UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2022
☐ | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from __________ to __________
Commission File Number: 1-09447
KAISER ALUMINUM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware | 94-3030279 | |
(State of incorporation) | (I.R.S. Employer Identification No.) |
1550 West McEwen Drive, Suite 500 | ||
Franklin, Tennessee | 37067 | |
(Address of principal executive offices) | (Zip Code) |
(629) 252-7040
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol | Name of each exchange on which registered |
Common stock, par value $0.01 per share | KALU | Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated” “accelerated filer," "smaller” “smaller reporting company"company” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ☒ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |
Emerging growth company | ||||
☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of October 16, 2017,19, 2022, there were 16,903,79115,940,625 shares of common stock of the registrant outstanding.
TABLE OF CONTENTS
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35 | ||
36 |
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
PART I – FINANCIAL INFORMATION
Item 1.
Financial StatementsCONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, 2017 | December 31, 2016 | ||||||
(In millions of dollars, except share and per share amounts) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 73.9 | $ | 55.2 | |||
Short-term investments | 191.4 | 231.0 | |||||
Receivables: | |||||||
Trade receivables, net | 138.2 | 137.7 | |||||
Other | 15.4 | 11.9 | |||||
Inventories | 212.2 | 201.6 | |||||
Prepaid expenses and other current assets | 31.5 | 18.5 | |||||
Total current assets | 662.6 | 655.9 | |||||
Property, plant and equipment, net | 557.8 | 530.9 | |||||
Deferred tax assets, net | 118.7 | 159.7 | |||||
Intangible assets, net | 25.3 | 26.4 | |||||
Goodwill | 18.8 | 37.2 | |||||
Other assets | 39.5 | 33.4 | |||||
Total | $ | 1,422.7 | $ | 1,443.5 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 94.4 | $ | 75.8 | |||
Accrued salaries, wages and related expenses | 39.0 | 49.1 | |||||
Other accrued liabilities | 43.3 | �� | 40.1 | ||||
Total current liabilities | 176.7 | 165.0 | |||||
Net liabilities of Salaried VEBA | 27.8 | 28.6 | |||||
Deferred tax liabilities | 3.3 | 3.3 | |||||
Long-term liabilities | 61.9 | 73.2 | |||||
Long-term debt | 369.4 | 368.7 | |||||
Total liabilities | 639.1 | 638.8 | |||||
Commitments and contingencies – Note 8 | |||||||
Stockholders' equity: | |||||||
Preferred stock, 5,000,000 shares authorized at both September 30, 2017 and December 31, 2016; no shares were issued and outstanding at September 30, 2017 and December 31, 2016 | — | — | |||||
Common stock, par value $0.01, 90,000,000 shares authorized at both September 30, 2017 and at December 31, 2016; 22,392,946 shares issued and 16,905,368 shares outstanding at September 30, 2017; 22,332,732 shares issued and 17,651,461 shares outstanding at December 31, 2016 | 0.2 | 0.2 | |||||
Additional paid in capital | 1,052.8 | 1,047.4 | |||||
Retained earnings | 109.0 | 75.2 | |||||
Treasury stock, at cost, 5,487,578 shares at September 30, 2017 and 4,681,271 shares at December 31, 2016, respectively | (345.7 | ) | (281.4 | ) | |||
Accumulated other comprehensive loss | (32.7 | ) | (36.7 | ) | |||
Total stockholders' equity | 783.6 | 804.7 | |||||
Total | $ | 1,422.7 | $ | 1,443.5 |
|
| As of September 30, 2022 |
|
| As of December 31, 2021 |
| ||
|
| (In millions of dollars, except share |
| |||||
ASSETS |
|
|
|
|
|
| ||
Current assets: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 129.3 |
|
| $ | 303.2 |
|
Receivables: |
|
|
|
|
|
| ||
Trade receivables, net |
|
| 311.5 |
|
|
| 332.7 |
|
Other |
|
| 56.9 |
|
|
| 53.0 |
|
Contract assets |
|
| 51.0 |
|
|
| 63.2 |
|
Inventories |
|
| 538.1 |
|
|
| 404.6 |
|
Prepaid expenses and other current assets |
|
| 40.9 |
|
|
| 48.7 |
|
Total current assets |
|
| 1,127.7 |
|
|
| 1,205.4 |
|
Property, plant and equipment, net |
|
| 989.6 |
|
|
| 955.2 |
|
Operating lease assets |
|
| 41.4 |
|
|
| 46.2 |
|
Deferred tax assets, net |
|
| 6.6 |
|
|
| 3.4 |
|
Intangible assets, net |
|
| 56.7 |
|
|
| 67.7 |
|
Goodwill |
|
| 39.3 |
|
|
| 39.3 |
|
Other assets |
|
| 112.3 |
|
|
| 105.2 |
|
Total |
| $ | 2,373.6 |
|
| $ | 2,422.4 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
|
| ||
Accounts payable |
| $ | 337.3 |
|
| $ | 351.4 |
|
Accrued salaries, wages and related expenses |
|
| 42.4 |
|
|
| 46.9 |
|
Other accrued liabilities |
|
| 88.5 |
|
|
| 58.4 |
|
Total current liabilities |
|
| 468.2 |
|
|
| 456.7 |
|
Long-term portion of operating lease liabilities |
|
| 37.3 |
|
|
| 40.8 |
|
Pension and other postretirement benefits |
|
| 91.8 |
|
|
| 92.5 |
|
Net liabilities of Salaried VEBA |
|
| 19.8 |
|
|
| 20.6 |
|
Deferred tax liabilities |
|
| 4.7 |
|
|
| 10.5 |
|
Long-term liabilities |
|
| 72.2 |
|
|
| 72.5 |
|
Long-term debt |
|
| 1,037.6 |
|
|
| 1,036.3 |
|
Total liabilities |
|
| 1,731.6 |
|
|
| 1,729.9 |
|
Commitments and contingencies – Note 6 |
|
|
|
|
|
| ||
Stockholders’ equity: |
|
|
|
|
|
| ||
Preferred stock, 5,000,000 shares authorized at both September 30, 2022 and |
|
| — |
|
|
| — |
|
Common stock, par value $0.01, 90,000,000 shares authorized at both |
|
| 0.2 |
|
|
| 0.2 |
|
Additional paid in capital |
|
| 1,087.2 |
|
|
| 1,078.9 |
|
Retained earnings |
|
| 52.2 |
|
|
| 93.0 |
|
Treasury stock, at cost, 6,835,286 shares at both September 30, 2022 and |
|
| (475.9 | ) |
|
| (475.9 | ) |
Accumulated other comprehensive loss |
|
| (21.7 | ) |
|
| (3.7 | ) |
Total stockholders’ equity |
|
| 642.0 |
|
|
| 692.5 |
|
Total |
| $ | 2,373.6 |
|
| $ | 2,422.4 |
|
The accompanying notes to interim consolidated financial statements are an integral part of these statements.
