Kaiser Aluminum Corporation Reports First Quarter 2019 Financial Results
First Quarter 2019 Highlights:
- Net Sales
$395 Million ; Value Added Revenue$218 Million - Net Income
$28 Million , Earnings per Diluted Share$1.71 - Adjusted Net Income
$30 Million , Adjusted Earnings per Diluted Share$1.85 - Adjusted EBITDA
$56 Million ; Adjusted EBITDA Margin 25.7% - Strong Aerospace Demand, Moderating Aerospace Supply Chain Destocking
- Improved Non-Contract Value Added Pricing
- Unplanned Equipment Downtime at Trentwood
First Quarter 2019 Management Summary
“Continuing the positive trend from the second half 2018, we reported strong first quarter 2019 results. Improving aerospace demand and non-contract value added pricing drove strong results in the quarter, partially offset by approximately
“Although demand for our general engineering products remains strong, we allocated a portion of our capacity for general engineering products in the quarter to address strong aerospace demand. This contrasts with 2017 and early 2018 when relatively soft aerospace demand enabled capacity to shift toward general engineering products,” said Mr. Hockema.
As previously noted during the Company’s fourth quarter earnings call, 2019 is a transition year for its automotive applications with numerous end-of-life automotive programs rolling off and new programs launching during the year. Additionally as noted, in
Outlook
“The recent reduction in
“While facing some uncertainty in aerospace and automotive demand this year, we are focused on executing on our strategic initiatives to capture the full efficiency and capacity benefits from our recent Trentwood investments and to position the Company for expected strong automotive extrusion shipments growth in 2020 and 2021.”
As the Company has previously discussed, significant maintenance activity and equipment downtime is scheduled to occur in the second quarter 2019 for the casting complex, hot line and large stretcher at Trentwood. The Company estimates a one-time EBITDA impact in the quarter of approximately
“Overall, while we continue to monitor the 737 MAX situation, at this time we have no specific information to warrant a change in our full year 2019 outlook for EBITDA margin above 25% and low to mid-single digit percent year-over-year increase in both shipments and value added revenue,” concluded Mr. Hockema.
First Quarter 2019 Consolidated Results | |||||||||||||||||||
(Unaudited)* | |||||||||||||||||||
(In millions of dollars, except shipments, realized price and per share amounts) | |||||||||||||||||||
Quarterly | |||||||||||||||||||
1Q19 | 4Q18 | 3Q18 | 2Q18 | 1Q18 | |||||||||||||||
Shipments (millions of lbs.) | 163 | 159 | 159 | 169 | 166 | ||||||||||||||
Net sales | $ | 395 | $ | 389 | $ | 393 | $ | 415 | $ | 388 | |||||||||
Less hedged cost of alloyed metal1 | (177 | ) | (179 | ) | (188 | ) | (205 | ) | (185 | ) | |||||||||
Value added revenue | $ | 218 | $ | 210 | $ | 205 | $ | 210 | $ | 203 | |||||||||
Realized price per pound ($/lb.) | |||||||||||||||||||
Net sales | $ | 2.43 | $ | 2.46 | $ | 2.48 | $ | 2.46 | $ | 2.34 | |||||||||
Less hedged cost of alloyed metal | (1.09 | ) | (1.14 | ) | (1.19 | ) | (1.22 | ) | (1.12 | ) | |||||||||
Value added revenue | $ | 1.34 | $ | 1.32 | $ | 1.29 | $ | 1.24 | $ | 1.22 | |||||||||
As reported | |||||||||||||||||||
Operating income | $ | 43 | $ | 37 | $ | 35 | $ | 35 | $ | 37 | |||||||||
Net income | $ | 28 | $ | 24 | $ | 22 | $ | 21 | $ | 26 | |||||||||
EPS, diluted2 | $ | 1.71 | $ | 1.41 | $ | 1.29 | $ | 1.22 | $ | 1.51 | |||||||||
Adjusted3 | |||||||||||||||||||
Operating income | $ | 44 | $ | 43 | $ | 36 | $ | 44 | $ | 38 | |||||||||
EBITDA4 | $ | 56 | $ | 55 | $ | 47 | $ | 55 | $ | 48 | |||||||||
EBITDA margin5 | 25.7 | % | 26.0 | % | 23.1 | % | 26.0 | % | 23.8 | % | |||||||||
Net income | $ | 30 | $ | 30 | $ | 24 | $ | 28 | $ | 27 | |||||||||
EPS, diluted2 | $ | 1.85 | $ | 1.77 | $ | 1.43 | $ | 1.68 | $ | 1.60 | |||||||||
1 Hedged cost of alloyed metal is our Midwest transaction price of aluminum plus the price of alloying elements plus any realized gains and/or losses on settled hedges, related to the metal sold in the referenced period. | |||||||||||||||||||
2 Diluted shares for EPS are calculated using the treasury stock method. | |||||||||||||||||||
3 Adjusted numbers exclude non-run-rate items (for all Adjusted numbers and EBITDA refer to Reconciliation of Non-GAAP Measures). | |||||||||||||||||||
4 Adjusted EBITDA = Consolidated Operating Income before non-run-rate plus Depreciation and Amortization. | |||||||||||||||||||
5 Adjusted EBITDA margin = Adjusted EBITDA as a percent of Value Added Revenue. | |||||||||||||||||||
*Please refer to GAAP financial statements. | |||||||||||||||||||
Totals may not sum due to rounding. |
First Quarter 2019
Net sales for the first quarter 2019 were
Value added revenue for the first quarter 2019 increased 8% year-over-year to
Adjusted consolidated EBITDA of
Net income for the first quarter 2019 was
Cash Flow and Balance Sheet
Adjusted EBITDA of
Conference Call
Company Description
Available Information
For more information, please visit the Company’s website atwww.kaiseraluminum.com. The website includes a section for investor relations under which the Company provides notifications of news or announcements regarding its financial performance, including
Non-GAAP Financial Measures
This earnings release contains certain non-GAAP financial measures. A “non-GAAP financial measure” is defined as a numerical measure of a company’s financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets, or statements of cash flow of the Company. Pursuant to the requirements of Regulation G, the Company has provided a reconciliation of non-GAAP financial measures to the most directly comparable financial measure in the accompanying tables.
