<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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 333-72245
GOLDEN NORTHWEST ALUMINUM, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Oregon 93-1249606
--------------------------------- ----------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
</TABLE>
3313 West Second Street
The Dalles, Oregon 97058
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
(541) 296-6161
----------------------------------------------------
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT NOVEMBER 13, 2000
----- --------------------------------
<S> <C>
Common Stock 1,000
</TABLE>
<PAGE> 2
This quarterly report on Form 10-Q also constitutes a quarterly report pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the following
subsidiaries of Golden Northwest Aluminum, Inc.:
<TABLE>
<CAPTION>
State of I.R.S. Employer
Commission file incorporation Identification
Company number or organization Number
------- --------------- --------------- --------------
<S> <C> <C> <C>
Goldendale Holding Company 333-72245-04 Delaware 91-1785763
Goldendale Aluminum Company 333-72245-05 Delaware 91-1380241
Northwest Aluminum Company 333-72245-02 Oregon 93-0905834
Northwest Aluminum Specialties, Inc. 333-72245-01 Oregon 93-1019176
Northwest Aluminum Technologies, LLC 333-72245-03 Washington 93-1196863
</TABLE>
The address of the principal executive offices for each of these entities is
3313 West Second Street, The Dalles, Oregon 97058 and their telephone number is
(541) 296-6161.
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 2000
--------- ---------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents ...................................................... $ 1,929 $ 1,939
Trade accounts receivable, less allowance for doubtful accounts of $100 ........ 54,752 46,436
Current portion of receivable due from related company ......................... 2,639 2,432
Inventories .................................................................... 65,618 78,778
Intercompany receivable ........................................................ 13,106 1,752
Prepaid expenses and other ..................................................... 666 1,546
Income taxes refundable ........................................................ 3,121 2,947
--------- ---------
Total current assets .................................................. 141,831 135,830
--------- ---------
Property, plant and equipment, net .................................................. 132,961 139,687
Goodwill, net of accumulated amortization of $14,241 and $17,710 ................... 81,348 75,305
Advances to shareholder ............................................................. 2,000 2,000
Receivable due from related company, less current portion ........................... 1,824 1,985
Other assets, net ................................................................... 10,667 8,893
--------- ---------
$ 370,631 $ 363,700
========= =========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt .............................................. $ 25,279 $ 41,593
Trade accounts payable ......................................................... 45,925 28,467
Accrued expenses ............................................................... 16,806 20,101
Deferred income taxes .......................................................... 1,583 --
--------- ---------
Total current liabilities ............................................. 89,593 90,161
--------- ---------
Long-term debt, less current portion ................................................ 170,000 170,000
Deferred income taxes ............................................................... 13,644 13,686
Deferred compensation notes payable ................................................. 662 305
Other long-term liabilities ......................................................... 1,825 1,838
Dividends payable ................................................................... 13,163 15,901
--------- ---------
Total liabilities ..................................................... 288,887 291,891
--------- ---------
Commitments and contingencies (Notes 5 and 6)
Preferred stock of subsidiary ....................................................... 29,663 29,663
Shareholder's equity:
Common stock; 350,000 shares authorized; 1,000 shares issued and
outstanding ................................................................. -- --
Additional paid-in capital ..................................................... 63,628 65,504
Accumulated deficit ............................................................ (11,547) (23,358)
--------- ---------
Total shareholder's equity ............................................ 52,081 42,146
--------- ---------
$ 370,631 $ 363,700
========= =========
</TABLE>
The accompanying notes to interim consolidated
financial statements are an integral part
of these statements.
1
<PAGE> 4
GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- ---------------------------
1999 2000 1999 2000
--------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C>
Revenues ................................................. $ 112,718 $ 101,017 $ 323,065 $ 330,279
Cost of revenues ......................................... 105,625 91,277 309,102 302,911
--------- --------- --------- ---------
Gross margin ............................................. 7,093 9,740 13,963 27,368
General and administrative expenses ...................... 3,615 6,521 12,234 14,716
--------- --------- --------- ---------
Operating income ......................................... 3,478 3,219 1,729 12,652
--------- --------- --------- ---------
Other income (expense):
Interest expense ...................................... (5,054) (5,561) (16,836) (17,390)
Other income (expense), net ........................... 82 (96) 607 (341)
--------- --------- --------- ---------
Net other expense ........................................ (4,972) (5,657) (16,229) (17,731)
--------- --------- --------- ---------
Loss before income taxes ................................. (1,494) (2,438) (14,500) (5,079)
Income tax expense (benefit) ............................. 846 580 (1,219) 2,118
--------- --------- --------- ---------
Net loss ................................................. $ (2,340) $ (3,018) $ (13,281) $ (7,197)
========= ========= ========= =========
Net loss ................................................. $ (2,340) $ (3,018) $ (13,281) $ (7,197)
Dividends accrued on preferred stock of subsidiary ....... (911) (914) (2,737) (2,737)
--------- --------- --------- ---------
Net loss available to common shareholder ................. $ (3,251) $ (3,932) $ (16,018) $ (9,934)
========= ========= ========= =========
Earnings (loss) per share - basic and diluted:
Net loss available to common shareholder .............. $ (3,251) $ (3,932) $ (16,018) $ (9,934)
========= ========= ========= =========
Net loss per share of common stock .................... $ (3,251) $ (3,932) $ (16,018) $ (9,934)
========= ========= ========= =========
Weighted average shares of common stock outstanding ... 1,000 1,000 1,000 1,000
========= ========= ========= =========
</TABLE>
The accompanying notes to interim consolidated
financial statements are an integral part
of these statements.