1
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME (LOSS) (UNAUDITED)
Quarter Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(In millions of dollars, except share and per share amounts) | |||||||||||||||
Net sales | $ | 332.8 | $ | 320.6 | $ | 1,044.4 | $ | 998.7 | |||||||
Costs and expenses: | |||||||||||||||
Cost of products sold: | |||||||||||||||
Cost of products sold, excluding depreciation and amortization and other items | 267.2 | 254.7 | 822.7 | 767.1 | |||||||||||
Lower of cost or market inventory write-down | — | — | — | 4.9 | |||||||||||
Unrealized gain on derivative instruments | (10.8 | ) | (2.0 | ) | (14.0 | ) | (16.9 | ) | |||||||
Depreciation and amortization | 10.2 | 9.0 | 29.3 | 26.7 | |||||||||||
Selling, general, administrative, research and development: | |||||||||||||||
Selling, general, administrative, research and development | 24.7 | 25.6 | 74.7 | 79.2 | |||||||||||
Net periodic postretirement benefit cost relating to Salaried VEBA | 1.2 | 0.8 | 3.4 | 2.5 | |||||||||||
Loss (gain) on removal of Union VEBA net assets – Note 6 | 0.5 | — | (0.8 | ) | (0.1 | ) | |||||||||
Total selling, general, administrative, research and development | 26.4 | 26.4 | 77.3 | 81.6 | |||||||||||
Goodwill impairment | — | — | 18.4 | — | |||||||||||
Other operating charges, net | — | 2.7 | — | 2.8 | |||||||||||
Total costs and expenses | 293.0 | 290.8 | 933.7 | 866.2 | |||||||||||
Operating income | 39.8 | 29.8 | 110.7 | 132.5 | |||||||||||
Other (expense) income: | |||||||||||||||
Interest expense | (5.3 | ) | (5.5 | ) | (16.4 | ) | (14.7 | ) | |||||||
Other income (expense), net – Note 13 | 1.5 | — | 3.1 | (10.4 | ) | ||||||||||
Income before income taxes | 36.0 | 24.3 | 97.4 | 107.4 | |||||||||||
Income tax provision | (16.1 | ) | (9.4 | ) | (36.8 | ) | (40.2 | ) | |||||||
Net income | $ | 19.9 | $ | 14.9 | $ | 60.6 | $ | 67.2 | |||||||
Net income per common share: | |||||||||||||||
Basic | $ | 1.18 | $ | 0.84 | $ | 3.55 | $ | 3.76 | |||||||
Diluted | $ | 1.16 | $ | 0.82 | $ | 3.49 | $ | 3.70 | |||||||
Weighted-average number of common shares outstanding (in thousands): | |||||||||||||||
Basic | 16,834 | 17,841 | 17,072 | 17,858 | |||||||||||
Diluted | 17,160 | 18,175 | 17,363 | 18,181 | |||||||||||
Dividends declared per common share | $ | 0.50 | $ | 0.45 | $ | 1.50 | $ | 1.35 |
|
| Quarter Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
| (In millions of dollars, except share and per share amounts) |
| |||||||||||||
Net sales |
| $ | 748.9 |
|
| $ | 750.6 |
|
| $ | 2,651.9 |
|
| $ | 1,815.6 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of products sold, excluding depreciation and amortization and other items |
|
| 694.9 |
|
|
| 677.8 |
|
|
| 2,459.2 |
|
|
| 1,613.6 |
|
Depreciation and amortization |
|
| 25.8 |
|
|
| 24.9 |
|
|
| 80.4 |
|
|
| 64.2 |
|
Selling, general, administrative, research and development |
|
| 25.2 |
|
|
| 28.1 |
|
|
| 82.9 |
|
|
| 90.8 |
|
Restructuring costs (benefit) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.8 | ) |
Other operating charges, net |
|
| — |
|
|
| — |
|
|
| 3.2 |
|
|
| — |
|
Total costs and expenses |
|
| 745.9 |
|
|
| 730.8 |
|
|
| 2,625.7 |
|
|
| 1,767.8 |
|
Operating income |
|
| 3.0 |
|
|
| 19.8 |
|
|
| 26.2 |
|
|
| 47.8 |
|
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense |
|
| (12.1 | ) |
|
| (12.5 | ) |
|
| (36.5 | ) |
|
| (37.2 | ) |
Other income (expense), net – Note 8 |
|
| 12.7 |
|
|
| (1.2 | ) |
|
| 7.4 |
|
|
| (38.2 | ) |
Income (loss) before income taxes |
|
| 3.6 |
|
|
| 6.1 |
|
|
| (2.9 | ) |
|
| (27.6 | ) |
Income tax (provision) benefit |
|
| (1.1 | ) |
|
| (8.4 | ) |
|
| (0.3 | ) |
|
| 7.4 |
|
Net income (loss) |
| $ | 2.5 |
|
| $ | (2.3 | ) |
| $ | (3.2 | ) |
| $ | (20.2 | ) |
Net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 0.16 |
|
| $ | (0.14 | ) |
| $ | (0.20 | ) |
| $ | (1.28 | ) |
Diluted |
| $ | 0.16 |
|
| $ | (0.14 | ) |
| $ | (0.20 | ) |
| $ | (1.28 | ) |
Weighted-average number of common shares outstanding (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
|
| 15,926 |
|
|
| 15,852 |
|
|
| 15,897 |
|
|
| 15,831 |
|
Diluted |
|
| 16,029 |
|
|
| 15,852 |
|
|
| 15,897 |
|
|
| 15,831 |
|
The accompanying notes to interim consolidated financial statements are an integral part of these statements.
