,337, respectively, during the three and nine month periods ended September 30, 2015.
The total net cash consideration paid to Alcoa after final resolution of all post-closing adjustments, including the earn-out provision, was $41,487.
5.
Fair value measurements
The following section describes the valuation methodology used to measure our financial assets and liabilities that were accounted for at fair value and are categorized based on the fair value hierarchy described in Accounting Standards Codification ("ASC") 820, "Fair Value Measurements and Disclosures."
Overview of Century’s valuation methodology
 
Level
Significant inputs
Cash equivalents
1
Quoted market prices
Trust assets (1)
1
Quoted market prices
Surety bonds
1
Quoted market prices
Forward sales contracts
2
Quoted LME forward market
Fixed for floating swaps
3
Quoted LME forward market, management's estimates of future U.S. Midwest premium
E.ON contingent obligation
3
Quoted LME forward market, management’s estimates of the LME forward market prices for periods beyond the quoted periods and management’s estimate of future level of operations
(1)
Trust assets are currently invested in money market funds. These trust assets are held to fund the non-qualified supplemental executive pension benefit obligations for certain of our officers. The trust has sole authority to invest the funds in secure interest producing investments consisting of short-term securities issued or guaranteed by the United States government or cash and cash equivalents.
Our fair value measurements include the consideration of market risks that other market participants might consider in pricing the particular asset or liability, specifically non-performance risk and counterparty credit risk. Considerations of the non-performance risk and counterparty credit risk are used to establish the appropriate risk-adjusted discount rates used in our fair value measurements.

9

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands, except share and per share amounts)
(Unaudited)


Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.  Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and the placement within the fair value hierarchy levels. There were no transfers between Level 1 and 2 during the periods presented. There were no transfers into or out of Level 3 during the periods presented. It is our policy to recognize transfers into and transfers out of Level 3 as of the date of the event or change in circumstances that caused the transfer.
The following table sets forth our financial assets and liabilities that were accounted for at fair value on a recurring basis by the level of input within the ASC 820 fair value hierarchy.

Recurring Fair Value Measurements
As of September 30, 2016
 
Level 1
Level 2
Level 3
Total
ASSETS:
 
 
 
 
Cash equivalents
$
104,730

$

$

$
104,730

Trust assets
3,664



3,664

Surety bonds
1,874



1,874

Derivative contracts

330

574

904

TOTAL
$
110,268

$
330

$
574

$
111,172

 
 
 
 
 
LIABILITIES:
 
 
 
 
   E.ON contingent obligation - net
$

$

$

$

Derivative contracts


574

574

TOTAL
$

$

$
574

$
574

Recurring Fair Value Measurements
As of December 31, 2015
 
Level 1
Level 2
Level 3
Total
ASSETS:
 
 
 
 
Cash equivalents
$
102,675

$

$

$
102,675

Trust assets
5,226



5,226

Surety bonds
1,870



1,870

TOTAL
$
109,771

$

$

$
109,771

LIABILITIES:
 
 
 
 
E.ON contingent obligation – net
$

$

$

$

TOTAL
$

$

$

$



10

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands, except share and per share amounts)
(Unaudited)


6.
Earnings (loss) per share
Basic earnings (loss) per share ("EPS") amounts are calculated by dividing net income (loss) allocated to common stockholders by the weighted average number of common shares outstanding. Diluted EPS amounts assume the issuance of common stock for all potentially dilutive common shares.
In periods when we report a net loss, all share-based compensation awards are excluded from the calculation of diluted weighted average shares outstanding because of their antidilutive effect on loss per share. In periods when we report net income, certain share-based compensation awards may be excluded from the calculation of diluted EPS if the exercise price was greater than the average market price of the underlying common stock.
The following table shows the basic and diluted earnings (loss) per share for the three and nine months ended September 30, 2016 and 2015:
 
For the three months ended September 30,
 
2016
 
2015
 
Loss
Shares (000)
Per-Share
 
Loss
Shares (000)
Per-Share
Net loss
$
(58,273
)
 
 
 
$
(56,112
)
 
 
Amount allocated to common stockholders
100.00
%
 
 
 
100.00
%
 
 
Basic and diluted EPS:
 
 
 
 
 
 
 
Net loss allocated to common stockholders
$
(58,273
)
87,076

$
(0.67
)
 
$
(56,112
)
86,907

$
(0.65
)

 
For the nine months ended September 30,
 
2016
 
2015
 
Loss
Shares (000)
Per-Share
 
Income
Shares (000)
Per-Share
Net loss
$
(83,951
)
 
 
 
$
(16,230
)
 
 
Amount allocated to common stockholders
100.00
%
 
 
 
100.00
%
 
 
Basic and diluted EPS:
 
 
 
 
 
 
 
Net loss allocated to common stockholders
$
(83,951
)
87,059

$
(0.96
)
 
$
(16,230
)
87,524

$
(0.19
)

Securities excluded from the calculation of diluted EPS:
Three months ended September 30,
Nine months ended September 30,
 
2016
2015
2016
2015
 
 
 
 
 
Stock options
372,569

317,266

391,375

327,599

Service-based share awards
1,449,520

646,128

1,157,077

599,001



11

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands, except share and per share amounts)
(Unaudited)