2
<PAGE> 5
GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1999 2000
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net loss ............................................................... $ (13,281) $ (7,197)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation and amortization ........................................ 16,271 17,907
Amortization of financing costs ...................................... 784 794
Provision for bad debts .............................................. -- 2,000
Loss on disposal of assets ........................................... 11 524
Deferred income taxes ................................................ (1,220) (315)
Change in assets and liabilities:
Trade accounts receivable ........................................ (3,672) 6,316
Inventories ...................................................... (5,308) (13,160)
Prepaid expenses ................................................. 66 468
Other assets ..................................................... (2,118) 962
Trade accounts payable ........................................... (5,250) (17,458)
Accrued expenses ................................................. (3) 3,295
Intercompany receivable .......................................... 4,145 11,354
Income taxes refundable .......................................... 2,257 174
Other liabilities ................................................ 64 13
--------- ---------
Net cash provided by (used in) operating activities ....................... (7,254) 5,677
--------- ---------
Cash flows from investing activities:
Acquisition of property, plant and equipment ........................... (26,218) (21,714)
Net payments from related company ...................................... 1,733 46
Proceeds from sale of equipment ........................................ 25 44
--------- ---------
Net cash used in investing activities ..................................... (24,460) (21,624)
--------- ---------
Cash flows from financing activities:
Borrowings under revolving credit facilities ........................... 31,733 303,922
Repayments under revolving credit facilities ........................... (28,625) (287,608)
Principal repayments of term loan facilities ........................... (17,472) --
Intercompany borrowings ................................................ 14,364 --
Deferred finance costs ................................................. (586) --
Principal payments on deferred compensation notes ...................... (277) (357)
--------- ---------
Net cash provided by (used in) financing activities ....................... (863) 15,957
--------- ---------
Net increase (decrease) in cash and cash equivalents ...................... (32,577) 10
Cash and cash equivalents, beginning of period ............................ 37,633 1,929
--------- ---------
Cash and cash equivalents, end of period .................................. $ 5,056 $ 1,939
========= =========
</TABLE>
Supplemental Disclosures of Cash Flow Information (Note 7)
The accompanying notes to interim consolidated
financial statements are an integral part
of these statements.
3
<PAGE> 6
GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION
The foregoing unaudited interim consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X as promulgated by the Securities and Exchange Commission.
Accordingly, these financial statements do not include all of the disclosures
required by generally accepted accounting principles for complete financial
statements. These unaudited interim consolidated financial statements should be
read in conjunction with the audited consolidated financial statements for the
year ended December 31, 1999. In the opinion of management, the unaudited
interim consolidated financial statements furnished herein include all
adjustments, all of which are of a normal recurring nature, necessary for a fair
statement of the results for the interim periods presented.
The preparation of financial statements in accordance with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities known to exist as of the date the financial
statements are published, and the reported amounts of revenues and expenses
during the reporting period. Uncertainties with respect to such estimates and
assumptions are inherent in the preparation of the Company's (defined below)
consolidated financial statements; accordingly, it is possible that the actual
results could differ from these estimates and assumptions, which could have a
material effect on the reported amounts of the Company's consolidated financial
position and results of operations.
Operating results for the three-month and nine-month periods ended
September 30, 2000 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2000.
2. OPERATIONS AND PRINCIPLES OF CONSOLIDATION
The operations of Golden Northwest Aluminum, Inc. (the "Company")
consist primarily of the smelting conversion of alumina to aluminum, processing
of aluminum into primary products, and the sale of those products within one
business segment. The Company's operating subsidiaries' smelting operations were
under tolling agreements with aluminum suppliers through December 1999. In
December 1999, Northwest Aluminum Company chose not to continue its tolling
arrangement and allowed it to expire. The Company's operations are located in
the Pacific Northwest on the Columbia River.
The Company was incorporated in the state of Oregon on June 3, 1998 for
the purposes of becoming the holding company of Northwest Aluminum Company,
Northwest Aluminum Specialties, Inc. (collectively "Northwest"), Goldendale
Holding Company and its wholly owned subsidiary, Goldendale Aluminum Company
(collectively "Goldendale"), and Northwest Aluminum Technologies, LLC
("Technologies"). The consolidated financial statements include the accounts of
Northwest, Goldendale and Technologies.
The Company, Goldendale and Technologies report on a calendar year
basis; Northwest reports on a September 30 fiscal year basis. Included in
current assets at December 31, 1999 is $13,106 and at
4
<PAGE> 7
GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE AMOUNTS)
September 30, 2000 is $1,752, representing the portion of intercompany advances
which do not eliminate due to the differing year-ends. All other significant
intercompany accounts and transactions have been eliminated.
3. EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 ("SFAS No. 133"), Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133 requires companies
to recognize all derivative contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. In June 2000, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 138 ("SFAS No. 138"), Accounting for Certain Derivative Instruments and
Certain Hedging Activities. If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is to match the
timing of gain or loss recognition on the hedging derivative with the
recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized as income in the period of
change. SFAS No. 133 and No. 138 are effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. The Company is currently analyzing the
financial impact (if any) that the adoption of SFAS No. 133 and No. 138 will
have on its consolidated financial statements.
4. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 2000
----------- ------------
<S> <C> <C>
Aluminum and tolling in process.................... $42,880 $49,954
Supplies and alloys ............................... 13,619 13,824
Carbon plant materials ............................ 5,414 4,200
Alumina ........................................... 3,705 10,800
------- -------
$65,618 $78,778
======= =======
</TABLE>
5
<PAGE> 8
GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE AMOUNTS)
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1999 2000
----------- ------------
<S> <C> <C>
First mortgage notes .............. $150,000 $150,000
Subordinated credit agreement ..... 20,000 20,000
Revolving credit facility ......... 25,279 41,593
-------- --------
Long-term debt .................... 195,279 211,593
Less current portion .............. 25,279 41,593
-------- --------
Long-term debt less current portion $170,000 $170,000
======== ========
</TABLE>
In December 1998, the Company issued $150 million of 12% first mortgage
notes due on December 15, 2006. Interest is payable semi-annually on June 15 and
December 15, commencing June 15, 1999. Payment of the notes is guaranteed by all
of the Company's subsidiaries. The debt is collateralized by substantially all
of the real property, plant and equipment of the Company's subsidiaries and by a
pledge of all of the issued and outstanding capital stock of the Company's
subsidiaries. On or after December 15, 2002 the notes are redeemable at the
option of the Company at specified redemption prices. There are no sinking fund
requirements. The indenture agreement limits principal payments on subordinated
debt, dividends or shareholder distributions, and investments in subsidiaries.
In connection with the issuance of the notes, each of the Company's direct and
indirect wholly owned subsidiaries has jointly and severally guaranteed the
notes on a full and unconditional basis.
The Company is a holding company with no independent operations or
assets other than those relating to its investments in its subsidiaries.
Separate financial statements of the subsidiary guarantors are not included
because the guarantees are full and unconditional, the subsidiary guarantors are
jointly and severally liable and the separate financial statements and other
disclosures concerning the subsidiary guarantors are not deemed material to
investors by management of the Company. No restrictions exist on the ability of
the subsidiary guarantors to make distributions to the Company, except, however,
the obligations of each guarantor under its guarantee are limited to the maximum
amount as will result in obligations of such guarantor under its guarantee not
constituting a fraudulent conveyance or fraudulent transfer for purposes of
bankruptcy law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law (e.g. adequate capital to pay
dividends under corporate laws).
In December 1998, the Company entered into a $75 million bank revolving
credit facility, which matures on December 20, 2003, and is collateralized by
inventory, accounts receivable and related intangibles, including a security
interest in the Company's tolling agreement. As specified in the credit
agreement, borrowings under the credit facility bear interest at a floating base
rate plus from 0.50% to 1.00% (10.5% at September 30, 2000) or the LIBOR rate
plus from 2.00% to 2.50% (9.12% at September 30, 2000). The additional margin is
dependent upon the ratio of consolidated earnings before interest, income taxes,
depreciation and amortization to consolidated interest expense. The credit
facility provides
6
<PAGE> 9
GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE AMOUNTS)
for the payment of a commitment fee of 0.50% per annum based on the unused
portion of the credit facility. The credit agreement contains restrictive
covenants, including a minimum net worth requirement, a minimum excess
availability requirement and limitations on capital expenditures, dividends,
additional indebtedness, mergers and other business combinations, asset sales,
encumbrances, investments and transactions with affiliates. The Company was in
compliance with these covenants at September 30, 2000.
Also in December 1998, the Company entered into a subordinated credit
agreement with Norsk Hydro USA, Inc. pursuant to which $20 million was borrowed.
The debt bears interest at LIBOR plus 2.00% (8.32% at September 30, 2000) and is
due in December 2005. The debt is secured by a second lien and a pledge on the
collateral securing the first mortgage notes and is guaranteed by the Company's
subsidiaries. Except for the collateral security, the guarantees by the
Company's subsidiaries are subordinate to the indebtedness under the bank
revolving credit facility. The credit agreement provides for additional
borrowings of $10 million on or prior to December 31, 2001.
On January 25, 1999, the Company terminated at no cost its then existing
interest rate swap agreements and entered into a new swap agreement that expires
in 2003. The fixed interest rate paid on the new swap is 6.4% and covers $20
million of notional principal amount of floating rate (LIBOR) indebtedness of
the Company. Although the Company is exposed to credit loss on the interest rate
swap in the event of nonperformance by the counterparties, the Company estimates
the likelihood of such nonperformance to be remote. At December 31, 1999 the
fair value of the interest rate swap was approximately $1,029, and at September
30, 2000 the fair value of the contract was approximately $35. These amounts
reflect the estimated amount that the Company would pay to terminate the
contract.
6. COMMITMENTS AND CONTINGENCIES
The Company, in the regular course of business, is involved in
investigations and claims by various regulatory agencies. The Company is also
engaged in various legal proceedings incidental to its normal business
activities. The Company's management does not believe that the ultimate
resolution of these investigations, claims and legal proceedings will have a
material effect on its financial position, results of operations or cash flows.
At September 30, 2000, the Company had a liability of approximately
$1,887 ($1,825 at December 31, 1999) for estimated environmental remediation
activities at Goldendale's facility. The Company's estimate of this liability is
based on a remediation study conducted by independent engineering consultants.
The total cost of remediation was estimated at $2,500; however, under a court
decree the Company is only responsible for approximately one-half of the total.
The remaining cost is the responsibility of prior owners. No accrual has been
provided for the Northwest facility as the Company is unaware of any current
condition which would give rise to remedial action.
