UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-34741

 

NORANDA ALUMINUM HOLDING CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Delaware		20-8908550
(State or Other Jurisdiction of Incorporation)		(I.R.S. Employer Identification Number)
801 Crescent Centre Drive, Suite 600
Franklin, Tennessee		37067
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (615) 771-5700

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.

YES þ NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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).

YES þ NO o

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 definition 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 o		Non-accelerated filer þ		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o NO þ

As of November 4, 2011, there were 67,231,472 shares of Noranda common stock outstanding.

 

 

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION			2
Item 1. Financial Statements			2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			31
Item 3. Quantitative and Qualitative Disclosures about Market Risk			44
Item 4. Controls and Procedures			44
PART II. OTHER INFORMATION			45
Item 1. Legal Proceedings			45
Item 1A. Risk Factors			45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			45
Item 3. Defaults upon Senior Securities			45
Item 5. Other Information			45
Item 6. Exhibits			46
SIGNATURES			47
Exhibit 10.1
Exhibit 12.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

Item 1.		Financial Statements

NORANDA ALUMINUM HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except par value)
(unaudited)

		December 31, 2010				September 30, 2011
		$				$
ASSETS
Current assets:
Cash and cash equivalents			33.8				103.9
Accounts receivable, net			131.6				140.0
Inventories, net			201.1				203.9
Prepaid expenses			12.9				14.5
Other current assets			19.2				36.8
Total current assets			398.6				499.1
Property, plant and equipment, net			719.9				696.5
Goodwill			137.6				137.6
Other intangible assets, net			73.0				68.6
Other assets			85.6				83.9
Total assets			1,414.7				1,485.7
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable			95.7				128.7
Accrued liabilities			54.9				64.9
Taxes payable			4.8				2.3
Derivative liabilities, net			23.2				33.5
Deferred tax liabilities			48.5				49.2
Total current liabilities			227.1				278.6
Long-term debt			419.7				428.5
Long-term derivative liabilities, net			18.4				6.1
Pension and other post-retirement liabilities			116.0				110.0
Other long-term liabilities			57.9				49.2
Long-term deferred tax liabilities			277.9				245.5
Common stock subject to redemption (0.2 shares at December 31, 2010 and September 30, 2011)			2.0				2.0
Shareholders’ equity:
Preferred stock (25.0 shares authorized, $0.01 par value; no shares issued and outstanding at December 31, 2010 and September 30, 2011)			—				—
Common stock (200.0 shares authorized; $0.01 par value; 66.81 shares issued and outstanding at December 31, 2010, 67.23 shares issued and outstanding at September 30, 2011, including 0.2 shares subject to redemption at December 31, 2010 and September 30, 2011)			0.7				0.7
Capital in excess of par value			227.7				232.9
Retained earnings (accumulated deficit)			(8.2	)			108.3
Accumulated other comprehensive income			69.5				17.9
Total shareholders’ equity			289.7				359.8
Non-controlling interest			6.0				6.0
Total equity			295.7				365.8
Total liabilities and equity			1,414.7				1,485.7

See accompanying notes

NORANDA ALUMINUM HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share information)
(unaudited)

		Three months ended September 30,								Nine months ended September 30,
		2010				2011				2010				2011
		$				$				$				$
Sales			314.2				400.4				950.6				1,221.3
Operating costs and expenses:
Cost of sales			274.2				350.4				830.1				1,031.8
Selling, general and administrative expenses			19.9				26.8				92.0				72.3
Total operating costs and expenses			294.1				377.2				922.1				1,104.1
Operating income			20.1				23.2				28.5				117.2
Other (income) expense:
Interest expense, net			7.2				5.2				25.0				16.4
Gain on hedging activities, net			(21.7	)			(19.5	)			(44.0	)			(65.6	)
Gain on debt repurchase			(3.5	)			—				(0.9	)			—
Total other income			(18.0	)			(14.3	)			(19.9	)			(49.2	)
Income before income taxes			38.1				37.5				48.4				166.4
Income tax expense			12.9				6.7				16.4				49.9
Net income			25.2				30.8				32.0				116.5
Net income per common share:
Basic		$	0.46			$	0.46			$	0.65			$	1.74
Diluted		$	0.45			$	0.45			$	0.64			$	1.71
Weighted-average common shares outstanding:
Basic			55.28				67.23				49.42				67.00
Diluted			56.30				68.49				50.31				68.32

See accompanying notes

NORANDA ALUMINUM HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY
(in millions)
(unaudited)