2
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Quarter Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(In millions of dollars) | |||||||||||||||
Net income | $ | 19.9 | $ | 14.9 | $ | 60.6 | $ | 67.2 | |||||||
Other comprehensive income, net of tax – Note 14: | |||||||||||||||
Salaried VEBA and defined benefit pension plan | 0.8 | 0.7 | 2.5 | 2.2 | |||||||||||
Available for sale securities | 0.3 | 0.3 | 0.6 | 0.6 | |||||||||||
Other | 0.5 | 0.1 | 0.9 | 0.1 | |||||||||||
Other comprehensive income, net of tax | 1.6 | 1.1 | 4.0 | 2.9 | |||||||||||
Comprehensive income | $ | 21.5 | $ | 16.0 | $ | 64.6 | $ | 70.1 |
|
| Quarter Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
| (In millions of dollars) |
|
| (In millions of dollars) |
| ||||||||||
Net income (loss) |
| $ | 2.5 |
|
| $ | (2.3 | ) |
| $ | (3.2 | ) |
| $ | (20.2 | ) |
Other comprehensive income (loss), net of tax – Note 7: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Defined benefit pension plans and Salaried VEBA |
|
| 1.0 |
|
|
| 0.8 |
|
|
| 2.8 |
|
|
| 2.2 |
|
Cash flow hedges |
|
| (1.4 | ) |
|
| 10.0 |
|
|
| (20.8 | ) |
|
| 33.7 |
|
Foreign currency translation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.1 | ) |
Other comprehensive (loss) income, net of tax |
|
| (0.4 | ) |
|
| 10.8 |
|
|
| (18.0 | ) |
|
| 35.8 |
|
Comprehensive income (loss) |
| $ | 2.1 |
|
| $ | 8.5 |
|
| $ | (21.2 | ) |
| $ | 15.6 |
|
The accompanying notes to interim consolidated financial statements are an integral part of these statements.
3
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED STOCKHOLDERS
Nine Months Ended September 30, 2022
|
| Common |
|
| Common |
|
| Additional |
|
| Retained |
|
| Treasury |
|
| Accumulated |
|
| Total |
| |||||||
|
| (In millions of dollars, except share and per share amounts) |
| |||||||||||||||||||||||||
BALANCE, December 31, 2021 |
|
| 15,865,118 |
|
| $ | 0.2 |
|
| $ | 1,078.9 |
|
| $ | 93.0 |
|
| $ | (475.9 | ) |
| $ | (3.7 | ) |
| $ | 692.5 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8.1 |
|
|
| — |
|
|
| — |
|
|
| 8.1 |
|
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 18.0 |
|
|
| 18.0 |
|
Common shares issued (including impacts from |
|
| 58,641 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Cancellation of shares to cover employees' tax |
|
| (19,643 | ) |
|
| — |
|
|
| (1.9 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1.9 | ) |
Cash dividends declared2 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (12.5 | ) |
|
| — |
|
|
| — |
|
|
| (12.5 | ) |
Amortization of unearned equity compensation |
|
| — |
|
|
| — |
|
|
| 4.0 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4.0 |
|
BALANCE, March 31, 2022 |
|
| 15,904,116 |
|
| $ | 0.2 |
|
| $ | 1,081.0 |
|
| $ | 88.6 |
|
| $ | (475.9 | ) |
| $ | 14.3 |
|
| $ | 708.2 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (13.8 | ) |
|
| — |
|
|
| — |
|
|
| (13.8 | ) |
Other comprehensive loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (35.6 | ) |
|
| (35.6 | ) |
Common shares issued (including impacts from |
|
| 18,101 |
|
|
| — |
|
|
| 0.6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.6 |
|
Cancellation of shares to cover employees' tax |
|
| (155 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Cash dividends declared2 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (12.6 | ) |
|
| — |
|
|
| — |
|
|
| (12.6 | ) |
Amortization of unearned equity compensation |
|
| — |
|
|
| — |
|
|
| 3.2 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3.2 |
|
BALANCE, June 30, 2022 |
|
| 15,922,062 |
|
| $ | 0.2 |
|
| $ | 1,084.8 |
|
| $ | 62.2 |
|
| $ | (475.9 | ) |
| $ | (21.3 | ) |
| $ | 650.0 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2.5 |
|
|
| — |
|
|
| — |
|
|
| 2.5 |
|
Other comprehensive loss, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.4 | ) |
|
| (0.4 | ) |
Common shares issued (including impacts from |
|
| 30,476 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Cancellation of shares to cover employees' tax |
|
| (11,958 | ) |
|
| — |
|
|
| (0.9 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.9 | ) |
Cash dividends declared2 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (12.5 | ) |
|
| — |
|
|
| — |
|
|
| (12.5 | ) |
Amortization of unearned equity compensation |
|
| — |
|
|
| — |
|
|
| 3.3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3.3 |
|
BALANCE, September 30, 2022 |
|
| 15,940,580 |
|
| $ | 0.2 |
|
| $ | 1,087.2 |
|
| $ | 52.2 |
|
| $ | (475.9 | ) |
| $ | (21.7 | ) |
| $ | 642.0 |
|
Common Shares Outstanding | Common Stock | Additional Paid in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||||||
(In millions of dollars, except share and per share amounts) | ||||||||||||||||||||||||||
BALANCE, December 31, 2016 | 17,651,461 | $ | 0.2 | $ | 1,047.4 | $ | 75.2 | $ | (281.4 | ) | $ | (36.7 | ) | $ | 804.7 | |||||||||||
Net income | — | — | — | 60.6 | — | — | 60.6 | |||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | — | 4.0 | 4.0 | |||||||||||||||||||
Issuance of non-vested shares to non-employee directors | 11,817 | — | — | — | — | — | — | |||||||||||||||||||
Issuance of common shares to non-employee directors | 2,282 | — | 0.2 | — | — | — | 0.2 | |||||||||||||||||||
Issuance of common shares to employees upon vesting of restricted stock units and performance shares | 102,737 | — | — | — | — | — | — | |||||||||||||||||||
Cancellation of employee non-vested shares | (427 | ) | — | — | — | — | — | — | ||||||||||||||||||
Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares | (56,195 | ) | — | (4.5 | ) | — | — | — | (4.5 | ) | ||||||||||||||||
Repurchase of common stock | (806,307 | ) | — | — | — | (64.9 | ) | — | (64.9 | ) | ||||||||||||||||
Cancellation of treasury stock | — | — | (0.2 | ) | (0.4 | ) | 0.6 | — | — | |||||||||||||||||
Cash dividends on common stock and restricted shares and dividend equivalents on restricted stock units and performance shares | — | — | — | (26.4 | ) | — | — | (26.4 | ) | |||||||||||||||||
Amortization of unearned equity compensation | — | — | 9.9 | — | — | — | 9.9 | |||||||||||||||||||
BALANCE, September 30, 2017 | 16,905,368 | $ | 0.2 | $ | 1,052.8 | $ | 109.0 | $ | (345.7 | ) | $ | (32.7 | ) | $ | 783.6 |
The accompanying notes to interim consolidated financial statements are an integral part of these statements.
