Kaiser Aluminum Reports First Quarter 2007 Financial Results
-- Operating income for fabricated products was $41 million
-- Record heat treat plate shipments for fifth consecutive quarter driven by strength in demand for aerospace and defense applications
-- Trentwood expansion on schedule
FOOTHILL RANCH, Calif.--(BUSINESS WIRE)--
Kaiser Aluminum Corporation (NASDAQ:KALU) today reported net income of $17 million for the first quarter 2007, which is net of an income tax provision of $16 million, approximately $11 million of which is non-cash. The non-cash tax provision is recorded despite the existence of significant net operating loss carryforwards and other tax attributes, the benefits of which are reflected in stockholder equity in accordance with fresh start accounting. This compares to $38 million of net income for the same period in 2006.
Net sales for the first quarter of 2007 increased 17 percent to $392 million, compared to $336 million for the first quarter of 2006. The increase is attributable to the pass-through to customers of significantly higher metal prices as well as improved value-added pricing in fabricated products.
"The company continues to deliver strong results, led by robust demand for aerospace and defense applications partially offset by soft demand in ground transportation and other industrial applications for fabricated products," said Jack A. Hockema, chairman, president, and CEO of Kaiser Aluminum.
Fabricated Products - Operating income in fabricated products was $41 million for the first quarter of 2007. In the prior year quarter, operating income of $45 million included $9 million of favorable non-run-rate items.
Strong shipments for aerospace and defense applications in the first quarter of 2007 contributed to a richer product mix. Value-added pricing was also favorable. The positive income impact from favorable mix and improved value-added pricing was partially offset by soft demand in ground transportation and other industrial applications for fabricated products as well as adverse cost performance. In addition, operating income improved approximately $2 million due to lower depreciation resulting from the company's implementation of fresh start accounting.
"Strong demand coupled with recently-added capacity enabled record heat treat plate shipments for the fifth consecutive quarter," added Hockema. "The first two heat treat plate furnaces in the Trentwood expansion are fully operational. The project remains on schedule, and in early 2008 we expect the new stretcher and third heat treat furnace to provide additional product capabilities and further increase capacity."
Primary Products - Operating income in the primary products segment was $4 million for the first quarter of 2007, compared to $9 million for the same period of 2006. The 2007 result included non-run-rate mark-to-market losses of $4 million, which was $9 million unfavorable when compared to the same period in 2006. Favorable impacts from higher primary aluminum prices were partially offset by higher alumina costs.
Kaiser Aluminum will host a conference call for investors, analysts and news media that will be accessible live via the Internet to discuss first quarter results. Interested parties are welcome to listen today at 10:00 a.m. PDT by navigating to the following URL: http://investors.kaiseraluminum.com/events.cfm. A copy of a presentation will be available for download shortly prior to the start of the call. An archive of the call will be available shortly thereafter at the same location for 30 days.
Kaiser Aluminum is a leading producer of fabricated aluminum products for aerospace and high-strength, general engineering, and automotive and custom industrial applications. The company has more than 2,000 employees and 11 plants in North America and produces more than 500 million pounds annually of value-added sheet, plate, extrusions, forgings, rod, bar and tube. For more information, please see www.kaiseraluminum.com.