														Retained				Accumulated
										Capital in				earnings				other				Non-
		Preferred				Common				excess of				(accumulated				comprehensive				controlling
		stock				stock				par value				deficit)				income				interest				Total equity
		$				$				$				$				$				$				$
Balance, December 31, 2009			—				0.4				16.1				(75.1	)			144.8				6.0				92.2
Components of comprehensive loss:
Net income			—				—				—				66.9				—				—				66.9
Pension loss, net of tax of $4.6			—				—				—				—				(8.4	)			—				(8.4	)
Unrealized loss on derivatives, net of tax of $8.4			—				—				—				—				(14.7	)			—				(14.7	)
Reclassification of derivative amounts realized in net income, net of tax of $29.9			—				—				—				—				(52.2	)			—				(52.2	)
Total comprehensive loss																											(8.4	)
Issuance of common shares			—				0.3				205.7				—				—				—				206.0
Stock compensation expense related to equity awards			—				—				5.9				—				—				—				5.9
Balance, December 31, 2010			—				0.7				227.7				(8.2	)			69.5				6.0				295.7
Components of comprehensive income:
Net income			—				—				—				116.5				—				—				116.5
Unrealized loss on derivatives, net of tax of $2.9			—				—				—				—				(4.9	)			—				(4.9	)
Reclassification of derivative amounts realized in net income, net of tax of $26.6			—				—				—				—				(46.7	)			—				(46.7	)
Total comprehensive income																											64.9
Excess tax benefit related to share-based payment arrangements			—				—				0.7				—				—				—				0.7
Issuance of common shares			—				—				0.6				—				—				—				0.6
Stock compensation expense related to equity awards			—				—				3.9				—				—				—				3.9
Balance, September 30, 2011			—				0.7				232.9				108.3				17.9				6.0				365.8

See accompanying notes

NORANDA ALUMINUM HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)

		Nine months ended September 30,
		2010				2011
		$				$
OPERATING ACTIVITIES
Net income			32.0				116.5
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization			76.1				73.1
Non-cash interest expense			14.3				11.0
Last in, first out and lower of cost or market inventory adjustments			(0.3	)			17.3
Loss on disposal of assets			3.4				1.8
Gain on hedging activities, net of cash settlements			(32.3	)			(83.1	)
Settlements from hedge terminations, net			164.6				—
Gain on debt repurchase			(0.9	)			—
Deferred income taxes			7.4				(2.3	)
Excess tax benefit related to share-based payment arrangements			—				(0.7	)
Stock compensation expense			4.2				4.4
Changes in other assets			(8.7	)			(5.7	)
Changes in pension, other post-retirement and other long-term liabilities			12.7				(13.9	)
Changes in current operating assets and liabilities:
Accounts receivable, net			(29.0	)			(8.4	)
Inventories, net			(13.2	)			(22.2	)
Taxes receivable and taxes payable			(5.1	)			(1.8	)
Other current assets			18.1				(20.0	)
Accounts payable			9.3				34.9
Accrued liabilities			(2.7	)			9.4
Cash provided by operating activities			249.9				110.3
INVESTING ACTIVITIES
Capital expenditures			(40.3	)			(44.1	)
Proceeds from sale of property, plant and equipment			0.2				2.6
Cash used in investing activities			(40.1	)			(41.5	)
FINANCING ACTIVITIES
Proceeds from issuance of common shares			82.9				0.6
Repayments on revolving credit facility			(215.9	)			—
Repayments of long-term debt			(211.0	)			—
Excess tax benefit related to share-based payment arrangements			—				0.7
Cash provided by (used in) financing activities			(344.0	)			1.3
Change in cash and cash equivalents			(134.2	)			70.1
Cash and cash equivalents, beginning of period			167.2				33.8
Cash and cash equivalents, end of period			33.0				103.9

See accompanying notes

NORANDA ALUMINUM HOLDING CORPORATION
Notes to Unaudited Condensed Consolidated Financial Statements

1. ACCOUNTING POLICIES

Basis of presentation

The accompanying unaudited consolidated financial statements represent the consolidation of Noranda Aluminum Holding Corporation and all companies that we directly or indirectly control (“Noranda,” “the Company,” “we,” “us,” and “our”). “Noranda HoldCo” refers only to Noranda Aluminum Holding Corporation, excluding its subsidiaries. “Noranda AcquisitionCo” refers only to Noranda Aluminum Acquisition Corporation, the wholly-owned direct subsidiary of Noranda HoldCo, excluding its subsidiaries.

These unaudited consolidated financial statements have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”) for interim financial information. The consolidated financial statements, including these condensed notes, are unaudited and exclude some of the disclosures required in annual consolidated financial statements. Consolidated balance sheet data as of December 31, 2010 was derived from our audited consolidated financial statements. In management’s opinion, these unaudited consolidated financial statements include all adjustments (including normal recurring accruals) that are considered necessary for the fair presentation of our financial position and operating results. All intercompany transactions and accounts have been eliminated in consolidation. Certain reclassifications have been made to previously issued consolidated financial statements to conform to the current period presentation. These reclassifications had no impact on operating results or cash flows.

The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. For example, our interim operating results are affected by peak power usage rates from June through September each year which affect our operating costs at the New Madrid smelter. We are also subject to seasonality associated with the demand cycles of our end-use customers, which results in lower shipment levels from November to February relative to other periods during the year.

These unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 7, 2011.

Common stock offerings

On May 19, 2010, we completed an initial public offering (“IPO”) of 11.5 million shares of common stock at an $8.00 per share public offering price on the New York Stock Exchange (NYSE: NOR). The net proceeds after the underwriting discounts, commissions, fees and expenses amounted to $82.9 million. We used those net proceeds from the offering together with $95.9 million of proceeds from settling all outstanding fixed price aluminum hedges, to repurchase the remaining principal amount of outstanding Noranda HoldCo Senior Floating Rate Notes due 2014 (“HoldCo Notes”) for a purchase price of $66.4 million, and to repay $110.0 million principal amount outstanding under the Term B Loan Due 2014 (“term B loan.”) The remaining $2.4 million was used for other corporate purposes.

In connection with the IPO, pursuant to our amended and restated certificate of incorporation, our authorized capital stock increased from 100.0 million to 225.0 million, of which 200.0 million ($0.01 par value) is designated as common stock and 25.0 million (at $0.01 par value) is designated as preferred stock. As of September 30, 2011, no preferred stock is outstanding.

On December 10, 2010, we completed a follow-on public offering of 11.5 million shares of common stock at an $11.35 per share public offering price on the NYSE. The net proceeds after the underwriting discounts, commissions, fees and expenses amounted to $123.1 million. We used those proceeds to repay $122.3 million principal amount outstanding under the term B loan. The remaining $0.8 million was used for other corporate purposes.

2. SUPPLEMENTAL CASH FLOW DATA

Depreciation and amortization in the accompanying unaudited consolidated statements of cash flows includes depreciation of property, plant and equipment and other, amortization of intangible assets and amortization of other long-term assets as follows (in millions):

		Three months ended September 30,								Nine months ended September 30,
		2010				2011				2010				2011
		$				$				$				$
Depreciation of property, plant and equipment and other			22.2				21.4				68.4				63.9
Amortization of intangible assets			1.5				1.4				4.5				4.4
Amortization of other long-term assets			1.2				2.2				3.2				4.8
Total depreciation and amortization			24.9				25.0				76.1				73.1

Purchases of property, plant and equipment accrued in accounts payable and not yet paid were $3.4 million as of September 30, 2011 and are not reflected as capital expenditures in the accompanying unaudited consolidated statements of cash flows. For the nine months ended September 30, 2011, we capitalized interest of $0.6 million related to long-term capital projects.

Cash paid for interest and income taxes was as follows (in millions):

		Nine months ended September 30,
		2010				2011
		$				$
Interest			6.0				2.1
Income taxes			14.1				59.8
Jamaican income taxes (prepayment)			10.0				4.0

3. INVENTORIES

We use the last in, first out (“LIFO”) method of valuing raw materials, work-in-process and finished goods inventories at our New Madrid smelter and our rolling mills. Supplies inventories at our rolling mills are valued using the first in, first out (“FIFO”) method. Product inventories at our bauxite mining operations in St. Ann, Jamaica and our alumina refinery operations in Gramercy, Louisiana, and supplies inventories at our smelter in New Madrid, Missouri are valued at weighted-average cost and are not subject to the LIFO adjustment. Combined Gramercy and St. Ann inventories comprise 24.9% and 24.1% of total product inventories, at cost, at December 31, 2010 and September 30, 2011, respectively. Inventories, net, consisted of the following (in millions):

		December 31,				September 30,
		2010				2011
		$				$
Raw materials, at cost			61.3				83.8
Work-in-process, at cost			66.1				59.5
Finished goods, at cost			27.7				27.8
Total product inventories, at cost			155.1				171.1
LIFO adjustments			13.1				(1.4	)
Lower of cost or market (“LCM”) reserve			—				(5.1	)
Product inventories, at lower of cost or market			168.2				164.6
Supplies			32.9				39.3
Total inventories, net			201.1				203.9

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net, consisted of the following (in millions):

		Estimated useful				December 31,				September 30,
		lives				2010				2011
		(in years)				$				$
Land			—				47.5				49.1
Buildings and improvements			10—47				127.0				127.9
Machinery and equipment			3—50				817.6				827.1
Construction in progress			—				34.5				47.2
Property, plant and equipment, at cost							1,026.6				1,051.3
Accumulated depreciation							(306.7	)			(354.8	)
Total property, plant and equipment, net							719.9				696.5

5. SUPPLEMENTAL BALANCE SHEET INFORMATION

Cash and cash equivalents consisted of the following (in millions):

		December 31,				September 30,
		2010				2011
		$				$
Cash			12.4				67.5
Money market funds (see Note 17, “Fair Value Measurements”)			21.4				36.4
Total cash and cash equivalents			33.8				103.9

Accounts receivable, net, consisted of the following (in millions):

