XNYS:NOR Noranda Aluminum Holding Corp Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012

NOR Fair Value Estimate
Premium
NOR Consider Buying
Premium
NOR Consider Selling
Premium
NOR Fair Value Uncertainty
Premium
NOR Economic Moat
Premium
NOR Stewardship
Premium
 

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2012
OR
£    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: 001-34741
 

NORANDA ALUMINUM HOLDING CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
(State or Other Jurisdiction of Incorporation)
20-8908550
(I.R.S. Employer Identification Number)
801 Crescent Centre Drive, Suite 600
Franklin, Tennessee
(Address of Principal Executive Offices)
37067
(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 x        NO£
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 x        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 definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  £
Accelerated filer x
Non-accelerated filer (Do not check if a smaller reporting company)  £
Smaller reporting company  £
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES£    NO x        
As of April 20, 2012, there were 67,440,300 shares of Noranda common stock outstanding.
 

1


NORANDA ALUMINUM HOLDING CORPORATION
TABLE OF CONTENTS


2


Part I.    FINANCIAL INFORMATION

Item 1.
Financial Statements

NORANDA ALUMINUM HOLDING CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except par value)
(unaudited)
 
March 31, 2012
December 31, 2011
 
$
$
ASSETS
 
 
Current assets:
 
 
Cash and cash equivalents
73.0

42.7

Accounts receivable, net
136.4

107.6

Inventories, net
213.5

186.5

Prepaid expenses
9.5

13.3

Other current assets
12.6

41.3

Total current assets
445.0

391.4

Property, plant and equipment, net
696.7

699.8

Goodwill
137.6

137.6

Other intangible assets, net
65.6

67.1

Other assets
84.2

81.6

Total assets
1,429.1

1,377.5

LIABILITIES AND EQUITY
 
 
Current liabilities:
 
 
Accounts payable
105.6

95.9

Accrued liabilities
55.9

87.3

Taxes payable
10.5

2.6

Derivative liabilities, net
35.2

40.9

Deferred tax liabilities
28.3

35.9

Current portion of long-term debt
3.3

2.4

Total current liabilities
238.8

265.0

Long-term debt, net
594.6

426.1

Long-term derivative liabilities, net
0.3

0.1

Pension and other post-retirement benefit ("OPEB") liabilities
168.7

175.7

Other long-term liabilities
46.7

46.2

Long-term deferred tax liabilities
201.7

202.8

Common stock subject to redemption (0.2 shares at March 31, 2012 and December 31, 2011)
2.0

2.0

Shareholders’ equity:
 
 
Preferred stock (25.0 shares authorized, $0.01 par value; no shares issued and outstanding at March 31, 2012 and December 31, 2011)


Common stock (200.0 shares authorized; $0.01 par value; 67.4 shares issued and outstanding at March 31, 2012; 67.3 shares issued and outstanding at December 31, 2011, including 0.2 shares subject to redemption at March 31, 2012 and December 31, 2011)
0.7

0.7

Capital in excess of par value
230.5

231.9

Retained earnings (accumulated deficit)
(7.3
)
63.4

Accumulated other comprehensive loss
(53.6
)
(42.4
)
Total shareholders’ equity
170.3

253.6

Non-controlling interest
6.0

6.0

Total equity
176.3

259.6

Total liabilities and equity
1,429.1

1,377.5

See accompanying notes

3


NORANDA ALUMINUM HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share information)
(unaudited)
 
Three months ended March 31,
 
2012
2011
 
$
$
Sales
353.5

394.6

Operating costs and expenses:
 
 
Cost of sales
304.2

328.3

Selling, general and administrative expenses
25.7

24.9

Total operating costs and expenses
329.9

353.2

Operating income
23.6

41.4

Other (income) expense:
 
 
Interest expense, net
6.5

5.7

Gain on hedging activities, net
(14.7
)
(21.8
)
Debt refinancing expense
8.1


Total other income, net
(0.1
)
(16.1
)
Income before income taxes
23.7

57.5

Income tax expense
7.5

19.2

Net income
16.2

38.3

Net income per common share:
 
 
Basic
$
0.24

$
0.57

Diluted
$
0.24

$
0.56

Weighted-average common shares outstanding:
 
 
Basic
67.33

66.83

Diluted
68.84

68.12

Cash dividends declared per common share
$
1.29

$

See accompanying notes

4


NORANDA ALUMINUM HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
 
Three months ended March 31,
 
2012
2011
 
$
$
Net income
16.2

38.3

Other comprehensive income:
 
 
Reclassification of pension and OPEB amounts realized in net income, net of tax of $1.1
1.8


Unrealized loss on derivatives, net of tax benefit of $1.4 and $0.2, respectively
(2.4
)
(0.3
)
Reclassification of derivative amounts realized in net income, net of tax of $6.1 and $7.2, respectively
(10.6
)
(12.6
)
Total other comprehensive loss, net of tax
(11.2
)
(12.9
)
Total comprehensive income
5.0

25.4

See accompanying notes


5


NORANDA ALUMINUM HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF EQUITY
(in millions)
(unaudited)
 
Preferred
stock
Common
stock
Capital in
excess of par
value
Retained
earnings
(accumulated
deficit)
Accumulated
other
comprehensive
income (loss)
Non-controlling
interest
Total
equity
 
$
$
$
$
$
$
$
Balance, December 31, 2010

0.7

227.7

(8.2
)
69.5

6.0

295.7

Net income



140.9



140.9

Other comprehensive loss




(111.9
)

(111.9
)
Issuance of common shares for equity-based awards


0.7




0.7

Stock compensation expense related to equity-based awards


4.6




4.6

Excess tax benefit related to share-based payment arrangements


0.7




0.7

Dividends to shareholders @ $1.03 per share



(69.3
)


(69.3
)
Distribution to share-based award holders @ $1.00 per share


(1.8
)



(1.8
)
Balance, December 31, 2011

0.7

231.9

63.4

(42.4
)
6.0

259.6

Net income



16.2



16.2

Other comprehensive loss




(11.2
)

(11.2
)
Issuance of common shares for equity-based awards


0.1




0.1

Stock compensation expense related to equity-based awards


1.9




1.9

Shares repurchased


(0.3
)



(0.3
)
Dividends to shareholders @ $1.29 per share



(86.9
)


(86.9
)
Distribution to share-based award holders @ $1.25 per share


(3.1
)



(3.1
)
Balance, March 31, 2012

0.7

230.5

(7.3
)
(53.6
)
6.0

176.3


See accompanying notes

6


NORANDA ALUMINUM HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
 
Three months ended March 31,
 
2012
2011
 
$
$
OPERATING ACTIVITIES
 
 
Net income
16.2

38.3

Adjustments to reconcile net income to cash provided by (used in) operating activities:
 
 
Depreciation and amortization
22.9

23.6

Non-cash interest expense
0.7

0.7

Last in, first out and lower of cost or market inventory adjustments
(4.9
)
10.1

Loss on disposal of assets
0.6

1.1

Gain on hedging activities, net of cash settlements
(26.0
)
(27.0
)
Debt refinancing expense
8.1


Deferred income taxes
(2.3
)
0.2

Share-based compensation expense
2.2

2.0

Excess tax benefit related to share-based payment arrangements

(0.1
)
Changes in other assets
(1.4
)
(5.8
)
Changes in pension, other post-retirement and other long-term liabilities
(1.3
)
3.1