7
<PAGE> 10
GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE AMOUNTS)
The Company has entered into various agreements for the purchase of
power, alumina and aluminum. The Company's agreements (included in the
commitment schedule) with the Bonneville Power Administration ("BPA") expire
October 2001. Subsequent to September 30, 2000, the Company entered into an
agreement with BPA to provide power through September 30, 2006. The Company is
renegotiating its alumina supply and tolling agreements. Future estimated
minimum payments under these noncancelable agreements are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ --------
<S> <C>
2000 ................................................. $ 83,990
2001 ................................................. 90,209
2002 ................................................. 31,429
2003 ................................................. 31,429
2004 ................................................. 31,429
2005 ................................................. 7,857
--------
$276,343
========
</TABLE>
7. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Supplemental disclosures of cash flow information are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1999 2000
------- -------
<S> <C> <C>
Cash paid during the period for:
Interest ............................................ $11,967 $11,992
Income taxes ........................................ -- 1,669
Non-cash investing and financing activities:
Dividends accrued on preferred stock ................ 2,737 2,737
Acquisition contingency accrual:
Goodwill .......................................... -- 2,574
Deferred income taxes ............................. -- 2,574
</TABLE>
8. SUBSEQUENT EVENTS
Beginning in late September 2000, the Company reduced smelter production
levels to 60% of capacity as a result of significant increases in the spot
market price of power. At reduced production levels, the Company will be able to
reshape or sell power contractually available under its existing power contracts
with the Bonneville Power Administration to minimize the effect of high market
power prices. In connection with this partial curtailment, the Company will
reduce its workforce and provide a severance package to employees that are
either voluntarily or involuntarily terminated. Costs related to the curtailment
and related workforce reduction will be accrued during the fourth quarter of
2000.
8
<PAGE> 11
GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE AMOUNTS)
9. NORTHWEST ALUMINUM COMPANY AND NORTHWEST ALUMINUM SPECIALTIES, INC. AND
GOLDENDALE HOLDING COMPANY AND SUBSIDIARY
Financial statements and financial statement schedules for Northwest and
Goldendale have been omitted because the 12% first mortgage notes issued by the
Company and its subsidiaries and registered under the Securities Act of 1933, of
which the subsidiaries are guarantors (thus subjecting them to the reporting
requirements under Section 13 or 15(d) of the Securities Exchange Act of 1934)
are fully and unconditionally guaranteed by the subsidiaries. Financial
information relating to these companies is presented herein in accordance with
Staff Accounting Bulletin 53 as an addition to the footnotes to the financial
statements of Golden Northwest Aluminum, Inc. Summarized unaudited financial
information is as follows:
Northwest Aluminum Company and Northwest Aluminum Specialties, Inc.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
----------------------------
1999 2000
--------- ---------
<S> <C> <C>
CONDENSED STATEMENT OF OPERATIONS:
Revenues:
Customers ........................................ $ 201,493 $ 182,368
Parent and related companies ..................... 330 62
--------- ---------
201,823 182,430
Cost of revenues ................................. 194,764 172,322
General and administrative expenses .............. 4,229 6,742
--------- ---------
Operating income ................................. 2,830 3,346
Net other expense ................................ (6,923) (9,653)
--------- ---------
Net loss ......................................... $ (4,093) $ (6,287)
========= =========
CONDENSED BALANCE SHEET:
Current assets ................................... $ 78,512 $ 92,165
Non-current assets ............................... 42,127 44,625
--------- ---------
Total assets ................................... $ 120,639 $ 136,790
========= =========
Current liabilities .............................. $ 41,460 $ 69,943
Non-current liabilities .......................... 66,856 66,872
Shareholder's equity ............................. 12,323 (25)
--------- ---------
Total liabilities and shareholder's equity ..... $ 120,639 $ 136,790
========= =========
</TABLE>
9
<PAGE> 12
GOLDEN NORTHWEST ALUMINUM, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES AND PER SHARE AMOUNTS)
Goldendale Holding Company and Subsidiary
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1999 2000
--------- ---------
<S> <C> <C>
CONDENSED STATEMENT OF OPERATIONS:
Revenues:
Customers ........................................... $ 121,572 $ 147,911
Parent and related companies ........................ 214 861
--------- ---------
121,786 148,772
Cost of revenues .................................... 115,527 131,512
General and administrative expenses ................. 7,791 7,702
--------- ---------
Operating income (loss) ............................. (1,532) 9,558
Net other expense ................................... (5,289) (6,975)
Income tax expense (benefit) ........................ (1,219) 2,118
--------- ---------
Net income (loss) ................................... $ (5,602) $ 465
========= =========
CONDENSED BALANCE SHEET:
Current assets ...................................... $ 44,773 $ 43,821
Non-current assets .................................. 181,298 177,273
--------- ---------
Total assets ..................................... $ 226,071 $ 221,094
========= =========
Current liabilities ................................. $ 39,476 $ 34,195
Non-current liabilities ............................. 132,614 139,721
Stockholder's equity ................................ 53,981 47,178
--------- ---------
Total liabilities and stockholder's equity ....... $ 226,071 $ 221,094
========= =========
</TABLE>
10
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This section should be read in conjunction with the financial statements
in Item 1, Part I, of this report.
OVERVIEW
The aluminum industry is highly cyclical, with market prices fluctuating
widely based on global supply and demand factors, most of which are beyond our
control. As shown below, for 1999, the average price per pound of aluminum on
the London Metal Exchange was approximately the same as for 1998, which was
lower than the average price in any of the three previous years. The average
three-month LME prices per pound of aluminum in each of the last five years were
as follows:
<TABLE>
<CAPTION>
Price Per
Year Ended December 31, Pound
----------------------- --------
<S> <C>
1995 ................................ $ 0.83
1996 ................................ $ 0.70
1997 ................................ $ 0.74
1998 ................................ $ 0.63
1999 ................................ $ 0.63
</TABLE>
The timing and magnitude of any increase or decrease in aluminum prices is
uncertain. As of September 30, 2000, the three-month LME price per pound of
aluminum was $.72, and more recently at October 31, 2000, LME prices have
fluctuated around $.67 per pound. Accordingly, we believe our cash flow and
earnings in the near term will be somewhat higher than amounts reported for
comparable prior periods.
Our cash flow and earnings are highly sensitive to aluminum prices
because production costs are largely fixed. At low market aluminum prices, we
are able to reduce some variable costs, but most of the production costs of
primary aluminum are constant in the short term (alumina, labor, carbon, power),
and therefore declines in market prices will cause declines in earnings.