7.
Shareholders’ equity
Common Stock
As of September 30, 2016 and December 31, 2015, we had 195,000,000 shares of common stock, $0.01 cent par value per share, authorized under our Restated Certificate of Incorporation, of which 94,262,108 shares were issued and 87,075,587 shares were outstanding at September 30, 2016; 94,224,571 shares were issued and 87,038,050 shares were outstanding at December 31, 2015.
The rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock which are currently outstanding, including our Series A Convertible Preferred Stock, or which we may designate and issue in the future.
Stock Repurchase Program
In 2011, our Board of Directors approved a $60,000 common stock repurchase program which was expanded in 2015 to $130,000. Through December 31, 2015 we had repurchased 7,186,521 shares of common stock for an aggregate purchase price of $86,276. We have made no share repurchases since April 2015 and we have $43,724 remaining under the repurchase program authorization. The repurchase program may be expanded, suspended or discontinued by our Board, in its sole discretion, at any time.
Shares of common stock repurchased are recorded at cost as treasury stock and result in a reduction of shareholders’ equity in the consolidated balance sheets. From time to time, treasury shares may be reissued and we use an average cost method for determining the cost for reissued treasury shares. The difference between the cost of the shares and the reissuance price is added to or deducted from additional paid-in capital.
Preferred Stock
As of September 30, 2016 and December 31, 2015 we had 5,000,000 shares of preferred stock, $0.01 cent par value per share, authorized under our Restated Certificate of Incorporation. In 2008, we issued 160,000 shares of our Series A Convertible Preferred Stock, all of which are held by Glencore, and at September 30, 2016 and December 31, 2015, 76,378 and 76,539 shares were outstanding, respectively. The issuance of common stock under our stock incentive programs, debt exchange transactions and any stock offering that excludes Glencore participation triggers anti-dilution provisions of the preferred stock agreement and results in the automatic conversion of Series A Convertible Preferred Stock shares into shares of common stock. The conversion of preferred to common shares is 100 shares of common for each share of preferred stock.  Our Series A Convertible Preferred Stock has a par value of $0.01 per share.  
Our Board of Directors may issue preferred stock in one or more series and determine for each series the dividend rights, conversion rights, voting rights, redemption rights, liquidation preferences, sinking fund terms and the number of shares constituting that series, as well as the designation thereof.  Depending upon the terms of preferred stock established by our Board of Directors, any or all of the preferred stock could have preference over the common stock with respect to dividends and other distributions and upon the liquidation of Century. In addition, issuance of any shares of preferred stock with voting powers may dilute the voting power of the outstanding common stock.

12

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands, except share and per share amounts)
(Unaudited)



The Common and Preferred Stock Activity table below contains additional information about preferred stock conversions during the nine months ended September 30, 2016 and 2015.
Common and Preferred Stock Activity:
Preferred stock
 
  Common stock
(in shares)
Series A convertible
 
   Treasury
  Outstanding
Beginning balance as of December 31, 2015
76,539

 
7,186,521

87,038,050

Conversion of convertible preferred stock
(161
)
 

16,109

Issuance for share-based compensation plans

 

21,428

Ending balance as of September 30, 2016
76,378

 
7,186,521

87,075,587

 
 
 
 
 
Beginning balance as of December 31, 2014
78,141

 
4,786,521

89,064,582

Repurchase of common stock

 
2,400,000

(2,400,000
)
Conversion of convertible preferred stock
(1,146
)
 

114,524

Issuance for share-based compensation plans

 

152,597

Ending balance as of September 30, 2015
76,995

 
7,186,521

86,931,703

8.
Income taxes
We recorded an income tax benefit for the three and nine months ended September 30, 2016 of $848 and $3,237, respectively, which primarily consisted of foreign income taxes.
We recorded an income tax benefit for the three months ended September 30, 2015 of $2,161 and income tax expense of $12,205 for the nine months ended September 30, 2015 which primarily consisted of foreign and state income taxes.
Our income tax benefit or expense is based on an annual effective tax rate forecast, including estimates and assumptions that could change during the year. The application of the requirements for accounting for income taxes in interim periods, after consideration of our valuation allowance, causes a significant variation in the typical relationship between income tax expense and pretax accounting income.
As of September 30, 2016, all of Century's U.S. and certain foreign deferred tax assets, net of deferred tax liabilities, continue to be subject to a valuation allowance.
9.
Inventories
Inventories consist of the following:
 
 
 
September 30, 2016
December 31, 2015
Raw materials
$
65,947

$
52,121

Work-in-process
32,679

34,025

Finished goods
20,052

15,988

Operating and other supplies
114,610

129,738

Total inventories
$
233,288

$
231,872

Inventories are stated at the lower of cost or market using the first-in, first-out method.

13

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands, except share and per share amounts)
(Unaudited)


10.
Debt
 
September 30, 2016
December 31, 2015
Debt classified as current liabilities:
 
 
Hancock County industrial revenue bonds ("IRBs") due 2028, interest payable quarterly (variable interest rates (not to exceed 12%)) (1)
$
7,815

$
7,815

Debt classified as non-current liabilities:
 
 
7.5% senior secured notes due June 1, 2021, net of debt discount of $2,410 and $2,722, respectively, interest payable semiannually
247,590

247,278

Total
$
255,405

$
255,093

(1)
The IRBs are classified as current liabilities because they are remarketed weekly and could be required to be repaid upon demand if there is a failed remarketing. The IRB interest rate at September 30, 2016 was 1.04%.
U.S. Revolving Credit Facility
We and certain of our direct and indirect domestic subsidiaries are party to a senior secured revolving credit facility, dated May 24, 2013, as amended, with a syndicate of lenders which provides for borrowings of up to $150,000 in the aggregate, including up to $110,000 under a letter of credit sub-facility (the "U.S. revolving credit facility"). Our U.S. revolving credit facility matures in June 2020. Any letters of credit issued and outstanding under the U.S. revolving credit facility reduce our borrowing availability on a dollar-for-dollar basis. The availability of funds under the U.S. revolving credit facility is limited by a specified borrowing base consisting of accounts receivable, inventory and qualified cash deposits of the borrowers which meet the eligibility criteria.
Status of our U.S. revolving credit facility:
 