		December 31,				September 30,
		2010				2011
		$				$
Trade			131.8				140.1
Allowance for doubtful accounts			(0.2	)			(0.1	)
Total accounts receivable, net			131.6				140.0

Other current assets consisted of the following (in millions):

		December 31,				September 30,
		2010				2011
		$				$
Current foreign deferred tax asset			2.8				2.9
Employee loans receivable, net			2.1				2.1
Restricted cash (see Note 16, “Commitments and Contingencies”)			9.8				27.8
Other current assets			4.5				4.0
Total other current assets			19.2				36.8

Other assets consisted of the following (in millions):

		December 31,				September 30,
		2010				2011
		$				$
Deferred financing costs, net of amortization			11.0				8.8
Cash surrender value of life insurance			24.0				23.9
Pension asset			5.9				6.0
Restricted cash (see Note 13, “Reclamation, Land and Asset Retirement Obligations”)			13.6				14.2
Supplies			16.1				13.7
Prepaid Jamaican income taxes			5.0				9.0
Other			10.0				8.3
Total other assets			85.6				83.9

Accrued liabilities consisted of the following (in millions):

		December 31,				September 30,
		2010				2011
		$				$
Compensation and benefits			26.7				24.2
Workers’ compensation			4.1				4.4
Other operating expenses			9.9				15.8
Accrued interest			0.3				6.2
Asset retirement obligations (see Note 13, “Reclamation, Land and Asset Retirement Obligations”)			2.2				1.5
Land obligation (see Note 13, “Reclamation, Land and Asset Retirement Obligations”)			2.2				3.7
Reclamation obligation (see Note 13 “Reclamation, Land and Asset Retirement Obligations”)			2.8				1.4
Environmental remediation obligations (see Note 16, “Commitments and Contingencies”)			2.0				1.8
Obligations to the Government of Jamaica			4.0				4.8
Pension and other post-retirement liabilities			0.7				0.6
Restricted stock unit liability awards (see Note 9, “Shareholders’ Equity and Share-Based Payments”)			—				0.5
Total accrued liabilities			54.9				64.9

Other long-term liabilities consisted of the following (in millions):

		December 31,				September 30,
		2010				2011
		$				$
Reserve for uncertain tax positions			10.5				2.4
Workers’ compensation			11.6				13.0
Asset retirement obligations (see Note 13, “Reclamation, Land and Asset Retirement Obligations”)			12.7				13.9
Land obligation (see Note 13, “Reclamation, Land and Asset Retirement Obligations”)			4.5				7.4
Reclamation obligation (see Note 13, “Reclamation, Land and Asset Retirement Obligations”)			6.6				4.8
Environmental remediation obligations (see Note 16, “Commitments and Contingencies”)			2.3				2.5
Deferred interest payable			2.3				—
Deferred compensation and other			7.4				5.2
Total other long-term liabilities			57.9				49.2

Accumulated other comprehensive income (“AOCI”) consisted of the following (in millions):

		December 31,				September 30,
		2010				2011
		$				$
Unrealized gains on cash flow hedges, net of tax of $75.1 at December 31, 2010 and $45.6 at September 30, 2011			132.1				80.5
Pension loss, net of tax of $36.8 at December 31, 2010 and $36.8 at September 30, 2011			(62.6	)			(62.6	)
Total accumulated other comprehensive income			69.5				17.9

6. LONG-TERM DEBT

Our outstanding debt consisted of the following (dollars in millions):

		December 31, 2010												September 30, 2011
		Carrying value				Fair value				Interest rate				Carrying value				Fair value				Interest rate
		$				$				%				$				$				%
Noranda AcquisitionCo:
Senior Floating Rate Notes due 2015 (“AcquisitionCo Notes”)			341.5				309.0				5.19				350.3				318.8				4.42
Term B loan due 2014			78.2				78.2				2.01				78.2				78.2				1.99
Revolving credit facility			—				—				—				—				—				—
Total debt			419.7												428.5

During the nine months ended September 30, 2011, Noranda AcquisitionCo issued $8.9 million of AcquisitionCo Notes as payment-in-kind for interest due May 15, 2011. For subsequent periods, Noranda AcquisitionCo is required to pay all interest in cash. In the nine months ended September 30, 2010, Noranda AcquisitionCo and Noranda HoldCo issued $9.1 million and $2.3 million in AcquisitionCo Notes and HoldCo Notes, respectively, as payment for interest due May 15, 2010. As of December 31, 2010, we had $215.2 million available for borrowing under our revolving credit facility, net of $27.5 million outstanding letters of credit. During third quarter 2011, outstanding letters of credit on the revolving credit facility increased to $29.4 million, which reduced the amount available for borrowing to $213.3 million as of September 30, 2011.