Conversely, increased market aluminum prices will cause increases in earnings.
For these reasons we strive to maximize plant utilization, which reduces the
average cost per pound of aluminum.
We do not actively hedge our production. To reduce our reliance on
market-priced primary aluminum and to improve overall profitability, we have
pursued a strategy of increasing both our "tolled" and "non-tolled" value-added
production through specialty casting and processing operations. Through these
operations, we are able to realize premiums over market LME prices, the amount
of which varies with the degree of value-added content of the product and
uniqueness of the product in the marketplace. Our volume of value-added
production has increased significantly over the past decade relative to the
volume of our primary production. Our continued investment in value-added
production operations is designed to further increase our value-added production
capabilities. As a consequence of this strategy, our volume of non-tolled
value-added production at Northwest has grown from 153.7 million pounds in 1993
to 245.3 million pounds in 1999.
11
<PAGE> 14
Northwest chose not to renew its tolling agreement with Glencore after
December 1999, and instead use its smelter production to source the majority of
its material needs in its value-added business. The effect of this non-renewal
is the elimination of revenue and gross margin Northwest derived from tolling
aluminum for Glencore. This is more than offset by an increase in gross margin
from the sale of non-tolled products, because the underlying cost for primary
aluminum is Northwest's own production cost rather than the market price.
RECENT DEVELOPMENTS
Power prices in the Pacific Northwest are extremely high compared to
historic levels in the region and have greatly increased the operating costs of
the aluminum industry. In the past 5 months, 3 of the 10 aluminum smelters in
the region have shut down and 4 more have announced partial shut downs as a
result of these prices. Our existing power contracts with the Bonneville Power
Administration ("BPA") will require us to purchase power on the spot market in
the spring of 2001. After September 30, 2001, our power contracts with BPA and
other public utility districts are structured so that, through September 30,
2006, we will be required to purchase approximately 50% of our power
requirements from sources other than BPA. As a result of the extremely high
forward price of power on the spot market, over the course of the last three
months we have shut down one smelter line at each of our facilities, reducing
our overall smelter production level to 60% of capacity. We are able to reshape
our procurements of power from BPA, moving purchases of excess BPA power
resulting from the curtailment to periods in which we would otherwise be
required to procure power from other sources. We are also able to resell the
excess power provided to us by BPA at a profit on the spot market and purchase
blocks of spot market power to cover our needs during periods that are not
currently covered by our existing power contracts.
The production curtailment will continue until we believe the
combination of power prices and aluminum prices will enable us to produce
profitably. We have entered into agreements with the local public utility
districts ("PUDs") that serve the areas where our facilities are located, under
which the PUDs will supply up to 10 megawatts per year to each smelter at rates
based on BPA's rate for power sold to them. We also have entered into a
Memorandum of Understanding with National Energy Systems Company and BPA to
develop a gas-fired combined cycle combustion turbine power generation facility.
We expect this facility to be complete sometime in 2002. The new facility may
have the effect of lowering the price we pay for power.
We are renegotiating our arrangements with suppliers and customers in
connection with the curtailment of our operations. We are negotiating an
amendment to our tolling agreement with Hydro to reduce the volume of alumina
and aluminum covered by the contract. We are also negotiating an amendment of
our alumina supply contract with Glencore to allow us to purchase the required
quantity of alumina over a longer period. We expect to reduce our usage of other
raw materials, such as carbon and bath, in proportion to our reduced production
of primary aluminum. We are also negotiating with the United Steel Workers of
America, the union representing a majority of our employees, to provide
severance packages to employees who are terminated as a result of the
curtailment. Finally, we have been reorganizing our management structure, which
we believe will further reduce costs.
12
<PAGE> 15
As a result of the curtailment, we expect our variable costs, such as
the cost of power, to decrease. Because many of our costs are fixed, however,
our cost per unit of aluminum produced will increase. The curtailment will not
impact our value-added operations to the same extent as primary production. We
expect to increase value-added production at our Goldendale facility due to the
increased capacity of the casthouse there. As a result of selling excess power,
we expect our earnings before interest and taxes and our cash from operations to
increase in fiscal 2001. We do not assure you, however, that we will be able to
realize any increase in earnings before interest and taxes or cash from
operations.
RESULTS OF OPERATIONS
The following table sets forth the combined statement of income data as
a percentage of revenues for the three-month and the nine-month periods ended
September 30, 1999 and 2000.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------- ---------------------
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1999 2000 1999 2000
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues .......................... 100.0% 100.0% 100.0% 100.0%
Cost of revenues .................. 93.7% 90.4% 95.7% 91.7%
----- ----- ----- -----
Gross margin ...................... 6.3% 9.6% 4.3% 8.3%
General and administrative expenses 3.2% 6.4% 3.8% 4.5%
----- ----- ----- -----
Operating income .................. 3.1% 3.2% 0.5% 3.8%
Interest expense .................. (4.5)% (5.5)% (5.2)% (5.3)%
Other income (expense), net ....... 0.1% (0.1)% 0.2% (0.1)%
----- ----- ----- -----
Net other expenses ................ (4.4)% (5.6)% (5.0)% (5.4)%
----- ----- ----- -----
Loss before income taxes .......... (1.3)% (2.4)% (4.5)% (1.6)%
Income tax expense (benefit) ...... 0.8% 0.6% (0.4)% 0.6%
----- ----- ----- -----
Net loss .......................... (2.1)% (3.0)% (4.1)% (2.2)%
===== ===== ===== =====
</TABLE>
THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THE THREE
MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2000
Total revenues decreased from $112.7 million to $101.0 million in the
three months ended September 30, 1999 and September 30, 2000, respectively, a
decrease of $11.7 million, or 10.4%. Total revenues increased from $323.1
million to $330.3 million in the nine months ended September 30, 1999 and
September 30, 2000, respectively, an increase of $7.2 million, or 2.2%. Revenues
were primarily influenced by the cessation of the Glencore tolling agreement, by
changes in the market price of aluminum and by production and shipped volumes.