September 30, 2016
Credit facility maximum amount
$
150,000

Borrowing availability
88,385

Outstanding letters of credit issued
47,941

Outstanding borrowings

Borrowing availability, net of outstanding letters of credit and borrowings
40,444

Iceland Revolving Credit Facility
We have also entered into, through our wholly-owned subsidiary Nordural Grundartangi ehf, a $50,000 revolving credit facility, dated November 27, 2013 (the "Iceland revolving credit facility"). The Iceland revolving credit facility expires on November 27, 2018. The availability of funds under the Iceland revolving credit facility is limited by a specified borrowing base consisting of inventory and accounts receivable of Grundartangi.
Status of our Iceland revolving credit facility:
 
September 30, 2016
Credit facility maximum amount
$
50,000

Borrowing availability
50,000

Outstanding borrowings

Borrowing availability, net of borrowings
50,000


14

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands, except share and per share amounts)
(Unaudited)


7.5% Notes due 2021
General. On June 4, 2013, we issued $250,000 of our 7.5% Notes due June 1, 2021 (the "2021 Notes") in a private offering exempt from the registration requirements of the Securities Act of 1933, as amended.  The 2021 Notes were issued at a discount and bear interest at the rate of 7.5% per annum on the principal amount, payable semi-annually in arrears in cash on June 1st and December 1st of each year.
Fair Value.  Fair value for our 2021 Notes was based on the latest trading data available and was $230,783 and $169,220, as of September 30, 2016 and December 31, 2015, respectively.  Although we use quoted market prices for identical debt instruments, the markets on which they trade are not considered to be active and are therefore considered Level 2 fair value measurements.



15

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands, except share and per share amounts)
(Unaudited)


11.
Commitments and contingencies
Environmental Contingencies
Based upon all available information, we believe our current environmental liabilities do not have, and are not likely to have, a material adverse effect on our financial condition, results of operations or liquidity. However, because of the inherent uncertainties in estimating environmental liabilities primarily due to unknown facts and circumstances and changing governmental regulations and legal standards regarding liability, there can be no assurance that future capital expenditures and costs for environmental compliance at currently or formerly owned or operated properties will not result in liabilities that may have a material adverse effect on our financial condition, results of operations or liquidity.
It is our policy to accrue for costs associated with environmental assessments and remedial efforts when it becomes probable that a liability has been incurred and the costs can be reasonably estimated. The aggregate environmental-related accrued liabilities were $1,519 and $1,112 at September 30, 2016 and December 31, 2015, respectively. All accrued amounts have been recorded without giving effect to any possible future recoveries. Costs for ongoing environmental compliance, including maintenance and monitoring are expensed as incurred.
In July 2006, we were named as a defendant, together with certain affiliates of Alcan Inc., in a lawsuit brought by Alcoa Inc. seeking to determine responsibility for certain environmental indemnity obligations related to the sale of a cast aluminum plate manufacturing facility located in Vernon, California, which we purchased from Alcoa Inc. in December 1998, and sold to Alcan Rolled Products-Ravenswood LLC in July 1999. The complaint also seeks costs and attorney fees. The matter was stayed by the court in 2008 to allow for the remediation of environmental areas at the site. On June 30, 2016 the court ordered the stay lifted and reopened the case. The matter is in a preliminary stage in the U.S. District Court for the District of Delaware, and we cannot predict the ultimate outcome of this action or estimate a range of possible losses related to this matter at this time.
Matters relating to the St. Croix Alumina Refining Facility
We are a party to a United States Environmental Protection Agency Administrative Order on Consent (the "Order") pursuant to which certain past and present owners of an alumina refining facility at St. Croix, Virgin Islands (the "St. Croix Alumina Refinery") have agreed to carry out a Hydrocarbon Recovery Plan to remove and manage hydrocarbons floating on groundwater underlying the facility.  Pursuant to the Hydrocarbon Recovery Plan, recovered hydrocarbons and groundwater are delivered to the adjacent petroleum refinery where they are received and managed. Through September 30, 2016, we have expended approximately $1,085 on the Hydrocarbon Recovery Plan.  At this time, we are not able to estimate the amount of any future potential payments under this indemnification to comply with the Order, but we do not anticipate that any such amounts will have a material adverse effect on our financial condition, results of operations or liquidity, regardless of the final outcome.
In December 2010, Century was among several defendants named in a lawsuit filed by plaintiffs who either worked, resided or owned property in the area downwind from the St. Croix Alumina Refinery. In March 2011, Century was also named a defendant in a nearly identical suit brought by certain additional plaintiffs. The plaintiffs in both suits allege damages caused by the presence of red mud and other particulates coming from the alumina facility and are seeking unspecified monetary damages, costs and attorney fees as well as certain injunctive relief. We tendered indemnity and defense to St. Croix Alumina LLC and Alcoa Alumina & Chemical LLC under the terms of an acquisition agreement relating to the facility and have filed motions to dismiss plaintiffs’ claims. In August 2015, the Superior Court of the Virgin Islands, Division of St. Croix denied the motions to dismiss but ordered all plaintiffs to refile individual complaints. At this time, it is not possible to predict the ultimate outcome of or to estimate a range of possible losses for any of the foregoing actions relating to the St. Croix Alumina Refinery.
Legal Contingencies
In addition to the foregoing matters, we have pending against us or may be subject to various lawsuits, claims and proceedings related primarily to employment, commercial, stockholder, safety and health matters. While the results of such litigation matters and claims cannot be predicted with certainty, we believe that the final outcome of such matters will not have a material adverse impact on our financial condition, results of operations or liquidity. However, because of the nature and inherent uncertainties of litigation, should the outcome of these actions be unfavorable, our business, financial condition, results of operations and liquidity could be materially and adversely affected.

