Quantcast
Last updated on April 23, 2014 at 1:22 EDT

Noranda Aluminum Holding Corporation Reports Third Quarter 2008 Results

November 12, 2008

Noranda Aluminum Holding Corporation (“Noranda” or the “Company”) announced its financial results for the third quarter of 2008.

Key highlights include:

— Revenues of $357.4 million, operating income of $32.1 million, and net losses of $19.3 million for the third quarter

— Revenues of $1.0 billion, operating income of $109.0 million, and net income of $1.4 million year-to-date

— Adjusted EBITDA of $60.6 million for the third quarter and $225.6 million year-to-date

— Generated $111.7 million in cash provided by operating activities year-to-date

— Cash and available borrowings totaled $263.0 million at September 30, 2008

— Achieved record production at our New Madrid smelter for the third quarter and nine months 2008

— Maintained aluminum hedging program at approximately 50% of forecasted aluminum shipments through 2012

— Continued implementation of our energy risk management program by hedging approximately 35% of our natural gas requirements through 2012

— Elected to pay the interest payments due on May 15, 2009, for the $220 million Senior Floating Rate Notes due 2014 and the $510 million Senior Floating Rate Notes due 2015, entirely in kind (“PIK Interest”)

— Appointed Kyle Lorentzen, who had been serving as the Company’s Chief Operating Officer, interim Chief Financial Officer

Third Quarter Results

Layle K. “Kip” Smith, the Company’s President and Chief Executive Officer stated, “Noranda enjoyed another solid quarter, achieving Adjusted EBITDA of $60.6 million while generating cash from operations of $11.0 million. During the quarter Noranda also positioned itself for the changing business environment by securing access to liquidity, continuing to implement its strategy through the CORE productivity initiative, expanding its risk management programs and progressing on its growth projects.”

Third party sales for the third quarter of 2008 were $357.4 million, down 5.3% from sales of $377.6 million reported for the third quarter of 2007. The favorable impact of higher Midwest primary aluminum prices for the third quarter of 2008 was more than offset by lower volumes of shipments to our external customers and the absence of brokered metal sales from our downstream business.

Sales to external customers in the upstream business for the three months ended September 30, 2008, increased 2.9% to $182.5 million from the $177.3 million reported for the same period last year. The increase in sales resulted from an increase in the average Midwest primary aluminum price to $1.34 per pound from the $1.22 price per pound in the third quarter of 2007. This increase in sales was partially offset by volume decreases in external sales in the upstream business due to sales declines in the value-added segment.

Total upstream metal shipments for the third quarter of 2008 were 148.4 million pounds, up 6.7 million pounds from the 141.7 million pounds shipped during the third quarter last year. Of the total amount shipped during the third quarter of 2008, 127.7 million pounds were shipped to external customers, while the remaining 20.7 million pounds were intersegment shipments to our downstream business. External shipments were down 9.3 million pounds because of a decline in demand for value-added products, including those utilized in the housing and construction industry. This decline was more than offset by a 16.0 million pound increase in shipments to our downstream operation. Our integrated operations continued to provide us the flexibility to shift a portion of our upstream production to our downstream business and reduce our overall external purchase commitments and to better manage working capital.

Sales in the downstream business were $174.9 million, down 12.7% from the $200.3 million reported for the third quarter of 2007. The decrease in downstream sales was impacted by a 9.4 million pound decline in sales volume mainly related to HVAC and the housing and construction industry, as well as $20.7 million in brokered metal sales during the third quarter of 2007 compared to no brokered metal sales during the third quarter of 2008.

Operating income for the third quarter of 2008 was $32.1 million, compared to $29.9 million for the third quarter last year, reflecting an increase of 7.4%. Quarter-over-quarter gross margin (sales less cost of sales) improvements of $4.3 million primarily were the result of increased production volumes and higher aluminum prices, but were partially offset by higher cost. These costs reflected higher raw material costs from the joint venture caused from the effects of hurricane Gustav and higher energy costs. The impact of the hurricane resulted in higher energy costs and lower production volumes during the third quarter. These costs also include a $2.1 million increase in selling, general and administrative expenses resulting from higher consulting fees related to the Company’s recent SEC filings and increases in the cost of providing certain employee benefits.