The cessation of the Glencore tolling agreement eliminated approximately
0.5 million pounds per day of production billable under tolling arrangements
beginning January 1, 2000. Because of Northwest's September 30 year-end, the
impact on the Company's consolidated financial statements was reported
13
<PAGE> 16
beginning April 1, 2000. For the three months ended September 30 tolling
revenues decreased $17.6 million from 1999 to 2000 and for the nine months ended
September 30 tolling revenues decreased $35.0 million from 1999 to 2000 due to
the cessation of this agreement. Tolling revenues continued to be earned under
the Company's Hydro tolling contract and were $44.1 million and $47.1 million
for the three-month periods, and $121.6 million and $147.9 million for the
nine-month periods, ended September 30, 1999 and September 30, 2000,
respectively. Total revenues from tolling agreements decreased from $61.7
million to $47.1 million in the three months ended September 30, 1999 and
September 30, 2000, respectively, a decrease of $14.6 million, or 23.7%. Tolling
revenues decreased from $177.3 million to $168.6 million for the nine months
ended September 30, 1999 and September 30, 2000, respectively, a decrease of
$8.7 million, or 4.9%.
Volumes produced under tolling contracts decreased from 133.5 million
pounds to 85.6 million for the three months ended September 30, 1999 and
September 30, 2000, respectively, and decreased from 393.4 million pounds to
308.6 million pounds for the nine months ended September 30, 1999 and September
30, 2000, respectively. Other than the decrease due to the non-renewal of the
Glencore tolling agreement, the changes in production level under tolling
arrangements were due primarily to the cyclical nature of our cell relining
activity. Volume changes, excluding the impact of the cessation of the Glencore
tolling agreement, caused revenues from tolling to decrease by $1.3 million for
the three months ended September 30, 2000 over the same period ended September
30, 1999 and caused revenues from tolling to increase by $4.0 million for the
nine months ended September 30, 2000 over the same period ended September 30,
1999.
Offsetting the impact of volume changes, increases in average effective
LME aluminum prices from $.68 per pound to $.75 per pound for the three months
ended September 30, 1999 and September 30, 2000, respectively, pushed revenues
from tolling contracts upward by $4.3 million. The average effective LME
aluminum prices for the nine months ended September 30, 1999 and September 30,
2000 were $.63 per pound and $.76 per pound, respectively, causing a $38.1
million increase in revenues from tolling contracts.
Sales of non-tolled products increased from $51.0 million to $53.9
million in the three months ended September 30, 1999 and September 30, 2000,
respectively, and increased from $145.8 million to $161.7 million for the nine
months ended September 30, 1999 and September 30, 2000, respectively. The
primary factors affecting revenues from sales of non-tolled products were the
rise in market prices of aluminum and changes in volumes shipped.
Shipments of non-tolled aluminum products were 67.7 million pounds and
67.2 million pounds in the three months ended September 30, 1999 and September
30, 2000, respectively. For the nine-month periods ended September 30, shipments
of non-tolled aluminum products increased from 197.0 million pounds for 1999 to
205.5 million pounds in 2000. These changes in volumes decreased revenues $0.4
million for the three-month periods and increased revenues $6.7 million for the
nine-month periods. The 4.3% increase in shipments for the nine-month periods
ended September 30 was due primarily to the continuing strength of the economy
and the Company's pursuit of value added markets.
In addition to the impact from changes in volume, an increase in average
selling price of $.05 per pound because of the overall rise in the market price
of aluminum provided increases in non-tolling
14
<PAGE> 17
revenues. For the three-month periods the positive impact from price was $3.3
million and for the nine-month periods the positive impact was $9.2 million.
Cost of revenues decreased from $105.6 million to $91.3 million in the
three months ended September 30, 1999 and September 30, 2000, respectively, a
decrease of $14.3 million, or 13.6%. Cost of revenues decreased from $309.1
million to $302.9 million in the nine months ended September 30, 1999 and
September 30, 2000, respectively, a decrease of $6.2 million, or 2.0%. As a
percentage of revenues, cost of revenues declined from 93.7% to 90.4% for the
three-month periods and declined from 95.7% to 91.7% for the nine-month periods
ended September 30. The primary influences on cost of revenues were the
cessation of the Glencore tolling agreement, changes in market aluminum prices
and increases in power costs.
Beginning January 1, 2000, the cessation of the Glencore tolling
agreement enabled us to utilize our Northwest smelting capacity to provide
material for our sales of non-tolled value-added product. This eliminated $18.2
million of cost of revenues related to tolling activities for the three months
ended September 30, 2000 and eliminated $36.2 million of cost of revenues
related to tolling for the nine months ended September 30, 2000. In addition,
the cost of materials for approximately 75% of our non-tolled value-added
product is now at our internal smelter production cost instead of market
aluminum prices, reducing our costs of revenues by $6.8 million for the three
months and $13.6 million for the nine-months ended September 30, 2000 compared
to the same periods in 1999.
The increased market price of aluminum from 1999 to 2000 resulted in an
increase in our purchased metal costs of $1.1 million for the comparative three
month periods ended September 30. For the nine month periods ended September 30,
the increased market price of aluminum resulted in our purchased metal costs
increasing for the comparative periods by $5.9 million.