16

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands, except share and per share amounts)
(Unaudited)


In evaluating whether to accrue for losses associated with legal contingencies, it is our policy to take into consideration factors such as the facts and circumstances asserted, our historical experience with contingencies of a similar nature, the likelihood of our prevailing and the severity of any potential loss.  For some matters, no accrual is established because we have assessed our risk of loss to be remote.  Where the risk of loss is probable and the amount of the loss can be reasonably estimated, we record an accrual, either on an individual basis or with respect to a group of matters involving similar claims, based on the factors set forth above.  
When we have assessed that a loss associated with legal contingencies is reasonably possible, we determine if estimates of possible losses or ranges of possible losses are in excess of related accrued liabilities, if any.  Based on current knowledge, management has ascertained estimates for losses that are reasonably possible and management does not believe that any reasonably possible outcomes in excess of our accruals, if any, either individually or in aggregate, would be material to our financial condition, results of operations or liquidity. We reevaluate and update our assessments and accruals as matters progress over time.
Ravenswood Retiree Medical Benefits changes
In November 2009, Century Aluminum of West Virginia ("CAWV") filed a class action complaint for declaratory judgment against the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union ("USW"), the USW’s local and certain CAWV retirees, individually and as class representatives, seeking a declaration of CAWV’s rights to modify/terminate retiree medical benefits.  Later in November 2009, the USW and representatives of a retiree class filed a separate suit against CAWV, Century Aluminum Company, Century Aluminum Master Welfare Benefit Plan, and various John Does with respect to the foregoing. 
As of the date of this filing, we believe we have reached a tentative agreement to settle these actions, subject to entering into a definitive written settlement agreement among the parties and obtaining court approval after notice to the class. For the quarter ended September 30, 2016, we recognized a $23,000 liability in the consolidated balance sheets with a corresponding expense included in Ravenswood charges in the consolidated statements of operations associated with this settlement. The tentative agreement currently anticipates that a $5,000 payment would be made upon the court's final approval of the settlement agreement and $2,000 annually thereafter for nine years.
PBGC Settlement
In April 2013, we entered into a settlement agreement with the Pension Benefit Guarantee Corporation ("PBGC") regarding an alleged "cessation of operations" at our Ravenswood facility as a result of the curtailment of operations at the facility and, pursuant to the agreement, we agreed to make additional contributions (above any minimum required contributions) to our defined benefit pension plans totaling approximately $17,400. The agreement permits us to defer payments during periods of lower primary aluminum prices relative to our cost of operations. We remeasure aluminum prices against our cost of operations on an annual basis based on our fourth quarter results. To the extent that we elect to defer one or more of these payments, we are required to provide the PBGC with acceptable security for any such deferred payments. We made contributions pursuant to this agreement of $1,100 in March 2015 and $6,700 in 2013. We did not make any contributions during 2014 and have not made any contributions through September 30, 2016. The remaining contributions under this agreement are approximately $9,600.
Power Commitments and Contingencies
Hawesville
Hawesville has a power supply arrangement with Kenergy and EDF Trading North America, LLC (“EDF") which provides market-based power to the Hawesville smelter. Under this arrangement, the power companies purchase power on the open market and pass it through to Hawesville at Midcontinent Independent System Operator ("MISO") pricing plus transmission and other costs. The power supply arrangement with Kenergy has an effective term through December 2023. The arrangement with EDF to act as our market participant with MISO has an effective term through May 2017, extending year to year thereafter unless a one year notice is given.

17

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands, except share and per share amounts)
(Unaudited)