Changes in current operating assets and liabilities:
 
 
Accounts receivable, net
(28.9
)
(29.1
)
Inventories, net
(22.9
)
(16.8
)
Taxes receivable and taxes payable
7.8

12.0

Other current assets
32.2

(3.6
)
Accounts payable
12.1

10.8

Accrued liabilities
(31.5
)
1.6

Cash provided by (used in) operating activities
(16.4
)
21.1

INVESTING ACTIVITIES
 
 
Capital expenditures
(21.6
)
(13.5
)
Cash used in investing activities
(21.6
)
(13.5
)
FINANCING ACTIVITIES
 
 
Proceeds from issuance of common shares, equity offerings
0.1


Dividends paid to shareholders
(86.9
)

Distributions paid to share-based award holders
(3.1
)

Repurchase of shares
(0.3
)

Repayments of long-term debt
(153.2
)

Borrowings on long-term debt
322.6


Payments of financing costs
(10.9
)

Excess tax benefit related to share-based payment arrangements

0.1

Cash provided by financing activities
68.3

0.1

Change in cash and cash equivalents
30.3

7.7

Cash and cash equivalents, beginning of period
42.7

33.8

Cash and cash equivalents, end of period
73.0

41.5

See accompanying notes
1.    ACCOUNTING POLICIES
Organization, Consolidation and 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, 2011 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.
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 12, 2012.

2.    SEGMENTS
We manage and operate our business segments based on the markets we serve and the products we produce. We have five reportable segments consisting of Bauxite, Alumina, Primary Aluminum, Flat-Rolled Products and Corporate.
Segment profit (in which certain items, primarily non-recurring costs or non-cash expenses, are not allocated to the segments and in which certain items, primarily the income statement effects of current period cash settlements of hedges, are allocated to the segments) is a measure used by management as a basis for resource allocation.
The following tables present operating and asset information for our reportable segments (in millions):
 
Three months ended March 31, 2012
 
Bauxite
Alumina
Primary Aluminum
Flat-Rolled Products
Corporate
Eliminations
Consolidated
 
$
$
$
$
$
$
$
Sales:
 
 
 
 
 
 


External customers
10.7

57.6

140.1

145.1



353.5

Intersegment
22.5

36.9

21.8



(81.2
)

Total sales
33.2

94.5

161.9

145.1


(81.2
)
353.5

Segment profit (loss)
2.2

13.7

25.7

14.5

(8.7
)
(2.8
)
44.6

Depreciation and amortization
2.0

5.2

10.8

4.5

0.4


22.9

Capital expenditures
1.3

4.3

12.7

2.8

0.5


21.6


 
Three months ended March 31, 2012
 
Bauxite
Alumina
Primary Aluminum
Flat-Rolled Products
Corporate
Eliminations
Consolidated
 
$
$
$
$
$
$
$
Segment profit (loss)
2.2

13.7

25.7

14.5

(8.7
)
(2.8
)
44.6

Depreciation and amortization
(2.0
)
(5.2
)
(10.8
)
(4.5
)
(0.4
)

(22.9
)
Last in, first out and lower of cost or market inventory adjustments


3.4

2.0


(0.5
)
4.9

Loss on disposal of assets


(0.5
)
(0.1
)


(0.6
)
Non-cash pension, accretion and stock compensation

(0.2
)
(1.4
)
(1.3
)
(2.2
)

(5.1
)
Relocation and severance


(0.2
)



(0.2
)
Consulting fees




(0.5
)

(0.5
)
Cash settlements on hedging transactions



1.2



1.2

Other, net

(0.1
)


(0.2
)
2.5

2.2

Operating income (loss)
0.2

8.2

16.2

11.8

(12.0
)
(0.8
)
23.6

Interest expense, net
6.5

Gain on hedging activities, net
(14.7
)
Debt refinancing expense
8.1

Total other income, net
(0.1
)
Income before income taxes
23.7

 
Three months ended March 31, 2011
 
Bauxite
Alumina
Primary Aluminum
Flat-Rolled Products
Corporate
Eliminations
Consolidated
 
$
$
$
$
$
$
$
Sales:
 
 
 
 
 
 
 
External customers
16.8

61.1

165.3

151.4



394.6

Intersegment
21.3

42.8

15.5



(79.6
)

Total sales
38.1

103.9

180.8

151.4


(79.6
)
394.6

Segment profit (loss)
6.4

22.9

47.8

13.5

(6.6
)
(1.9
)
82.1

Depreciation and amortization
1.6

5.2

11.7

4.8

0.3


23.6

Capital expenditures
3.1

2.3

6.1

2.0



13.5


 
Three months ended March 31, 2011
 
Bauxite
Alumina
Primary Aluminum
Flat-Rolled Products
Corporate
Eliminations
Consolidated
 
$
$
$
$
$
$
$
Segment profit (loss)
6.4

22.9

47.8

13.5

(6.6
)
(1.9
)
82.1

Depreciation and amortization
(1.6
)
(5.2
)
(11.7
)
(4.8
)
(0.3
)

(23.6
)
Last in, first out and lower of cost or market inventory adjustments


(4.8
)
(5.9
)

0.6

(10.1
)
Loss on disposal of assets


(0.5
)
(0.6
)


(1.1
)
Non-cash pension, accretion and stock compensation
(0.1
)
(0.1
)
(0.7
)
(0.6
)
(2.2
)

(3.7
)
Relocation and severance

(0.1
)
(0.2
)

(0.1
)

(0.4
)
Consulting fees




(0.3
)

(0.3
)
Cash settlements on hedging transactions


(0.2
)
(1.0
)


(1.2
)
Other, net
(0.1
)
(0.2
)
0.1

(0.1
)


(0.3
)
Operating income (loss)
4.6

17.3

29.8

0.5

(9.5
)
(1.3
)
41.4

Interest expense, net
5.7

Gain on hedging activities, net
(21.8
)
Total other income, net
(16.1
)
Income before income taxes
57.5


 
March 31, 2012
December 31, 2011
Segment assets:
$
$
Bauxite
146.9

148.3

Alumina
253.1

241.7

Primary Aluminum
563.6

574.5

Flat-Rolled Products
390.6

367.5

Corporate
119.4

83.6

Eliminations
(44.5
)
(38.1
)
Total assets
1,429.1

1,377.5


3.    SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
Consolidated statements of cash flows:
Depreciation and amortization in the accompanying unaudited consolidated statements of cash flows comprised depreciation of property, plant and equipment and other, amortization of intangible assets and amortization of other long-term assets as follows (in millions):

7

NORANDA ALUMINUM HOLDING CORPORATION
Condensed Notes to Unaudited Consolidated Financial Statements

 
Three months ended March 31,
 
2012
2011
 
$
$
Depreciation of property, plant and equipment
20.2

21.5

Amortization of intangible assets
1.5

1.5

Amortization of other long-term assets
1.2

0.6

Total depreciation and amortization
22.9

23.6

Cash paid for interest and income taxes was as follows (in millions):
 