For the three-month periods ended September 30, power costs increased
$0.4 million from $19.8 million in 1999 to $20.2 million in 2000. For the
nine-month periods ended September 30, they increased $9.7 million from $61.1
million in 1999 to $70.8 million in 2000. The increases resulted from increases
in the market price of power.
Gross margin increased from $7.1 million in the three months ended
September 30, 1999 to $9.7 million in the three months ended September 30, 2000,
an increase of 36.6%. Gross margin increased from $14.0 million in the nine
months ended September 30, 1999 to $27.4 million in the nine months ended
September 30, 2000, an increase of 95.7%. As a percentage of revenues, gross
margin rose from 6.3% to 9.6% for the three month periods, and rose from 4.3% to
8.3% for the nine month periods, ended September 30, 1999 and 2000,
respectively. The increase in gross margin resulted primarily from the changes
in revenues and cost of revenues (discussed above).
General and administrative expenses increased from $3.6 million to $6.5
million in the three months ended September 30, 1999 and September 30, 2000,
respectively, an increase of 80.4%. General and administrative expenses
increased from $12.2 million to $14.7 million for the nine months ended
September 30, 1999 and September 30, 2000, respectively, an increase of 20.5%.
As a percentage of revenues, general and administrative expenses increased from
3.2% to 6.4% for the related three-month periods, and increased from 3.8% to
4.5% for the related nine-month periods. The increases resulted
15
<PAGE> 18
primarily from the recognition of a $2.0 million provision for the possible
non-collection of an account receivable.
Interest expense increased from $5.1 million to $5.6 million in the
three months ended September 30, 1999 and September 30, 2000, respectively.
Interest expense increased from $16.8 million to $17.4 million in the nine
months ended September 30, 1999 and September 30, 2000, respectively. The
increase from 1999 to 2000 is due to increased borrowings under the revolving
credit facility.
Income tax expense was $0.9 million and $0.6 million in the three months
ended September 30, 1999 and September 30, 2000, respectively. Income tax
benefit decreased from $1.2 million to an income tax expense of $2.1 million for
the nine months ended September 30, 1999 and September 30, 2000, respectively.
These changes were due primarily to changes in taxable income or loss in the
corresponding periods in 1999 and 2000.
As a result of the foregoing factors, we reported a net loss of $3.0
million in the three months ended September 30, 2000 versus a net loss of $2.3
million in the three months ended September 30, 1999. For the nine months ended
September 30, 2000, we reported a net loss of $7.2 million, versus a net loss of
$13.3 million for the nine months ended September 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Historically, our cash and capital requirements have been satisfied
through cash generated from operating activities and borrowings under our
primary credit facilities.
Our credit facility with Fleet Capital (previously BankBoston) is a
$75.0 million senior secured revolving credit facility collateralized by all of
the inventory, accounts receivable and other rights to payment of our
subsidiaries. Availability under the revolving line of credit is controlled by a
borrowing base formula based on eligible receivables and inventory, and there
must always be at least $15 million excess borrowing base available at any given
time. Based on this formula, the net availability under the revolving line of
credit was $67.7 million at September 30, 2000, and we had $41.6 million
outstanding under this credit facility at September 30, 2000. More recently at
October 31, 2000, the net availability under the revolving line of credit was
$70.4 million and we had $45.6 million outstanding.
Our liquidity and capital needs relate primarily to payment of principal
and interest on borrowings, capital expenditures, including our facilities
investment program, and distributions to our sole shareholder to pay income
taxes. Subject to reasonable market aluminum prices, we will require
approximately $9.9 million in 2000 for our facilities investment program. The
first stage of the facilities investment program consisting of an expansion of
the Goldendale casthouse and a 34-cell demonstration of new cell line technology
should be substantially completed by the end of 2000. Our liquidity and capital
needs also relate to working capital and other general corporate requirements,
including the incremental working capital needs in connection with the cessation
of the Glencore tolling agreement in December 1999. Additionally, the Goldendale
preferred stock became redeemable at our discretion after December 31, 1998. We
anticipate that the funds necessary to redeem the Goldendale preferred stock
would be drawn
16
<PAGE> 19
from our revolving credit facility with Fleet. Furthermore, we are subject to a
number of contingencies and uncertainties.
Our statement of cash flows for the periods indicated are summarized
below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1999 2000
-------- --------
<S> <C> <C>
Net cash provided by (used in) operating activities $ (7,254) $ 5,677
Net cash used in investing activities (24,460) (21,624)
Net cash provided by (used in) financing activities (863) 15,957
Increase (decrease) in cash (32,577) 10
</TABLE>
The net cash provided by operating activities was $5.7 million for the
nine months ended September 30, 2000, and the net cash used in operating
activities was $7.3 million for the nine months ended September 30, 1999. Of the
net cash provided by operating activities during the nine months ended September
30, 2000, $11.7 million was attributable to cash provided by our net income, as
adjusted for non-cash charges. In addition, changes in working capital used net
cash of $6.0 million. The increase in working capital was primarily due to the
transition from the Glencore tolling arrangement with related impacts on trade
accounts receivable, inventories and trade accounts payable. Of the net cash
used in operating activities during the nine months ended September 30, 1999,
$2.6 million was attributable to cash provided by our net loss, as adjusted for
non-cash charges. In addition, changes in working capital used net cash of $9.9
million. The increase in working capital requirements was due to the
normalization of credit terms with a primary supplier.
Net cash used in investing activities was $21.6 million and $24.5
million in the nine months ended September 30, 2000 and September 30, 1999,
respectively. Cash used in investing activities in the nine months ended
September 30, 2000 was primarily attributable to capital expenditures of $21.7
million. Cash used in investing activities in the nine months ended September
30, 1999 was primarily attributable to capital expenditures of $26.2 million.
