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8-K - FORM 8-K - KAISER ALUMINUM CORP | a59362e8vk.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Kaiser Aluminum Corporation Reports
First Quarter 2011 Financial Results
First Quarter 2011 Financial Results
| Value Added Revenue of $157 Million up 15% on Improving Demand and Benefit of Recent Acquisitions | ||
| Adjusted Consolidated Operating Income of $17 Million; Adjusted EBITDA of $23 Million | ||
| EBITDA Margins Negatively Impacted by Lag in Passing Through Rapidly Rising Metal Costs |
FOOTHILL RANCH, Calif., April 27, 2011 Kaiser Aluminum Corporation (NASDAQ:KALU) today
reported net income of $11 million or $0.59 earnings per diluted share for the first quarter 2011
compared to $9 million, or $0.44 per diluted share for the prior year quarter. Excluding the impact
of non-run-rate items, adjusted net income and earnings per diluted share were $9 million and
$0.47, respectively, for both the first quarter of 2011 and the prior year quarter.
Value added revenue of $157 million for the first quarter ended March 31, 2011 increased
$20 million from $137 million in the prior year quarter. Adjusted consolidated EBITDA of $23
million or 15% of value added revenue reflected the favorable impact of stronger demand and
recent acquisitions, partially offset by a margin squeeze due to a lag in passing through rapidly
increasing metal costs on some products during the quarter.
Summary
Improving demand across our end market applications combined with the benefit of our recent
acquisitions of Alexco and Nichols Wire drove higher sales and higher adjusted EBITDA, said Jack
A. Hockema, President, CEO and Chairman. However, we did not fully realize our earnings potential
during the quarter as the timing and amount of price increases on spot sales for high value added
products have been insufficient to recover sharply rising aluminum and alloying costs. We are
encouraged that recently implemented price increases are sustainable, and we expect to begin to
recapture some of the margin squeeze in the second quarter, said Mr. Hockema.
The ramp-up of our Kalamazoo, Michigan extrusion facility continues to gain momentum. We expect
that EBITDA margins will improve throughout the year as we realize price increases and improving
cost benefits from Kalamazoo, concluded Mr. Hockema.
First Quarter 2011 Consolidated Results
(Non GAAP, Unaudited)*
($mm, except shipments, realized price and per share amounts)
(Non GAAP, Unaudited)*
($mm, except shipments, realized price and per share amounts)
Quarter | ||||||||||||
1Q11 | 4Q10 | 1Q10 | ||||||||||
Net Sales |
$ | 323 | $ | 266 | $ | 268 | ||||||
Shipments (mm lbs) |
144 | 124 | 128 | |||||||||
Value Added Revenue1 |
$ | 157 | $ | 134 | $ | 137 | ||||||
Realized Price per Pound ($/lb) |
||||||||||||
Contained Metal |
$ | 1.15 | $ | 1.07 | $ | 1.02 | ||||||
Value Added Revenue |
$ | 1.09 | $ | 1.07 | $ | 1.07 | ||||||
Total |
$ | 2.24 | $ | 2.14 | $ | 2.09 | ||||||
Adjusted EBITDA2 |
$ | 23 | $ | 16 | $ | 20 | ||||||
Depreciation and Amortization |
$ | (6 | ) | $ | (6 | ) | $ | (4 | ) | |||
Operating Income before NRR3 |
$ | 17 | $ | 10 | $ | 16 | ||||||
Non-Run-Rate Items |
$ | 4 | $ | 3 | $ | (1 | ) | |||||
Reported Operating Income4 |
$ | 21 | $ | 12 | $ | 15 | ||||||
Net Income |
$ | 11 | $ | (0 | ) | $ | 9 | |||||
EPS (diluted, GAAP) |
$ | 0.59 | $ | (0.02 | ) | $ | 0.44 | |||||
Adjusted EPS5 |
$ | 0.47 | $ | (0.06 | ) | $ | 0.47 |
1 | Value added revenue = Fabricated Products net sales less hedged cost of alloyed metal | |
2 | Operating Income (before non-run-rate items) plus depreciation and amortization | |
3 | NRR = Non-run-rate | |
4 | Totals may not sum due to rounding | |
5 | Estimated EPS excluding NRR items (net of tax) | |
* | Please refer to GAAP financial statements |
As indicated in the Companys prior earnings call outlook, higher value added revenue and
adjusted EBITDA in the first quarter reflected the benefit of additional sales from the
acquisitions of Alexco and Nichols Wire in addition to improving demand and higher shipments across
virtually all of the Companys products and end market applications. Adjusted consolidated EBITDA
was $23 million for the first quarter of 2011, or 15% of value added revenue, compared to
$20 million, or 15% of value added revenue in the prior year quarter.