Gain or loss on debt repurchase

During third quarter 2010, we repurchased and retired $20.6 million aggregate principal amount of our AcquisitionCo Notes. During the nine months ended September 30, 2010, we used available cash balances, proceeds from our IPO in May 2010 and proceeds from the termination of fixed-price aluminum swaps, completed in connection with the IPO, to repay $127.5 million and $215.9 million of aggregate principal amount on the term B loan and revolving credit facility at face value, respectively, and to repurchase $66.3 million and $20.6 million aggregate principal amount of our HoldCo Notes and AcquisitionCo Notes, respectively. Debt repurchases resulted in the accelerated amortization of $0.3 million of deferred financing cost for the three months ended September 30, 2010 and $2.9 million of deferred financing costs and unamortized debt issuance discount for the nine months ended September 30, 2010. No debt repurchases or repayments were made during the three and nine months ended September 30, 2011.

In the table below, the net carrying amount of debt repurchased includes aggregate principal amount of the debt repurchased plus accrued interest, net of any unamortized debt issuance discount and deferred financing costs. The (gain) loss on debt repurchased during the 2010 periods consisted of the following (in millions):

		Three months ended September 30, 2010
														Revolving credit
		HoldCo Notes				AcquisitionCo Note				Term B loan				facility				Total
		$				$				$				$				$
Net carrying amount of debt repurchased			—				(20.6	)			—				—				(20.6	)
Amount paid to repurchase debt			—				17.1				—				—				17.1
Gain on debt repurchase			—				(3.5	)			—				—				(3.5	)

		Nine months ended September 30, 2010
						AcquisitionCo								Revolving credit
		HoldCo Notes				Notes				Term B loan				facility				Total
		$				$				$				$				$
Net carrying amount of debt repurchased			(65.4	)			(20.6	)			(125.9	)			(215.9	)			(427.8	)
Amount paid to repurchase debt			66.4				17.1				127.5				215.9				426.9
(Gain) loss on debt repurchase			1.0				(3.5	)			1.6				—				(0.9	)

7. RESTRUCTURING

On February 26, 2010, we announced a workforce and business process restructuring in our U.S. operations that reduced operating costs, conserved liquidity and improved operating efficiency. The U.S. workforce restructuring plan reduced headcount through a combination of voluntary retirement packages and involuntary terminations. We completed substantially all activities associated with this workforce reduction as of February 26, 2010.

In connection with a decision to contract the substantial portion of our bauxite mining to third party contractors, on April 21, 2010, we announced a workforce reduction in our Jamaican bauxite mining operations. The workforce restructuring plan reduced headcount through involuntary terminations. We completed substantially all activities associated with this workforce reduction as of April 21, 2010.

These restructuring activities resulted in $0.3 million and $8.1 million of pre-tax restructuring charges in the three months and nine months ended September 30, 2010, respectively, primarily due to one-time termination benefits and early retirement benefits. We recorded these charges in the accompanying unaudited consolidated statements of operations as a component of selling, general and administrative expenses when employee service requirements, if any, were met. We paid the majority of these restructuring expenses in 2010. We paid the final restructuring expenses of $0.5 million during the first nine months of 2011.

8. PENSIONS AND OTHER POST-RETIREMENT BENEFITS

We sponsor defined benefit pension plans for hourly and salaried employees. Benefits under our sponsored defined benefit pension plans are based on years of service and/or eligible compensation prior to retirement. We also sponsor other post-retirement benefit (“OPEB”) plans for certain employees. These benefits include life and health insurance. In addition, we provide supplemental executive retirement benefits for certain executive officers.

Net periodic cost (benefit) was as follows (in millions):

		Noranda Pension
		Three months ended September 30,								Nine months ended September 30,
		2010				2011				2010				2011
		$				$				$				$
Service cost			2.2				2.7				6.7				7.9
Interest cost			4.5				4.5				13.3				13.7
Expected return on plan assets			(4.2	)			(4.9	)			(12.6	)			(14.7	)
Actuarial loss			1.2				1.3				3.7				3.9
Prior service cost			0.1				0.1				0.3				0.3
Settlement and termination benefits			—				—				1.6				—
Net periodic cost			3.8				3.7				13.0				11.1

		St. Ann Pension
		Three months ended September 30,								Nine months ended September 30,
		2010				2011				2010				2011
		$				$				$				$
Service cost			0.1				0.2				0.4				0.5
Interest cost			0.3				0.4				1.2				1.1
Expected return on plan assets			(0.4	)			(0.5	)			(1.7	)			(1.4	)
Recognized net loss			—				—				1.5				—
Net amortization and deferral			—				—				—				0.1
Curtailment gain			—				—				(1.5	)			—
Net periodic cost (benefit)			—				0.1				(0.1	)			0.3

		Noranda OPEB
		Three months ended September 30,								Nine months ended September 30,
		2010				2011				2010				2011
		$				$				$				$
Service cost			0.1				0.1				0.2				0.3
Interest cost			0.1				0.1				0.4				0.3
Actuarial gain			—				—				(0.1	)			—
Prior service cost			—				—				0.1				—
Net periodic cost			0.2				0.2				0.6				0.6

