KAISER ALUMINUM CORP

Previous wording

In the areas of aluminum extrusions, we focus on demanding Aero/HS Products, GE Products, and Automotive Extrusions that require high strength, machinability or other specific properties where we can create and maintain a defensible competitive position because of our technical expertise, strong production capability and high product quality. Our 11 extrusion/drawing facilities, 10 of which are in the United States and one of which is in Canada, serve primarily North American demand for aerospace, general engineering, or automotive applications. Additionally, we have a facility in Columbia, New Jersey, that focuses on multi-material advanced manufacturing methods and techniques, which include multi-axis computer numerical control machining, additive manufacturing (“3D Printing”), welding and fabrication for demanding aerospace and defense, high tech, general industrial, and automotive applications. Our consolidated Net sales for the quarter ended March 31, 2024 totaled $737.5 million on 291.0 million pounds shipped from our facilities. We employed approximately 4,000 people at March 31, 2024.

Current wording

In the areas of aluminum extrusions, we focus on demanding Aero/HS Products, GE Products, and Automotive Extrusions that require high strength, machinability or other specific properties where we can create and maintain a defensible competitive position because of our technical expertise, strong production capability and high product quality. Our 10 active extrusion/drawing facilities, nine of which are in the United States and one of which is in Canada, serve primarily North American demand for aerospace, general engineering, or automotive applications. Additionally, we have a facility in Columbia, New Jersey, that focuses on multi-material advanced manufacturing methods and techniques, which include multi-axis computer numerical control machining, additive manufacturing (“3D Printing”), welding and fabrication for demanding aerospace and defense, high technology, general industrial, and automotive applications. Our consolidated Net sales for the six months ended June 30, 2024 totaled $1,510.9 million on 587.8 million pounds shipped from our facilities. We employed approximately 4,000 people at June 30, 2024.

Previous wording

Cash dividends and dividend equivalents of $0.77 per share or $12.6 million paid during the quarter ended March 31, 2024.

Current wording

Cash dividends and dividend equivalents of $0.77 per share or $12.7 million paid during the quarter ended June 30, 2024.

Previous wording

Net Sales. Net sales totaled $737.5 million and $807.6 million for the quarters ended March 31, 2024 and March 31, 2023, respectively, reflecting an 8.3 million pound decrease in shipment volume and a $0.17/lb (6%) decrease in average realized sales price per pound. The shipment volume decrease reflected: (i) an 11.3 million pound (7%) decrease in Packaging reflecting the impact of destocking primarily of coated food packaging material; (ii) a 1.7 million pound (61%) decrease in Other products; and (iii) a 1.2 million pound (4%) decrease in Automotive Extrusions, partially offset by: (i) a 4.7 million pound (8%) increase in Aero/HS Products reflecting continued strong demand for commercial aerospace applications and (ii) a 1.2 million pound (2%) increase in GE Products. The average realized sales price per pound reflected a $0.20/lb (14%) decrease in the average Hedged Cost of Alloyed Metal price per pound and a $0.03/lb (2%) increase in Conversion Revenue per pound reflecting higher pricing and improved mix. For further details, see the table below in “Selected Operational and Financial Information.”

Current wording

Net Sales. Net sales totaled $773.4 million and $814.1 million for the quarters ended June 30, 2024 and June 30, 2023, respectively, reflecting a 17.3 million pound (6%) decrease in shipment volume and a $0.02/lb (1%) increase in average realized sales price per pound. The shipment volume decrease reflected: (i) a 17.4 million pound (11%) decrease in Packaging; (ii) a 1.7 million pound (3%) decrease in Aero/HS Products; and (iii) a 1.7 million pound (61%) decrease in Other products, partially offset by: (i) a 3.2 million pound (6%) increase in GE Products and (ii) a 0.3 million pound (1%) increase in Automotive Extrusions. The average realized sales price per pound reflected a $0.01/lb (1%) decrease in the average Hedged Cost of Alloyed Metal price per pound and a $0.03/lb (2%) increase in Conversion Revenue per pound reflecting higher pricing. For further details, see the table below in “Selected Operational and Financial Information.”

Previous wording

COGS. COGS for the quarter ended March 31, 2024 totaled $642.9 million, or 87% of Net sales, compared to $731.1 million, or 91% of Net sales, for the quarter ended March 31, 2023. The decrease of $88.2 million reflected a $67.7 million decrease in Hedged Cost of Alloyed Metal and a $20.5 million decrease in net manufacturing conversion and other costs. Of the $67.7 million decrease in Hedged Cost of Alloyed Metal, $55.5 million was due to lower hedged metal prices and $12.2 million was due to lower shipment volume (see above in our “Net Sales” discussion for further details). The $20.5 million decrease in net manufacturing conversion and other costs reflected: (i) an $8.1 million decrease due to lower shipments; (ii) a $7.5 million decrease in major maintenance costs driven by timing of annual planned maintenance programs; and (iii) a $4.9 million decrease in freight and other manufacturing cost. For a further discussion of the comparative results of operations for the quarters ended March 31, 2024 and March 31, 2023, see below in “Selected Operational and Financial Information.”