Consolidated operating income was $21 million in the first quarter 2011, up $6 million compared to
the prior year quarter partially as a result of more favorable non-run-rate adjustments. Adjusted
for non-run-rate items, consolidated operating income was $17 million for the first quarter 2011
compared to $16 million the first quarter 2010. Operating income in the first quarter 2011
reflected a $2 million increase in depreciation and amortization due to assets placed in service
during 2010.
During the quarter the Company completed the acquisition of Alexco, a Chandler, Arizona based
manufacturer of hard alloy extrusions for the aerospace industry. The net cash consideration paid
was approximately $83 million. Total cash combined with borrowing availability under the revolving
credit facility exceeded $245 million as of March 31, 2011.
Outlook
We are experiencing strong demand throughout our extensive aerospace product offering with the
exception of aerospace plate where shipments have been constrained by the overhang of excess
inventory in the supply chain. However, we anticipate that our aerospace plate order rate will
begin to ramp up in the second half and into 2012. Longer term we expect very substantial
aerospace demand growth driven by increasing build rates, larger airframes, and monolithic design,
said Mr. Hockema.
Our general engineering and automotive applications continue to experience slowly improving
underlying demand, modest restocking in the supply chain, and growth in new aluminum extrusion
automotive programs. Although we have not to date experienced any change in demand for our
automotive and semi-conductor applications as a result of manufacturing disruptions in Japan, there
remains some uncertainty as to the potential impact, if any, on the overall supply chain.
Overall, we expect that our shipments and value added revenue in the second quarter of 2011 will
be similar to the first quarter, and we expect our adjusted EBITDA margin as a percentage of value
added revenue will benefit from improving operating efficiencies and partial recovery of the margin
squeeze caused by rising aluminum costs. Looking to the second half of the year, we are optimistic
that we will get a strong second half boost from higher order rates for aerospace plate, and we
anticipate further EBITDA margin improvement as we gain increasing benefits from higher aerospace
plate shipments, the Kalamazoo ramp up, and improved pricing, concluded Mr. Hockema.
Conference Call
Kaiser Aluminum Corporation will host a conference call on April 28, 2011, at 10:00am (Pacific
Time); 12:00pm (Central Time); 1:00pm (Eastern Time), to discuss first quarter 2011 results. To
participate, the conference call can be directly accessed from the U.S. and Canada at (877)
645-6210, and accessed internationally at (914) 495-8566. A link to the simultaneous web cast can
be accessed on the Companys website at http://investors.kaiseraluminum.com/events.cfm. A copy of a
presentation will be available for download prior to the call and an audio archive will be
available on the Companys website following the call.
Company Description
Kaiser Aluminum Corporation, headquartered in Foothill Ranch, Calif., is a leading producer of
semi-fabricated specialty aluminum products, serving customers worldwide with highly-engineered
solutions for aerospace and high-strength, general engineering, and custom automotive and
industrial applications. The Companys North American facilities produce value-added sheet, plate,
extrusions, rod, bar, tube and wire products, adhering to traditions of quality, innovation and
service that have been key components of our culture since the Company was founded in 1946. The
Companys stock is included in the Russell 2000® index and the S&P SmallCap 600® index.
Available Information
For more information, please visit the Companys web site at www.kaiseraluminum.com. The
web site includes a section for investor relations under which the Company provides notifications
of news or announcements regarding its financial performance, including Securities and Exchange
Commission (SEC) filings, investor events, and earnings and other press releases. In addition, all
Company filings submitted to the SEC are available through a link to the section of the SECs web
site at www.sec.gov which includes: Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K and Proxy Statements for the Companys annual stockholders meetings
and other information statements as filed with the SEC. In addition, the Company provides a webcast
of its quarterly earnings calls and certain events in which management participates or hosts with
members of the investment community.
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 companys 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 operating income, EBITDA, net
income and earnings per diluted share, excluding non-run-rate items. 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.
