Kaiser Aluminum Corporation Reports Second Quarter and First Half 2020 Financial Results
Second Quarter 2020:
Net Sales $276 Million ; Value Added Revenue$175 Million , Down 17% Year-over-Year- Net Loss
$7 Million ; Net Loss per Diluted Share$0.41 , Includes Pre-tax Restructuring Charges of$12 Million , or$0.57 per Diluted Share After-tax - Adjusted Net Income
$6 Million ; Adjusted Earnings per Diluted Share$0.36 - Adjusted EBITDA
$34 Million ; Adjusted EBITDA Margin 19.7% - Total Liquidity
~$1.0 Billion
First Half 2020:
Net Sales $645 Million ; Value Added Revenue$391 Million , Down 9% Year-over-Year- Net Income
$23 Million ; Net Income per Diluted Share$1.41 - Adjusted Net Income
$36 Million ; Adjusted Earnings per Diluted Share$2.27 - Adjusted EBITDA
$94 Million ; Adjusted EBITDA Margin 24.0%
Second Quarter 2020 Highlights
“Second quarter shipments and value added revenue reflect the impact of lower demand across our end markets due to the effects of COVID-19,” said
Demand for the Company’s large commercial aerospace applications declined as Boeing and Airbus temporarily halted production and curtailed deliveries, while demand for defense applications continued to remain strong as the F-35 and other legacy fighter programs remained robust. The Company’s general engineering business showed good resiliency as demand for high performance KaiserSelect® products, along with solid support from the Company’s long-term customers, helped create additional pull for its products during the quarter. Demand for automotive applications significantly eroded during the second quarter as virtually all automotive assembly plants in
As discussed during the Company’s first quarter earnings call, Kaiser’s longstanding business cycle strategy has consistently focused on being well prepared for unexpected economic adversity. In April, the Company issued $350 million aggregate principal amount of 6.50% unsecured senior notes due 2025 to further strengthen its liquidity and financial flexibility. With approximately
Outlook
As the Company noted on the first quarter earnings call, value added revenue for large commercial aerospace and defense applications is anticipated to be down approximately 15% to 20% from record full year 2019 results. The two businesses combined represent approximately 50% of the Company’s total value added revenue.
“For the second half 2020, we anticipate total value added revenue will be down approximately 10% to 15% from the second quarter pace, with EBITDA margin in the mid-teens,” said
“As previously noted during our first quarter earnings call, in April we began limiting capital spending to critical sustaining projects only; however, with ample liquidity and more visibility for our end markets, we will proactively initiate capital spending on a number of organic investment opportunities to further support our automotive growth and enhance efficiencies throughout our operations. We anticipate that total capital spending for the full year 2020 will be approximately
Second Quarter and First Half 2020 Consolidated Results
(Unaudited)*
(In millions of dollars, except shipments, realized price and per share amounts)
Quarterly | Six Months | |||||||||||||||||||
2Q20 | 1Q20 | 2Q19 | 1H20 | 1H19 | ||||||||||||||||
Shipments (millions of lbs.) | 119 | 156 | 156 | 274 | 318 | |||||||||||||||
Net sales | $ | 276 | $ | 369 | $ | 375 | $ | 645 | $ | 771 | ||||||||||
Less hedged cost of alloyed metal1 | (101 | ) | (153 | ) | (166 | ) | (254 | ) | (343 | ) | ||||||||||
Value added revenue | $ | 175 | $ | 217 | $ | 209 | $ | 391 | $ | 428 | ||||||||||
Realized price per pound ($/lb.) | ||||||||||||||||||||
Net sales | $ | 2.32 | $ | 2.37 | $ | 2.41 | $ | 2.35 | $ | 2.42 | ||||||||||
Less hedged cost of alloyed metal | (0.85 | ) | (0.98 | ) | (1.07 | ) | (0.92 | ) | (1.08 | ) | ||||||||||
Value added revenue | $ | 1.47 | $ | 1.39 | $ | 1.34 | $ | 1.43 | $ | 1.34 | ||||||||||
As reported | ||||||||||||||||||||
Operating income | $ | 5 | $ | 46 | $ | 32 | $ | 50 | $ | 75 | ||||||||||
Net (loss) income | $ | (7 | ) | $ | 29 | $ | 19 | $ | 23 | $ | 47 | |||||||||
Net (loss) income per share, diluted2 | $ | (0.41 | ) | $ | 1.81 | $ | 1.18 | $ | 1.41 | $ | 2.89 | |||||||||
Adjusted3 | ||||||||||||||||||||
Operating income | $ | 21 | $ | 46 | $ | 35 | $ | 68 | $ | 80 | ||||||||||
EBITDA4 | $ | 34 | $ | 59 | $ | 48 | $ | 94 | $ | 104 | ||||||||||
EBITDA margin5 | 19.7 | % | 27.4 | % | 22.7 | % | 24.0 | % | 24.3 | % | ||||||||||
Net income | $ | 6 | $ | 30 | $ | 23 | $ | 36 | $ | 53 | ||||||||||
EPS, diluted2 | $ | 0.36 | $ | 1.90 | $ | 1.40 | $ | 2.27 | $ | 3.24 |
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.