The Company reported a loss of $39.8 million related to derivative instruments and hedging activities for the three months ended September 30, 2008, compared to a gain of $6.7 million reported for the three months ended September 30, 2007. The 2008 loss relates primarily to mark-to-market adjustments for natural gas hedges entered into during the quarter, as well as net cash settlements of fixed-price and variable-priced aluminum swaps. The gain in 2007 primarily was related to changes in the fair value of a portion of our fixed-price aluminum swaps, which in 2007 did not qualify for hedge accounting. Cash settlement payments for aluminum hedges for the third quarter of 2008 were $11 million, compared to $2 million in cash settlement receipts for the prior year quarter.

Net losses reported for the third quarter of 2008 were $19.3 million compared to the $6.3 million net income reported for the third quarter of 2007. This decrease was primarily a result of the cash and non-cash losses on derivative instruments, which were partially offset by lower interest expense and an income tax benefit of $9.9 million.

Adjusted EBITDA totaled $60.6 million for the third quarter of 2008, compared to the $73.4 million reported for the same period last year.

Year-to-Date Results

Third party sales for the first nine months of 2008 were $1,004.9 million, down 8.3% from sales of $1,095.9 million reported for the first nine months of 2007. This decrease primarily resulted from reduced upstream and downstream shipments to external customers, increased intersegment shipments, and the absence of brokered metal sales from our downstream business in 2008.

Sales to external customers in the upstream business for the nine months ended September 30, 2008, decreased 4.4% to $522.8 million from the $546.7 million reported for the same period last year. The decrease in sales resulted from lower valued-added sales and from volume that shifted from external commodity sow sales to intersegment shipments to our downstream business.

Total upstream metal shipments for the first nine months of 2008 were 435.7 million pounds, up 16.4 million pounds from the 419.3 million pounds shipped during the first nine months of last year. Of the total amount shipped in 2008, 374.5 million pounds were shipped to external customers, while the remaining 61.2 million pounds were intersegment shipments to our downstream business. External shipments were down 26.6 million pounds as a result of a decline in demand for value-added products, including those utilized in the housing and construction industry. This decline was more than offset by a 43.0 million pound increase in shipments to our downstream operation.

Sales in the downstream business were $482.1 million, down 12.2% from the $549.2 million reported for the first nine months of 2007. The decrease in downstream sales was impacted by a 5.4% decline in volume and $36.9 million in brokered metal sales during the first nine months of 2007 compared to no brokered metal sales during the first nine months of 2008.

Operating income for the first nine months of 2008 was $109.0 million compared to $129.4 million reported for the same period last year, a decrease of $20.4 million. This decrease was the result of higher 2008 raw material costs, particularly at the joint ventures, as well as increased selling, general and administrative costs including higher consulting and other fees, some of which related to costs associated with the recent SEC filings.

The Company reported a loss of $44.8 million related to derivative instruments and hedging activities for the nine months ended September 30, 2008, compared to a loss of $49.6 million reported for the nine months ended September 30, 2007. The 2008 loss relates primarily to mark-to-market adjustments for natural gas hedges entered into during the quarter, as well as net cash settlements of fixed-price and variable-priced aluminum swaps. The 2007 loss primarily related to changes in the fair value of a portion of our fixed-price aluminum swaps, which in 2007 did not qualify for hedge accounting. Cash settlement payments for aluminum hedges for the year-to-date were $19 million, compared to $2 million in cash settlement receipts for the prior year.

Net income reported for the first nine months of the year was $1.4 million, compared to net income of $20.9 million reported for the nine months of 2007, a decrease that primarily resulted from reduced operating income, which was partially offset by lower interest expense and income taxes.

Adjusted EBITDA totaled $225.6 million for the first nine months of 2008, compared to $246.7 million reported for the same period last year

Liquidity

Net cash provided by operating activities totaled $111.7 million for the first nine months ended September 30, 2008, compared to $192.1 million for the first nine months ended September 30, 2007. In 2007, the Company liquidated excess inventories in its downstream business as part of its cash management program, which contributed to the higher cash provided from operations for the same period last year. Cash and cash equivalents at third quarter-end 2008 were $245.0 million, compared with $75.6 million at December 31, 2007. Cash and available borrowings totaled $263.0 million at September 30, 2008.

Management believes cash flows from operating activities, together with cash and cash equivalents will be sufficient to meet the Company’s short-term liquidity needs.