###
This press release contains statements based on managements 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
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) material adverse changes in economic or
industry conditions generally, including global financial markets; (b) our inability to achieve the
level of growth or other benefits anticipated by management, including those anticipated from our
acquisitions and other strategic investments and the integration of acquired businesses; (c)
increases in our costs, including the cost of energy, raw materials and freight costs, which
we are unable to pass through to our customers; (d) pressure to reduce defense spending and
demand for the Companys products used in defense applications as the U.S. and other governments
are faced with competing national priorities; (e) changes in the markets served by the Company,
including aerospace, defense, general engineering, automotive, distribution and other markets,
including changes impacting the volume, price or mix of products sold by the Company and the
Companys ability to flex production consistent with changing demand levels; (f) the Companys
ability to lower energy costs, realize manufacturing efficiencies and complete its expansion and
organic growth projects, equipment and facility upgrades to improve manufacturing and cost
efficiencies and product expansions as planned and by targeted completion dates; (g) unfavorable
changes in laws or regulations that impact our operations and results; (h) the outcome of
contingencies, including legal proceedings, government investigations and environmental
remediation and (i) other risk factors summarized in the Companys reports filed with the
Securities and Exchange Commission, including the Companys Form 10-K for the year ended December
31, 2010. 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. 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 Companys expectations.
Investor Relations Contact:
Melinda C. Ellsworth
Kaiser Aluminum
(949) 614-1757
Melinda C. Ellsworth
Kaiser Aluminum
(949) 614-1757
Public Relations Contact:
Dave Quast
Financial Dynamics
(646) 421-5341
Dave Quast
Financial Dynamics
(646) 421-5341
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME (1)
(Unaudited)
(In millions of dollars except share and per share amounts)
STATEMENTS OF CONSOLIDATED INCOME (1)
(Unaudited)
(In millions of dollars except share and per share amounts)
STATEMENTS OF CONSOLIDATED INCOME
Quarter Ended March 31, | ||||||||
2011 | 2010 | |||||||
Net sales |
$ | 322.6 | $ | 267.5 | ||||
Costs and expenses: |
||||||||
Cost of products sold: |
||||||||
Cost of products sold, excluding
depreciation, amortization and
other items |
280.9 | 232.0 | ||||||
Restructuring costs and other benefits |
| (0.6 | ) | |||||
Depreciation and amortization |
6.3 | 4.0 | ||||||
Selling, administrative, research and development, and general |
14.9 | 17.3 | ||||||
Total costs and expenses |
302.1 | 252.7 | ||||||
Operating income |
20.5 | 14.8 | ||||||
Other (expense) income: |
||||||||
Interest expense |
(4.5 | ) | | |||||
Other income, net |
1.7 | 0.2 | ||||||
Income before income taxes |
17.7 | 15.0 | ||||||
Income tax provision |
(6.4 | ) | (6.2 | ) | ||||
Net income |
$ | 11.3 | $ | 8.8 | ||||
Earnings per share, Basic 2 |
||||||||
Net income per share |
$ | 0.59 | $ | 0.44 | ||||
Earnings per share, Diluted 2 |
||||||||
Net income per share |
$ | 0.59 | $ | 0.44 | ||||
Weighted-average number of common shares outstanding (000): |
||||||||
Basic |
18,950 | 20,020 | ||||||
Diluted |
18,950 | 20,020 | ||||||
1 | Please refer to the Companys Form 10-Q for the quarter ended March 31, 2011, for additional detail regarding the items in the table. | |
2 | All of the Companys unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are treated as participating securities and affect the computation of net income available to common stockholders and earnings per share pursuant to the two-class method. |
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
SELECTED OPERATIONAL AND FINANCIAL INFORMATION (1)
(Unaudited)
(In millions of dollars except shipments and average realized third-party sales price)
SELECTED OPERATIONAL AND FINANCIAL INFORMATION (1)
(Unaudited)
