Kaiser Aluminum Corporation Reports Third Quarter and First Nine Months 2019 Financial Results
Third Quarter 2019 Results:
- Net Sales
$375 Million ; Net Income$25 Million ; Earnings per Diluted Share$1.57 - Value Added Revenue
$215 Million ; Adjusted EBITDA$57 Million ; Adjusted EBITDA Margin 26.4% - Adjusted Net Income
$29 Million ; Adjusted Earnings per Diluted Share$1.82
Third Quarter 2019 Highlights:
- Record Value Added Revenue and Adjusted EBITDA - Strong Aerospace Demand, Value Added Pricing
- Weakening Industrial Demand Exacerbated by Supply Chain Destocking
- Lower Than Anticipated Automotive Shipments - General Motors Strike, Program Launch Delays
Third Quarter Management Summary and Full Year 2019 Outlook
“Third quarter 2019 results established new records for value added revenue and EBITDA, driven by continued strength in our aerospace order book and strong value added pricing. These results were achieved despite weakening industrial demand exacerbated by destocking throughout the supply chain and lower than anticipated automotive shipments due to delays in new program launches and the
“Record nine month 2019 results for value added revenue, EBITDA and adjusted earnings per diluted share confirm strong underlying momentum. Strong results were achieved despite the approximately
"Driven by a strong aerospace order book, we anticipate fourth quarter 2019 results will be similar to the fourth quarter 2018, reflecting the impact of normal seasonal demand weakness, slowing industrial demand and a potential
Long-term Aerospace Demand and Capacity Outlook
“Although timing of the
“We expect to have increased capacity available in 2020 as we continue to realize the full benefits of the Trentwood modernization in addition to expecting significantly less downtime than we experienced in the first half 2019. However, as we continue to monitor the long-term needs of our customers, our team has developed a future state vision for additional brown site expansions at Trentwood that can be implemented in phases to accommodate expected customer demand needs well beyond the next decade. We are closely evaluating those needs and opportunities to assess timing for the next phases of expansion," concluded Mr. Hockema.
Third Quarter 2019 Consolidated Results | |||||||||||||||
(Unaudited)* | |||||||||||||||
(In millions of dollars, except shipments, realized price and per share amounts) | |||||||||||||||
Quarterly | September 30, | ||||||||||||||
3Q19 | 3Q18 | 2019 | 2018 | ||||||||||||
Shipments (millions of lbs.) | 154 | 159 | 473 | 494 | |||||||||||
Net sales | $ | 375 | $ | 393 | $ | 1,145 | $ | 1,197 | |||||||
Less hedged cost of alloyed metal1 | (160 | ) | (188 | ) | (503 | ) | (579 | ) | |||||||
Value added revenue | $ | 215 | $ | 205 | $ | 642 | $ | 618 | |||||||
Realized price per pound ($/lb.) | |||||||||||||||
Net sales | $ | 2.43 | $ | 2.48 | $ | 2.42 | $ | 2.42 | |||||||
Less hedged cost of alloyed metal | (1.04 | ) | (1.19 | ) | (1.06 | ) | (1.17 | ) | |||||||
Value added revenue | $ | 1.39 | $ | 1.29 | $ | 1.36 | $ | 1.25 | |||||||
As reported | |||||||||||||||
Operating income | $ | 41 | $ | 35 | $ | 116 | $ | 107 | |||||||
Net income | $ | 25 | $ | 22 | $ | 73 | $ | 68 | |||||||
EPS, diluted2 | $ | 1.57 | $ | 1.29 | $ | 4.47 | $ | 4.03 | |||||||
Adjusted3 | |||||||||||||||
Operating income | $ | 44 | $ | 36 | $ | 124 | $ | 118 | |||||||