Three months ended March 31,
 
2012
2011
 
$
$
Interest paid
3.5

0.7

U.S. Federal and state income taxes paid, net of refunds received
1.9

5.3

Jamaican income taxes paid

4.0

Purchases of property, plant and equipment accrued in accounts payable and not yet paid were $4.0 million and $3.7 million for the three months ended March 31, 2012 and 2011, respectively, and are not reflected as capital expenditures in the unaudited consolidated statements of cash flows. For the three months ended March 31, 2012 and 2011, we capitalized interest of $0.4 million and $0.2 million, respectively, related to long-term capital projects.
Consolidated statements of equity:
Changes in accumulated other comprehensive income (loss) ("AOCI") were as follows (in millions):
 
Unrealized net actuarial gain (loss), prior service cost and other related to pension and OPEB
Accumulated tax benefit (expense) related to unrealized net actuarial gain/loss, prior service cost and other related to pension and OPEB
Unrealized gain (loss) on derivatives
Accumulated tax benefit (expense) related to unrealized gain or loss on derivatives
Total, net of tax
Balance, December 31, 2010
(99.4)
36.8
207.1
(75.0)
69.5
Amounts recorded to AOCI for the year ended December 31, 2011
(70.4)
26.6
(14.3)
5.3
(52.8)
Reclassification of amounts realized in net income
6.0
(2.2)
(98.7)
35.8
(59.1)
Balance, December 31, 2011
(163.8)
61.2
94.1
(33.9)
(42.4)
Amounts recorded to AOCI for the three months ended March 31, 2012
(3.8)
1.4
(2.4)
Reclassification of amounts realized in net income
2.9
(1.1)
(16.7)
6.1
(8.8)
Balance, March 31, 2012
(160.9)
60.1
73.6
(26.4)
(53.6)

Consolidated balance sheets:
Cash and cash equivalents consisted of the following (in millions):
 
March 31,
December 31,
 
2012
2011
 
$
$
Cash
73.0

39.8

Money market funds

2.9

Total cash and cash equivalents
73.0

42.7


Accounts receivable, net, consisted of the following (in millions):
 
March 31,
December 31,
 
2012
2011
 
$
$
Trade
136.5

107.7

Allowance for doubtful accounts
(0.1
)
(0.1
)
Total accounts receivable, net
136.4

107.6

Other current assets consisted of the following (in millions):
 
March 31,
December 31,
 
2012
2011
 
$
$
Current foreign deferred tax asset
3.3

3.3

Employee loans receivable, net
2.4

2.2

Current derivative assets (see Note 11, "Derivative Financial Instruments")
1.6

2.0

Restricted cash (see Note 7, "Commitments and Contingencies")
0.1

30.1

Other current assets
5.2

3.7

Total other current assets
12.6

41.3

Other assets consisted of the following (in millions):
 
March 31,
December 31,
 
2012
2011
 
$
$
Deferred financing costs, net of amortization
10.7

8.1

Cash surrender value of life insurance
25.3

25.1

Pension asset (see Note 10, "Pensions and Other Post-Retirement Benefits")
7.2

7.0

Restricted cash (see Note 9, "Reclamation, Land and Asset Retirement Obligations")
12.7

12.7

Supplies
12.7

12.7

Prepaid Jamaican income taxes
6.0

6.0

Derivative assets (see Note 11, "Derivative Financial Instruments")
0.3


Other
9.3

10.0

Total other assets
84.2

81.6

Accrued liabilities consisted of the following (in millions):
 
March 31,
December 31,
 
2012
2011
 
$
$
Compensation and benefits
17.7

22.5

Workers’ compensation
4.8

4.6

Other operating expenses
10.8

11.1

Power rate case related accruals (see Note 7, "Commitments and Contingencies")
0.1

30.1

Accrued interest
5.0

2.4

Asset retirement obligations (see Note 9, "Reclamation, Land and Asset Retirement Obligations")
2.2

1.8

Land obligation (see Note 9 "Reclamation, Land and Asset Retirement Obligations")
4.8

4.3

Reclamation obligation (see Note 9, "Reclamation, Land and Asset Retirement Obligations")
2.1

2.8

Environmental remediation obligations (see Note 7 "Commitments and Contingencies")
1.8

1.9

Obligations to the Government of Jamaica (see Note 17, "Non-Controlling Interest")
5.4

4.7

Pension and OPEB liabilities (see Note 10, "Pensions and Other Post-Retirement Benefits")
0.9

0.9

Restricted stock unit ("RSU") liability awards (see Note 13, "Share-Based Payments")
0.3

0.2

Total accrued liabilities
55.9

87.3

Other long-term liabilities consisted of the following (in millions):
 
March 31,
December 31,
 
2012
2011
 
$
$
Reserve for uncertain tax positions
0.8

0.8

Workers’ compensation
13.5

13.1

Asset retirement obligations (see Note 9, "Reclamation, Land and Asset Retirement Obligations")
13.7

13.9

Land obligation (see Note 9, "Reclamation, Land and Asset Retirement Obligations")
9.0

8.9

Reclamation obligation (see Note 9, "Reclamation, Land and Asset Retirement Obligations")
1.7

1.8

Environmental remediation obligations (see Note 7, "Commitments and Contingencies")
2.2

2.2

Deferred compensation and other
5.8

5.5

Total other long-term liabilities
46.7

46.2


4.    FAIR VALUE MEASUREMENTS
The tables below set forth by level the fair value hierarchy of our assets and liabilities that were measured at fair value on a recurring basis (in millions):
 
March 31, 2012
 
Level 1
Level 2
Level 3
Total
 
$
$
$
$
Derivative assets

3.9


3.9

Derivative liabilities

(37.4
)

(37.4
)
RSU liability awards
(0.3
)


(0.3
)
Total
(0.3
)
(33.5
)

(33.8
)
 
December 31, 2011
 
Level 1
Level 2
Level 3
Total
 
$
$
$
$
Cash equivalents
2.9



2.9

Derivative assets

2.5


2.5

Derivative liabilities

(41.5
)

(41.5
)
RSU liability awards
(0.2
)


(0.2
)
Total
2.7

(39.0
)

(36.3
)
Cash equivalents are temporary cash investments with high credit quality financial institutions, which include money market funds invested in U.S. treasury securities, short-term treasury bills and commercial paper. These instruments are valued based upon unadjusted, quoted prices in active markets and are classified within Level 1.
Fair values of all derivative instruments are classified as Level 2 and are primarily measured using industry standard models that incorporate inputs including quoted forward prices for commodities, interest rate curves, and current market prices for those assets and liabilities. Substantially all of the inputs are observable throughout the full term of the instrument. The counterparty of our derivative trades is Merrill Lynch, with the exception of a small portion of our other hedging contracts related to Midwest premiums.
In Note 13 "Share-Based Payments," we discuss RSU liability awards. The fair value of this Level 1 liability was determined based on the closing market price of our common stock at each balance sheet date.
In Note 8, "Long-Term Debt" we disclose the fair values of our debt instruments. The fair value of our AcquisitionCo Notes is based on recent market transactions and is classified as Level 2 within the hierarchy. While the AcquisitionCo Notes have quoted market prices used to determine fair value, we do not believe transactions of those instruments occur in sufficient frequency or volume for a Level 1 classification. The fair values of the term B loan and revolver are based on interest rates available at each balance sheet date. These instruments are also classified as Level 2.
We had no transfers between fair value hierarchy levels during first quarter 2012.