Sebree
Sebree has a power supply arrangement with Kenergy and EDF which provides market-based power to the Sebree smelter. Similar to the arrangement at Hawesville, the power companies purchase power on the open market and pass it through to Sebree at MISO pricing plus transmission and other costs. The power supply arrangement with Kenergy has an effective term through December 2023. The arrangement with EDF to act as our market participant with MISO has an effective term through May 2017, extending year to year thereafter unless a one year notice is given.
Mt. Holly
Mt. Holly has a power supply arrangement pursuant to which 25% of the Mt. Holly load is served from the South Carolina Public Service Authority’s ("Santee Cooper") generation at a standard cost-based industrial rate and 75% of the Mt. Holly load is sourced from a third party supplier from generation that is outside Santee Cooper’s service territory at market prices that are tied to natural gas prices. The agreement with Santee Cooper has a term through December 31, 2018. The current third party supply contract has a term through December 31, 2017. Both of these agreements may be terminated by Mt. Holly on 60 days' notice.
Grundartangi
Grundartangi has power purchase agreements for approximately 525 MW with HS Orka hf ("HS"), Landsvirkjun and Orkuveita Reykjavikur ("OR") to provide power to its Grundartangi smelter.  These power purchase agreements, which will expire on various dates from 2019 through 2036 (subject to extension), provide power at LME-based variable rates.  Each power purchase agreement contains take-or-pay obligations with respect to a significant percentage of the total committed and available power under such agreement.
Grundartangi recently reached an agreement with Landsvirkjun for an extension of the 161MW power contract that would have expired in October 2019. Under the terms of the extension, Landsvirkjun will continue to supply 161MW of power to Grundartangi from November 1, 2019 through December 31, 2023. Under the terms of the extension, Grundartangi will continue to pay LME-based variable rates through October 2019 and will pay rates linked to the Nord Pool power market thereafter.
Helguvik
Nordural Helguvik ehf ("Helguvik") has power purchase agreements with HS and OR to provide power to the Helguvik project.  These power purchase agreements provide power at LME-based variable rates and contain take-or-pay obligations with respect to a significant percentage of the total committed and available power under such agreements. The power purchase agreements contain certain conditions to HS’s and OR’s obligations. HS (with respect to all phases) and OR (with respect to all phases other than the first phase) have alleged that certain of these conditions have not been satisfied.  The first stage of power under the OR power purchase agreement (approximately 47.5 MW) became available in the fourth quarter of 2011 and is currently being utilized at Grundartangi.  In July 2014, HS commenced arbitration proceedings against Helguvik seeking, among other things, an order declaring, (i) that the conditions to the power contract have not been fulfilled and, (ii) that the power contract is therefore no longer valid. Arbitration hearings were held in April 2016 but the arbitral tribunal has yet to issue its decision.
Other Commitments and Contingencies
Labor Commitments
The bargaining unit employees at our Grundartangi, Vlissingen, Hawesville, Sebree and Ravenswood facilities are represented by labor unions, representing 64% of our total workforce. 
Approximately 84% of Grundartangi’s work force is represented by five labor unions, governed by a labor agreement which is effective through December 31, 2019 that establishes wages and work rules for covered employees. 100% of Vlissingen's work force is represented by the Federation for the Metal and Electrical Industry ("FME") which negotiates working conditions with trade unions on behalf of its members. In March 2016, a new labor agreement was reached with the FME which is effective retroactively from May 1, 2015 to June 1, 2018.

18

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands, except share and per share amounts)
(Unaudited)


Approximately 53% of our U.S. based work force is represented by the USW. In June 2015, CAKY entered into a new collective bargaining agreement with the USW for its employees at the Hawesville smelter. The agreement is effective through April 1, 2020. Century Sebree, LLC has a collective bargaining agreement with the USW for its employees at the Sebree smelter that is effective through October 28, 2019. Our employees at Mt. Holly are not represented by a labor union.
12.
Components of accumulated other comprehensive loss
 
September 30, 2016
December 31, 2015
Defined benefit plan liabilities
$
(118,153
)
$
(121,910
)
Unrealized loss on financial instruments
(1,574
)
(1,435
)
Other comprehensive loss before income tax effect
(119,727
)
(123,345
)
Income tax effect (1)
9,548

10,695

Accumulated other comprehensive loss
$
(110,179
)
$
(112,650
)
(1) The allocation of the income tax effect to the components of other comprehensive loss is as follows:
 
September 30, 2016
December 31, 2015
Defined benefit plan liabilities
$
10,071

$
11,243

Unrealized loss on financial instruments
(523
)
(548
)

The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive loss ("AOCL"):
 
Defined benefit plan and other postretirement liabilities
Unrealized loss on financial instruments
Total, net of tax
Balance, July 1, 2016
$
(108,944
)
$
(2,059
)
$
(111,003
)
Net amount reclassified to net loss
862

(38
)
824

Balance, September 30, 2016
$
(108,082
)
$
(2,097
)
$
(110,179
)
 
 
 
 
Balance, July 1, 2015
$
(96,335
)
$
(1,907
)
$
(98,242
)
Other comprehensive income before reclassifications (1)
(4,114
)

(4,114
)
Net amount reclassified to net loss
529

(39
)
490

Balance, September 30, 2015
$
(99,920
)
$
(1,946
)
$
(101,866
)
 
 
 
 
Balance, December 31, 2015
$
(110,667
)
$
(1,983
)
$
(112,650
)
Net amount reclassified to net loss
2,585

(114
)
2,471

Balance, September 30, 2016
$
(108,082
)
$
(2,097
)
$
(110,179
)
 
 
 
 
Balance, December 31, 2014
$
(115,852
)
$
(1,830
)
$
(117,682
)
Other comprehensive income before reclassifications (1)
13,928


13,928

Net amount reclassified to net income
2,004

(116
)
1,888

Balance, September 30, 2015
$
(99,920
)
$
(1,946
)
$
(101,866
)

(1) The gain in other comprehensive income before reclassifications was due to a plan remeasurement related to labor negotiations, census and other actuarial adjustments.