Net cash provided by financing activities was $16.0 million in the nine
months ended September 30, 2000, compared to net cash used in financing
activities of $0.9 million in the nine months ended September 30, 1999. Net cash
provided by financing activities in the nine months ended September 30, 2000 was
primarily attributable to net borrowings of $16.3 million under our revolving
credit facility.
We believe cash flow from curtailed operations and the sale of the
resulting excess electrical power, available borrowings under our revolving
credit facility and under our note purchase agreement with Hydro and cash on
hand will provide adequate funds for our foreseeable working capital needs,
planned capital expenditures and debt service and other obligations through
2001.
17
<PAGE> 20
Our ability to fund operations, make planned capital expenditures, such
as our facilities investment program, make principal and interest payments on
the notes, and remain in compliance with all of the financial covenants under
our debt agreements will be dependent on our future operating performance. Our
future operating performance is dependent on a number of factors, including
aluminum prices and power costs, many of which are beyond our control. These
factors include prevailing economic conditions and financial, competitive,
regulatory and other factors affecting our business and operations, and may be
dependent on the availability of borrowings under our revolving credit facility
or other borrowings. We do not assure you our cash flow from operations,
together with other sources of liquidity, will be adequate:
- to make required payments of principal and interest on the notes and our
other debt;
- to finance anticipated capital expenditures;
- to fund working capital requirements; or
- to fund the possible redemption of all outstanding shares of the Goldendale
preferred stock.
If we do not have sufficient available resources to repay any of our
indebtedness when it becomes due and payable, we may need to refinance the
indebtedness. We do not assure you refinancing will be available or available on
reasonable terms.
SEASONALITY AND INFLATION
Our results of operations can be affected by seasonal factors, such as
substantial increases in the cost of electricity in the fall and winter. We do
not believe inflation has had a material effect on the combined financial
statements for the periods presented.
EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 ("SFAS No. 133"), Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133 requires companies
to recognize all derivative contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. In June 2000, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 138 ("SFAS No. 138"), Accounting for Certain Derivative Instruments and
Certain Hedging Activities. If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is to match the
timing of gain or loss recognition on the hedging derivative with the
recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized as income in the period of
change. SFAS No. 133 and No. 138 are effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. We are currently analyzing the financial
impact, if any, that the adoption of SFAS No. 133 and No. 138 will have on our
consolidated financial statements.
18
<PAGE> 21
FORWARD-LOOKING STATEMENTS
This report contains statements which constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements appear in a number of places in this report (see, for
example, "-Overview," "-Recent Developments," "-Results of Operations," and
"-Liquidity and Capital Resources"). Such statements can be identified by the
use of forward looking terminology such as "believes," "expects," "may,"
"estimates," "will," "should," "plans," or "anticipates" or comparable
terminology, or by discussions of strategy. Readers are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
significant risks and uncertainties, and that actual results may vary materially
from those in the forward-looking statements as a result of various factors.
These factors include the following:
- fluctuations in the price of primary aluminum;
- fluctuations in the cost of electricity;
- servicing our substantial indebtedness;
- the incurrence of future indebtedness;
- restrictions on our ability to operate our business imposed by the terms of
our indebtedness;
- the effects of federal and state environmental laws and regulations;
- the continued viability of the technology used in our smelters;
- our ability to operate effectively without tolling agreements, including the
Glencore tolling agreement;
- retaining and recruiting key personnel; and
- changes in labor relations with the unions representing our employees.
Other factors include the effectiveness of management's strategies and
decisions, general economic and business conditions, developments in technology,
new or modified statutory or regulatory requirements, and changing prices and
market conditions. No assurance can be given that these are all of the factors
that could cause actual results to vary materially from the forward-looking
statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We manage interest rate risk through the strategic use of fixed and
variable interest rate debt and, to a limited extent, interest rate derivatives.
At September 30, 2000, our derivative instrument consisted of an interest rate
swap agreement which expires in 2003 and effectively fixes our interest rate at
6.4% on
19
<PAGE> 22
a notional principal amount of $20.0 million on our floating rate long-term
debt. The agreement requires quarterly cash settlements for interest rate
fluctuation outside of the fixed rate.
20
<PAGE> 23
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1 Amendment No. 3 to Power Sale Agreement, dated September
28, 1995, between the United States of America
Department of Energy acting by and through the
Bonneville Power Administration and Northwest.
10.2 Amendment No. 4 to Power Sale Agreement, dated September
18, 1995, between the United States of America
Department of Energy acting by and through the
Bonneville Power Administration and Goldendale.
27.1 Financial Data Schedule.
(b) Reports on form 8-K.
No reports on Form 8-K were filed during the period.
21
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GOLDEN NORTHWEST ALUMINUM, INC.
NORTHWEST ALUMINUM COMPANY
NORTHWEST ALUMINUM SPECIALTIES, INC.
Date: November 13, 2000 By: /s/ WILLIAM R. REID
--------------------------
William R. Reid
Chief Financial Officer
GOLDENDALE HOLDING COMPANY
GOLDENDALE ALUMINUM COMPANY
NORTHWEST ALUMINUM TECHNOLOGIES, LLC
Date: November 13, 2000 By: /s/ JESSIE CASSWELL
--------------------------
Jessie Casswell
Chief Financial Officer
22
<PAGE> 25
EXHIBIT INDEX
10.1 Amendment No. 3 to Power Sale Agreement, dated September 28,
1995, between the United States of America Department of Energy
acting by and through the Bonneville Power Administration and
Northwest.
10.2 Amendment No. 4 to Power Sale Agreement, dated September 18,
1995, between the United States of America Department of Energy
acting by and through the Bonneville Power Administration and
Goldendale.
27.1 Financial Data Schedule.