In light of general market concerns about the ability of financial institutions to honor credit commitments, in late September 2008 the Company borrowed $225 million under the revolving portion of its senior credit facility and invested the proceeds in highly liquid cash equivalents, including U.S. Government T-bills and money market funds holding only U.S. Treasury securities. At September 30, 2008, the Company had remaining borrowing capacity of $18.0 million under the revolving portion of the senior credit facility. Total debt at the end of the third quarter of 2008 was $1.3 billion. At September 30, 2008, the Company’s Adjusted EBITDA to fixed charge ratio was 3.2x to 1 at the Noranda Aluminum Holding Corporation and all of its subsidiaries (“Holdco”) level and 4.2x to 1 at the Noranda Aluminum Acquisition Corporation (“AcquisitionCo”) level, while AcquisitionCo’s net debt to Adjusted EBITDA ratio for its senior secured credit facilities was 1.3x to 1. The Company has no maintenance covenants on any borrowings.

The Company has made a permitted election under the indentures governing its $220 million Senior Floating Rate Notes due 2014 and its $510 million Senior Floating Rate Notes due 2015, to pay all interest under the Notes that is due on May 15, 2009, for the interest period beginning on November 15, 2008, and ending on May 15, 2009, entirely in kind.

The Company has entered into fixed price aluminum, interest rate, and natural gas swaps for the primary purpose of hedging its exposure to price risk and earnings volatility.

— As part of a hedging strategy for approximately 50% of forecasted shipments through December 2012, the Company has outstanding aluminum swap contracts to hedge aluminum shipments totaling approximately 72,000 pounds for the fourth quarter of 2008 and 289,000 pounds in 2009 at average prices of $1.18 and $1.09 per/lb of primary aluminum, respectively.

— As part of a hedging strategy for approximately 35% of the Company’s estimated natural gas exposure through 2012, the Company has outstanding swap contracts to purchase approximately 61% of its requirements for the fourth quarter of 2008 and 55% of its requirements in 2009 at average prices of $9.02 and $9.29 per mmbtu, respectively.

Capital expenditures for the nine months were $37.5 million, including $9.4 million invested in the $48.0 million New Madrid expansion project.

Mr. Smith stated, “We are confronted with an extraordinary global economic environment that is challenging our industry and our Company. During this time of uncertainty in the U.S. and global environment, primary aluminum pricing and demand have declined. Noranda is well-positioned to meet the challenges of this uncertain period. We believe our integrated North American business strategy combined with our liquidity position and hedging strategy supports our ability to respond quickly to changing business conditions. Noranda continues to implement its strategy to improve productivity, manage capital spending and reduce working capital while continuing to support our highest value growth projects.”

“We have managed our business to give us the flexibility to quickly make the adjustments needed during this period of volatility in the business cycle.” Mr. Smith continued, “We are aggressively evaluating every aspect of our business to reduce costs while operating to achieve optimal results. Through the continued implementation of our CORE (Cost-Out, Reliability and Effectiveness) program, we will seek to reduce our costs and improve our productivity to build the foundation for sustainable results.”

Conference Call Information

Noranda has scheduled an information conference call on November 12, 2008, at 2:00 PM EST. The call is accessible to the media and general public. To listen to the conference call, dial the appropriate number at least 10 minutes prior to the scheduled start of the call.

U.S. participants: 1-888-562-3356

International participants: 1-973-582-2700

Conference ID #: 72527181

The earnings conference call also will be webcast at http://w.on24.com/clients/norandair/126510. Plan to begin the registration process at least 15 minutes before the live call is scheduled to start.

A replay of the conference call will be available two hours after the completion of the call on November 12 until midnight EST on November 30, 2008. U.S. listeners should dial 1-800-642-1687. International callers should dial 1-706-645-9291. The Conference ID # for the replay is 72527181.

A replay of the webcast also will be available two hours after the completion of the call on November 12 until midnight EST on January 31, 2009. The URL for the replay is http://w.on24.com/clients/norandair/126510.

About the Company

Noranda Aluminum Holding Corporation is a leading North American integrated producer of value-added primary aluminum products, as well as high quality rolled aluminum coils. The Company has two businesses, an upstream and downstream business. The primary metals, or upstream business, produce approximately 259,000 metric tons of primary aluminum annually. The rolling mills, or downstream business, are one of the largest foil producers in North America and a major producer of light gauge sheet products. Noranda Aluminum Holding Corporation is a private company owned by affiliates of Apollo Management, L.P. The information contained in this release is limited and management encourages interested parties to read the Company’s financial reports and other information available on the Company’s website at www.norandaaluminum.com.