5.    INVENTORIES
We use the 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 at FIFO. Inventories at Gramercy and St. Ann and supplies at New Madrid are valued at weighted-average cost and are not subject to the LIFO adjustment. Gramercy and St. Ann inventories comprise approximately 25% and 26% of total inventories, at cost, at March 31, 2012 and December 31, 2011, respectively.
Inventories, net, consisted of the following (in millions):
 
March 31,
December 31,
 
2012
2011
 
$
$
Raw materials, at cost
82.3

71.2

Work-in-process, at cost
58.7

51.7

Finished goods, at cost
28.4

26.3

Total inventories, at cost
169.4

149.2

Last in first out adjustment
10.4

10.3

Lower of cost or market reserve
(6.7
)
(11.5
)
Inventories, at lower of cost or market
173.1

148.0

Supplies
40.4

38.5

Total inventories, net
213.5

186.5


6.    PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net, consisted of the following (in millions):
 
Estimated useful
March 31,
December 31,
 
lives
2012
2011
 
(in years)
$
$
Land
 
 
 
49.3

49.2

Buildings and improvements
10
47
142.9

128.2

Machinery and equipment
3
50
836.5

831.3

Construction in progress
53.7

59.1

Property, plant and equipment, at cost
1,082.4

1,067.8

Accumulated depreciation
(385.7
)
(368.0
)
Total property, plant and equipment, net
696.7

699.8


7.    COMMITMENTS AND CONTINGENCIES
Labor Commitments
We are a party to six collective bargaining agreements, each of which expire within the next five years. Our collective bargaining agreements are with the following unions: the United Steelworkers of America ("USWA"); the International Association of Machinists and Aerospace Workers; the University and Allied Workers Union; and the Union of Technical, Administrative and Supervisory Personnel ("UTASP"). We have recently completed the process of formalizing recognition of a third union at St. Ann with the Bustamante Industrial Trade Union.
The agreement at St. Ann with the UTASP expired in December 2010. A claim for a new contract was received in June 2011. Negotiations regarding the terms of a new agreement are ongoing. This contract covers only a small portion of our St. Ann workforce.
The five-year contract in place with the USWA, representing our unionized employees at the New Madrid smelter, will expire in August 2012. This contract covers approximately 80% of our New Madrid workforce.

8

NORANDA ALUMINUM HOLDING CORPORATION
Condensed Notes to Unaudited Consolidated Financial Statements

The three-year contract in place with the USWA, representing our unionized employees at the Salisbury rolling mill, will expire in November 2012. This contract covers approximately 88% of our Salisbury workforce.
Legal Contingencies
We are a party to legal proceedings incidental to our business. We assess the likelihood of an unfavorable outcome of each legal proceeding based upon the available facts and our historical experience with similar matters. We do not accrue a liability when we assess the likelihood of an unfavorable outcome to be remote. Where the risk of loss is probable and the costs can be reasonably estimated, we accrue a liability based on the factors mentioned above. Where the risk of loss is considered reasonably possible, we estimate the range of reasonably possible losses and disclose any reasonably possible losses, if material. We update our loss assessment as matters progress over time. Based on current knowledge, we do not believe any reasonably possible losses in excess of our accruals would be material to our unaudited consolidated financial statements.
Environmental Matters
We cannot predict what environmental laws or regulations will be enacted or amended in the future, how existing or future laws or regulations will be interpreted or enforced or the amount of future expenditures that may be required to comply with such laws or regulations. Such future requirements may result in liabilities which may have a material adverse effect on our financial condition, results of operations or cash flows.
The Environmental Protection Agency ("EPA") has developed National Ambient Air Quality Standards ("NAAQS") for six compounds currently identified as criteria pollutants. The NAAQS establishes acceptable ambient air levels of each pollutant based on a review of their effects to human health and the environment. Sulfur dioxide ("SO2"), an emission from our New Madrid smelter facility, is one such criteria pollutant. To determine our smelter's compliance with NAAQS, we measure emissions using currently-acceptable methods.
In 2010, the EPA issued regulations that increased the stringency of NAAQS. Federal and state regulators are in the process of developing measurement methods and time lines that will govern the implementation of those regulations. Once finalized, these implementation requirements may present material implications for our smelter's compliance with NAAQS. Failure to meet NAAQS may require us to incur significant capital or operational costs to bring our smelter into compliance and could have negative implications for the permits that we currently have in place in support of our smelter expansion project.
Power Contract
Electricity is our largest cash cost component in the production of primary aluminum and is a key factor to our long-term competitive position in the primary aluminum business. We have a power purchase agreement with Ameren pursuant to which we have agreed to purchase substantially all of New Madrid’s electricity through May 2020. Included in the contract is a minimum purchase requirement equal to five mega watts, calculated at peak and non-peak demand charges, or approximately $4.0 million over the remaining life of the contract. This minimum purchase requirement represents significantly less power usage than we require, given the power-intensive nature of our smelter facility. Our current rate structure with Ameren consists of two components: a base rate and a fuel adjustment clause ("FAC").
On September 3, 2010, Ameren filed a new rate case with the Missouri Public Service Commission ("MoPSC") seeking an 11.0% base rate increase. In July 2011, the MoPSC ruled on this rate case approving Ameren to increase its base rates, which increased our base rate by 5.2% effective July 31, 2011.
We are currently a party to the appeal of several rate-related issues, including rate increases approved by the MoPSC in May 2010 and July 2011 and the amount of cost increases related to the FAC. Despite these appeals, our unaudited consolidated financial statements reflect our payment of power costs at the enacted rates, with disputed amounts held in escrow by the Missouri Circuit Court. As of March 31, 2012 and December 31, 2011, other current assets (see Note 3, "Supplemental Financial Statement Information" to our accompanying unaudited condensed consolidated financial statements) included $0.1 million and $30.1 million, respectively, for amounts held in escrow related to these appeals, with corresponding liabilities recorded in accrued liabilities.
On November 7, 2011, the Missouri Court of Appeals issued a decision to uphold the MoPSC's January 2009 rate increase approval, and as a result,$30.0 million of the escrowed funds were released to Ameren. The release of these funds did not result in any impact to our operating results, our net working capital, or our net assets.
On February 3, 2012, Ameren filed a new rate case with the MoPSC seeking a 14.6% base rate increase. As we have in previous rate cases, we expect to be an active participant in the MoPSC rate setting process. Any increase approved would be effective at the beginning of the month following the MoPSC's ruling. We expect a ruling on this request by January 3, 2013.