4
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWSSTOCKHOLDERS’ EQUITY CONTINUED (UNAUDITED)
Nine Months Ended September 30, 2021
|
| Common |
|
| Common |
|
| Additional |
|
| Retained |
|
| Treasury |
|
| Accumulated |
|
| Total |
| |||||||
|
| (In millions of dollars, except share and per share amounts) |
| |||||||||||||||||||||||||
BALANCE, December 31, 2020 |
|
| 15,812,169 |
|
| $ | 0.2 |
|
| $ | 1,068.6 |
|
| $ | 158.2 |
|
| $ | (475.9 | ) |
| $ | (18.7 | ) |
| $ | 732.4 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4.5 |
|
|
| — |
|
|
| — |
|
|
| 4.5 |
|
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9.1 |
|
|
| 9.1 |
|
Common shares issued (including impacts from |
|
| 56,394 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Cancellation of shares to cover employees' tax |
|
| (20,625 | ) |
|
| — |
|
|
| (2.4 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2.4 | ) |
Cash dividends declared1 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (11.7 | ) |
|
| — |
|
|
| — |
|
|
| (11.7 | ) |
Amortization of unearned equity compensation |
|
| — |
|
|
| — |
|
|
| 3.1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3.1 |
|
BALANCE, March 31, 2021 |
|
| 15,847,938 |
|
| $ | 0.2 |
|
| $ | 1,069.3 |
|
| $ | 151.0 |
|
| $ | (475.9 | ) |
| $ | (9.6 | ) |
| $ | 735.0 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (22.4 | ) |
|
| — |
|
|
| — |
|
|
| (22.4 | ) |
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15.9 |
|
|
| 15.9 |
|
Common shares issued (including impacts from |
|
| 12,291 |
|
|
| — |
|
|
| 0.3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.3 |
|
Cancellation of shares to cover employees' tax |
|
| (409 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Cash dividends declared1 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (11.7 | ) |
|
| — |
|
|
| — |
|
|
| (11.7 | ) |
Amortization of unearned equity compensation |
|
| — |
|
|
| — |
|
|
| 3.6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3.6 |
|
BALANCE, June 30, 2021 |
|
| 15,859,820 |
|
| $ | 0.2 |
|
| $ | 1,073.2 |
|
| $ | 116.9 |
|
| $ | (475.9 | ) |
| $ | 6.3 |
|
| $ | 720.7 |
|
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2.3 | ) |
|
| — |
|
|
| — |
|
|
| (2.3 | ) |
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 10.8 |
|
|
| 10.8 |
|
Common shares issued (including impacts from |
|
| 3,431 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Cancellation of shares to cover employees' tax |
|
| (579 | ) |
|
| — |
|
|
| (0.1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.1 | ) |
Cash dividends declared1 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (11.6 | ) |
|
| — |
|
|
| — |
|
|
| (11.6 | ) |
Amortization of unearned equity compensation |
|
| — |
|
|
| — |
|
|
| 3.5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3.5 |
|
BALANCE, September 30, 2021 |
|
| 15,862,672 |
|
| $ | 0.2 |
|
| $ | 1,076.6 |
|
| $ | 103.0 |
|
| $ | (475.9 | ) |
| $ | 17.1 |
|
| $ | 721.0 |
|
Nine Months Ended | |||||||
September 30, | |||||||
2017 | 2016 | ||||||
(In millions of dollars) | |||||||
Cash flows from operating activities: | |||||||
Net income | $ | 60.6 | $ | 67.2 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation of property, plant and equipment | 28.3 | 25.5 | |||||
Amortization of definite-lived intangible assets | 1.0 | 1.2 | |||||
Amortization of debt discount and debt issuance costs | 0.9 | 0.8 | |||||
Deferred income taxes | 38.6 | 40.7 | |||||
Non-cash equity compensation | 10.1 | 8.8 | |||||
Lower of cost or market inventory write-down | — | 4.9 | |||||
Gain on sale of available for sale securities | (1.8 | ) | — | ||||
Non-cash unrealized gain on derivative instruments | (14.0 | ) | (16.9 | ) | |||
Loss on extinguishment of debt | — | 11.1 | |||||
Non-cash intangible asset impairment charge | 18.4 | 2.6 | |||||
(Gain) loss on disposition of property, plant and equipment | (0.4 | ) | 0.2 | ||||
Non-cash net periodic postretirement benefit cost relating to Salaried VEBA | 3.4 | 2.5 | |||||
Other non-cash changes in assets and liabilities | (0.8 | ) | 1.1 | ||||
Changes in operating assets and liabilities: | |||||||
Trade and other receivables | (4.0 | ) | (26.7 | ) | |||
Inventories, excluding lower of cost or market write-down | (10.6 | ) | (8.9 | ) | |||
Prepaid expenses and other current assets | (1.8 | ) | (0.9 | ) | |||
Accounts payable | 21.6 | 0.8 | |||||
Accrued liabilities | 0.9 | 27.9 | |||||
Annual variable cash contributions to VEBAs | (20.0 | ) | (19.5 | ) | |||