  NORANDA ALUMINUM HOLDING CORPORATION Condensed Consolidated Balance Sheets (dollars expressed in thousands) (unaudited)  December 31, 2007 September 30, 2008 ----------------- ------------------ $                 $ ----------------- ------------------ ASSETS Current assets: Cash and cash equivalents                 75,630            245,037 Accounts receivable, net                  97,169            123,601 Inventories                              180,250            162,363 Derivative assets                         21,163                374 Other current assets                      13,173             42,202 ----------------- ------------------ Total current assets                       387,385            573,577 ----------------- ------------------  Investments in affiliates                  198,874            202,737 Property, plant and equipment, net                                       657,811            614,485 Goodwill                                   256,122            271,235 Other intangible assets, net                70,136             67,312 Other assets                                80,216             71,337 ----------------- ------------------ Total assets                             1,650,544          1,800,683 ================= ==================  LIABILITIES AND SHAREHOLDERS' DEFICIENCY Current Liabilities: Accounts Payable Trade                                   32,505             70,401 Affiliates                              27,571             31,639 Accrued liabilities                       31,742             37,026 Accrued interest                          12,182             22,826 Deferred revenue                          14,181              8,193 Derivative liabilities                     5,077             16,800 Deferred tax liabilities                  22,355             24,088 Current portion of long-term debt due to third party                  30,300                 -- ----------------- ------------------ Total current liabilities                  175,913            210,973 ----------------- ------------------ Long-term debt                           1,121,372          1,346,546 Long-term derivative liabilities            65,998             78,309 Pension and other long-term liabilities                                75,916             66,352 Deferred tax liabilities                   211,421            208,417 Common stock subject to redemption                                     --              2,000 Shareholders' deficiency: Common stock                                 216                216 Capital in excess of par value            11,767             13,499 Accumulated deficit                           --           (100,867) Accumulated other comprehensive loss                                    (12,059)           (24,762) ----------------- ------------------ Total shareholders' deficiency                 (76)          (111,914) ----------------- ------------------ Total liabilities and shareholders' deficiency                1,650,544          1,800,683 ================= ================== 

  NORANDA ALUMINUM HOLDING CORPORATION Condensed Consolidated Statement of Operations Data (dollars expressed in thousands, except per share amounts) (unaudited)  Successor          Successor ------------------ ------------------ For the            For the three months ended three months ended September 30, 2008 September 30, 2007 ------------------ ------------------ Statement of Operations Data: Sales                                    357,410            377,589 Operating costs and expenses Cost of sales                          312,906            337,354 Selling, general and administrative expenses and other                                  12,414             10,243 Other expenses                              --                 43 ------------------ ------------------  325,320            347,640 ------------------ ------------------  Operating income                          32,090             29,949 ------------------ ------------------ Other expenses (income) Interest expense, net                   19,816             27,417 Loss (gain) on derivative instruments and hedging activities, net                        39,796             (6,765) Equity in net income (loss) of investments in affiliates                              1,652             (1,055) ------------------ ------------------  Total other expenses                        61,264             19,597 ------------------ ------------------  Income before income (loss) taxes                                   (29,174)            10,352 Income tax expense (benefit)              (9,845)             4,020 ------------------ ------------------  Net income (loss) for the period                                  (19,329)             6,332 ================== ==================  Sales by segment Upstream                               182,548            177,305 Downstream                             174,862            200,284 ------------------ ------------------  Total                                  357,410            377,589 ================== ==================   Operating income Upstream                                29,695             25,655 Downstream                               2,395              4,294 ------------------ ------------------  Total                                   32,090             29,949 ================== ==================   Weighted-average shares outstanding Basic                                   21,750             21,613 Diluted                                 21,750             21,613  Financial and other data: EBITDA                                  15,360             67,033 Adjusted EBITDA                         60,569             73,352 Average Midwest transaction price                                    1.34               1.22 Net cash cost for primary aluminum (per pound shipped)                                 0.95               0.84 Shipments (pounds in millions) Upstream: External customers                       127.7              137.0 Intersegment                              20.7                4.7 ------------------ ------------------  Total Upstream                           148.4              141.7 ================== ==================  Downstream                                  94.9              104.3 