(In millions of dollars except shipments and average realized third-party sales price)
Quarter Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Shipments (mm lbs): |
||||||||
Fabricated Products |
144.1 | 128.0 | ||||||
All Other2 |
| 0.4 | ||||||
144.1 | 128.4 | |||||||
Average Realized Third-Party Sales Price (per
pound): |
||||||||
Fabricated Products3 |
$ | 2.24 | $ | 2.09 | ||||
All Other4 |
$ | | $ | 0.92 | ||||
Net Sales: |
||||||||
Fabricated Products |
$ | 322.6 | $ | 267.2 | ||||
All Other |
| 0.3 | ||||||
Total Net Sales |
$ | 322.6 | $ | 267.5 | ||||
Segment Operating Income (Loss):5 |
||||||||
Fabricated Products6 7 |
$ | 23.7 | $ | 22.1 | ||||
All Other8 |
(3.2 | ) | (7.3 | ) | ||||
Total Operating Income |
$ | 20.5 | $ | 14.8 | ||||
Income tax provision |
$ | (6.4 | ) | $ | (6.2 | ) | ||
Net Income |
$ | 11.3 | $ | 8.8 | ||||
Capital Expenditures |
$ | 6.2 | $ | 13.9 | ||||
1 | Please refer to the Companys Form 10-Q for the quarter ended March 31, 2011, for additional detail regarding the items in the table. | |
2 | Shipments in All Other in 2010 represent residual activity involving primary aluminum purchased by us from Anglesey while it continued its smelting operations (prior to September 30, 2009) and resold by us in the first quarter of 2010. | |
3 | Average realized prices for our 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. | |
4 | Average realized prices for All Other represent the average realized prices on sales of primary aluminum purchased by us from Anglesey while it continued its smelting operations (prior to September 30, 2009) and resold by us in the first quarter of 2010. | |
5 | We periodically reassess the methodologies used to allocate costs among our business units to assess segment profitability. In the fourth quarter of 2010, we modified the allocation of incentive compensation expense relating to both our long-term incentive plans and certain short-term incentive plans to our business units. These reclassifications have no impact on our segment or consolidated Net sales, or our consolidated operating income. All interim period results of 2010 have been retrospectively adjusted for consistency with such cost allocation. As a result, an additional $0.9 million of charges relating to our long-term incentive plans and certain short-term employee incentive plans are reflected in the operating results of the Fabricated Products segment and, accordingly, excluded from the operating results of All Other in the quarter ended March 31, 2010. | |
6 | Fabricated Products segment results for the quarter ended March 31, 2011 include non-cash mark-to-market gains on natural gas, electricity and foreign currency hedging activities totaling $1.2 million. Fabricated Products segment results for the quarter |
ended March 31, 2010 include non-cash mark-to-market losses on natural gas and foreign currency hedging activities of $(3.2) million. | ||
7 | Fabricated Products segment operating results for the quarters ended March 31, 2011 and March 31, 2010 include non-cash last-in, first-out (LIFO) inventory charges of $14.9 million and $9.2 million, respectively, and metal gains of approximately $12.4 million and $8.2 million, respectively. | |
8 | The changes in operating income in All Other were driven by the Corporate and Other and the Hedging business unit operating results. Included in the operating results of Corporate and Other were $2.2 million and $(0.4) million of net periodic pension benefit income (expense) relating to the VEBAs for the quarters ended March 31, 2011 and March 31, 2010, respectively. In addition, for the quarters ended March 31, 2011 and March 31, 2010, non-cash mark-to-market gains on primary aluminum hedging activities were $3.1 million and $3.4 million, respectively. |
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (1)
(Unaudited)
(In millions of dollars, except share and per share amounts)
CONSOLIDATED BALANCE SHEETS (1)
(Unaudited)
(In millions of dollars, except share and per share amounts)
CONSOLIDATED BALANCE SHEETS
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 55.9 | $ | 135.6 | ||||
Receivables: |
||||||||
Trade, less allowance for doubtful receivables of
$0.6 at March 31, 2011 and $0.6 at December 31, 2010 |
114.0 | 83.0 | ||||||
Other |