		St. Ann OPEB
		Three months ended September 30,								Nine months ended September 30,
		2010				2011				2010				2011
		$				$				$				$
Service cost			0.1				0.1				0.2				0.3
Interest cost			0.2				0.2				0.6				0.6
Recognized loss			—				—				1.2				—
Net amortization and deferral			—				0.1				—				0.2
Curtailment gain			—				—				(1.2	)			—
Net periodic cost			0.3				0.4				0.8				1.1

Employer contributions

During the nine months ended September 30, 2011, we contributed $18.0 million to the Noranda pension plans and $0.4 million to the St. Ann pension plans. We anticipate contributing approximately $3.5 million to the Noranda pension plans during fourth quarter 2011 in order to maintain an Adjusted Funding Target Attainment Percentage under the Pension Protection Act of 2006 of 80%.

9. SHAREHOLDERS’ EQUITY AND SHARE-BASED PAYMENTS

We recorded stock compensation expense as follows (in millions):

		Three months ended								Nine months ended
		September 30,								September 30,
		2010				2011				2010				2011
		$				$				$				$
Stock options			0.2				0.3				4.2				2.3
Restricted stock unit equity awards			—				0.6				—				1.6
Restricted stock unit liability awards			—				—				—				0.5
Total stock compensation expense			0.2				0.9				4.2				4.4

We reserved 3,800,000 shares of common stock for issuance under our 2007 Long-Term Incentive Plan. Employees and non-employee directors held 1,650,231 options at September 30, 2011. The investor director provider group held 140,000 options at September 30, 2011. The investor director provider group consists of the six full-time employees of our principal shareholders affiliated with Apollo Management VI (“Apollo”) who serve on our Board of Directors (“the Board”). Common stock shares awarded or sold to employees and non-employee directors under the plan totaled 940,232 shares through September 30, 2011. We had 618,785 shares available for issuance under the 2007 Long-Term Incentive Plan as of September 30, 2011.

We reserved 5,200,000 shares of common stock for issuance under our 2010 Incentive Award Plan. As of September 30, 2011, employees and non-employee directors held 496,350 service-vesting restricted stock units awards (“RSUs”) and a target amount of 243,791 performance-vesting RSUs. The number and grant date fair value of the performance awards to be issued, a maximum of 487,582 awards, will be based on Company performance for the years 2011 through 2013. We had 4,459,859 shares available for issuance under the 2010 Incentive Award Plan as of September 30, 2011.

In the first nine months of 2011, we granted 90,000 service-vesting RSUs, (“the investor director provider RSUs,”) in lieu of RSUs that would otherwise be granted under the director compensation program to the investor director provider group. These investor director provider RSUs vest in December 2011 and June 2012, subject to the continued service of the Apollo employees as our directors. We will make a cash payment to Apollo equal to the fair market value of the outstanding investor director provider RSUs on the vesting dates. We account for the investor director provider RSUs as liability awards. We remeasure the fair value of the liability at each reporting date and adjust stock compensation expense so that the amount ultimately recorded as stock compensation expense will equal the cash paid on the vesting date (see Note 17 “Fair Value Measurements”). As of September 30, 2011, we had $0.5 million in accrued liabilities in the accompanying unaudited consolidated balance sheet for these awards.

In May 2010, in connection with the Company’s IPO, stock options were modified to remove a call option which had created an implicit seven year vesting period. The effect of this modification was to accelerate expense recognition for certain fully-vested options and to change the amount of expense to be recognized based on an assumed forfeiture rate. We recognized $3.2 million of compensation expense for the nine months ended September 30, 2010 in connection with this modification.

Our stock option activity and related information follows:

		Employee options and non-employee director
		options								Investor director provider options
						Weighted-average								Weighted-average
		Common shares				exercise price				Common shares				exercise price
						$								$
Outstanding, December 31, 2010			2,087,056				1.76				140,000				9.00
Exercised			(422,423	)			1.58				—				—
Forfeited			(14,402	)			2.00				—				—
Outstanding, September 30, 2011			1,650,231				1.80				140,000				9.00
Fully vested, September 30, 2011 (weighted-average remaining contractual term of 5.9 years and 6.1 years, respectively)			1,029,706				2.10				140,000				9.00
Currently exercisable, September 30, 2011 (weighted-average remaining contractual term of 5.9 years and 6.1 years, respectively)			919,366				2.11				140,000				9.00

Our RSU activity follows:

		Non-vested
		employee and								Target
		non-employee				Weighted-				non-vested				Non-vested				Fair value as of
		director service				average grant				performance				investor director				September 30,
		RSUs				date fair value				RSUs				provider RSUs				2011
						$												$
Non-vested, December 31, 2010			103,524				11.63				—				—				—
Granted			405,403				15.32				248,038				90,000				8.35
Forfeited			(12,577	)			15.48				(4,247	)			—				—
Non-vested, September 30, 2011			496,350				14.55				243,791				90,000				8.35

We determined grant date fair value of service-vesting RSUs based on the closing price of our common stock on the grant date. We estimated a forfeiture rate for service-vesting RSUs based on the historical forfeiture rate for employee stock option grants of comparable size. We expect all non-employee director and investor director provider RSUs to vest. Service-vesting RSUs will generally vest over three years, on the anniversary of the grant date, in the following increments: 25% on the first anniversary, 25% on the second anniversary and 50% on the third anniversary. We recognize stock compensation expense on a straight-line basis over the three year vesting period.