  NORANDA ALUMINUM HOLDING CORPORATION Condensed Consolidated Statement of Operations Data (dollars expressed in thousands, except per share amounts) (unaudited)  Successor  Predecessor Successor  Successor ----------- ----------- --------- ----------- For the                 Period    For the nine                   from       nine months    Period from May 18,     months ended    January 1,   2007 to     ended September     2007 to   September September 30,      May 17,       30,        30, 2008         2007      2007       2007 ----------- ----------- --------- ----------- Statement of Operations Data: Sales                  $1,004,906    $527,666  $568,224  $1,095,890 Operating costs and expenses Cost of sales           846,823     424,505   506,355     930,860 Selling, general and administrative expenses and other      49,100      16,816    18,804      35,620 ----------- ----------- --------- -----------  895,923     441,321   525,159     966,480 ----------- ----------- --------- -----------  Operating income          108,983      86,345    43,065     129,410 ----------- ----------- --------- ----------- Other expenses (income): Interest expense, net                     66,245       6,235    41,730      47,965 Loss (gain) on derivative instruments and hedging activities      44,797      56,467    (6,882)     49,585 Equity in net income of investments in affiliates              (3,862)     (4,269)   (2,703)     (6,972) ----------- ----------- --------- -----------  Total other expenses      107,180      58,433    32,145      90,578 ----------- ----------- --------- -----------  Income before income taxes                      1,803      27,912    10,920      38,832 Income tax expense            447      13,655     4,239      17,894 ----------- ----------- --------- -----------  Net income for the period                     1,356      14,257     6,681      20,938 =========== =========== ========= ===========   Sales per Segment Upstream                  522,823     275,157   271,549     546,706 Downstream                482,083     252,509   296,675     549,184 ----------- ----------- --------- -----------  Total                   1,004,906     527,666   568,224   1,095,890 =========== =========== ========= ===========  Operating income Upstream                  107,973      78,194    41,286     119,480 Downstream                  1,010       8,151     1,779       9,930 ----------- ----------- --------- -----------  Total                     108,983      86,345    43,065     129,410 =========== =========== ========= ===========   Financial and other data: EBITDA                    142,097                           158,628 Adjusted EBITDA           225,638                           246,731 Average Midwest transaction price           1.31                              1.27 Net cash cost for primary aluminum (per pound shipped)              0.83                              0.78 Shipments (pounds in millions) Upstream: External customers          374.5       198.3     202.8       401.1 Intersegment                 61.2        12.1       6.1        18.2 ----------- ----------- --------- -----------  Total Upstream            435.7       210.4     208.9       419.3 =========== =========== ========= ===========  Downstream                  273.3       135.6     153.4       288.9 