F-1070
This press release contains statements based on management's current expectations, estimates and projections that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 involving known and unknown risks and uncertainties that may cause actual results, performance or achievements of the company to be materially different from those expressed or implied. Kaiser Aluminum cautions that such forward-looking statements are not guarantees of future performance or events and involve significant risks and uncertainties, and that actual events may vary materially from those expressed or implied in the forward-looking statements as a result of various factors. These factors include: (a) changes in economic or aluminum industry business conditions generally, including global supply and demand conditions; (b) changes in the markets served by the company, including aerospace, defense, general engineering, automotive, distribution and other markets; (c) the company's ability to complete its expansion projects as planned and by targeted completion dates; (d) the company's ability to meet contractual commitments and obligations to supply products meeting required specifications; (e) customer performance; (f) changes in competitive factors in the markets served by the company; (g) developments in technology used by the company, its competitors or its customers; (h) changes in accounting that may affect the company's reported earnings, operating income or results; and (i) other risk factors summarized in the company's reports filed with the Securities and Exchange Commission, including the company's Form 10-K for the year ended December 31, 2006. As more fully described in these reports, "non-run-rate" items are items that, while they may occur from period to period, are particularly material to results, impact costs as a result of external market factors and may not occur in future periods if the same level of underlying performance were to occur. All information in this release is as of the date of the release. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME(1)
(Unaudited)
(In millions of dollars except share and per share amounts)
Predecessor
Quarter Quarter
Ended Ended
March 31, March 31,
2007 2006
------------ ------------
Net sales $392.2 $336.3
------------ ------------
Costs and expenses:
Cost of products sold 337.1 272.2
Depreciation and amortization 2.6 4.8
Selling, administrative, research and
development, and general(2) 19.0 15.3
Other operating (benefits) charges, net(3) 1.2 --
------------ ------------
Total costs and expenses 359.9 292.3
------------ ------------
Operating income 32.3 44.0
Other income (expense):
Interest expense (excluding unrecorded
contractual interest expense of $23.7 for
the quarter ended March 31, 2006) (.6) (.8)
Reorganization items -- (6.4)
Other -- net 1.2 1.3
------------ ------------
Income before income taxes and discontinued
operations 32.9 38.1
Provision for income taxes(4) (15.8) (7.0)
------------ ------------
Income from continuing operations 17.1 31.1
Income from discontinued operations, net of
income taxes -- 7.3
------------ ------------
Net income $17.1 $38.4
============ ============
Earnings per share -- Basic:(5)
Income from continuing operations $.86 $.39
============ ============
Income from discontinued operations $-- $.09
============ ============
Net income $.86 $.48
============ ============
Earnings per share -- Diluted (same as basic
for Predecessor):(5)
Income from continuing operations $.85
============
Income from discontinued operations $--
============
Net income $.85
============
Weighted average shares outstanding (000):(5)
Basic 20,005 79,672
============ ============
Diluted 20,204 79,672
============ ============
Notes follow.
(1) The Company and its subsidiaries which included all of the
Company's core fabricated products facilities and operations and a
49% interest in Anglesey Aluminium Limited ("Anglesey"), which owns
an interest in a smelter in the United Kingdom, emerged from chapter
11 on July 6, 2006 (the "Effective Date") pursuant to the Company's
Second Amended Plan of Reorganization (the "Plan"). Pursuant to the
Plan, all material pre-petition debt, pension, post-retirement
medical obligations and asbestos and other tort liabilities, along
with other pre-petition plans (which in total aggregated at June 30,
2006 approximately $4.4 billion) were addressed and resolved.
Pursuant to the Plan, the interests of the Company's pre-emergence
stockholders were cancelled without consideration. Equity of the
newly emerged Kaiser was issued and delivered to a third-party
disbursing agent for distribution to claimholders pursuant to the
Plan.
As a result of the Company's emergence from chapter 11 on the
Effective Date, the Company applied "fresh start" accounting to its
opening July 2006 consolidated financial statements as required by
American Institute of Certified Professional Accountants ("AICPA")
Statement of Position 90-7 ("SOP 90-7"), Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code. As such, the
Company adjusted its stockholders' equity to equal the reorganization
value at the Effective Date. Items such as accumulated depreciation,
accumulated deficit and accumulated other comprehensive income (loss)
were reset to zero. The Company allocated the reorganization value to
its individual assets and liabilities based on their estimated fair
value. Items such as current liabilities, accounts receivable, and
cash reflected values similar to those reported prior to emergence.
Items such as inventory, property, plant and equipment, long-term
assets and long-term liabilities were significantly adjusted from
amounts previously reported.
The accompanying financial statements include the financial statements
of the Company both before and after emergence from chapter 11
bankruptcy in July, 2006. Financial information related to the
Company after emergence is generally referred to throughout this
report as "Successor" information. Information of the Company before
emergence is generally referred to as "Predecessor" information. The
financial information of the Successor entity is not comparable to
that of the Predecessor given the impacts of the Plan, implementation
of fresh start reporting and other factors.