Second Quarter 2020
Net sales for the second quarter 2020 were
Value added revenue for the second quarter 2020 decreased to
Adjusted EBITDA of
Reported operating income for the second quarter 2020 was approximately
Reported net loss for the second quarter 2020 was
First Half 2020
Net sales for the first half 2020 were
Value added revenue for the first half 2020 decreased to
Adjusted EBITDA of
Reported operating income for the first half 2020 was
Reported net income for the first half 2020 was
Cash Flow and Balance Sheet
In the first half 2020, adjusted EBITDA of
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, 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 which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management based on information available to it at the time such statements are made.
Investor Relations and Public Relations Contact: |
(949) 614-1757 |
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)(1)
Quarter Ended | Six Months Ended | |||||||||||||||
June 30, | ||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
(In millions of dollars, except share and per share amounts) | ||||||||||||||||
Net sales | $ | 275.7 | $ | 375.3 | $ | 645.0 | $ | 770.5 | ||||||||
Costs and expenses: | ||||||||||||||||
Cost of products sold, excluding depreciation and amortization and other items | 224.5 | 303.5 | 511.1 | 618.6 | ||||||||||||
Depreciation and amortization | 13.0 | 12.1 | 26.2 | 24.0 | ||||||||||||
Selling, general, administrative, research and development | 22.7 | 27.2 | 46.6 | 52.4 | ||||||||||||
Restructuring costs | 11.9 | — | 11.9 | — | ||||||||||||
Other operating charges, net | (1.1 | ) | 0.1 | (1.1 | ) | 0.1 | ||||||||||
Total costs and expenses | 271.0 | 342.9 | 594.7 | 695.1 | ||||||||||||
Operating income | 4.7 | 32.4 | 50.3 | 75.4 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (10.5 | ) | (5.8 | ) | (16.6 | ) | (11.5 | ) | ||||||||
Other income (expense), net | 0.5 | (0.1 | ) | (0.3 | ) | 0.4 | ||||||||||
(Loss) income before income taxes | (5.3 | ) | 26.5 | 33.4 | 64.3 | |||||||||||
Income tax provision | (1.3 | ) | (7.3 | ) | (10.9 | ) | (17.1 | ) | ||||||||
Net (loss) income | $ | (6.6 | ) | $ | 19.2 | $ | 22.5 | $ | 47.2 | |||||||
Net (loss) income per common share: | ||||||||||||||||
Basic | $ | (0.41 | ) | $ | 1.19 | $ | 1.42 | $ | 2.93 | |||||||
Diluted2 | $ | (0.41 | ) | $ | 1.18 | $ | 1.41 | $ | 2.89 | |||||||
Weighted-average number of common shares outstanding (in thousands): | ||||||||||||||||