  NORANDA ALUMINUM HOLDING CORPORATION Condensed Consolidated Statement of Cash Flows (dollars expressed in thousands) (unaudited)  Successor       Successor     Predecessor ----------------- ------------- --------------- Period from    Period from For the      May 18, 2007  January 1, 2007 nine months ended    through        through September 30,   September 30,     May 17, 2008            2007           2007 ----------------- ------------- --------------- $               $              $ ----------------- ------------- --------------- OPERATING ACTIVITIES Net income                        1,356         6,681          14,257 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization                  74,049        42,194          29,637 Non-cash interest               5,019         2,745           2,200 Loss (gain) on disposal of property, plant and equipment                      2,404           166            (160) Loss (gain) on derivative activities, net of cash settlements              25,811        (4,621)         56,467 Equity in net income of investments in affiliates                    (3,862)       (2,703)         (4,269) Deferred income taxes                         (7,226)        1,257         (14,828) Stock option expense            1,507            --              -- Changes in deferred charges and other assets                         4,034        (1,403)            124 Changes in pension and other liabilities                   (9,564)       (8,044)         (4,925) Changes in operating assets and liabilities: Accounts receivable                 (26,432)      (13,483)         (8,239) Inventories                  17,887        63,470         (18,069) Other current assets                       1,622         1,038          16,956 Accounts payable             19,443        30,261            (239) Accrued liabilities                  5,637        33,326         (27,743) ----------------- ------------- --------------- Cash provided by operating activities           111,685       150,884          41,169 ----------------- ------------- ---------------  INVESTING ACTIVITIES Capital expenditures          (37,464)      (18,353)         (5,768) Net increase in advances due from parent                            --            --          10,925 Payment for the Apollo acquisition, net of cash acquired                          --    (1,161,519)             -- Proceeds from sale of property, plant and equipment                    484            --              -- ----------------- ------------- --------------- Cash (used in) provided by investing activities                     (36,980)   (1,179,872)          5,157 ----------------- ------------- ---------------  FINANCING ACTIVITIES Proceeds from issuance of shares             2,225       216,130              -- Distributions to shareholders                (102,223)     (216,130)             -- Capital contributions from parents                           --            --         101,256 Distributions to parents                           --            --         (25,000) Deferred financing costs                             --       (39,020)             -- Borrowings on long- term debt                         --     1,227,800              -- Repayments on long- term debt                    (30,300)      (76,250)       (160,000) Borrowings on revolving credit facility                     250,500            --              -- Repayments on revolving credit facility                     (25,500)           --              -- ----------------- ------------- --------------- Cash provided by (used in) financing activities                      94,702     1,112,530         (83,744) ----------------- ------------- --------------- Change in cash and cash equivalents               169,407        83,542         (37,418) Cash and cash                                      -- equivalents, beginning of period             75,630                        40,549 ----------------- ------------- --------------- Cash and cash equivalents, end of period                         245,037        83,542           3,131 ================= ============= =============== 

Covenant Compliance

Certain covenants contained in the credit agreement governing our senior secured credit facilities and the indentures governing our notes restrict our ability to take certain actions (including incurring additional secured or unsecured debt, expanding borrowings under existing term loan facilities, paying dividends, engaging in mergers, acquisitions and certain other investments, and retaining proceeds from asset sales) if we are unable to meet defined Adjusted EBITDA to fixed charges and net senior secured debt to Adjusted EBITDA ratios. Further, the interest rates we pay under our senior secured credit facilities are determined in part by the ratio of our net senior secured debt to Adjusted EBITDA. Furthermore, our ability to take certain actions, including paying dividends and making acquisitions and certain other investments, depends on the amounts available for such actions under the covenants, which amounts accumulate with reference to our Adjusted EBITDA on a quarterly basis. With respect to the ratios with which we must comply, Adjusted EBITDA is computed on a trailing four quarter basis and the minimum or maximum amounts generally required by those covenants and our performance against those minimum or maximum levels are summarized below:

  Actual -------------------------- December 31, September 30, Requirement        2007         2008 Adjusted EBITDA to fixed charges: HoldCo: Senior Floating Rate Notes(1)(2)            1.75 to 1.0      2.8 to 1     3.2 to 1 AcquisitionCo: Senior Floating Rate Notes(1)(2)             2.0 to 1.0      3.7 to 1     4.2 to 1  Net Senior Secured Debt to Adjusted EBITDA: AcquisitionCo: Senior Secured Credit Facilities(3)(4)     2.75 to 1.0 (5)    1.1 to 1     1.3 to 1 

 (1)  Fixed charges, in accordance with our debt agreements, is the sum of consolidated interest expense and all cash dividend payments with respect to preferred and certain other types of our capital stock. For the purpose of calculating these ratios, pro forma effect is given to any repayment and issuance of Senior debt (excluding the Revolver), as if such transaction occurred at the beginning of the trailing four-quarter period. (2)  Covenants for the Holdco notes and AcquisitionCo notes are generally based on a minimum ratio of Adjusted EBITDA to fixed charges; however, certain provisions also require compliance with the net senior secured debt to Adjusted EBITDA ratio. (3)  Covenants for our senior secured credit facilities are generally based on a maximum ratio of net senior secured debt to Adjusted EBITDA; however, certain provisions also require compliance with a net senior debt to Adjusted EBITDA ratio. (4)  The senior secured credit facilities net debt covenant is calculated based on net debt outstanding under that facility. (5)  Maximum ratio changes to 3.0 to 1.0 at January 1, 2009.  