As of September 30, 2011, unrecognized stock compensation expense related to non-vested options, service-vesting RSUs and investor director provider RSUs was $6.0 million. We will recognize this amount over a weighted-average period of 1.6 years. We have not yet recognized stock compensation expense for performance-vesting RSUs because the performance conditions have not been determined as of September 30, 2011.

Cash Dividend

On November 1, 2011, the Board declared a regular quarterly cash dividend of $0.03 per share on our outstanding shares of common stock. The Board anticipates declaring this dividend in future quarters on a regular basis; however, changes in our financial condition and cash needs could result in dividends being declared in different amounts, or not at all.

In addition, on November 1, 2011, the Board declared a supplemental cash dividend of $1.00 per share on our outstanding common stock. The regular and supplemental dividends will be paid on November 22, 2011 to shareholders of record as of the close of business on November 14, 2011.

Cash payments related to the November 2011 regular and supplemental dividends will total approximately $71.0 million in aggregate, comprising $69.2 million of dividends on outstanding shares of common stock and $1.8 million of cash payments to holders of vested and unvested stock options. We expect to pay these amounts entirely from available cash balances.

10. INCOME TAXES

Our effective income tax rate was approximately 33.9% for the nine months ended September 30, 2010 and 30.0% for the nine months ended September 30, 2011. The effective tax rate for both periods was primarily impacted by state income taxes, the Internal Revenue Code Section 199 manufacturing deduction, and adjustments to unrecognized tax benefits.

The Apollo Acquisition was consummated on May 18, 2007, when Noranda AcquisitionCo acquired the Noranda Aluminum business of Xstrata (Schweiz) A.G., or “Xstrata,” by acquiring the stock of Noranda Intermediate Holding Corporation (“Noranda Intermediate,)” which owned all of the outstanding shares of Noranda Aluminum, Inc. In connection with the Apollo Acquisition, Xstrata generally agreed to indemnify us for taxes imposed on Noranda Intermediate and its subsidiaries with respect to periods ending on or prior to the date of the Apollo Acquisition. At December 31, 2010 and September 30, 2011, we had a receivable of $4.5 million and $1.2 million, respectively, from Xstrata equal to our provision for uncertain tax positions (net of federal benefits) for income taxes of Noranda Intermediate and its subsidiaries for periods ending on or prior to the date of the Apollo Acquisition. The net decrease of $3.3 million in the nine months ended September 30, 2011 consists of a $3.4 million decrease as a result of the expiration of the statute of limitations with respect to certain income tax returns, partially offset by an increase of $0.1 million for additional amounts related to prior period tax positions.

As of December 31, 2010 and September 30, 2011, we had unrecognized tax benefits (including interest) of approximately $11.8 million and $3.7 million, respectively. The net decrease of $8.1 million in the nine months ended September 30, 2011 consists of an $8.3 million decrease as a result of the expiration of the statute of limitations with respect to certain income tax returns, partially offset by an increase of $0.2 million for additional amounts related to prior period tax positions, resulting in a $5.3 million reduction (net of federal benefits) in income tax expense. The total amounts of net unrecognized tax benefits as of December 31, 2010 and September 30, 2011 that, if recognized, would impact the effective tax rate were $7.7 million and $2.5 million, respectively. Within the next twelve months, we estimate that the unrecognized benefits could change by approximately $1.8 million as a result of tax audit closings, settlements, and the expiration of the statute of limitations with respect to returns in various jurisdictions.

11. NET INCOME PER COMMON SHARE

We present both basic and diluted earnings per share (“EPS”) on the face of the accompanying unaudited consolidated statements of operations. The calculation of basic and diluted EPS follows (in millions, except per share values):

		Three months ended								Nine months ended
		September 30,								September 30,
		2010				2011				2010				2011
Net income		$	25.2			$	30.8			$	32.0			$	116.5
Weighted-average common shares outstanding:
Basic			55.28				67.23				49.42				67.00
Effect of dilution			1.02				1.26				0.89				1.32
Diluted			56.30				68.49				50.31				68.32
Net income per common share:
Basic		$	0.46			$	0.46			$	0.65			$	1.74
Diluted		$	0.45			$	0.45			$	0.64			$	1.71

Certain stock options could potentially dilute basic EPS in the future, but were not included in the computation of diluted EPS because to do so would have been antidilutive. Those antidilutive options were as follows (in millions):

		Three months ended								Nine months ended
		September 30,								September 30,
		2010				2011				2010				2011
Antidilutive options			0.20				—				0.13				—

12. DERIVATIVE FINANCIAL INSTRUMENTS

We use derivative instruments to mitigate the risks associated with fluctuations in aluminum prices, natural gas prices and interest rates. All derivatives are held for purposes other than trading.