The non-GAAP financial measures used within this earnings release are value added revenue, adjusted operating income, EBITDA, adjusted EBITDA, adjusted net income, and adjusted earnings per diluted share which exclude non-run-rate items and ratios related thereto. 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 primarily as a result of external market factors and may not occur in future periods if the same level of underlying performance were to occur. These measures are presented because management uses this information to monitor and evaluate financial results and trends and believes this information to also be useful for investors.
Forward-Looking Statements
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.
Investor Relations and Public Relations Contact: | |
Melinda C. Ellsworth | |
Kaiser Aluminum Corporation | |
(949) 614-1757 |
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)(1)
Quarter Ended | |||||||
March 31, | |||||||
2019 | 2018 | ||||||
(In millions of dollars, except share and per share amounts) |
|||||||
Net sales | $ | 395.2 | $ | 388.0 | |||
Costs and expenses: | |||||||
Cost of products sold, excluding depreciation and amortization and other items | 315.1 | 316.7 | |||||
Depreciation and amortization | 11.9 | 10.5 | |||||
Selling, general, administrative, research and development | 25.2 | 23.6 | |||||
Other operating charges, net | — | 0.1 | |||||
Total costs and expenses | 352.2 | 350.9 | |||||
Operating income | 43.0 | 37.1 | |||||
Other income (expense): | |||||||
Interest expense | (5.7 | ) | (5.6 | ) | |||
Other income, net | 0.5 | 0.1 | |||||
Income before income taxes | 37.8 | 31.6 | |||||
Income tax provision | (9.8 | ) | (5.9 | ) | |||
Net income | $ | 28.0 | $ | 25.7 | |||
Net income per common share: | |||||||
Basic | $ | 1.74 | $ | 1.54 | |||
Diluted2 | $ | 1.71 | $ | 1.51 | |||
Weighted-average number of common shares outstanding (in thousands): | |||||||
Basic | 16,108 | 16,707 | |||||
Diluted2 | 16,372 | 17,031 |
1 Please refer to the Company's Form 10-Q for the quarter ended March 31, 2019 for detail regarding the items in the table.
2 Diluted shares for EPS are calculated using the treasury stock method.
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (1)
March 31, 2019 | December 31, 2018 | ||||||
(In millions of dollars, except share and per share amounts) |
|||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 115.3 | $ | 125.6 | |||
Short-term investments | 22.3 | 36.7 | |||||
Receivables: | |||||||
Trade receivables, net | 195.8 | 179.8 | |||||
Other | 22.4 | 25.6 | |||||
Contract assets | 58.4 | 54.9 | |||||
Inventories | 233.9 | 215.1 | |||||
Prepaid expenses and other current assets | 23.0 | 18.9 | |||||
Total current assets | 671.1 | 656.6 | |||||
Property, plant and equipment, net | 610.9 | 611.8 | |||||
Operating lease asset | 27.4 | — | |||||
Deferred tax assets, net | 22.4 | 35.9 | |||||
Intangible assets, net | 31.7 | 32.4 | |||||
Goodwill | 44.0 | 44.0 | |||||
Other assets | 40.3 | 38.6 | |||||
Total | $ | 1,447.8 | $ | 1,419.3 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 124.4 | $ | 121.4 | |||
Accrued salaries, wages and related expenses | 28.2 | 40.1 | |||||
Other accrued liabilities | 51.6 | 44.0 | |||||
Total current liabilities | 204.2 | 205.5 | |||||
Long term portion operating lease liability | 26.6 | — | |||||
Net liabilities of Salaried VEBA | 32.5 | 32.4 | |||||
Deferred tax liabilities | 4.2 | 4.2 | |||||
Long-term liabilities | 61.8 | 66.4 | |||||
Long-term debt | 370.6 | 370.4 | |||||
Total liabilities | 699.9 | 678.9 | |||||
Commitments and contingencies | |||||||
Stockholders' equity: | |||||||
Preferred stock, 5,000,000 shares authorized at both March 31, 2019 and December 31, 2018; no shares were issued and outstanding at March 31, 2019 and December 31, 2018 |
— | — | |||||
Common stock, par value $0.01, 90,000,000 shares authorized at both March 31, 2019 and at December 31, 2018; 22,547,626 shares issued and 16,134,547 shares outstanding at March 31, 2019; 22,471,705 shares issued and 16,234,603 shares outstanding at December 31, 2018 |
0.2 | 0.2 | |||||
Additional paid in capital | 1,056.7 | 1,059.3 | |||||
Retained earnings | 168.0 | 150.2 | |||||
Treasury stock, at cost, 6,413,079 shares at March 31, 2019 and 6,237,102 shares at December 31, 2018, respectively |
(437.9 | ) | (420.5 | ) | |||
Accumulated other comprehensive loss | (39.1 | ) | (48.8 | ) | |||
Total stockholders' equity | 747.9 | 740.4 | |||||
Total | $ | 1,447.8 | $ | 1,419.3 |
1 Please refer to the Company's Form 10-Q for the quarter ended March 31, 2019 for detail regarding the items in the table.