19

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands, except share and per share amounts)
(Unaudited)


Reclassifications out of AOCL were included in the consolidated statements of operations as follows:
 
 
For the three months ended September 30,
For the nine months ended September 30,
AOCL Components
Location
2016
2015
2016
2015
Defined benefit plan and other postretirement liabilities
Cost of goods sold
$
777

$
669

$
2,332

$
2,422

 
Selling, general and administrative expenses
125

252

375

755

 
Other operating expense, net
350


1,050


 
Income tax expense
(390
)
(392
)
(1,172
)
(1,173
)
 
Net of tax
$
862

$
529

$
2,585

$
2,004

 
 
 
 
 
 
Unrealized loss on financial instruments
Cost of goods sold
$
(46
)
$
(47
)
$
(139
)
$
(140
)
 
Income tax benefit
8

8

25

24

 
Net of tax
$
(38
)
$
(39
)
$
(114
)
$
(116
)

13.
Components of net periodic benefit cost
 
Pension Benefits
 
Three months ended September 30,

Nine months ended September 30,
 
2016
2015

2016
2015
Service cost
$
1,270

$
2,074

 
$
3,810

$
5,287

Interest cost
3,478

3,348

 
10,440

10,003

Expected return on plan assets
(4,813
)
(5,262
)
 
(14,445
)
(16,025
)
Amortization of prior service costs
28

28

 
84

83

Amortization of net loss
1,041

1,025

 
3,125

3,049

Curtailment

377

 

365

Net periodic benefit cost
$
1,004

$
1,590

 
$
3,014

$
2,762


 
Other Postretirement Benefits ("OPEB")
 
Three months ended September 30,
 
Nine months ended September 30,
 
2016
2015
 
2016
2015
Service cost
$
330

$
468

 
$
990

$
1,517

Interest cost
1,469

1,542

 
4,364

4,523

Amortization of prior service cost
(695
)
(1,007
)
 
(2,085
)
(2,929
)
Amortization of net loss
878

874

 
2,633

2,973

Net periodic benefit cost
$
1,982

$
1,877

 
$
5,902

$
6,084


Employer contributions
During the nine months ended September 30, 2016, we made contributions of $1,338 to the qualified defined benefit and unqualified supplemental executive retirement benefit ("SERB") plans that we sponsor.


20

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands, except share and per share amounts)
(Unaudited)


14.
Supplemental cash flow information
 
Nine months ended September 30,
 
2016
2015
Cash paid for:
 
 
Interest
$
9,893

$
9,396

Income taxes
10,245

13,921


15.
Derivative instruments
As a global producer of primary aluminum, our operating results and cash flows from operations are subject to risk of fluctuations in the market prices of primary aluminum. We enter into financial contracts from time to time to manage our exposure to such risk. As of September 30, 2016, we had entered into LME forward financial sales contracts with Glencore to fix the forward LME price of approximately 45,000 tonnes of primary aluminum (the “Forward Sales Contracts”). The Forward Sales Contracts settle monthly, on a ratable basis, through December 31, 2017. From time to time, we enter into financial contracts to offset fixed price sales arrangements with certain of our customers. As of September 30, 2016, we had entered into such arrangements with respect to approximately 8,200 tonnes of primary aluminum (the “fixed for floating swaps”). Fixed for floating swaps settle at various dates up to and including January 2018.
We record our financial contracts at fair value in prepaid and other current assets, due from/to affiliates, or other liabilities in the consolidated balance sheets. We value our derivative instruments using quoted market prices and other significant unobservable inputs. These derivatives are not designated as cash flow hedges. We recognize changes in fair value and settlements of these derivative instruments in net gain (loss) on forward and derivative contracts in the consolidated statements of operations as they occur.
Changes in fair value and settlements of these derivative instruments are not material to the consolidated financial statements for all periods presented.


16.
Condensed consolidating financial information
Our 2021 Notes are guaranteed by each of our material existing and future domestic subsidiaries (The "Guarantor Subsidiaries"), except for Nordural US LLC and Century Aluminum Development LLC.  The Guarantor Subsidiaries are 100% owned by Century.  All guarantees are full and unconditional; all guarantees are joint and several.  These notes are not guaranteed by our foreign subsidiaries (such foreign subsidiaries, Nordural US LLC and Century Aluminum Development LLC, collectively the “Non-Guarantor Subsidiaries”).  We allocate corporate expenses or income to our subsidiaries and charge interest on certain intercompany balances.

The following summarized condensed consolidating statements of comprehensive income (loss) for three and nine months ended September 30, 2016 and 2015, condensed consolidating balance sheets as of September 30, 2016 and December 31, 2015 and the condensed consolidating statements of cash flows for the nine months ended September 30, 2016 and 2015 present separate results for Century, the Guarantor Subsidiaries, the Non-Guarantor Subsidiaries, consolidating adjustments and total consolidated amounts.  Although Century Aluminum West Virginia (which owns our curtailed Ravenswood smelter) has guaranteed our Notes due 2021, because we are in the process of selling substantially all of its assets, we have included its net assets, results of operations and cash flows in the columns under the caption Non-Guarantor Subsidiaries.

21

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands)
(unaudited)

Condensed Consolidating Statements of Comprehensive Income (Loss)
For the three months ended September 30, 2016
 
 
The Company
 
Combined Guarantor Subsidiaries
 
Combined Non-Guarantor Subsidiaries
 
Consolidating Adjustments
 
Total Consolidated
 NET SALES:
 
 
 
 
 
 
 
 
 
 
   Related parties
 
$

 
$
170,947

 
$
152,449

 
$
(22,285
)
 
$
301,111

   Third-party customers
 

 
32,795

 
11

 
(267
)
 
32,539

 Total net sales
 

 
203,742

 
152,460

 
(22,552
)
 
333,650

 Cost of goods sold
 

 
231,082

 
141,957

 
(21,777
)
 
351,262

 Gross profit (loss)
 

 
(27,340
)
 
10,503

 
(775
)
 
(17,612
)
Selling, general and administrative expenses
 
9,517

 

 
216

 

 
9,733

   Ravenswood charges
 

 

 
26,830

 

 
26,830

   Other operating expense - net
 

 

 
878

 

 
878

 Operating loss
 
(9,517
)
 
(27,340
)
 