Fixed price aluminum swaps. In 2007 and 2008, we implemented a hedging strategy designed to reduce commodity price risk and protect operating cash flows in our primary aluminum products segment through the use of fixed price aluminum sale swaps. In addition, during first quarter 2009, we entered into fixed price aluminum purchase swaps to lock in a portion of the favorable market position of our fixed price aluminum sale swaps. In March 2009, we entered into a hedge settlement agreement with Merrill Lynch to provide a mechanism for us to monetize our favorable net fixed price swap positions to fund debt repurchases, subject to certain limitations.

At the closing of our IPO in May 2010, we settled all of our remaining fixed price aluminum swaps and used the proceeds to repay indebtedness. We have no outstanding fixed price aluminum swaps at September 30, 2011.

Variable price aluminum swaps and other. From time to time, we enter into forward contracts with our customers to sell aluminum in the future at fixed prices in the normal course of business. Because these contracts expose us to aluminum market price fluctuations, we economically hedge this risk by entering into variable price aluminum swap contracts with Merrill Lynch, typically for terms less than one year. We also have a small number of other hedging contracts with various brokers related to Midwest premiums. As of September 30, 2011, our outstanding variable price aluminum swaps were as follows:

		Average hedged price				Pounds hedged
		per pound				annually
Year		$				(in millions)
2011			1.11				15.7
2012			1.02				28.5
							44.2

Natural gas swaps. We purchase natural gas to meet our production requirements. These purchases expose us to the risk of fluctuating natural gas prices. To offset changes in the Henry Hub Index Price of natural gas, we enter into financial swaps by purchasing the fixed forward price for the Henry Hub Index and simultaneously entering into an agreement to sell at the actual Henry Hub Index Price. As of September 30, 2011, our outstanding natural gas swaps were as follows:

		Average price
		per million BTUs				BTUs hedged annually
Year		$				(in millions)
2011			7.28				2.0
2012			7.46				8.1
							10.1

Interest rate swaps. We have floating rate debt, which is subject to variations in interest rates. We have entered into an interest rate swap agreement to limit our exposure to floating interest rates through November 15, 2011. As of September 30, 2011, our outstanding interest rate swaps were as follows:

		Hedged LIBOR rate				Variable rate debt hedged
		%				$
November 15, 2011			4.98				100.0

We recognize all derivative instruments as either assets or liabilities at their estimated fair value in our consolidated balance sheets. The following table presents the fair values of our derivative instruments outstanding (in millions):

		December 31, 2010				September 30, 2011
		$				$
Variable price aluminum swaps and other			3.1				(5.1	)
Natural gas swaps			(40.3	)			(32.2	)
Interest rate swaps			(4.4	)			(2.3	)
			(41.6	)			(39.6	)

Merrill Lynch is the counterparty for a substantial portion of our derivatives. All swap arrangements with Merrill Lynch are part of a master arrangement which is subject to the same guarantee and security provisions as the senior secured credit facilities. The master arrangement does not require us to post additional collateral, or cash margin. We present the fair values of derivatives where Merrill Lynch is the counterparty in a net position on the consolidated balance sheets as a result of our master netting agreement. The following is a presentation of the gross components of our net derivative balances (in millions):

		December 31, 2010				September 30, 2011
		$				$
Current derivative assets			3.4				0.5
Current derivative liabilities			(26.6	)			(34.0	)
Current derivative liabilities, net			(23.2	)			(33.5	)
Long-term derivative assets			0.1				—
Long-term derivative liabilities			(18.5	)			(6.1	)
Long-term derivative liabilities, net			(18.4	)			(6.1	)

The following is a gross presentation of the derivative balances segregated by type of contract and between derivatives that are designated and qualify for hedge accounting and those that are not (in millions):

		December 31, 2010																September 30, 2011
		Hedges that qualify for								Hedges that do not qualify								Hedges that qualify for								Hedges that do not qualify
		hedge accounting								for hedge accounting								hedge accounting								for hedge accounting
		Asset				Liability				Asset				Liability				Asset				Liability				Asset				Liability
Variable price aluminum swaps and other			—				—				3.5				(0.4	)			—				—				0.5				(5.6	)
Natural gas swaps			—				(23.0	)			—				(17.3	)			—				(20.0	)			—				(12.2	)
Interest rate swaps			—				—				—				(4.4	)			—				—				—				(2.3	)
			—				(23.0	)			3.5				(22.1	)			—				(20.0	)			0.5				(20.1	)