Reconciliation of Non-GAAP Measures - Consolidated | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
(In millions of dollars, except share and per share amounts) | |||||||||||||||||||
Quarterly | |||||||||||||||||||
1Q19 | 4Q18 | 3Q18 | 2Q18 | 1Q18 | |||||||||||||||
GAAP net income | $ | 28.0 | $ | 23.6 | $ | 21.7 | $ | 20.7 | $ | 25.7 | |||||||||
Interest expense | 5.7 | 5.7 | 5.7 | 5.7 | 5.6 | ||||||||||||||
Other (income) expense, net | (0.5 | ) | 1.2 | (0.7 | ) | 0.5 | (0.1 | ) | |||||||||||
Income tax provision | 9.8 | 6.4 | 8.2 | 7.8 | 5.9 | ||||||||||||||
GAAP operating income | 43.0 | 36.9 | 34.9 | 34.7 | 37.1 | ||||||||||||||
Mark-to-market loss 1 | 2.4 | 3.0 | 2.9 | 5.5 | 6.3 | ||||||||||||||
Other operating NRR (gain) loss 2.3 | (1.1 | ) | 3.2 | (1.4 | ) | 3.5 | (5.7 | ) | |||||||||||
Operating income, excluding operating NRR items | 44.3 | 43.1 | 36.4 | 43.7 | 37.7 | ||||||||||||||
Depreciation and Amortization | 11.9 | 11.5 | 11.0 | 10.9 | 10.5 | ||||||||||||||
Adjusted EBITDA 4 | $ | 56.2 | $ | 54.6 | $ | 47.4 | $ | 54.6 | $ | 48.2 | |||||||||
GAAP net income | $ | 28.0 | $ | 23.6 | $ | 21.7 | $ | 20.7 | $ | 25.7 | |||||||||
Operating NRR Items | 1.3 | 6.2 | 1.5 | 9.0 | 0.6 | ||||||||||||||
Non-Operating NRR Items | 1.7 | 1.6 | 1.5 | 1.5 | 1.5 | ||||||||||||||
Tax impact of above NRR Items | (0.7 | ) | (1.7 | ) | (0.8 | ) | (2.8 | ) | (0.5 | ) | |||||||||
Adjusted net income | $ | 30.3 | $ | 29.7 | $ | 23.9 | $ | 28.4 | $ | 27.3 | |||||||||
GAAP earnings per diluted share 5 | $ | 1.71 | $ | 1.41 | $ | 1.29 | $ | 1.22 | $ | 1.51 | |||||||||
Adjusted earnings per diluted share 5 | $ | 1.85 | $ | 1.77 | $ | 1.43 | $ | 1.68 | $ | 1.60 | |||||||||
1 Mark-to market loss on derivative instruments represents the reversal of mark-to-market gain on hedges entered into prior to the adoption of ASU 2017-12 and settled in 2019 and 2018. Operating income excluding non-run-rate items reflect the realized (gain) loss of such settlements. | |||||||||||||||||||
2 NRR is an abbreviation for Non-Run-Rate; NRR items are pre-tax. | |||||||||||||||||||
3 Other operating NRR items primarily represent the impact of non-cash net periodic benefit (income) cost related to the Salaried VEBA, adjustments to plant-level LIFO, lower of cost or market, environmental expenses, workers' compensation cost (benefit) due to discounting and impairment losses. | |||||||||||||||||||
4 Adjusted EBITDA = Consolidated Operating Income before non-run-rate plus Depreciation and Amortization. | |||||||||||||||||||
5 Diluted shares for EPS are calculated using treasury method. |
Source: Kaiser Aluminum Corporation