Current wording

COGS. COGS for the quarter ended June 30, 2024 totaled $690.5 million, or 89% of Net sales, compared to $718.4 million, or 88% of Net sales, for the quarter ended June 30, 2023. The decrease of $27.9 million reflected a $31.2 million decrease in Hedged Cost of Alloyed Metal, partially offset by a $3.3 million increase in net manufacturing conversion and other costs. Of the $31.2 million decrease in Hedged Cost of Alloyed Metal, $24.0 million was due to lower shipment volume and $7.2 million was due to lower hedged metal prices (see above in our “Net Sales” discussion for further details). The $3.3 million increase in net manufacturing conversion and other costs primarily reflected: (i) a $5.5 million decrease in costs associated with a reduction in pounds shipped during the quarter, more than offset by; (ii) a $4.5 million net increase in manufacturing costs attributable to an $11.7 million increase in non-cash LIFO inventory expense, partially offset by improved metal sourcing and operating efficiencies; (iii) a $2.6 million increase in energy costs; and (iv) a $1.7 million increase in major maintenance costs driven by timing of annual planned maintenance programs. For a further discussion of the comparative results of operations for the quarters ended June 30, 2024 and June 30, 2023, see below in “Selected Operational and Financial Information.”

Previous wording

Selling, General, Administrative, Research and Development (“SG&A and R&D”). SG&A and R&D expense totaled $32.6 million and $29.7 million for the quarters ended March 31, 2024 and March 31, 2023, respectively. The increase during the quarter ended March 31, 2024 was primarily due to a $2.8 million increase in employee related costs.

Current wording

Selling, General, Administrative, Research and Development (“SG&A and R&D”). SG&A and R&D expense totaled $31.6 million and $32.2 million for the quarters ended June 30, 2024 and June 30, 2023, respectively, and $64.2 million and $61.9 million for the six months ended June 30, 2024 and June 30, 2023, respectively. The decrease during the quarter ended June 30, 2024 was primarily due to: (i) a $0.5 million decrease in legal fees; (ii) a $0.3 million decrease in salaries, benefits, and incentive compensation; and (iii) a $0.3 million decrease in other SG&A and R&D expenses, partially offset by a $0.5 million increase in consulting and outsourced services.

Previous wording

Restructuring Costs. Restructuring costs of $0.1 million and $1.4 million for the quarters ended March 31, 2024 and March 31, 2023, respectively, related to our restructuring plan initiated in 2022. See Note 4 of Notes to Interim Consolidated Financial Statements included in this Report for further information regarding the restructuring plan.

Current wording

Restructuring Costs. Restructuring costs of $6.8 million and $1.2 million for the quarters ended June 30, 2024 and June 30, 2023, respectively, and $6.9 million and $2.6 million for the six months ended June 30, 2024 and June 30, 2023, respectively, related to our restructuring plans initiated in 2022 and 2024. See Note 4 of Notes to Interim Consolidated Financial Statements included in this Report for further information regarding the restructuring plans.

Previous wording

Other Operating Charges, Net. Other operating charge of $0.4 million for the quarter ended March 31, 2024 represents an impairment charge on land classified as held for sale during the quarter.

Current wording

Other Operating Charges, Net. Other operating charges of $0.4 million for the six months ended June 30, 2024 represents an impairment charge on land classified as held for sale during the quarter ended March 31, 2024.

Previous wording

Interest Expense. See Note 6 of Notes to Interim Consolidated Financial Statements included in this Report for a discussion of our debt and credit facilities that were in effect during the quarters ended March 31, 2024 and March 31, 2023 and interest expense capitalized as part of construction in progress.

Current wording

Interest Expense. See Note 6 of Notes to Interim Consolidated Financial Statements included in this Report for a discussion of our debt and credit facilities that were in effect during the quarters and six months ended June 30, 2024 and June 30, 2023 and interest expense capitalized as part of construction in progress.

Previous wording

Mark-to-market gain on derivative instruments represents the gain on non-designated commodity hedges. Adjusted EBITDA reflects the realized gains related to these derivatives upon settlement.

Current wording

Mark-to-market loss on derivative instruments represents the loss on non-designated commodity hedges. Adjusted EBITDA reflects the realized impact related to these derivatives upon settlement.