Long-term assets and liabilities, net | 1.1 | (15.0 | ) | ||||
Net cash provided by operating activities | 131.5 | 107.4 | |||||
Cash flows from investing activities1: | |||||||
Capital expenditures | (56.1 | ) | (57.4 | ) | |||
Purchase of available for sale securities | (196.0 | ) | (201.1 | ) | |||
Proceeds from disposition of available for sale securities | 237.2 | 30.0 | |||||
Proceeds from disposal of property, plant and equipment | 0.6 | — | |||||
Net cash used in investing activities | (14.3 | ) | (228.5 | ) | |||
Cash flows from financing activities1: | |||||||
Repayment of principal and redemption premium of 8.25% Senior Notes | — | (206.0 | ) | ||||
Issuance of 5.875% Senior Notes | — | 375.0 | |||||
Cash paid for debt issuance costs | — | (6.8 | ) | ||||
Proceeds from stock option exercises | — | 1.0 | |||||
Repayment of capital lease | (0.2 | ) | (0.1 | ) | |||
Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares | (4.5 | ) | (2.8 | ) | |||
Repurchase of common stock | (66.7 | ) | (13.6 | ) |
Nine Months Ended | |||||||
September 30, | |||||||
2017 | 2016 | ||||||
Cash dividends and dividend equivalents paid | (26.4 | ) | (24.4 | ) | |||
Net cash (used in) provided by financing activities | (97.8 | ) | 122.3 | ||||
Net increase in cash, cash equivalents and restricted cash during the period | 19.4 | 1.2 | |||||
Cash, cash equivalents and restricted cash at beginning of period | 67.7 | 83.7 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 87.1 | $ | 84.9 |
The accompanying notes to interim consolidated financial statements are an integral part of these statements.
5
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
|
| Nine Months Ended September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
| (In millions of dollars) |
| |||||
Cash flows from operating activities1: |
|
|
|
|
|
| ||
Net loss |
| $ | (3.2 | ) |
| $ | (20.2 | ) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
| ||
Depreciation of property, plant and equipment |
|
| 72.5 |
|
|
| 58.0 |
|
Amortization of definite-lived intangible assets |
|
| 7.9 |
|
|
| 6.2 |
|
Amortization of debt premium and debt issuance costs |
|
| 1.6 |
|
|
| 1.6 |
|
Deferred income taxes |
|
| (3.5 | ) |
|
| (9.9 | ) |
Non-cash equity compensation |
|
| 11.1 |
|
|
| 10.5 |
|
Non-cash asset impairment charge |
|
| 3.2 |
|
|
| — |
|
Loss on extinguishment of debt |
|
| — |
|
|
| 35.9 |
|
(Gain) loss on disposition of property, plant and equipment |
|
| (6.3 | ) |
|
| 0.1 |
|
Changes in operating assets and liabilities, net of effects of acquisition: |
|
|
|
|
|
| ||
Trade and other receivables |
|
| 17.3 |
|
|
| (110.7 | ) |
Contract assets |
|
| 12.2 |
|
|
| (4.1 | ) |
Inventories |
|
| (133.5 | ) |
|
| (52.5 | ) |
Prepaid expenses and other current assets |
|
| (4.3 | ) |
|
| (3.9 | ) |
Accounts payable |
|
| (40.6 | ) |
|
| 105.8 |
|
Accrued liabilities |
|
| 8.3 |
|
|
| 17.8 |
|
Annual variable cash contributions to Salaried VEBA |
|
| — |
|
|
| (1.7 | ) |
Long-term assets and liabilities, net |
|
| (1.3 | ) |
|
| 0.4 |
|
Net cash (used in) provided by operating activities |
|
| (58.6 | ) |
|
| 33.3 |
|
Cash flows from investing activities1: |
|
|
|
|
|
| ||
Capital expenditures |
|
| (82.4 | ) |
|
| (29.9 | ) |
Cash payment for acquisition of the Warrick rolling mill, net of cash received |
|
| — |
|
|
| (609.2 | ) |
Purchase of equity securities |
|
| (0.3 | ) |
|
| (0.4 | ) |
Proceeds from disposition of property, plant and equipment |
|
| 11.0 |
|
|
| — |
|
Net cash used in investing activities |
|
| (71.7 | ) |
|
| (639.5 | ) |
Cash flows from financing activities1: |
|
|
|
|
|
| ||
Repayment of principal and redemption premium of 6.50% Senior Notes |
|
| — |
|
|
| (380.9 | ) |
Issuance of 4.50% Senior Notes |
|
| — |
|
|
| 550.0 |
|
Cash paid for debt issuance costs |
|
| (1.8 | ) |
|
| (8.6 | ) |
Repayment of finance lease |
|
| (1.0 | ) |
|
| (1.6 | ) |
Cancellation of shares to cover employees' tax withholdings upon |
|
| (2.8 | ) |
|
| (2.5 | ) |
Cash dividends and dividend equivalents paid |
|
| (37.6 | ) |
|
| (35.0 | ) |
Net cash (used in) provided by financing activities |
|
| (43.2 | ) |
|
| 121.4 |
|
Net decrease in cash, cash equivalents and restricted cash during the period |
|
| (173.5 | ) |
|
| (484.8 | ) |
Cash, cash equivalents and restricted cash at beginning of period |
|
| 317.0 |
|
|
| 794.3 |
|
Cash, cash equivalents and restricted cash at end of period |
| $ | 143.5 |
|
| $ | 309.5 |
|
The accompanying notes to interim consolidated financial statements are an integral part of these statements.