(17,421
)
 
(775
)
 
(55,053
)
   Interest expense - third parties
 
(5,101
)
 
(385
)
 
(45
)
 

 
(5,531
)
Interest income (expense) - affiliates
 
9,947

 
2,059

 
(12,006
)
 

 

   Interest income - third parties
 
33

 

 
157

 

 
190

Net gain on forward and derivative contracts
 

 
1,275

 

 

 
1,275

    Other income (expense) - net
 
48

 
14

 
(219
)
 

 
(157
)
Loss before income taxes and equity in earnings (loss) of joint ventures
 
(4,590
)
 
(24,377
)
 
(29,534
)
 
(775
)
 
(59,276
)
    Income tax effect
 
(877
)
 

 
1,725

 

 
848

 Loss before equity in earnings (loss) of joint ventures
 
(5,467
)
 
(24,377
)
 
(27,809
)
 
(775
)
 
(58,428
)
Equity in earnings (loss) of joint ventures
 
(52,806
)
 

 
155

 
52,806

 
155

 Net income (loss)
 
$
(58,273
)
 
$
(24,377
)
 
$
(27,654
)
 
$
52,031

 
$
(58,273
)
Other comprehensive income (loss) before income tax effect
 
1,206

 
777

 
303

 
(1,080
)
 
1,206

   Income tax effect
 
(382
)
 

 
8

 
(8
)
 
(382
)
 Other comprehensive income (loss)
 
824

 
777

 
311

 
(1,088
)
 
824

 Total comprehensive income (loss)
 
$
(57,449
)
 
$
(23,600
)
 
$
(27,343
)
 
$
50,943

 
$
(57,449
)














22

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands)
(unaudited)

Condensed Consolidating Statements of Comprehensive Income (Loss)
For the three months ended September 30, 2015
 
 
The Company
 
Combined Guarantor Subsidiaries
 
Combined Non-Guarantor Subsidiaries
 
Consolidating Adjustments
 
Total Consolidated
 NET SALES:
 
 
 
 
 
 
 
 
 
 
   Related parties
 
$
14,136

 
$
284,891

 
$
156,167

 
$
(27,176
)
 
$
428,018

   Third-party customers
 

 
26,728

 
18

 
(224
)
 
26,522

 Total net sales
 
14,136

 
311,619

 
156,185

 
(27,400
)
 
454,540

 Cost of goods sold
 

 
359,072

 
148,949

 
(11,058
)
 
496,963

 Gross profit (loss)
 
14,136

 
(47,453
)
 
7,236

 
(16,342
)
 
(42,423
)
Selling, general and administrative expenses
 
10,375

 
59

 
1,132

 

 
11,566

   Ravenswood charges
 

 

 

 

 

   Other operating expense - net
 

 

 
1,537

 

 
1,537

 Operating income (loss)
 
3,761

 
(47,512
)
 
4,567

 
(16,342
)
 
(55,526
)
   Interest expense - third parties
 
(4,980
)
 
(391
)
 
(47
)
 

 
(5,418
)
   Interest income (expense) - affiliates
 
9,163

 
1,901

 
(11,064
)
 

 

   Interest income - third parties
 
15

 

 
30

 

 
45

Net gain (loss) on forward and derivative contracts
 
(177
)
 
353

 
109

 

 
285

Unrealized gain on fair value of contingent consideration
 

 
1,523

 

 

 
1,523

    Other income (expense) - net
 
164

 
92

 
(142
)
 

 
114

Income (loss) before income taxes and equity in earnings of joint ventures
 
7,946

 
(44,034
)
 
(6,547
)
 
(16,342
)
 
(58,977
)
    Income tax effect
 
2,030

 

 
(32
)
 
163

 
2,161

Income (loss) before equity in earnings of joint ventures
 
9,976

 
(44,034
)
 
(6,579
)
 
(16,179
)
 
(56,816
)
Equity in earnings of joint ventures
 
(66,088
)
 

 
704

 
66,088

 
704

 Net income (loss)
 
$
(56,112
)
 
$
(44,034
)
 
$
(5,875
)
 
$
49,909

 
$
(56,112
)
Other comprehensive income (loss) before income tax effect
 
(3,241
)
 
212

 
(4,826
)
 
4,614

 
(3,241
)
    Income tax effect
 
(383
)
 

 
8

 
(8
)
 
(383
)
 Other comprehensive income (loss)
 
(3,624
)
 
212

 
(4,818
)
 
4,606

 
(3,624
)
 Total comprehensive income (loss)
 
$
(59,736
)
 
$
(43,822
)
 
$
(10,693
)
 
$
54,515

 
$
(59,736
)






23

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands)
(unaudited)

Condensed Consolidating Statements of Comprehensive Income (Loss)
For the nine months ended September 30, 2016
 
 
The Company
 
Combined Guarantor Subsidiaries
 
Combined Non-Guarantor Subsidiaries
 
Consolidating Adjustments
 
Total Consolidated
 NET SALES:
 
 
 
 
 
 
 
 
 
 
   Related parties
 
$

 
$
502,707

 
$
438,660

 
$
(69,596
)
 
$
871,771

   Third-party customers
 

 
107,725

 
29

 
(267
)
 
107,487

 Total net sales
 

 
610,432

 
438,689

 
(69,863
)
 
979,258

 Cost of goods sold
 

 
653,258

 
411,651

 
(69,552
)
 
995,357

 Gross profit (loss)
 

 
(42,826
)
 
27,038

 
(311
)
 
(16,099
)
Selling, general and administrative expenses
 
26,077

 