Previous wording

Adjusted EBITDA for the quarter ended March 31, 2024 was $15.7 million higher than Adjusted EBITDA for the quarter ended March 31, 2023. Adjusted EBITDA for the quarter ended March 31, 2024 was impacted by: (i) improved pricing and mix; (ii) improved operating efficiencies; (iii) lower cost of major maintenance driven by timing of annual planned maintenance programs; and (iv) a decrease in freight costs, partially offset by an increase in employee benefit and incentive costs. See above in “Consolidated Results of Operations” for further details.

Current wording

Adjusted EBITDA for the six months ended June 30, 2024 was $5.5 million higher than Adjusted EBITDA for the six months ended June 30, 2023. Adjusted EBITDA for the six months ended June 30, 2024 was impacted by: (i) improved pricing and mix; (ii) a decrease in major maintenance driven by timing of annual planned maintenance programs, partially offset by: (i) a decrease in shipment volume and (ii) an increase in costs, primarily attributable to non-cash LIFO inventory expenses partially offset by improved metal sourcing and manufacturing efficiencies. See above in “Consolidated Results of Operations” for further details.

Previous wording

Hedged Cost of Alloyed Metal for the quarters ended March 31, 2024 and March 31, 2023 included $367.1 million and $436.7 million, respectively, reflecting the cost of aluminum at the average MWTP and the cost of certain alloys used in the production process, as well as metal price exposure on shipments that we hedged with realized losses upon settlement of $3.5 million and $1.6 million in the quarters ended March 31, 2024 and March 31, 2023, respectively, all of which were included within both Net sales and COGS in our Statements of Consolidated Income. See Note 5 of Notes to Consolidated Financial Statements included in this Report for the total realized loss on aluminum hedges for which we hedged the metal price exposure externally.

Current wording

Hedged Cost of Alloyed Metal for the quarters ended June 30, 2024 and June 30, 2023 included $408.0 million and $428.8 million, respectively, reflecting the cost of aluminum at the average MWTP and the cost of certain alloys used in the production process, as well as metal price exposure on shipments that we hedged with realized gains upon settlement of $3.5 million and realized losses upon settlement of $6.8 million in the quarters ended June 30, 2024 and June 30, 2023, respectively, all of which were included within both Net sales and COGS in our Statements of Consolidated Income. Hedged Cost of Alloyed Metal for the six months ended June 30, 2024 and June 30, 2023 included $775.1 million and $865.6 million, respectively, reflecting the cost of aluminum at the average MWTP and the cost of certain alloys used in the production process, as well as metal price exposure on shipments that we hedged with realized losses upon settlement of $8.3 million in the six months ended June 30, 2023, all of which were included within both Net sales and COGS in our Statements of Consolidated Income. There were no gains or losses upon settlement for the six months ended June 30, 2024. See Note 5 of Notes to Consolidated Financial Statements included in this Report for the total realized loss on aluminum hedges for which we hedged the metal price exposure externally.

Previous wording

Cash provided by operating activities for the quarter ended March 31, 2024 reflected results of business activity described above in our “Consolidated Results of Operations” discussion, as well as the following working capital changes: (i) an increase in accounts payable of $18.6 million primarily due to the timing of payments and higher metal cost; (ii) an increase in trade and other receivables of $15.1 million and contract assets of $4.5 million primarily due to timing of customer shipments; (iii) a decrease in inventory of $4.4 million due to continued focus on inventory management; and (iv) a decrease in accrued liabilities of $5.2 million.

Current wording

Cash provided by operating activities for the six months ended June 30, 2024 reflected results of business activity described above in our “Consolidated Results of Operations” discussion, as well as the following working capital changes: (i) an increase in trade and other receivables of $46.2 million primarily due to higher metal costs; (ii) a decrease in inventory of $22.6 million, excluding non-cash LIFO impact, due to continued focus on inventory management; (iii) an increase in accounts payable of $16.1 million primarily due to the timing of payments; and (iv) an increase in prepaid expenses and other current assets of $10.9 million.

Previous wording

Cash used in operating activities for the quarter ended March 31, 2023 reflected results of business activity described above in our “Consolidated Results of Operations” discussion, as well as the following working capital changes: (i) an increase in trade and other receivables of $36.9 million, primarily due to higher pricing and an increase in metal price; (ii) a decrease in accounts payable of $22.6 million primarily due to the timing of payments; and (iii) an increase in inventory of $12.3 million due primarily to a higher per pound inventory cost.

Current wording

Cash provided by operating activities for the six months ended June 30, 2023 reflected results of business activity described above in our “Consolidated Results of Operations” discussion, as well as the following working capital changes: (i) a decrease in accounts payable of $56.0 million primarily due to a decrease in metal purchases and timing of payments; (ii) a decrease in inventory of $31.5 million, excluding non-cash LIFO impact, due to increased focus on inventory management; and (iii) an increase in trade and other receivables of $17.8 million primarily due to increased pricing and an increase in metal costs.