6
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
NOTES INDEX
8 | |||
10 | |||
10 | |||
Derivatives, Hedging Programs and Other Financial Instruments | 12 | ||
16 | |||
18 | |||
19 | |||
20 | |||
20 | |||
21 | |||
21 | |||
22 | |||
22 |
7
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
1. SummaryBasis of SignificantPresentation and Recent Accounting Policies
This Quarterly Report on Form 10-Q (this "Report"“Report”) should be read in conjunction with the Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 2016.2021. Unless the context otherwise requires, references in these notes to interim consolidated financial statements - unaudited to "Kaiser“Kaiser Aluminum Corporation," "we," "us," "our," "the Company"” “we,” “us,” “our,” “the Company” and "our Company"“our Company” refer collectively to Kaiser Aluminum Corporation and its subsidiaries.
Principles of Consolidation and Basis of Presentation.
The accompanying unaudited consolidated financial statements include the accounts of our wholly owned subsidiaries and are prepared in accordance with United States generally accepted accounting principlesUse of Estimates in the Preparation of Financial Statements.
The preparation of financial statements in accordance with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of our consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of our consolidated financial position and results of operations.Supply Chain Financing. We are statedparty to several supply chain financing arrangements, in which we may sell certain of our customers’ trade accounts receivable to such customers’ financial institutions without recourse. We sell our undivided interests in certain of these receivables at the lower of cost or market value. On March 31, 2016,our discretion when we recorded a lower of cost or market inventory write-down of $4.9 million as a result of a decrease in our net realizable value of inventory. The net realizable value reflected commitments as ofdetermine that date from customers to purchase our inventory at prices that exceeded the Midwest Transaction Price ("Midwest Price"), which reflects the primary aluminum supply/demand dynamics in North America, reduced by an approximate normal profit margin. There were no additional lower of cost or market inventory adjustments since the quarter ended March 31, 2016.
Government Grants. From time-to-time, we receive grants from certain governmental agencies such as states and municipalities. We recognize government grants when we have reasonable assurance that we will comply with any conditions attached to the grant and the grant will be received. Government grants related to property, plant and equipment are presented as a reduction to the related asset’s carrying amount. Grants related to compensation for expenses already incurred or for immediate financial support with no future related costs are recognized as income in the period in which it is receivable. The following table presents the total government assistance recognized during the nine months ended September 30, 20172022 (in millions of dollars):
Grantor |
| Grant |
| Amount |
|
| Duration |
| Classification | |
Tennessee Department of Economic and Community Development |
| TN Fast Track |
| $ | 1.1 |
|
| 2021 - 2028 |
| Property, plant and equipment, net |
Tennessee Department of Economic and Community Development |
| TN Fast Track |
|
| 0.2 |
|
| 2021 - 2028 |
| Selling, general, administrative, research and development |
Tennessee Valley Authority |
| Performance |
|
| 0.3 |
|
| 2021 - 2026 |
| Property, plant and equipment, net |
Indiana Economic Development Corporation |
| IN EDGE Tax Credit |
|
| 1.6 |
|
| 2021 - 2030 |
| Cost of products sold, excluding depreciation and amortization and other items |
Total |
|
|
| $ | 3.2 |
|
|
|
|
|
To be eligible to receive and keep the full amount of the TN Fast Track and Performance grants, we must achieve: (i) minimum cumulative expenditures towards developmental and/or capital expenditures; (ii) a minimum number of new full-time employees; and
8
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
(iii) a minimum average annual wage, all within seven years of our execution of the grant agreement. To be eligible to receive and keep the full amount of the IN EDGE Tax Credit, we must achieve: (i) minimum cumulative expenditures towards capital expenditures and (ii) a minimum number of full-time employees.
Favorable Commodity Contract Intangible Asset Impairment. During the quarter ended June 30, 2022, we impaired the remaining book value of our favorable commodity contract intangible asset as the supplier associated with the intangible asset ceased all deliveries of magnesium to us and provided no indication of when or if deliveries would resume over the remaining six months of the contract. The impairment charge of $3.1 million was included within Other operating charges, net, in our Statements of Consolidated Income (Loss).
Adoption of New Accounting Pronouncements
Accounting Standard Update (“ASU”) No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance (“ASU 2021-10”) was issued in November 2021. Under ASU 2021-10, the accounting entities with transactions with a government that are accounted for by analogy to a grant or contribution accounting model are required to annually disclose certain information regarding the transaction including: (i) nature and related accounting policy used; (ii) line items on the balance sheet and income statement affected by the transactions; (iii) amounts applicable to each line item; and (iv) significant terms and conditions. Our adoption of ASU 2021-10 during the quarter ended March 31, 2022 using a prospective approach did not have a material impact on our consolidated financial statements.
In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”) and also issued subsequent amendments to the initial guidance (collectively, “Topic 848”). Topic 848 is effective for all entities as of March 12, 2020 through December 31, 2022 and provides optional guidance for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. As of June 30, 2022, our customers’ supply chain financing contracts have transitioned to the Secured Overnight Financing Rate (“SOFR”) to replace the London Interbank Offered Rate (“LIBOR”). Our adoption of Topic 848 did not have a material impact on our consolidated financial statements.
