Kaiser Aluminum Corporation Reports Fourth Quarter and Full Year 2019 Financial Results
Fourth Quarter 2019:
- Net Sales
$369 Million ; Value Added Revenue$213 Million , Up 1% Year-over-Year - Net Loss
$11 Million ; Net Loss per Share$0.66 , Includes Pre-tax Charges of$45 Million , or$2.14 per Share After-tax, Related to Senior Notes Refinancing and Goodwill Impairment - Adjusted Net Income
$29 Million ; Adjusted Earnings per Diluted Share$1.79 - Adjusted EBITDA
$52 Million ; Adjusted EBITDA Margin 24.5%
Full Year 2019:
- Net Sales
$1.5 Billion ; Record Value Added Revenue$856 Million , Up 3% Year-over-Year - Net Income
$62 Million ; Earnings per Diluted Share$3.83 , Reflects Fourth Quarter Charges - Record Adjusted Net Income
$111 Million ; Record Adjusted Earnings per Diluted Share$6.85 - Record Adjusted EBITDA
$213 Million ; Adjusted EBITDA Margin 24.9% - Trentwood Capacity and Efficiency Hindered by Planned and Unplanned Downtime on Key Equipment
- New Revolving Credit Facility and Senior Notes Increased Liquidity and Extended Debt Maturity Dates
- Successfully Negotiated New 5-Year USW Master Labor Agreement (
October 2020 -September 2025 )
"We achieved several financial milestones in 2019, including record value added revenue, adjusted EBITDA, adjusted net income and adjusted earnings per diluted share," said
"We were proactive to enhance our financial and operational position during the year. Capitalizing on attractive credit markets, we successfully completed two new debt financings that increased liquidity. This enhanced financial flexibility will support our strategic investment initiatives, ensuring our continued financial strength throughout the business and economic cycles. In addition, we recently finalized a new labor agreement that extends through 2025 for our two largest facilities in
Full Year 2019 Management Summary
Full year 2019 results were driven by record aerospace shipments and strong value added pricing, partially offset by lower general engineering and automotive shipments. Strong aerospace demand was driven by growing military airframe builds and restocking in the commercial aerospace supply chain. The strong demand provided a favorable environment for non-contract pricing on the Company's aerospace and industrial products. Results were negatively impacted by heat treat plate capacity constraints at the Company's Trentwood facility due to planned and unplanned downtime during the first half of 2019. Lower shipments of the Company's general engineering applications resulted primarily from allocating a portion of its heat treat plate capacity to meet the strong aerospace demand during the year. In addition, demand for general engineering and industrial applications began to slow in the second half of 2019, and supply chain destocking resulted in additional pressure on demand for the Company's products. Automotive shipments reflected lower build rates, a significant number of automotive model changeovers and new program delays, in addition to the impact of the
Record adjusted EBITDA for the full year 2019 reflected an impact of approximately
2020 Outlook
"Looking forward, we expect that the impact of the
The Company's aerospace order book for 2020 is strengthened by increased defense spending and demand for the F35 Joint Strike Fighter, the F/A-18 Super Hornet, and other military applications. For the full year 2020, the Company expects a single-digit reduction in aerospace/high strength shipments and value added revenue, compared to the record high of 2019. The Company also anticipates North American automotive build rates in 2020 to be similar to 2019 and expects double-digit year-over-year growth in its automotive shipments as new programs continue to come on stream. General engineering demand is expected to be driven by strong semi-conductor demand and relief from the supply chain destocking that suppressed demand in the second half of 2019. The Company's shipments of non-core applications are expected to decline significantly in 2020 as capacity is allocated to more strategic applications.