 
3,226

 

 
29,303

   Ravenswood charges
 

 

 
26,830

 

 
26,830

   Other operating expense - net
 

 

 
2,337

 

 
2,337

 Operating loss
 
(26,077
)
 
(42,826
)
 
(5,355
)
 
(311
)
 
(74,569
)
   Interest expense - third parties
 
(15,236
)
 
(1,150
)
 
(135
)
 

 
(16,521
)
Interest income (expense) - affiliates
 
29,222

 
6,013

 
(35,235
)
 

 

   Interest income - third parties
 
108

 
9

 
358

 

 
475

Net gain on forward and derivative contracts
 

 
2,998

 

 

 
2,998

    Other income (expense) - net
 
682

 
29

 
(1,173
)
 

 
(462
)
Loss before income taxes and equity in earnings (loss) of joint ventures
 
(11,301
)
 
(34,927
)
 
(41,540
)
 
(311
)
 
(88,079
)
    Income tax effect
 
591

 

 
2,646

 

 
3,237

Loss before equity in earnings (loss) of joint ventures
 
(10,710
)
 
(34,927
)
 
(38,894
)
 
(311
)
 
(84,842
)
Equity in earnings (loss) of joint ventures
 
(73,241
)
 

 
891

 
73,241

 
891

 Net income (loss)
 
$
(83,951
)
 
$
(34,927
)
 
$
(38,003
)
 
$
72,930

 
$
(83,951
)
Other comprehensive income before income tax effect
 
3,618

 
2,332

 
910

 
(3,242
)
 
3,618

   Income tax effect
 
(1,147
)
 

 
25

 
(25
)
 
(1,147
)
 Other comprehensive income (loss)
 
2,471

 
2,332

 
935

 
(3,267
)
 
2,471

 Total comprehensive income (loss)
 
$
(81,480
)
 
$
(32,595
)
 
$
(37,068
)
 
$
69,663

 
$
(81,480
)







24

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands)
(unaudited)

Condensed Consolidating Statements of Comprehensive Income (Loss)
For the nine months ended September 30, 2015
 
 
The Company
 
Combined Guarantor Subsidiaries
 
Combined Non-Guarantor Subsidiaries
 
Consolidating Adjustments
 
Total Consolidated
 NET SALES:
 
 
 
 
 
 
 
 
 
 
   Related parties
 
$
14,136

 
$
1,052,963

 
$
491,946

 
$
(41,617
)
 
$
1,517,428

   Third-party customers
 

 
48,702

 
36

 
(224
)
 
48,514

 Total net sales
 
14,136

 
1,101,665

 
491,982

 
(41,841
)
 
1,565,942

 Cost of goods sold
 

 
1,107,955

 
426,441

 
(28,468
)
 
1,505,928

 Gross profit
 
14,136

 
(6,290
)
 
65,541

 
(13,373
)
 
60,014

Selling, general and administrative expenses
 
30,743

 
(115
)
 
2,921

 

 
33,549

   Ravenswood charges
 

 

 
30,850

 

 
30,850

   Other operating expense - net
 

 

 
6,217

 

 
6,217

 Operating income (loss)
 
(16,607
)
 
(6,175
)
 
25,553

 
(13,373
)
 
(10,602
)
   Interest expense - third parties
 
(15,217
)
 
(1,186
)
 
(139
)
 

 
(16,542
)
   Interest income (expense) - affiliates
 
28,242

 
5,531

 
(33,773
)
 

 

   Interest income - third parties
 
48

 
4

 
196

 

 
248

Net gain on forward and derivative contracts
 

 
1,059

 
145

 

 
1,204

Unrealized gain on fair value of contingent consideration
 

 
18,337

 

 

 
18,337

    Other income (expense) - net
 
1,083

 
(97
)
 
2,005

 
(1,730
)
 
1,261

Income (loss) before income taxes and equity in earnings of joint ventures
 
(2,451
)
 
17,473

 
(6,013
)
 
(15,103
)
 
(6,094
)
    Income tax effect
 
(1,158
)
 

 
(11,047
)
 

 
(12,205
)
Income (loss) before equity in earnings of joint ventures
 
(3,609
)
 
17,473

 
(17,060
)
 
(15,103
)
 
(18,299
)
Equity in earnings of joint ventures
 
(12,621
)
 

 
2,069

 
12,621

 
2,069

 Net income (loss)
 
$
(16,230
)
 
$
17,473

 
$
(14,991
)
 
$
(2,482
)
 
$
(16,230
)
Other comprehensive income before income tax effect
 
16,964

 
13,034

 
(2,866
)
 
(10,168
)
 
16,964

    Income tax effect
 
(1,148
)
 

 
25

 
(25
)
 
(1,148
)
 Other comprehensive income (loss)
 
15,816

 
13,034

 
(2,841
)
 
(10,193
)
 
15,816

 Total comprehensive income (loss)
 
$
(414
)
 
$
30,507

 
$
(17,832
)
 
$
(12,675
)
 
$
(414
)













25

CENTURY ALUMINUM COMPANY
Condensed Notes to the Consolidated Financial Statements (continued)
(amounts in thousands)
(unaudited)

Condensed Consolidating Balance Sheet
As of September 30, 2016
 
 
The Company
 
Combined Guarantor Subsidiaries
 
Combined Non-Guarantor Subsidiaries
 
Consolidating Adjustments
 
Total Consolidated
   Cash & cash equivalents
 
$
37,605

 
$
(125
)
 
$
80,113

 
$

 
$