| • FORM 10-Q • EXHIBIT 12.1 • EXHIBIT 31.1 • EXHIBIT 31.2 • EXHIBIT 32.1 • EXHIBIT 95.1 • XBRL INSTANCE DOCUMENT • XBRL TAXONOMY EXTENSION SCHEMA DOCUMENT • XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT • XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT • XBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENT • XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENT | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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 June 30, 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)
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):
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 July 20, 2012, there were 67,690,078 shares of Noranda common stock outstanding. 1 NORANDA ALUMINUM HOLDING CORPORATION TABLE OF CONTENTS 2 Part I. FINANCIAL INFORMATION
NORANDA ALUMINUM HOLDING CORPORATION CONSOLIDATED BALANCE SHEETS (in millions, except par value) (unaudited)
See accompanying notes 3 NORANDA ALUMINUM HOLDING CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share information) (unaudited)
See accompanying notes NORANDA ALUMINUM HOLDING CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) (unaudited)
See accompanying notes 4 NORANDA ALUMINUM HOLDING CORPORATION CONSOLIDATED STATEMENTS OF EQUITY (in millions) (unaudited)
See accompanying notes 5 NORANDA ALUMINUM HOLDING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (unaudited)
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. 6 NORANDA ALUMINUM HOLDING CORPORATION Condensed Notes to Unaudited Consolidated Financial Statements The following tables present operating and asset information for our reportable segments (in millions):
7 NORANDA ALUMINUM HOLDING CORPORATION Condensed Notes to Unaudited Consolidated Financial Statements
8 NORANDA ALUMINUM HOLDING CORPORATION Condensed Notes to Unaudited Consolidated Financial Statements
9 NORANDA ALUMINUM HOLDING CORPORATION Condensed Notes to Unaudited Consolidated Financial Statements
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): 10 NORANDA ALUMINUM HOLDING CORPORATION Condensed Notes to Unaudited Consolidated Financial Statements
Cash paid for interest and income taxes was as follows (in millions):
Purchases of property, plant and equipment accrued in accounts payable and not yet paid were $5.6 million and $3.0 million for the six months ended June 30, 2012 and 2011, respectively, and were not reflected as capital expenditures in the unaudited consolidated statements of cash flows. For the six months ended June 30, 2012 and 2011, we capitalized interest of $0.6 million and $0.3 million, respectively, related to long-term capital projects. During second quarter 2012, we received net proceeds of $4.5 million upon the sale of idle mill equipment from our Flat Rolled Products segment. This gain is included in (gain) loss on disposal of assets in the unaudited consolidated statement of cash flows for the six months ended June 30, 2012. Gains and losses on disposal of assets are reported net as a component of selling, general and administrative expenses in the accompanying unaudited statements of operations. Consolidated statements of equity: Changes in accumulated other comprehensive income (loss) ("AOCI") were as follows (in millions):
Consolidated balance sheets: Cash and cash equivalents consisted of the following (in millions):
11 NORANDA ALUMINUM HOLDING CORPORATION Condensed Notes to Unaudited Consolidated Financial Statements Accounts receivable, net, consisted of the following (in millions):
Other current assets consisted of the following (in millions):
Other assets consisted of the following (in millions):
Accrued liabilities consisted of the following (in millions):
12 NORANDA ALUMINUM HOLDING CORPORATION Condensed Notes to Unaudited Consolidated Financial Statements Other long-term liabilities consisted of the following (in millions):
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):
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 2012 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 second 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 June 30, 2012 and December 31, 2011, respectively. Inventories, net, consisted of the following (in millions):
6. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, net, consisted of the following (in millions):
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("UAWU"); the Union of Technical, Administrative and Supervisory Personnel ("UTASP"); and the Bustamante Industrial Trade Union ("BITU").