Commencing in 2020, the Company will launch a
The initial project at Trentwood is a new
| Fourth Quarter and Full Year 2019 Consolidated Results | |||||||||||||||||||
| (Unaudited)* | |||||||||||||||||||
| (In millions of dollars, except shipments, realized price and per share amounts) | |||||||||||||||||||
| Quarterly | December 31, | ||||||||||||||||||
| 4Q19 | 3Q19 | 4Q18 | 2019 | 2018 | |||||||||||||||
| Shipments (millions of lbs.) | 153 | 154 | 159 | 625 | 652 | ||||||||||||||
| Net sales | $ | 369 | $ | 375 | $ | 389 | $ | 1,514 | $ | 1,586 | |||||||||
| Less hedged cost of alloyed metal1 | (156 | ) | (160 | ) | (179 | ) | (658 | ) | (758 | ) | |||||||||
| Value added revenue | $ | 213 | $ | 215 | $ | 210 | $ | 856 | $ | 828 | |||||||||
| Realized price per pound ($/lb.) | |||||||||||||||||||
| Net sales | $ | 2.42 | $ | 2.43 | $ | 2.46 | $ | 2.42 | $ | 2.43 | |||||||||
| Less hedged cost of alloyed metal | (1.02 | ) | (1.04 | ) | (1.14 | ) | (1.05 | ) | (1.16 | ) | |||||||||
| Value added revenue | $ | 1.40 | $ | 1.39 | $ | 1.32 | $ | 1.37 | $ | 1.27 | |||||||||
| As reported | |||||||||||||||||||
| Operating income | $ | 10 | $ | 41 | $ | 37 | $ | 126 | $ | 144 | |||||||||
| Net (loss) income | $ | (11 | ) | $ | 25 | $ | 24 | $ | 62 | $ | 92 | ||||||||
| Net (loss) income per share, diluted2 | $ | (0.66 | ) | $ | 1.57 | $ | 1.41 | $ | 3.83 | $ | 5.43 | ||||||||
| Adjusted3 | |||||||||||||||||||
| Operating income | $ | 40 | $ | 44 | $ | 43 | $ | 164 | $ | 161 | |||||||||
| EBITDA4 | $ | 52 | $ | 57 | $ | 55 | $ | 213 | $ | 205 | |||||||||
| EBITDA margin5 | 24.5 | % | 26.4 | % | 26.0 | % | 24.9 | % | 24.7 | % | |||||||||
| Net income | $ | 29 | $ | 29 | $ | 30 | $ | 111 | $ | 109 | |||||||||
| EPS, diluted2 | $ | 1.79 | $ | 1.82 | $ | 1.77 | $ | 6.85 | $ | 6.48 | |||||||||
| 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, excluding operating non-run-rate items, 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. | |||||||||||||||||||
Fourth Quarter 2019
Net sales for the fourth quarter 2019 were
Value added revenue for the fourth quarter 2019 increased to
Adjusted EBITDA of
Reported net loss for the fourth quarter 2019 was
Full Year 2019
Net sales for the full year 2019 were
Value added revenue for the full year 2019 increased 3% to
Adjusted EBITDA of
Net income for the full year 2019 was
Cash Flow and Balance Sheet
In the full year 2019, adjusted EBITDA of
During the fourth quarter 2019, the Company entered into a new
As of December 31, 2019, total cash and cash equivalents and short-term investments were approximately
Conference Call
Company Description
Available Information
For more information, please visit the Company’s website at www.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(1)
| Year Ended December 31, | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
| (In millions of dollars, except share and per share amounts) | ||||||||||||
| Net sales | $ | 1,514.1 | $ | 1,585.9 | $ | 1,397.5 | ||||||
| Costs and expenses: | ||||||||||||
| Cost of products sold, excluding depreciation and amortization and other items | 1,215.2 | 1,300.7 | 1,085.9 | |||||||||
| Depreciation and amortization | 49.1 | 43.9 | 39.7 | |||||||||
| Selling, general, administrative, research and development | 98.0 | 96.3 | 97.5 | |||||||||
| Goodwill impairment | 25.2 | — | 18.4 | |||||||||
| Other operating charges, net | 0.9 | 1.4 | 0.8 | |||||||||
| Total costs and expenses | 1,388.4 | 1,442.3 | 1,242.3 | |||||||||
| Operating income | 125.7 | 143.6 | 155.2 | |||||||||
| Other expense: | ||||||||||||
| Interest expense | (24.6 | ) | (22.7 | ) | (22.2 | ) | ||||||
| Other expense, net | (20.7 | ) | (0.9 | ) | — | |||||||
| Income before income taxes | 80.4 | 120.0 | 133.0 | |||||||||
| Income tax provision | (18.4 | ) | (28.3 | ) | (87.6 | ) | ||||||
| Net income | $ | 62.0 | $ | 91.7 | $ | 45.4 | ||||||
| Net income per common share: | ||||||||||||
| Basic | $ | 3.88 | $ | 5.53 | $ | 2.67 | ||||||
| Diluted2 | $ | 3.83 | $ | 5.43 | $ | 2.63 | ||||||
| Weighted-average number of common shares outstanding (in thousands): | ||||||||||||
| Basic | 15,997 | 16,585 | 16,996 | |||||||||
| Diluted2 | 16,203 | 16,874 | 17,259 | |||||||||
1 Please refer to the Company's Form 10-K for the year ended December 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)
| December 31, 2019 |
December 31, 2018 |
|||||||
| (In millions of dollars, except share and per share amounts) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 264.3 | $ | 125.6 | ||||
| Short-term investments | 78.7 | 36.7 | ||||||
| Receivables: | ||||||||
| Trade receivables, net | 167.1 | 179.8 | ||||||
| Other | 18.1 | 25.6 | ||||||
| Contract assets | 54.6 | 54.9 | ||||||
| Inventories | 177.6 | 215.1 | ||||||
| Prepaid expenses and other current assets | 19.4 | 18.9 | ||||||