9
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
2. Supplemental Balance Sheet Information
|
| As of September 30, 2022 |
|
| As of December 31, 2021 |
| ||
|
| (In millions of dollars) |
| |||||
Trade Receivables, Net |
|
|
|
|
|
| ||
Billed trade receivables |
| $ | 312.1 |
|
| $ | 333.5 |
|
Allowance for doubtful receivables |
|
| (0.6 | ) |
|
| (0.8 | ) |
Trade receivables, net |
| $ | 311.5 |
|
| $ | 332.7 |
|
|
|
|
|
|
|
| ||
Inventories1 |
|
|
|
|
|
| ||
Finished products |
| $ | 88.1 |
|
| $ | 90.3 |
|
Work-in-process |
|
| 229.6 |
|
|
| 162.2 |
|
Raw materials |
|
| 208.6 |
|
|
| 143.0 |
|
Operating supplies |
|
| 11.8 |
|
|
| 9.1 |
|
Total |
| $ | 538.1 |
|
| $ | 404.6 |
|
|
|
|
|
|
|
| ||
Property, Plant and Equipment, Net |
|
|
|
|
|
| ||
Land and improvements |
| $ | 28.4 |
|
| $ | 26.0 |
|
Buildings and leasehold improvements |
|
| 184.2 |
|
|
| 179.0 |
|
Machinery and equipment |
|
| 1,190.6 |
|
|
| 1,151.5 |
|
Construction in progress2 |
|
| 136.6 |
|
|
| 75.3 |
|
Property, plant and equipment, gross |
|
| 1,539.8 |
|
|
| 1,431.8 |
|
Accumulated depreciation and amortization |
|
| (550.4 | ) |
|
| (480.4 | ) |
Assets held for sale |
|
| 0.2 |
|
|
| 3.8 |
|
Property, plant and equipment, net |
| $ | 989.6 |
|
| $ | 955.2 |
|
|
|
|
|
|
|
| ||
Other Accrued Liabilities |
|
|
|
|
|
| ||
Uncleared cash disbursements |
| $ | 19.8 |
|
| $ | 10.9 |
|
Accrued income taxes and other taxes payable |
|
| 11.0 |
|
|
| 9.5 |
|
Accrued interest |
|
| 10.3 |
|
|
| 9.9 |
|
Short-term environmental accrual – Note 6 |
|
| 1.8 |
|
|
| 2.6 |
|
Short-term operating lease liabilities |
|
| 9.3 |
|
|
| 9.0 |
|
Other – Note 4 |
|
| 36.3 |
|
|
| 16.5 |
|
Total |
| $ | 88.5 |
|
| $ | 58.4 |
|
|
|
|
|
|
|
| ||
Long-Term Liabilities |
|
|
|
|
|
| ||
Workers' compensation accrual |
| $ | 31.5 |
|
| $ | 31.9 |
|
Long-term environmental accrual – Note 6 |
|
| 13.1 |
|
|
| 14.2 |
|
Other long-term liabilities |
|
| 27.6 |
|
|
| 26.4 |
|
Total |
| $ | 72.2 |
|
| $ | 72.5 |
|
3. Employee Benefits
Deferred Compensation Plan
Assets of our deferred compensation plan are included in Other assets, classified within Level 1 of the straight-line methodfair value hierarchy and are measured and recorded at ratesfair value based on their quoted market prices. The fair value of these assets at September 30, 2022 and December 31, 2021 was $9.6 million and $10.5 million, respectively. The assets in the trust are held in various investment funds at certain registered investment companies and are accounted for as equity investments with changes in fair value recorded within
10
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
Other income (expense), net (see Note 8). Offsetting liabilities relating to the deferred compensation plan are included in Other accrued liabilities and Long-term liabilities.
Short-Term Incentive Plans (“STI Plans”)
As of September 30, 2022, we had a liability of $4.7 million recorded within Accrued salaries, wages and related expenses for estimated useful livesprobable future payments relating to the nine month performance period of our 2022 STI Plan.
Postretirement Benefit Plans
The following table presents the total expense (benefit) related to all postretirement benefit plans (in millions of dollars):
|
| Quarter Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Defined contribution plans1 |
| $ | 3.9 |
|
| $ | 3.4 |
|
| $ | 13.6 |
|
| $ | 10.4 |
|
Deferred compensation plan2 |
|
| (0.1 | ) |
|
| 0.2 |
|
|
| (0.9 | ) |
|
| 0.6 |
|
Multiemployer pension plans1 |
|
| 1.3 |
|
|
| 1.3 |
|
|
| 3.9 |
|
|
| 3.7 |
|
Salaried VEBA2 |
|
| 0.9 |
|
|
| 0.6 |
|
|
| 2.8 |
|
|
| 1.7 |
|
Pension plans3 |
|
| 1.3 |
|
|
| 1.4 |
|
|
| 4.0 |
|
|
| 2.9 |
|
OPEB3 |
|
| 0.9 |
|
|
| 0.9 |
|
|
| 2.8 |
|
|
| 1.9 |
|
Total |
| $ | 8.2 |
|
| $ | 7.8 |
|
| $ | 26.2 |
|
| $ | 21.2 |
|
Components of Net Periodic Postretirement Benefit Cost. Our results of operations included the following impacts associated with the Salaried VEBA, pension plans and OPEB: (i) a charge for service rendered by employees; (ii) a charge for accretion of interest; (iii) a benefit for the expected return on plan assets; (iv) amortization of prior service costs associated with plan amendments; and (v) amortization of net actuarial differences.