The following tables reconcile net income to EBITDA and Adjusted EBITDA for the periods presented, as defined in our credit documents and the indentures governing our notes:

  For the    For the     Last nine      nine      twelve months    months     months ended      ended     ending September September  September 30,        30,        30, (in thousands)                           2008       2007       2008 -------------------------------------- --------- ---------- ---------- $         $          $ --------- ---------- ---------- Net income                                1,356     20,938      2,842 Income taxes                                447     17,894      1,345 Interest expense, net                    66,245     47,965     91,758 Depreciation and amortization            74,049     71,831    101,564 --------- ---------- ----------  EBITDA                                  142,097    158,628    197,509 ========= ========== ==========   Joint venture EBITDA (a)                  9,414     11,899     12,849 LIFO expense (b)                         31,186      5,437     20,183 LCM adjustment (c)                       (7,627)    11,913     (5,217) Non-cash derivative gains and losses (d)                                     30,716     51,846     32,832 Incremental stand-alone costs (e)            --     (2,700)        -- Employee compensation items (f)           4,848      7,112      8,097 Other items, net (g)                     15,004      2,596     21,998 --------- ---------- ----------  Adjusted EBITDA                         225,638    246,731    288,251 ========= ========== ==========    Twelve     Three      Three months    months     months ended     ended      ended December  September  September 31,        30,        30, (in thousands)                           2007       2008       2007 -------------------------------------- --------- ---------- ---------- $         $          $ --------- ---------- ---------- Net income                               22,424    (19,329)     6,332 Income taxes                             18,792     (9,845)     4,020 Interest expense, net                    73,478     19,816     27,417 Depreciation and amortization            99,346     24,718     29,264 --------- ---------- ----------  EBITDA                                  214,040     15,360     67,033 ========= ========== ==========   Joint venture EBITDA (a)                 15,334      4,021      4,194 LIFO expense (b)                         (5,566)      (432)    (2,849) LCM adjustment (c)                       14,323      6,696      7,850 Non-cash derivative gains and losses (d)                                     53,962     29,612     (4,504) Incremental stand-alone costs (e)        (2,700)        --         -- Employee compensation items (f)          10,361        599        567 Other items, net (g)                      9,590      4,713      1,061 --------- ---------- ----------  Adjusted EBITDA                         309,344     60,569     73,352 ========= ========== ==========  

 (a)  Our upstream business is fully integrated from bauxite mined by St. Ann to alumina produced by Gramercy to primary aluminum metal manufactured by our aluminum smelter in New Madrid, Missouri. Our reported Adjusted EBITDA includes 50% of the net income of Gramercy and St. Ann, based on transfer prices that are generally in excess of the actual costs incurred by the joint venture operations. To reflect the underlying economics of the vertically integrated upstream business, this adjustment eliminates certain components of equity income, such as depreciation and amortization, tax expense, and interest income to reflect 50% of the EBITDA of the joint ventures. (b)  We use the LIFO method of inventory accounting for financial reporting and tax purposes. To achieve better matching of revenues and expenses, particularly in the downstream business where customer LME pricing terms generally correspond to the timing of primary aluminum purchases, this adjustment restates net income to the FIFO method of inventory accounting by eliminating the LIFO expenses related to inventory held at the smelter and downstream facilities. The adjustment also includes non-cash charges relating to inventories that have been revalued at fair value at the date of the Xstrata Acquisition and Apollo Acquisition and recorded in cost of sales during the periods presented resulting from the sales of inventories. (c)  Reflects adjustments to reduce inventory to the lower of cost, adjusted for purchase accounting, to market value. (d)  We use derivative financial instruments to mitigate effects of fluctuations in aluminum and natural gas prices. We do not enter into derivative financial instruments for trading purposes. This adjustment eliminates the non-cash gains and losses (excluding cash settlements) resulting from fair market value changes of aluminum swaps. (e)  Reflects (i) the incremental insurance, audit and other administrative costs on a stand-alone basis, net of certain corporate overheads allocated by the former parent that we no longer expect to incur on a go-forward basis and (ii) the elimination of income from administrative and treasury services provided to Noranda Aluminum, Inc.'s former parent and its affiliates that are no longer provided. (f)  Represents stock compensation expense, re-pricing of stock options and bonus payments. (g)  Other items, net, consist primarily of non-recurring consulting fees, sponsor fees, the non-cash portion of pension expense and asset disposals. Additionally, certain business optimization charges related to our downstream business are included in other, net in the three and nine months ended September 30, 2008.