9

NORANDA ALUMINUM HOLDING CORPORATION
Condensed Notes to Unaudited Consolidated Financial Statements

8.    LONG-TERM DEBT
The carrying values and fair values of our outstanding debt were as follows (in millions):
 
March 31, 2012
December 31, 2011
 
Carrying
value
Fair
value
Interest
rate
Carrying
value
Fair
value
Interest
rate
 
$
$
%
$
$
%
Senior Floating Rate Notes due 2015 ("AcquisitionCo Notes")
275.3

264.3

4.66
%
350.3

324.0

4.66
%
Term B Loan, net
322.6

322.6

5.75
%
78.2

78.2

2.05
%
Revolver


 


 
Total debt, net
597.9

 
 
428.5

 


Less: Current portion
(3.3
)
 
 
(2.4
)
 
 
Long-term debt, net
594.6

 
 
426.1

 
 
2012 Refinancing
In first quarter 2012, we refinanced our existing senior secured credit facilities and entered into the new senior secured credit facilities consisting of the 2012 Term B Loan ($325.0 million) and the 2012 Revolver (up to $250.0 million.) We also repaid the remaining $78.2 million balance of our existing term loan. We refer to this transaction as the "2012 Refinancing."
Using proceeds from the 2012 Refinancing, in first quarter 2012, Noranda AcquisitionCo repurchased $75.0 million in aggregate principal amount of AcquisitionCo Notes ("the 2012 Tender Offer"). Noranda AcquisitionCo paid a total of $73.9 million, including fees, in connection with the 2012 Tender Offer.
We recorded debt refinancing expense of $8.1 million related to the 2012 Refinancing, comprising $5.7 million of creditor fees related to the new senior secured credit facilities and $2.4 million of deferred financing fees related to the existing senior secured credit facilities.
As of March 31, 2012, we had $325.0 million outstanding under the 2012 Term B Loan, which is recorded in our accompanying unaudited consolidated balance sheet net of $2.4 million of unamortized discount. The 2012 Revolver had no outstanding balance at March 31, 2012 and outstanding letters of credit totaled $34.4 million at March 31, 2012. Availability under the revolver is subject to a calculated borrowing base, which totaled $173.3 million as of March 31, 2012. The 2012 Refinancing and the 2012 Tender Offer resulted in a $169.4 million increase in our outstanding indebtedness. We are required to repay $0.8 million of the 2012 Term B Loan quarterly, beginning in second quarter 2012.

9.    RECLAMATION, LAND AND ASSET RETIREMENT OBLIGATIONS
Reclamation Obligation
St. Ann has an obligation to rehabilitate land disturbed by St. Ann's Bauxite mining operations.
Our reclamation obligations activity at St. Ann follows (in millions):
 
Three months ended March 31, 2012
 
$
Balance, beginning of period
4.6

Additional liabilities incurred
0.4

Liabilities settled
(1.2
)
Accretion

Balance, end of period
3.8

Land Obligation
In cases where land to be mined is privately owned, St. Ann agrees to purchase the residents’ property, including land, crops, homes, and other improvements in exchange for consideration paid in the form of cash, a commitment to relocate the residents to another area, or a combination of these two options ("St. Ann Land Obligation").

Our St. Ann Land Obligation activity follows (in millions):
 
Three months ended March 31, 2012
 
$
Balance, beginning of period
13.2

Additional liabilities incurred
0.7

Liabilities settled
(0.1
)
Balance, end of period
13.8

Asset Retirement Obligations
Our asset retirement obligations consist of costs related to the disposal of certain spent pot liners associated with the New Madrid smelter, as well as costs associated with the future closure and post-closure care of "red mud lakes" at the Gramercy facility, where Gramercy disposes of wastes from its refining process. Asset retirement obligations are estimated based on cash flows discounted at a credit-adjusted risk-free rate.
Our asset retirement obligations activity follows (in millions):
 
Three months ended March 31, 2012
 
$
Balance, beginning of period
15.7

Additional liabilities incurred
0.2

Liabilities settled
(0.2
)
Accretion
0.2

Balance, end of period
15.9

As of March 31, 2012 and December 31, 2011, we had $9.2 million of restricted cash in an escrow account as security for the payment of red mud lake closure obligations that will arise under state environmental laws if we were to cease operations at the Gramercy facility. This amount is included in other assets in the accompanying unaudited consolidated balance sheets. The remaining restricted cash in other assets relates primarily to funds for workers’ compensation claims.
Environmental Remediation Obligations
In addition to our asset retirement obligations, we have identified certain environmental conditions requiring remedial action or ongoing monitoring at the Gramercy refinery. As of March 31, 2012 and December 31, 2011, we recorded undiscounted liabilities of $1.8 million and $1.9 million, respectively, in accrued liabilities and $2.2 million and $2.2 million, respectively, in other long-term liabilities, for remediation of Gramercy’s known environmental conditions. Approximately 2/3 of the recorded liability represents clean-up costs expected to be incurred during the next five years. The remainder represents monitoring costs which will be incurred ratably over a 30 year period. Because the remediation and subsequent monitoring related to these environmental conditions occurs over an extended period of time, these estimates are subject to change based on cost. No other responsible parties are involved in any ongoing environmental remediation activities.

10.    PENSIONS AND OTHER POST-RETIREMENT BENEFITS
We sponsor defined benefit pension plans for hourly and salaried employees. Benefits under our sponsored defined benefit plans are based on years of service and/or eligible compensation prior to retirement. We also sponsor OPEB plans for certain employees. These benefits include life and health insurance. In addition, we provide supplemental executive retirement benefits for certain executive officers.

10

NORANDA ALUMINUM HOLDING CORPORATION
Condensed Notes to Unaudited Consolidated Financial Statements

Net periodic benefit costs related to the pension plans included the following (in millions):
 
Noranda Pension Plans
St. Ann Pension Plans
 
Three months ended March 31,
Three months ended March 31,
 
2012
2011
2012
2011
 
$
$
$
$
Service cost
3.1

2.6

0.2

0.2

Interest cost
4.5

4.6

0.4

0.4

Expected return on plan assets
(4.7
)
(4.9
)
(0.5
)
(0.5
)
Recognized actuarial loss
2.8

1.3



Amortization of prior service cost
0.1

0.1



Net periodic cost
5.8

3.7

0.1

0.1

Net periodic benefit costs related to the OPEB plans included the following (in millions):
 
Noranda OPEB Plans
St. Ann OPEB Plans
 
Three months ended March 31,
Three months ended March 31,
 
2012
2011
2012
2011
 
$
$
$
$
Service cost
0.1

0.1

0.1

0.1

Interest cost
0.1

0.1

0.1

0.2

Recognized actuarial loss



0.1

Net periodic cost
0.2

0.2

0.2

0.4

Expected Employer Contributions
We contributed $9.8 million and $0.2 million to the Noranda Pension Plans and the St. Ann Pension Plans, respectively, during first quarter 2012. Remaining contributions approximate $17.2 million and $0.4 million for the Noranda Pension Plans and the St. Ann Pension Plans, respectively, in 2012. We may elect to make additional contributions to the plans.