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 permits necessary to support increases in production volumes at our smelter. 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 December 31, 2011, other current assets (see Note 3, "Supplemental Financial Statement Information" to our accompanying unaudited condensed consolidated financial statements) included $30.1 million, held in escrow related to these appeals, with a corresponding liability recorded in accrued liabilities. We had no disputed amounts held in escrow as of June 30, 2012. 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 during first quarter 2012. 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. 8. LONG-TERM DEBT The carrying values and fair values of our outstanding debt were as follows (in millions):
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." We are required to repay $0.8 million of the 2012 Term B Loan quarterly. 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. The 2012 Refinancing and the 2012 Tender Offer resulted in a $169.4 million increase in our outstanding indebtedness. 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 June 30, 2012, we had $321.9 million outstanding under the 2012 Term B Loan, which is recorded in our accompanying unaudited consolidated balance sheet net of $2.3 million of unamortized discount. The 2012 Revolver had no outstanding balance and outstanding letters of credit totaled $36.1 million at June 30, 2012. Availability under the 2012 Revolver is subject to a calculated borrowing base, which totaled $165.5 million as of June 30, 2012. 9. ASSET RETIREMENT AND OTHER 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):
Land Obligation In cases where land to be mined is privately owned, St. Ann acquires the right to mine either through a purchase of the land or by compensating the owner for disturbing the owner's surface rights. In the case of a purchase of the land, the consideration is typically cash and or a commitment to resettle the Owner to another area ("St. Ann Land Obligation"). Additional consideration is paid for crops, homes, and other structures that may exist on the land but which may be destroyed or damaged by the mining activities. Our St. Ann Land Obligation activity follows (in millions): 13 NORANDA ALUMINUM HOLDING CORPORATION Condensed Notes to Unaudited Consolidated Financial Statements
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):
As of June 30, 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 June 30, 2012 and December 31, 2011, we had undiscounted liabilities of $1.8 million and $1.9 million, respectively, in accrued liabilities and $2.2 million, in other long-term liabilities at each period end, for remediation of Gramercy’s known environmental conditions. Approximately $0.8 million of the recorded liability represents monitoring costs which will be incurred ratably over a 30 year period. The remainder is related to clean-up costs expected to be incurred between 2012 and 2014. 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. Net periodic benefit costs related to the pension plans included the following (in millions):
14 NORANDA ALUMINUM HOLDING CORPORATION Condensed Notes to Unaudited Consolidated Financial Statements
Net periodic benefit costs related to the OPEB plans included the following (in millions):
Expected Employer Contributions We contributed $14.6 million and $0.3 million to the Noranda Pension Plans and the St. Ann Pension Plans, respectively, during the six months ended June 30, 2012. We are currently evaluating our pension funding for the remainder of 2012 in light of recent legislation. 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 June 30, 2012, we had 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 less than one year. As of June 30, 2012, our outstanding fixed-price aluminum customer contracts were as follows: 15 NORANDA ALUMINUM HOLDING CORPORATION Condensed Notes to Unaudited Consolidated Financial Statements
As of June 30, 2012, our outstanding variable-price aluminum offset swaps were as follows:
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 June 30, 2012, our outstanding natural gas swaps were as follows:
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. In May 2012, we set fixed prices for an additional 3.0 million BTUs for the remaining anticipated usage through December 2012. We record these contracts as derivatives, based on the fair value of the Henry Hub Index. As of June 30, 2012, 7.1 million BTUs remain hedged. 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):
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):
16 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):
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.
The following table presents the net amount of unrealized gains (losses) on cash flow hedges as of June 30, 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):
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. The following table presents how our hedging activities affected our unaudited consolidated statements of operations for each period (in millions): 17 NORANDA ALUMINUM HOLDING CORPORATION Condensed Notes to Unaudited Consolidated Financial Statements
12. SHAREHOLDERS' EQUITY Dividends declared and paid during the six months ended June 30, 2012 were as follows:
On July 24, 2012, the Board declared a regular quarterly dividend of $0.04 per share to be paid on August 29, 2012 to shareholders of record as of August 6, 2012. Cash payments related to this dividend will total approximately $2.7 million 13. SHARE-BASED PAYMENTS We recorded stock compensation expense as follows (in millions): 18 NORANDA ALUMINUM HOLDING CORPORATION Condensed Notes to Unaudited Consolidated Financial Statements
Share-based payment awards held by employee and non-employee directors include stock options, restricted stock, and restricted stock units ("RSUs"). Restricted stock and RSU 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 five 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 and of 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. 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 dividends in first and second quarter 2012. 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 June 30, 2012, total unrecognized stock compensation expense related to share-based payment awards was $6.8 million. We will recognize this amount over a weighted-average period of 1.5 years. We have not yet recognized stock compensation expense for performance-vesting restricted stock or RSUs because the performance conditions had not been determined as of June 30, 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:
Options that were not in-the-money at December 31, 2011 and June 30, 2012, and therefore have a negative intrinsic value, have been excluded from intrinsic value calculations. Restricted stock and RSU equity award activity was as follows: 19 NORANDA ALUMINUM HOLDING CORPORATION Condensed Notes to Unaudited Consolidated Financial Statements
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 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 June 30, 2012, because the performance conditions had not yet been determined. As of December 31, 2011, our accrued liabilities in the accompanying unaudited consolidated balance sheets included $0.2 million related to RSU liability awards. At June 30, 2012, the fair value of non-vested RSU liability awards was immaterial. RSU liability award activity was as follows:
14. NET INCOME PER COMMON SHARE Basic and diluted net income per common share ("EPS") were calculated as follows (in millions, except per share):
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