Previous wording

See Statements of Consolidated Cash Flows included in this Report for further details on our cash flows from operating, investing, and financing activities for the quarters ended March 31, 2024 and March 31, 2023.

Current wording

See Statements of Consolidated Cash Flows included in this Report for further details on our cash flows from operating, investing, and financing activities for the six months ended June 30, 2024 and June 30, 2023.

Previous wording

We engage in certain customer-based supply chain financing programs to accelerate the receipt of payment for outstanding accounts receivable from certain customers. Costs of these programs are typically reimbursed to us by the customer. Receivables transferred under these customer-based supply chain financing programs generally meet the requirements to be accounted for as sales resulting in the derecognition of such receivables from our consolidated balance sheets. Receivables involved with these customer‑based supply chain finance programs for the quarter ended March 31, 2024 constituted approximately 37% of our Net sales. See Note 9 of Notes to Interim Consolidated Financial Statements included in this Report for further details with respect to these supply chain financing programs.

Current wording

We engage in certain customer-based supply chain financing programs to accelerate the receipt of payment for outstanding accounts receivable from certain customers. Costs of these programs are typically reimbursed to us by the customer. Receivables transferred under these customer-based supply chain financing programs generally meet the requirements to be accounted for as sales resulting in the derecognition of such receivables from our consolidated balance sheets. Receivables involved with these customer‑based supply chain finance programs for the quarter ended June 30, 2024 constituted approximately 35% of our Net sales. See Note 9 of Notes to Interim Consolidated Financial Statements included in this Report for further details with respect to these supply chain financing programs.

Previous wording

We strive to strengthen our competitive position across our end markets through strategic capital investment. Significant investments over the past decade have positioned us well with increased capacity and expanded manufacturing capabilities while more recent capital projects have focused on further enhancing manufacturing cost efficiency, improving product quality and promoting operational security, which we believe are critical to maintaining and strengthening our position in an increasingly competitive market environment. A significant portion of our capital spending over the past several years related to the modernization project at our Trentwood rolling mill, which focused on equipment upgrades throughout the process flow to reduce conversion costs, increase efficiency, and further improve our competitive cost position on all products produced at our Trentwood facility. In addition, a significant portion of the investment also focused on modernizing legacy equipment and the process flow for thin gauge plate to achieve Kaiser Select® quality enhancements for these Aero/HS Products and GE Products. These improvements have allowed us to gain incremental manufacturing capacity to enable future sales growth. We continue spending on our previously announced capital project to add a fourth roll coat line at our Warrick facility to increase our capacity for higher margin coated packaging product.

Current wording

We strive to strengthen our competitive position across our end markets through strategic capital investment. Significant investments over the past decade have positioned us well with increased capacity and expanded manufacturing capabilities while more recent capital projects have focused on further enhancing manufacturing cost efficiency, improving product quality and promoting operational security, which we believe are critical to maintaining and strengthening our position in an increasingly competitive market environment. A significant portion of our capital spending over the past several years related to the modernization project at Trentwood, which focused on equipment upgrades throughout the process flow to reduce conversion costs, increase efficiency, and further improve our competitive cost position on all products produced at Trentwood. In addition, a significant portion of the investment also focused on modernizing legacy equipment and the process flow for thin gauge plate to achieve Kaiser Select® quality enhancements for these Aero/HS Products and GE Products. These improvements have allowed us to gain incremental manufacturing capacity to enable future sales growth. We continue spending on our previously announced capital project to add a fourth roll coat line at Warrick to increase our capacity for higher margin coated packaging product.

Previous wording

Our capital investment plans remain focused on supporting demand growth through capacity expansion, sustaining our operations, enhancing product quality and increasing operating efficiencies. We anticipate total capital spending in 2024 of approximately $170.0 million to $190.0 million, the majority of which will be focused on growth initiatives, primarily reflecting investment in the new roll coat line at the Warrick facility, which we anticipate will be $100 million. In addition, approximately $10 million is attributable to our Phase VII growth project at out Trentwood facility. We expect to continue to deploy capital thoughtfully so that investment decisions align with demand expectations in order to maximize the earnings potential of the business and maintain financial strength and flexibility.

Current wording

Our capital investment plans remain focused on supporting demand growth through capacity expansion, sustaining our operations, enhancing product quality and increasing operating efficiencies. We anticipate total capital spending in 2024 of approximately $170.0 million to $190.0 million, the majority of which will be focused on growth initiatives, primarily reflecting investment in the new roll coat line at Warrick, which we anticipate will be approximately $100 million. We expect to continue to deploy capital thoughtfully so that investment decisions align with demand expectations in order to maximize the earnings potential of the business and maintain financial strength and flexibility.