EBITDA4 | $ | 57 | $ | 47 | $ | 160 | $ | 150 | |||||||
EBITDA margin5 | 26.4 | % | 23.1 | % | 25.0 | % | 24.3 | % | |||||||
Net income | $ | 29 | $ | 24 | $ | 82 | $ | 80 | |||||||
EPS, diluted2 | $ | 1.82 | $ | 1.43 | $ | 5.06 | $ | 4.72 | |||||||
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. |
Third Quarter 2019
Net sales for the third quarter 2019 were
Value added revenue for the third quarter 2019 increased to
Adjusted consolidated EBITDA of
Net income for the third quarter 2019 was
First Nine Months 2019
Net sales for the first nine months 2019 were
Value added revenue for the first nine months 2019 increased 4% to
Adjusted consolidated EBITDA of
Net income for the first nine months 2019 was
Cash Flow and Balance Sheet
In the first nine months 2019, 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, 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 | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(In millions of dollars, except share and per share amounts) | |||||||||||||||
Net sales | $ | 374.9 | $ | 393.1 | $ | 1,145.4 | $ | 1,196.5 | |||||||
Costs and expenses: | |||||||||||||||
Cost of products sold, excluding depreciation and amortization and other items | 298.6 | 323.3 | 917.2 | 983.4 | |||||||||||
Depreciation and amortization | 12.3 | 11.0 | 36.3 | 32.4 | |||||||||||
Selling, general, administrative, research and development | 23.3 | 23.9 | 75.7 | 73.9 | |||||||||||
Other operating charges, net | — | — | 0.1 | 0.1 | |||||||||||
Total costs and expenses | 334.2 | 358.2 | 1,029.3 | 1,089.8 | |||||||||||
Operating income | 40.7 | 34.9 | 116.1 | 106.7 | |||||||||||
Other (expense) income: | |||||||||||||||
Interest expense | (5.8 | ) | (5.7 | ) | (17.3 | ) | (17.0 | ) | |||||||
Other (expense) income, net | (0.8 | ) | 0.7 | (0.4 | ) | 0.3 | |||||||||
Income before income taxes | 34.1 | 29.9 | 98.4 | 90.0 | |||||||||||
Income tax provision | (8.7 | ) | (8.2 | ) | (25.8 | ) | (21.9 | ) | |||||||
Net income | $ | 25.4 | $ | 21.7 | $ | 72.6 | $ | 68.1 | |||||||
Net income per common share: | |||||||||||||||
Basic | $ | 1.59 | $ | 1.31 | $ | 4.52 | $ | 4.09 | |||||||
Diluted2 | $ | 1.57 | $ | 1.29 | $ | 4.47 | $ | 4.03 | |||||||
Weighted-average number of common shares outstanding (in thousands): | |||||||||||||||
Basic | 15,956 | 16,573 | 16,042 | 16,654 | |||||||||||
Diluted2 | 16,125 | 16,783 | 16,235 | 16,882 |
1 Please refer to the Company's Form 10-Q for the quarter ended September 30, 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)
September 30, 2019 | December 31, 2018 | ||||||
(In millions of dollars, except share and per share amounts) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 172.1 | $ | 125.6 | |||
Short-term investments | 25.3 | 36.7 | |||||
Receivables: | |||||||
Trade receivables, net | 188.1 | 179.8 | |||||
Other | 26.1 | 25.6 | |||||
Contract assets | 46.1 | 54.9 | |||||
Inventories | 192.5 | 215.1 | |||||
Prepaid expenses and other current assets | 18.4 | 18.9 | |||||
Total current assets | 668.6 | 656.6 | |||||
Property, plant and equipment, net | 614.3 | 611.8 | |||||
Operating lease assets | 26.3 | — | |||||
Deferred tax assets, net | 6.3 | 35.9 | |||||
Intangible assets, net | 30.3 | 32.4 | |||||
Goodwill | 44.0 | 44.0 | |||||
Other assets | 36.5 | 38.6 | |||||
Total | $ | 1,426.3 | $ | 1,419.3 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 93.8 | $ | 121.4 | |||