Basic | 15,781 | 16,063 | 15,809 | 16,085 | ||||||||||||
Diluted2 | 15,781 | 16,240 | 15,929 | 16,298 |
1 Please refer to the Company's Form 10-Q for the quarter ended
2 Diluted shares for EPS are calculated using the treasury stock method.
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (1)
(In millions of dollars, except share and per share amounts) |
||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 710.6 | $ | 264.3 | ||||
Short-term investments | — | 78.7 | ||||||
Receivables: | ||||||||
Trade receivables, net | 126.4 | 167.1 | ||||||
Other | 22.0 | 18.1 | ||||||
Contract assets | 41.6 | 54.6 | ||||||
Inventories | 181.4 | 177.6 | ||||||
Prepaid expenses and other current assets | 25.7 | 19.4 | ||||||
Total current assets | 1,107.7 | 779.8 | ||||||
Property, plant and equipment, net | 627.1 | 622.0 | ||||||
Operating lease assets | 28.0 | 25.8 | ||||||
Deferred tax assets, net | 0.0 | 11.8 | ||||||
Intangible assets, net | 28.1 | 29.6 | ||||||
18.8 | 18.8 | |||||||
Other assets | 38.7 | 38.4 | ||||||
Total | $ | 1,848.4 | $ | 1,526.2 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 61.0 | $ | 92.0 | ||||
Accrued salaries, wages and related expenses | 34.9 | 34.4 | ||||||
Other accrued liabilities | 54.5 | 44.0 | ||||||
Total current liabilities | 150.4 | 170.4 | ||||||
Long-term portion of operating lease liabilities | 27.0 | 25.2 | ||||||
Net liabilities of Salaried VEBA | 32.5 | 32.6 | ||||||
Deferred tax liabilities | 7.3 | 4.5 | ||||||
Long-term liabilities | 75.3 | 67.0 | ||||||
Long-term debt | 837.1 | 492.6 | ||||||
Total liabilities | 1,129.6 | 792.3 | ||||||
Commitments and contingencies | ||||||||
Stockholders' equity: | ||||||||
Preferred stock, 5,000,000 shares authorized at both |
— | — | ||||||
Common stock, par value |
0.2 | 0.2 | ||||||
Additional paid in capital | 1,063.3 | 1,062.9 | ||||||
Retained earnings | 173.4 | 172.8 | ||||||
(475.9 | ) | (463.4 | ) | |||||
Accumulated other comprehensive loss | (42.2 | ) | (38.6 | ) | ||||
Total stockholders' equity | 718.8 | 733.9 | ||||||
Total | $ | 1,848.4 | $ | 1,526.2 |
1 Please refer to the Company's Form 10-Q for the quarter ended
Reconciliation of Non-GAAP Measures - Consolidated
(Unaudited)
(In millions of dollars, except share and per share amounts)
Quarterly | ||||||||||||||||||||
2Q20 | 1Q20 | 4Q19 | 3Q19 | 2Q19 | ||||||||||||||||
GAAP net (loss) income | $ | (6.6 | ) | $ | 29.1 | $ | (10.6 | ) | $ | 25.4 | $ | 19.2 | ||||||||
Interest expense | 10.5 | 6.1 | 7.3 | 5.8 | 5.8 | |||||||||||||||
Other (income) expense, net 1 | (0.5 | ) | 0.8 | 20.3 | 0.8 | 0.1 | ||||||||||||||
Income tax provision (benefit) | 1.3 | 9.6 | (7.4 | ) | 8.7 | 7.3 | ||||||||||||||
GAAP operating income | 4.7 | 45.6 | 9.6 | 40.7 | 32.4 | |||||||||||||||
Mark-to-market loss 2 | 0.5 | 0.1 | 0.8 | 1.1 | 1.5 | |||||||||||||||
Restructuring charges | 11.9 | — | — | — | — | |||||||||||||||
— | — | 25.2 | — | — | ||||||||||||||||
Other operating NRR loss 3,4 | 4.3 | 0.5 | 3.9 | 2.6 | 1.5 | |||||||||||||||
Operating income, excluding operating NRR items | 21.4 | 46.2 | 39.5 | 44.4 | 35.4 | |||||||||||||||
Depreciation and amortization | 13.0 | 13.2 | 12.8 | 12.3 | 12.1 | |||||||||||||||
Adjusted EBITDA 5 | $ | 34.4 | $ | 59.4 | $ | 52.3 | $ | 56.7 | $ | 47.5 | ||||||||||
GAAP net (loss) income | $ | (6.6 | ) | $ | 29.1 | $ | (10.6 | ) | $ | 25.4 | $ | 19.2 | ||||||||
Operating NRR Items | 16.7 | 0.6 | 29.9 | 3.7 | 3.0 | |||||||||||||||
Non-operating NRR Items 6 | 1.2 | 1.2 | 22.0 | 1.6 | 1.6 | |||||||||||||||
Tax impact of above NRR Items | (5.6 | ) | (0.5 | ) | (12.5 | ) | (1.5 | ) | (1.1 | ) | ||||||||||
Adjusted net income | $ | 5.7 | $ | 30.4 | $ | 28.8 | $ | 29.2 | $ | 22.7 | ||||||||||
Net (loss) income per share, diluted 7 | $ | (0.41 | ) | $ | 1.81 | $ | (0.66 | ) | $ | 1.57 | $ | 1.18 | ||||||||
Adjusted earnings per diluted share 7 | $ | 0.36 | $ | 1.90 | $ | 1.79 | $ | 1.82 | $ | 1.40 |
1 Other (income) expense, net includes loss on extinguishment of our 5.875% Senior Notes during the fourth quarter of 2019 which includes a
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 2020 and 2019. Operating income excluding non-run-rate items reflect the realized 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, excluding 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
7 Diluted shares for EPS are calculated using the treasury stock method.
Source: Kaiser Aluminum Corporation