3.3 | 5.2 | ||||||
Inventories |
169.6 | 167.5 | ||||||
Prepaid expenses and other current assets |
90.3 | 80.1 | ||||||
Total current assets |
433.1 | 471.4 | ||||||
Property, plant, and equipment net |
358.1 | 354.1 | ||||||
Net asset in respect of VEBAs |
208.6 | 195.7 | ||||||
Deferred tax assets net |
221.0 | 231.1 | ||||||
Intangible assets net |
38.8 | 4.0 | ||||||
Goodwill |
37.2 | 3.1 | ||||||
Other assets |
74.0 | 83.0 | ||||||
Total |
$ | 1,370.8 | $ | 1,342.4 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 63.7 | $ | 50.8 | ||||
Accrued salaries, wages, and related expenses |
29.5 | 31.1 | ||||||
Other accrued liabilities |
42.5 | 42.0 | ||||||
Payable to affiliate |
23.9 | 17.1 | ||||||
Current portion of secured debt and credit facilities |
4.8 | 1.3 | ||||||
Total current liabilities |
164.4 | 142.3 | ||||||
Long-term liabilities |
130.1 | 134.7 | ||||||
Cash convertible senior notes |
143.0 | 141.4 | ||||||
Long-term secured debt and credit facilities |
7.9 | 11.8 | ||||||
Total liabilities |
445.4 | 430.2 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Common stock, par value $0.01, 90,000,000 shares authorized at both March 31, 2011 and
at December 31, 2010; 19,268,791 shares issued and outstanding at March 31, 2011 and
19,214,451 shares issued and outstanding at December 31, 2010 |
0.2 | 0.2 | ||||||
Additional capital |
988.8 | 987.1 | ||||||
Retained earnings |
86.7 | 80.1 | ||||||
Common stock owned by Union VEBA subject to transfer restrictions, at reorganization
value, 3,306,938 shares at March 31, 2011 and 3,523,980 shares at December 31, 2010 |
(79.4 | ) | (84.6 | ) | ||||
Treasury stock, at cost, 1,724,606 shares at March 31, 2011 and 1,724,606 shares
at December 31, 2010 |
(72.3 | ) | (72.3 | ) | ||||
Accumulated other comprehensive income |
1.4 | 1.7 | ||||||
Total stockholders equity |
925.4 | 912.2 | ||||||
Total |
$ | 1,370.8 | $ | 1,342.4 | ||||
1 | Please refer to the Companys Form 10-Q for the quarter ended March 31, 2011 for additional detail regarding the items in the table. |
Reconciliation of Non-GAAP Measures Quarter Ended March 31, 2011
The following table presents a reconciliation of non-GAAP measures presented in the earnings release for the
quarter ended March 31, 2011 (in millions of dollars except share and per share amounts):
Consolidated | ||||
GAAP operating income |
$ | 20.5 | ||
Mark to market gains |
4.3 | |||
Other non-run-rate items1 |
(0.5 | ) | ||
Total non-run-rate adjustments |
3.8 | |||
Operating income, excluding non-run-rate items |
$ | 16.7 | ||
Depreciation and Amortization |
6.3 | |||
Adjusted EBITDA |
$ | 23.0 | ||
GAAP net income |
$ | 11.3 | ||
Total non-run-rate adjustments (net of tax) |
2.4 | |||
Net income, excluding non-run-rate adjustments (net of tax) |
$ | 8.9 | ||
Diluted earnings per share (GAAP) |
$ | 0.59 | ||
Diluted earnings per share, excluding non-run-rate items |
$ | 0.47 | ||
1 | Other non-run-rate items primarily represent non-cash LIFO charges and metal gains in the Fabricated Products segment and non-cash net periodic benefit income related to the VEBAs in All Other. |
Reconciliation of Non-GAAP Measures Quarter Ended March 31, 2010
The following table presents a reconciliation of non-GAAP measures presented in the earnings release for the
quarter ended March 31, 2010 (in millions of dollars except share and per share amounts):
Consolidated | ||||
GAAP operating income |
$ | 14.8 | ||
Mark to market gains |
0.2 | |||
Restructuring costs and other operating benefits, net |
0.6 | |||
Other non-run-rate items1 |
(1.8 | ) | ||
Total non-run-rate adjustments |
(1.0 | ) | ||
Operating income, excluding non-run-rate items |
$ | 15.8 | ||
Depreciation and Amortization |
4.0 | |||
Adjusted EBITDA |
$ | 19.8 | ||
GAAP net income |
$ | 8.8 | ||
Total non-run-rate adjustments (net of tax) |
(0.6 | ) | ||
Net income, excluding non-run-rate adjustments (net of tax) |
$ | 9.4 | ||
Diluted earnings per share (GAAP) |
$ | 0.44 | ||
Diluted earnings per share, excluding non-run-rate items |
$ | 0.47 | ||
1 | Other non-run-rate items represent environmental expenses, non-cash LIFO charges and metal gains in the Fabricated Products segment and non-cash net periodic benefit expense related to the VEBAs in All Other. |