Accrued salaries, wages and related expenses | 31.9 | 40.1 | |||||
Other accrued liabilities | 50.1 | 44.0 | |||||
Total current liabilities | 175.8 | 205.5 | |||||
Long-term portion of operating lease liabilities | 25.6 | — | |||||
Net liabilities of Salaried VEBA | 32.8 | 32.4 | |||||
Deferred tax liabilities | 4.2 | 4.2 | |||||
Long-term liabilities | 65.4 | 66.4 | |||||
Long-term debt | 371.1 | 370.4 | |||||
Total liabilities | 674.9 | 678.9 | |||||
Commitments and contingencies | |||||||
Stockholders' equity: | |||||||
Preferred stock, 5,000,000 shares authorized at both September 30, 2019 and December 31, 2018; no shares were issued and outstanding at September 30, 2019 and December 31, 2018 | — | — | |||||
Common stock, par value $0.01, 90,000,000 shares authorized at both September 30, 2019 and at December 31, 2018; 22,550,827 shares issued and 15,900,956 shares outstanding at September 30, 2019; 22,471,705 shares issued and 16,234,603 shares outstanding at December 31, 2018 | 0.2 | 0.2 | |||||
Additional paid in capital | 1,061.5 | 1,059.3 | |||||
Retained earnings | 193.0 | 150.2 | |||||
Treasury stock, at cost, 6,649,871 shares at September 30, 2019 and 6,237,102 shares at December 31, 2018, respectively | (460.1 | ) | (420.5 | ) | |||
Accumulated other comprehensive loss | (43.2 | ) | (48.8 | ) | |||
Total stockholders' equity | 751.4 | 740.4 | |||||
Total | $ | 1,426.3 | $ | 1,419.3 |
1 Please refer to the Company's Form 10-Q for the quarter ended September 30, 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 | |||||||||||||||||||||||
3Q19 | 2Q19 | 1Q19 | 3Q18 | 2Q18 | 1Q18 | ||||||||||||||||||
GAAP net income | $ | 25.4 | $ | 19.2 | $ | 28.0 | $ | 21.7 | $ | 20.7 | $ | 25.7 | |||||||||||
Interest expense | 5.8 | 5.8 | 5.7 | 5.7 | 5.7 | 5.6 | |||||||||||||||||
Other expense (income), net | 0.8 | 0.1 | (0.5 | ) | (0.7 | ) | 0.5 | (0.1 | ) | ||||||||||||||
Income tax provision | 8.7 | 7.3 | 9.8 | 8.2 | 7.8 | 5.9 | |||||||||||||||||
GAAP operating income | 40.7 | 32.4 | 43.0 | 34.9 | 34.7 | 37.1 | |||||||||||||||||
Mark-to-market loss 1 | 1.1 | 1.5 | 2.4 | 2.9 | 5.5 | 6.3 | |||||||||||||||||
Other operating NRR loss (gain) 2.3 | 2.6 | 1.5 | (1.1 | ) | (1.4 | ) | 3.5 | (5.7 | ) | ||||||||||||||
Operating income, excluding operating NRR items | 44.4 | 35.4 | 44.3 | 36.4 | 43.7 | 37.7 | |||||||||||||||||
Depreciation and Amortization | 12.3 | 12.1 | 11.9 | 11.0 | 10.9 | 10.5 | |||||||||||||||||
Adjusted EBITDA 4 | $ | 56.7 | $ | 47.5 | $ | 56.2 | $ | 47.4 | $ | 54.6 | $ | 48.2 | |||||||||||
GAAP net income | $ | 25.4 | $ | 19.2 | $ | 28.0 | $ | 21.7 | $ | 20.7 | $ | 25.7 | |||||||||||
Operating NRR Items | 3.7 | 3.0 | 1.3 | 1.5 | 9.0 | 0.6 | |||||||||||||||||
Non-Operating NRR Items | 1.6 | 1.6 | 1.7 | 1.5 | 1.5 | 1.5 | |||||||||||||||||
Tax impact of above NRR Items | (1.5 | ) | (1.1 | ) | (0.7 | ) | (0.8 | ) | (2.8 | ) | (0.5 | ) | |||||||||||
Adjusted net income | $ | 29.2 | $ | 22.7 | $ | 30.3 | $ | 23.9 | $ | 28.4 | $ | 27.3 | |||||||||||
GAAP earnings per diluted share 5 | $ | 1.57 | $ | 1.18 | $ | 1.71 | $ | 1.29 | $ | 1.22 | $ | 1.51 | |||||||||||
Adjusted earnings per diluted share 5 | $ | 1.82 | $ | 1.40 | $ | 1.85 | $ | 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 the treasury stock method. |
Source: Kaiser Aluminum Corporation