| Total current assets | 779.8 | 656.6 | ||||||
| Property, plant and equipment, net | 622.0 | 611.8 | ||||||
| Operating lease assets | 25.8 | — | ||||||
| Deferred tax assets, net | 11.8 | 35.9 | ||||||
| Intangible assets, net | 29.6 | 32.4 | ||||||
| Goodwill | 18.8 | 44.0 | ||||||
| Other assets | 38.4 | 38.6 | ||||||
| Total | $ | 1,526.2 | $ | 1,419.3 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 92.0 | $ | 121.4 | ||||
| Accrued salaries, wages and related expenses | 34.4 | 40.1 | ||||||
| Other accrued liabilities | 44.0 | 44.0 | ||||||
| Total current liabilities | 170.4 | 205.5 | ||||||
| Long-term portion of operating lease liabilities | 25.2 | — | ||||||
| Net liabilities of Salaried VEBA | 32.6 | 32.4 | ||||||
| Deferred tax liabilities | 4.5 | 4.2 | ||||||
| Long-term liabilities | 67.0 | 66.4 | ||||||
| Long-term debt | 492.6 | 370.4 | ||||||
| Total liabilities | 792.3 | 678.9 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' equity: | ||||||||
| Preferred stock, 5,000,000 shares authorized at both December 31, 2019 and December 31, 2018; no shares were issued and outstanding at December 31, 2019 and December 31, 2018 | — | — | ||||||
| Common stock, par value $0.01, 90,000,000 shares authorized at both December 31, 2019 and December 31, 2018; 22,550,827 shares issued and 15,868,304 shares outstanding at December 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 | 1,062.9 | 1,059.3 | ||||||
| Retained earnings | 172.8 | 150.2 | ||||||
| Treasury stock, at cost, 6,682,523 shares at December 31, 2019 and 6,237,102 shares at December 31, 2018 | (463.4 | ) | (420.5 | ) | ||||
| Accumulated other comprehensive loss | (38.6 | ) | (48.8 | ) | ||||
| Total stockholders' equity | 733.9 | 740.4 | ||||||
| Total | $ | 1,526.2 | $ | 1,419.3 | ||||
1 Please refer to the Company's Form 10-K for the year ended December 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) | |||||||||||||||
| Quarter Ended December 31, |
Year Ended December 31, |
||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| GAAP net (loss) income | $ | (10.6 | ) | $ | 23.6 | $ | 62.0 | $ | 91.7 | ||||||
| Interest expense | 7.3 | 5.7 | 24.6 | 22.7 | |||||||||||
| Other expense, net 1 | 20.3 | 1.2 | 20.7 | 0.9 | |||||||||||
| Income tax (benefit) provision | (7.4 | ) | 6.4 | 18.4 | 28.3 | ||||||||||
| GAAP operating income | 9.6 | 36.9 | 125.7 | 143.6 | |||||||||||
| Mark-to-market loss 2 | 0.8 | 3.0 | 5.8 | 17.7 | |||||||||||
| Goodwill impairment | 25.2 | — | 25.2 | — | |||||||||||
| Other operating NRR loss (gain) 3,4 | 3.9 | 3.2 | 6.9 | (0.4 | ) | ||||||||||
| Operating income, excluding operating NRR items | 39.5 | 43.1 | 163.6 | 160.9 | |||||||||||
| Depreciation and amortization | 12.8 | 11.5 | 49.1 | 43.9 | |||||||||||
| Adjusted EBITDA 5 | $ | 52.3 | $ | 54.6 | $ | 212.7 | $ | 204.8 | |||||||
| GAAP net (loss) income | $ | (10.6 | ) | $ | 23.6 | $ | 62.0 | $ | 91.7 | ||||||
| Operating NRR Items | 29.9 | 6.2 | 37.9 | 17.3 | |||||||||||
| Non-operating NRR Items 6 | 22.0 | 1.6 | 26.9 | 6.1 | |||||||||||
| Tax impact of above NRR Items | (12.5 | ) | (1.7 | ) | (15.8 | ) | (5.8 | ) | |||||||
| Adjusted net income | $ | 28.8 | $ | 29.7 | $ | 111.0 | $ | 109.3 | |||||||
| Net (loss) income per share, diluted 7 | $ | (0.66 | ) | $ | 1.41 | $ | 3.83 | $ | 5.43 | ||||||
| Adjusted earnings per diluted share 7 | $ | 1.79 | $ | 1.77 | $ | 6.85 | $ | 6.48 | |||||||
| 1 Other expense, net includes loss on extinguishment of our 5.875% Senior Notes during the year ended December 31, 2019 which includes a $16.5 million premium paid to redeem the notes and a $3.8 million write-off of unamortized debt issuance costs associated with the notes. | |||||||||||||||
| 2 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. | |||||||||||||||
| 3 NRR is an abbreviation for Non-Run-Rate; NRR items are pre-tax. | |||||||||||||||
| 4 Other operating NRR items primarily represent the impact of non-cash service cost related to the Salaried VEBA, adjustments to plant-level LIFO, environmental expenses, workers' compensation cost (benefit) due to discounting and impairment losses. | |||||||||||||||
| 5 Adjusted EBITDA = Consolidated operating income, exluding operating NRR items, plus Depreciation and amortization. | |||||||||||||||
| 6 Non-operating NRR items represents the impact of non-cash net periodic benefit cost related to the Salaried VEBA excluding service cost, loss on extinguishment of our 5.875% Senior Notes during the year ended December 31, 2019 which includes a $16.5 million premium paid to redeem the notes and a $3.8 million write-off of unamortized debt issuance costs associated with the notes. | |||||||||||||||
| 7 Diluted shares for EPS are calculated using the treasury stock method. | |||||||||||||||
Source: Kaiser Aluminum Corporation