11.    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 the Primary Aluminum 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.
In May 2010, we settled all of our remaining fixed price aluminum swaps and used the proceeds to repay indebtedness. As of March 31, 2012, we have no outstanding fixed price aluminum swaps.
Fixed-price customer arrangements. 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. Prior to fourth quarter 2011, we made a determination under ASC 815-10-15 "Derivatives and Hedging" to elect normal sale accounting on our sales contracts. Beginning in fourth quarter 2011, we began not to elect normal sale accounting on certain of these customer contracts and began to record those contracts as derivatives ("fixed-price aluminum customer contracts"). Because these fixed-price customer contracts expose us to aluminum market price fluctuations, we economically hedge this risk by entering into variable price aluminum swap contracts ("variable-price aluminum offset swaps") with various brokers, typically for terms not greater than one year.
As of March 31, 2012, our outstanding fixed-price aluminum customer contracts were as follows:
 
Average hedged price
per pound
Pounds hedged
Year
$
(in millions)
2012
1.07

37.3

2013
1.19

5.4


11

NORANDA ALUMINUM HOLDING CORPORATION
Condensed Notes to Unaudited Consolidated Financial Statements

As of March 31, 2012, our outstanding variable-price aluminum offset swaps were as follows:
 
Average hedged price
per pound
Pounds hedged
Year
$
(in millions)
2012
1.00

61.1

2013
1.10

5.6

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 the actual Henry Hub Index Price.
As of March 31, 2012, our outstanding natural gas swaps were as follows:
 
Average price
per million BTUs
 BTUs hedged
Year
$
(in millions)
2012
7.46

6.1

Fixed-price natural gas contract. In March 2012, we exercised a provision in the natural gas supply contract for our alumina refinery to set fixed prices for 7.7 million BTUs of the refinery's anticipated natural gas usage in the period from April through October 2012. We record this contract as a derivative based on the fair value of the Henry Hub Index.
We recognize all derivative instruments as either assets or liabilities at their estimated fair value in our accompanying unaudited consolidated balance sheets. The following table presents the carrying values, which were recorded at fair value, of our derivative instruments outstanding (in millions):
 
March 31, 2012
December 31, 2011
 
$
$
Fixed-price aluminum customer contracts
1.4

2.0

Variable-price aluminum offset swaps
(2.9
)
(7.5
)
Natural gas swaps
(29.6
)
(33.5
)
Natural gas fixed-price contract
(2.4
)

Total
(33.5
)
(39.0
)
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 our 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):
 
March 31, 2012
December 31, 2011
 
$
$
Current derivative assets
3.5

2.5

Current derivative liabilities
(37.1
)
(41.4
)
Current derivative assets (liabilities), net
(33.6
)
(38.9
)
Long-term derivative assets
0.4


Long-term derivative liabilities
(0.3
)
(0.1
)
Long-term derivative assets (liabilities), net
0.1

(0.1
)

12

NORANDA ALUMINUM HOLDING CORPORATION
Condensed Notes to Unaudited Consolidated Financial Statements

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):
 
March 31, 2012
December 31, 2011
 
Hedges that qualify for
hedge accounting
Hedges that do not qualify
for hedge accounting
Hedges that qualify for
hedge accounting
Hedges that do not qualify
for hedge accounting
 
Asset
Liability
Asset
Liability
Asset
Liability
Asset
Liability
Fixed-price aluminum customer contracts


2.1

(0.7
)


2.0


Variable-price aluminum offset swaps


1.8

(4.7
)


0.5

(8.0
)
Natural gas swaps

(6.1
)

(23.5
)

(21.9
)

(11.6
)
Natural gas fixed-price contract



(2.4
)




Total

(6.1
)
3.9

(31.3
)

(21.9
)
2.5

(19.6
)
For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of any gain or loss on the derivative is reported as a component of AOCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.
Fixed price aluminum swaps. From January 1, 2008 to January 29, 2009, fixed price aluminum-swaps were designated and qualified as cash flow hedges. As a result of the New Madrid power outage in January 2009, we concluded that certain hedged sale transactions were no longer probable of occurring, and we discontinued hedge accounting for all our aluminum fixed price sale swaps on January 29, 2009. At that date, amounts were frozen in AOCI until such time as they are reclassified into earnings in the period the hedged sales occur, or until it is determined that the original forecasted sales are probable of not occurring.
Natural gas swaps. We entered into certain natural gas contracts during the fourth quarter of 2009 that qualified for and were designated as cash flow hedges based on a portion of estimated consumption of natural gas. As a result of entering into the fixed-price natural gas contract discussed above, we discontinued hedge accounting for those swaps covered under that contract. As a result, during March 2012, amounts were frozen in AOCI and will be reclassified into earnings in the period the hedged transactions occur.
The following table presents the net amount of unrealized gains (losses) on cash flow hedges as of March 31, 2012 that were reported as a component of AOCI and are expected to be reclassified into earnings during the year ending December 31, 2012 (in millions):
 
Net unrealized gains (losses) on cash flow hedges, pre-tax, in AOCI
 
 
 
$
Fixed-price aluminum swaps
93.0

Natural gas swaps
(19.4
)
Total
73.6

Gains and losses on the derivatives representing hedge ineffectiveness are recognized in current earnings, along with amounts that are reclassified from AOCI; however these amounts were not material for the periods presented. Derivatives that do not qualify for hedge accounting or have not been designated for hedge accounting treatment are adjusted to fair value through earnings in gains (losses) on hedging activities in the unaudited consolidated statements of operations.

13

NORANDA ALUMINUM HOLDING CORPORATION
Condensed Notes to Unaudited Consolidated Financial Statements

The following table presents how our hedging activities affected our consolidated statements of operations for each period (in millions):
 
Derivatives qualified as hedges
Derivatives not
qualified as hedges
 
 
Amount reclassified from AOCI
Change in
fair value
Total (gain) loss on hedging activities
 
$
$
$
Three months ended March 31, 2011:
 
 
 
Fixed-price aluminum swaps
(23.6
)

(23.6
)
Variable-price aluminum offset swaps

(2.1
)
(2.1
)
Natural gas swaps
3.8

0.1

3.9

Total
(19.8
)
(2.0
)
(21.8
)
Three months ended March 31, 2012:
 
 
 
Fixed-price aluminum swaps
(23.0
)

(23.0
)
Fixed-price aluminum customer contracts

0.6

0.6

Variable-price aluminum offset swaps

(3.0
)
(3.0
)
Natural gas swaps
6.3

2.0

8.3

Natural gas fixed-price contract

2.4

2.4

Total
(16.7
)
2.0

(14.7
)

12.    SHAREHOLDERS' EQUITY
On February 15, 2012, the Board declared a regular quarterly dividend of $0.04 per share which we paid on March 21, 2012 to shareholders of record as of February 27, 2012. Cash payments related to this dividend totaled $2.6 million. The Board anticipates declaring this dividend in future quarters on a regular basis; however, changes in the Company's financial condition and cash needs could result in dividends being declared in different amounts, or not at all.
On February 29, 2012, the Board declared a supplemental dividend of $1.25 per share which we paid on March 19, 2012 to shareholders of record as of March 12, 2012. Cash payments related to the supplemental dividend totaled $87.4 million and were paid from the net proceeds of the 2012 Refinancing discussed in Note 8, "Long-Term Debt."
On April 24, 2012, the Board declared a regular quarterly dividend of $0.04 per share to be paid on May 30, 2012 to shareholders of record as of May 7, 2012. Dividend payments will total approximately $2.7 million.

13.    SHARE-BASED PAYMENTS
We recorded stock compensation expense as follows (in millions):
 
Three months ended March 31,
 
2012
2011
 
$
$
Stock options
0.2

1.5

Restricted stock and restricted stock unit equity awards
1.8

0.3

Restricted stock unit liability awards
0.2

0.2

Total stock compensation expense
2.2

2.0

Share-based payment awards held by employee and non-employee directors include stock options, restricted stock, and restricted stock units ("RSUs"). Restricted stock and RSUs awards have either service-vesting and/or performance-vesting requirements. We account for RSUs granted to the investor director provider group, which consists of the six full-time employees of our principal shareholders affiliated with Apollo Management VI ("Apollo") who serve on our board of directors, as liability awards.
During first quarter 2012, in respect of the supplemental dividend of $1.25 discussed in Note 12, "Shareholders' Equity", holders of stock options, service-vesting restricted stock and RSUs received $1.25 for each share underlying such awards. We accelerated $1.2 million of stock compensation expense in connection with this payment. Holders of performance-vesting restricted stock and RSUs were granted additional performance-vesting restricted stock or RSUs, as applicable, with respect to the $1.25 per share supplemental dividend.