Income (loss) per share of the Predecessor is not meaningful because
all equity interests of the Company's stockholders prior to the
Company's July 6, 2006 emergence from chapter 11 were cancelled
without consideration.
(2) Selling, administrative, research and development, and general for
the quarter ended March 31, 2007 includes non-cash compensation
charges of $2.0 related to outstanding non-vested stock and
restricted stock units.
(3) Other operating (benefits) charges, net, for the quarters ended
March 31, 2007 and 2006, was as follows:
Predecessor
Quarter Quarter
Ended Ended
March 31, March 31,
2007 2006
------------- ------------
Non-cash benefit resulting from settlement
of a $5.0 claim by purchaser of the
Gramercy, Louisiana alumina refinery and
Kaiser Jamaica Bauxite Company for payment
of $.1 -Corporate $ 4.9 $ --
Post-emergence chapter 11-related items -
Corporate (1.8) --
Non-cash charge resulting from Anglesey's
adjustment to increase CARO liability -
Primary Aluminum (2.8) --
Non-cash charge related to additional share
based compensation recorded by Anglesey -
Primary Aluminum (1.7) --
Other .2 --
------------- ------------
$(1.2) $--
============= ============
(4) Provision for income taxes for continuing operations for the
quarters ended March 31, 2007 and 2006 include foreign income
provisions of approximately $4.6 and $6.1, respectively. Foreign
taxes for the post emergence period primarily represent Canadian
income taxes in respect of operations of the London, Ontario facility
and United Kingdom income taxes in respect of the Company's ownership
interest in Anglesey.
Although the Company has between approximately $975 and $1,050 of tax
attributes available to offset the impact of future income taxes, the
Company does not meet the "more likely than not" criteria for
recognition of such attributes primarily because the Company does not
have sufficient history of paying taxes. As such, the Company
recorded a full valuation allowance against the amount of tax
attributes available and no deferred tax asset was recognized. The
benefit associated with any reduction of the valuation allowance is
first utilized to reduce intangible assets with any excess being
recorded as an adjustment to Stockholders' equity rather than as a
reduction of income tax expense. Therefore, despite the existence of
such tax attributes, the Company expects to record a full statutory
tax provision in future periods and, therefore, the benefit of any
tax attributes realized will only affect future balance sheets and
statements of cash flows. If the Company ultimately determines that
it meets the "more likely than not" recognition criteria, the amount
of net operating loss carryforwards and the other deferred tax assets
would be recorded on the balance sheet and would be recorded as an
adjustment to stockholders' equity.
(5) Basic earnings per share are computed by dividing earnings by the
weighted average number of common shares outstanding during the
period. The shares owned by a VEBA for the benefit of certain union
retirees and their surviving spouses and eligible dependents (the
"Union VEBA") that are subject to transfer restrictions, while
treated in the balance sheet, similar to treasury stock (i.e., as a
reduction in Stockholders' equity), are included in the computation
of the basic shares outstanding in the income statement because such
shares were irrevocably issued and have full dividend and voting
rights.
Diluted earnings per share are computed by dividing earnings by the
weighted average number of diluted common shares outstanding during
the period. The weighted average number of diluted shares includes
the dilutive effect of the non-vested stock and restricted stock
units granted from dates of grant. The impact of the non-vested
shares and restricted stock units on the number of dilutive common
shares is calculated by reducing the total number of non-vested
shares and restricted stock units (523,968) by the theoretical number
of shares that could be repurchased under the assumption that the
hypothetical proceeds of such non-vested shares and restricted stock
units are the amount of unrecognized compensation expense together
with any related income tax benefits (324,284). Based on the
foregoing, a total 199,684 common shares have been added to the
diluted earnings per share computation.