14

NORANDA ALUMINUM HOLDING CORPORATION
Condensed Notes to Unaudited Consolidated Financial Statements

The number of additional shares or units was computed by dividing the amount of the dividend the award holder would have received for a number of shares of our common stock equal to the number subject to the applicable award divided by the fair market value of a share of our common stock on the last trading day before the dividend payment date. These additional shares or units are subject to the same vesting conditions as the underlying awards. Generally, holders of service-vesting and performance-vesting restricted stock and RSUs were granted additional shares or units, with respect to the $0.04 per share regular quarterly dividend. The number of additional shares or units was computed by dividing the amount of dividend the award holder would have received had the holder owned a number of shares equal to the number subject to the applicable award by the fair market value of a share of our common stock on the last trading day before the date of the dividend payment date. These additional shares or units are subject to the same vesting conditions as the underlying award.
As of March 31, 2012, total unrecognized stock compensation expense related to share-based payment awards was $7.3 million. We will recognize this amount over a weighted-average period of 1.7 years. We have not yet recognized stock compensation expense for performance-vesting restricted stock or RSUs because the performance conditions have not been determined as of March 31, 2012. Outstanding share-based payment awards include dividend equivalent units issued to restricted stock and RSU holders in connection with dividend payments to shareholders.
Our stock option activity was as follows:
 
Employee options and non-employee
director options
Investor director provider options
 
 
Common
shares
Weighted-average
exercise price
Intrinsic value (in millions)
Common
shares
Weighted-average
exercise price
Intrinsic value (in millions)
 
 
$
$
 
$
$
Outstanding, December 31, 2011
1,637,431

1.81

13.4

140,000

9.00

 
Exercised
(75,000
)
2.00

0.7



 
Outstanding, March 31, 2012
1,562,431

1.80

12.6

140,000

9.00

0.1

Fully vested and exercisable, March 31, 2012 (weighted-average remaining contractual term of 5.2 years and 5.6 years, respectively)
1,065,641

2.10

8.4

140,000

9.00

0.1

Options that were not in-the-money at December 31, 2011, and therefore have a negative intrinsic value, have been excluded from intrinsic value calculations.
Restricted stock and RSU equity employee and non-employee director award activity was as follows:
 
Service-vesting restricted stock and RSUs
Performance-vesting restricted stock and RSUs
 
Awards
Weighted-average grant
date fair value
Awards (target)
 
#
$
#
Non-vested, December 31, 2011
479,465

13.66

260,866

Granted
377,760

12.11

462,053

Dividend equivalent units granted
2,824

10.75

88,085

Vested (aggregate intrinsic value of $1.2 million)
(93,923
)
14.51


Forfeited
(4,217
)
14.51

(1,406
)
Non-vested, March 31, 2012 (aggregate intrinsic value of $15.7 million)
761,909

12.77

809,598

We determine grant date fair value of service-vesting restricted stock and RSUs based on the closing price of our common stock on the grant date. We estimate a forfeiture rate for share-based payment awards based on historical forfeiture rates of similar awards, which was 7% for restricted stock and RSUs granted to employees during first quarter 2012. We expect all share-based payment awards granted to executives and directors to vest. Service-vesting restricted stock and 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. A grant date had not been determined for performance-vesting awards as of March 31, 2012, because the performance conditions had not yet been determined.
As of March 31, 2012 and December 31, 2011, our accrued liabilities in the accompanying unaudited consolidated balance sheets included $0.3 million and $0.2 million, respectively, related to RSU liability awards.

15

NORANDA ALUMINUM HOLDING CORPORATION
Condensed Notes to Unaudited Consolidated Financial Statements

RSU liability investor director provider award activity was as follows:
 
RSUs
 
#
Non-vested, December 31, 2011
34,148

Granted

Dividend equivalent units granted
127

Vested

Non-vested, March 31, 2012
34,275


14.    NET INCOME PER COMMON SHARE
Basic and diluted net income per common share ("EPS") were calculated as follows (in millions, except per share):
 
Three months ended March 31,
 
2012
2011
Net income
$
16.2

$
38.3

Weighted-average common shares outstanding:
 
 
Basic
67.33

66.83

Effect of dilutive options
1.51

1.29

Diluted
68.84

68.12

Net income per common share:
 
 
Basic
$
0.24

$
0.57

Diluted
$
0.24

$
0.56

Certain share-based payment awards whose terms and conditions are described in Note 13 "Share-Based Payments" 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 March 31,
 
2012
2011
Antidilutive options
0.15



15.    INCOME TAXES
Our effective income tax rate was approximately 31.6% and for the three months ended March 31, 2012 was 33.4% for the three months ended March 31, 2011. The effective tax rate for both periods was primarily impacted by state income taxes, the Internal Revenue Code Section 199 manufacturing deduction, and accrued interest related to unrecognized tax benefits.

16.    RELATED PARTY TRANSACTIONS
We sell flat-rolled products to two customers that are affiliated with Apollo. Sales to these companies were as follows (in millions):
 
Three months ended March 31,
 
2012
2011
 
$
$
Berry Plastics Corporation
2.3

2.6

Metals USA Holdings Corp.
2.3

3.8


16

NORANDA ALUMINUM HOLDING CORPORATION
Condensed Notes to Unaudited Consolidated Financial Statements

Accounts receivable from these related parties were as follows (in millions):
 
March 31, 2012
December 31, 2011
 
$
$
Berry Plastics Corporation
0.8

0.4

Metals USA Holdings Corp.
0.8

3.7

In connection with the 2012 Refinancing, we paid $0.7 million in fees to Apollo Global Securities, LLC, an affiliate of Apollo that participated in the arrangement and structuring of the 2012 Refinancing.

17.    NON-CONTROLLING INTEREST
Through St. Ann, we hold a 49% partnership interest in Noranda Jamaica Bauxite Partners ("NJBP"), in which the GOJ holds a 51% interest. NJBP mines bauxite, approximately 50% of which was sold to Gramercy during 2011, with the remaining majority sold to Sherwin Alumina Company.
Under an establishment agreement between Noranda Bauxite Limited (NBL) and the GOJ, NBL committed to make certain expenditures for haulroad development, maintenance, dredging, land purchases, contract mining, training and other general capital expenditures from 2009 through 2014. If we do not meet our commitment to the GOJ regarding these expenditures, we would owe to the GOJ a penalty that could be material to our consolidated financial statements. We believe there is a remote possibility that we will not meet the commitment.
We have determined that NJBP is a variable interest entity under U.S. GAAP, and St. Ann is NJBP’s primary beneficiary. The determination that St. Ann is the primary beneficiary was based on the fact that St. Ann absorbs the profits and losses associated with the partnership, while the GOJ receives certain fees from St. Ann (royalties, production and asset usage fees, etc.). We consolidate NJBP into our consolidated financial statements as follows (in millions):
 
March 31, 2012
December 31, 2011
 
NJBP
balances
Impact of
Eliminations
Impact on
consolidated
statements
NJBP
balances
Impact of
Eliminations
Impact on
consolidated
statements
 
$
$
$
$
$
$
Cash and cash equivalents



1.9


1.9

Accounts receivable, net
12.9

(12.9
)

11.2

(11.2
)

Inventories, net (consisting of maintenance supplies, inventory and fuel)
11.5


11.5

12.0


12.0

Other current assets
1.2


1.2

2.1


2.1

Property, plant and equipment, net
39.1


39.1

38.4


38.4

Other assets
4.6


4.6

5.2


5.2

Accounts payable
(50.2
)
41.9

(8.3
)
(50.1
)
42.8

(7.3
)
Accrued liabilities
(3.5
)

(3.5
)
(4.3
)

(4.3
)
Environmental, land and reclamation liabilities
(3.8
)

(3.8
)
(4.6
)

(4.6
)
Non-controlling interest
(6.0
)

(6.0
)
(6.0
)

(6.0
)
NBP’s net investment and advances to NJBP
5.8

29.0

34.8

5.8

31.6

37.4


18.    SUBSIDIARY ISSUER OF GUARANTEED NOTES
The AcquisitionCo Notes are fully and unconditionally guaranteed on a senior unsecured, joint and several basis by the existing and future wholly owned domestic subsidiaries of Noranda AcquisitionCo that guarantee the senior secured credit facilities. NHB and St. Ann are not guarantors of the senior secured credit facilities and, are not guarantors of the AcquisitionCo Notes. Noranda HoldCo fully and unconditionally guarantees the AcquisitionCo Notes on a joint and several basis with the subsidiary guarantors. The guarantee by Noranda HoldCo is not required by the indenture governing the AcquisitionCo Notes and may be released by Noranda HoldCo at any time. Noranda HoldCo has no independent operations or any assets other than its interest in Noranda AcquisitionCo. Noranda AcquisitionCo is a wholly owned finance subsidiary of Noranda HoldCo with no operations independent of its subsidiaries.

17

NORANDA ALUMINUM HOLDING CORPORATION
Condensed Notes to Unaudited Consolidated Financial Statements

The following unaudited condensed consolidating financial statements present separately the financial condition and results of operations and cash flows for Noranda HoldCo (as parent guarantor), Noranda AcquisitionCo (as the issuer), the subsidiary guarantors, the subsidiary non-guarantors and eliminations ("the guarantor financial statements"). The guarantor financial statements have been prepared and presented in accordance with SEC Regulation S-X Rule 3-10 "Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered."
The accounting policies used in the preparation of the guarantor financial statements are consistent with those found elsewhere in the accompanying unaudited consolidated financial statements. Intercompany transactions have been presented gross in the guarantor financial statements; however these transactions eliminate in consolidation.
We have reduced the amount for other intangible assets in the Subsidiary guarantors' column by $6.0 million in the following unaudited consolidating balance sheet as of December 31, 2011 to reclassify an intercompany elimination among subsidiary guarantors which had been incorrectly included within the Eliminations column.

18

NORANDA ALUMINUM HOLDING CORPORATION
Condensed Notes to Unaudited Consolidated Financial Statements

NORANDA ALUMINUM HOLDING CORPORATION
Consolidating Balance Sheet
March 31, 2012
(in millions)
(unaudited)
 
Parent guarantor
(Noranda HoldCo)
Issuer (Noranda
AcquisitionCo)
Subsidiary
guarantors
Subsidiary
non-guarantors
Eliminations
Consolidated
 
$
$
$
$
$
$
ASSETS
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
1.3

69.7

0.1

1.9


73.0

Accounts receivable, net:












Trade


132.8

3.6


136.4

Affiliates
21.8

11.9

0.3

24.0

(58.0
)

Inventories, net


190.2

25.4

(2.1
)
213.5

Prepaid expenses
0.2


2.9

6.4


9.5

Other current assets


5.7

6.9


12.6

Total current assets
23.3

81.6

332.0

68.2

(60.1
)
445.0

Investments in affiliates
353.2

1,486.2



(1,839.4
)

Advances due from affiliates

91.6

655.9

63.4

(810.9
)

Property, plant and equipment, net


637.9

58.8


696.7

Goodwill


137.6



137.6

Other intangible assets, net


65.6



65.6

Other assets

10.7

53.5

20.0


84.2

Total assets
376.5

1,670.1

1,882.5

210.4

(2,710.4
)
1,429.1

LIABILITIES AND EQUITY
 
 
 
 
 


Current liabilities:
 
 
 
 
 


Accounts payable:
 
 
 
 
 


Trade

1.3

95.7

8.6


105.6

Affiliates

21.8

24.0

12.2

(58.0
)

Accrued liabilities
0.3

5.0

31.1

19.5


55.9

Taxes payable
9.0


1.2

0.3


10.5

Derivative liabilities, net


35.2



35.2

Deferred tax liabilities
0.1

0.1

28.1



28.3

Current portion of long-term debt

3.3




3.3

Total current liabilities
9.4

31.5

215.3

40.6

(58.0
)
238.8

Long-term debt, net

594.6




594.6

Long-term derivative liabilities, net


0.3



0.3

Pension and other "OPEB" liabilities


161.2

7.5


168.7

Other long-term liabilities


35.8

10.9


46.7

Advances due to affiliates
155.4

655.5



(810.9
)

Long-term deferred tax liabilities
39.4

35.3

125.6

3.5

(2.1
)
201.7

Common stock subject to redemption
2.0





2.0

Shareholders’ equity:
 
 
 
 
 
 
Preferred stock






Common stock
0.7





0.7

Capital in excess of par value
230.5

352.1

1,199.7

83.7

(1,635.5
)
230.5

Retained earnings (accumulated deficit)
(7.3
)
54.7

195.6

60.8

(311.1
)
(7.3
)
Accumulated other comprehensive income (loss)
(53.6
)
(53.6
)
(51.0
)
(2.6
)
107.2

(53.6
)
Total shareholders' equity
170.3

353.2

1,344.3

141.9

(1,839.4
)
170.3

Non-controlling interest



6.0


6.0

Total equity
170.3

353.2

1,344.3

147.9

(1,839.4
)
176.3

Total liabilities and equity
376.5

1,670.1

1,882.5

210.4

(2,710.4
)
1,429.1


19

NORANDA ALUMINUM HOLDING CORPORATION
Condensed Notes to Unaudited Consolidated Financial Statements

NORANDA ALUMINUM HOLDING CORPORATION
Consolidating Balance Sheet
December 31, 2011
(in millions)
</
 
Parent guarantor
(Noranda HoldCo)
Issuer (Noranda
AcquisitionCo)
Subsidiary
guarantors
Subsidiary
non-guarantors
Eliminations
Consolidated
 
$
$
$
$
$
$
ASSETS
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
3.3

31.3

3.3

4.8


42.7

Accounts receivable, net:
 
 
 
 
 
 
Trade


102.5

5.1


107.6

Affiliates
21.7

11.9

0.7

21.6

(55.9
)

Inventories, net


163.5

24.3

(1.3
)
186.5

Prepaid expenses
0.2


6.4

6.7


13.3

Other current assets


33.2

8.1


41.3

Total current assets
25.2

43.2

309.6

70.6

(57.2
)
391.4