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
SELECTED OPERATIONAL AND FINANCIAL INFORMATION(1)
(Unaudited)
(In millions of dollars except share and per share amounts)
Predecessor
Three Months Three Months
Ended Ended
March 31, March 31,
2007 2006
------------- ------------
Shipments (millions of lbs):
Fabricated Products 140.0 137.7
Primary Aluminum 39.1 39.1
------------- ------------
179.1 176.8
============= ============
Average Realized Third-Party Sales Price
(per pound):
Fabricated Products(2) $2.41 $2.09
Primary Aluminum(3) $1.39 $1.20
Net Sales:
Fabricated Products $338.0 $288.0
Primary Aluminum 54.2 48.3
------------- ------------
Total Net Sales $392.2 $336.3
============= ============
Segment Operating Income (Loss):
Fabricated Products(4)(5) $41.4 $45.0
Primary Aluminum(6) 4.2 8.7
Corporate and Other (12.1) (9.7)
Other Operating Benefits (Charges), Net(7) (1.2) --
------------- ------------
Total Operating Income $32.3 $44.0
============= ============
Discontinued Operations $-- $7.3
============= ============
Net Income $17.1 $38.4
============= ============
Capital Expenditures(8) $7.4 $10.6
============= ============
(1) See Note 1 of Statements of Consolidated Income for a discussion
regarding the Company's emergence from Chapter 11.
The table provides selected operational and financial information on a
consolidated basis. The selected operational and financial
information after the Effective Date are those of the Successor and
are not comparable to those of the Predecessor. However, for
purposes of this presentation (in the table above), the Successor's
results for the quarter ended March 31, 2007 are compared to the
Predecessor's results for the quarter ended March 31, 2006.
(2) Average realized prices for the Company's Fabricated products
segment are subject to fluctuations due to changes in product mix as
well as underlying primary aluminum prices and are not necessarily
indicative of changes in underlying profitability.
(3) Average realized prices for the Company's Primary aluminum segment
exclude hedging revenues.
(4) Fabricated products segment operating results for the quarter
ended March 31, 2007 include a non-cash LIFO inventory charge of $8.0
and metal gains of $5.2. Operating results for the quarter ended
March 31, 2006 included metal gains of $9.3. There was no LIFO charge
in the quarter ended March 31, 2006.
(5) Fabricated products segment includes non-cash mark-to-market gains
(losses) on natural gas hedging activities totaling $2.7 and $(.5) in
the quarters ended March 31, 2007 and 2006, respectively.
(6) Primary aluminum segment includes non-cash mark-to-market gains
(losses) on primary aluminum hedging activities totaling $(2.2) and
$3.3 and on foreign currency derivatives totaling $(1.8) and $1.4 in
the quarters ended March 31, 2007 and 2006, respectively.
(7) See Note 3 of Statements of Consolidated Income for information
regarding Other operating benefits (charges), net.
(8) Capital expenditures for the quarters ended March 31, 2007 and
2006 are primarily related to the previously announced $105 million
expansion at the Trentwood facility in Spokane, Washington.
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions of dollars)
March 31, December 31,
2007 2006
------------ ------------
Assets(1)
Current assets(2) $385.4 $384.9
Investments in and advances to unconsolidated
affiliate 26.1 18.6
Property, plant, and equipment - net 179.5 170.3
Net assets in respect of VEBAs 89.0 40.7
Other assets 37.6 40.9
------------ ------------
Total $717.6 $655.4
============ ============
Liabilities & Stockholders' Equity(1)
Current liabilities $162.3 $176.4
Long-term liabilities 60.4 58.3
Long-term debt 50.0 50.0
Commitments and contingencies
Stockholders' equity:
Common stock .2 .2
Additional capital 524.9 487.5
Retained earnings 43.3 26.2
Common stock owned by Union VEBA subject to
transfer restrictions,
at reorganization value (131.4) (151.1)
Accumulative other comprehensive income 7.9 7.9
------------ ------------
Total stockholders' equity 444.9 370.7
------------ ------------
$717.6 $655.4
============ ============
(1) See Note 1 of Statements of Consolidated Income for a discussion
regarding the Company's emergence from chapter 11.
(2) Includes Cash and cash equivalents of $51.8 and $50.0 at March 31,
2007 and December 31, 2006, respectively, and inventories of $180.8
and $188.1 at March 31, 2007 and December 31, 2006 respectively.
Source: Kaiser Aluminum Corporation
Released May 15, 2007