The following table presents the components of Net periodic postretirement benefit cost (in millions of dollars):
|
| Pension Plans |
|
| OPEB |
|
| Salaried VEBA |
| |||||||||||||||
|
| Quarter Ended |
|
| Quarter Ended |
|
| Quarter Ended |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||
Service cost |
| $ | 1.5 |
|
| $ | 1.4 |
|
| $ | 0.4 |
|
| $ | 0.3 |
|
| $ | — |
|
| $ | — |
|
Interest cost |
|
| 0.1 |
|
|
| 0.1 |
|
|
| 0.5 |
|
|
| 0.6 |
|
|
| 0.5 |
|
|
| 0.4 |
|
Expected return on plan assets |
|
| (0.3 | ) |
|
| (0.1 | ) |
|
| — |
|
|
| — |
|
|
| (0.8 | ) |
|
| (0.8 | ) |
Amortization of prior service cost1 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1.2 |
|
|
| 0.9 |
|
Amortization of net actuarial loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.1 |
|
Total net periodic postretirement benefit cost |
| $ | 1.3 |
|
| $ | 1.4 |
|
| $ | 0.9 |
|
| $ | 0.9 |
|
| $ | 0.9 |
|
| $ | 0.6 |
|
11
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
|
| Pension Plans2 |
|
| OPEB2 |
|
| Salaried VEBA |
| |||||||||||||||
|
| Nine Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Nine Months Ended September 30, |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||
Service cost |
| $ | 4.3 |
|
| $ | 2.8 |
|
| $ | 1.2 |
|
| $ | 0.7 |
|
| $ | — |
|
| $ | — |
|
Interest cost |
|
| 0.4 |
|
|
| 0.3 |
|
|
| 1.6 |
|
|
| 1.2 |
|
|
| 1.4 |
|
|
| 1.2 |
|
Expected return on plan assets |
|
| (0.7 | ) |
|
| (0.3 | ) |
|
| — |
|
|
| — |
|
|
| (2.3 | ) |
|
| (2.4 | ) |
Amortization of prior service cost1 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3.7 |
|
|
| 2.6 |
|
Amortization of net actuarial loss |
|
| — |
|
|
| 0.1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.3 |
|
Total net periodic postretirement benefit cost |
| $ | 4.0 |
|
| $ | 2.9 |
|
| $ | 2.8 |
|
| $ | 1.9 |
|
| $ | 2.8 |
|
| $ | 1.7 |
|
4. Derivatives, Hedging Programs and amortization.
Overview.In conducting our business, we enter into derivative transactions, including forward contracts and options, to limit our exposure to: (i) metal price risk related to our sale only when an asset is being actively marketed and expected to sell within 12 months. Assets held for sale are initially measured at the lesser of the assets' carrying amountfabricated aluminum products and the fair value less costs to sell.
Our derivative activities are overseen by a committee (“Hedging Committee”), which is composed of our chief executive officer, chief financial officer, chief accounting officer, vice president of treasury, risk and procurement and other officers and employees selected by the chief executive officer.The Hedging Committee meets regularly to review commodity price exposure, derivative positions and strategy. Management reviews the scope of the Hedging Committee’s activities with our Board of Directors.
We are exposed to counterparty credit risk on all of our derivative instruments, which we manage by monitoring the credit quality of our counterparties, allocating our hedging positions among multiple counterparties to limit exposure to any single entity and using options as part of the hedging strategy. Our counterparties are major investment grade financial institutions or trading companies and our hedged transactions are governed by negotiated reciprocal credit lines, which generally require collateral to be posted above specified credit thresholds which may adjust up or down, depending on our liquidity. As a result, we believe the risk of loss is remote and contained. The aggregate fair value of our derivative instruments that were in a net liability position was $14.8 million and zero at September 30, 2022 and December 31, 2021, respectively, and we had no collateral posted as of those dates.
Additionally, our firm-price customer sales commitments create incremental customer credit risk related to metal price movements. Under certain circumstances, we mitigate this risk by periodically requiring cash collateral from them, which we classify as deferred revenue and include as a component of Other accrued liabilities. We had $1.1 million and zero cash collateral posted from our customers at September 30, 2022 and December 31, 2021, respectively.
Cash Flow Hedges
We designate as cash flow hedges forward swap contracts for aluminum, energy and, from time-to-time, zinc and copper (“Alloying Metals”) used in our fabrication operations and foreign currency forward contracts for equipment and services for which payments are due in foreign currency. Unrealized gains and losses associated with our cash flow hedges are deferred in Other comprehensive (loss) income, net of tax, and reclassified to COGS when such hedges settle or when it is probable that the original forecasted transactions will not occur by the end of the originally specified time period. See Note 7 for the total amount of gain or loss on derivative instruments designated and qualifying as cash flow hedging instruments that was reported in Accumulated other comprehensive (loss) income (“AOCI”), as well as the related reclassifications into earnings and tax effects. Cumulative gains and
12
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
losses related to cash flow hedges are reclassified out of AOCI and recorded within COGS when the associated hedged commodity purchases impact earnings.
Aluminum Hedges. Our pricing of fabricated aluminum products is generally intended to lock in a conversion margin (representing the value added from the fabrication process) and to pass through aluminum price fluctuations to our customers. For some of our higher value added products sold on a spot basis, the pass through of aluminum price movements can sometimes lag by as much as several months, with a favorable impact to us when aluminum prices decline and an adverse impact to us when aluminum prices increase. Additionally, in certain instances, we enter into firm-price arrangements with our customers for stipulated volumes to be delivered in the future. Because we generally purchase primary and secondary aluminum on a floating price basis, the lag in passing through aluminum price movements to customers on some of our higher value added products sold on a spot basis and the volume that we have committed to sell to our customers under a firm-price arrangement create aluminum price risk for us. We use third-party hedging instruments to limit exposure to aluminum price risk related to the aluminum pass through lag on some of our products and firm-price customer sales contracts.
Alloying Metals Hedges. We are exposed to risk of fluctuating prices for alloying metals used as raw materials in our fabrication operations. We, from time-to-time, in the ordinary course of business, enter into hedging transactions and/or physical delivery commitments with third parties to mitigate our risk from fluctuations in alloying metals prices that are not passed through completely or at the time of sale pursuant to the terms of certain customer contracts.
Energy Hedges. We are exposed to risk of fluctuating prices for natural gas and electricity. We, from time-to-time, in the ordinary course of business, enter into hedging transactions and/or physical delivery commitments with third parties to mitigate our risk from fluctuations in natural gas and electricity prices that are not passed through completely or at the time of sale pursuant to the terms of certain customer contracts.
The following table summarizes the percentages as of September 30, 2022 of our expected variable priced purchases of metal alloys and energy for which we have executed derivative and/or physical delivery commitments to reduce price fluctuations for each of the following years:
|
| Remainder |
| 2023 |
| 2024 |
| 2025 |
| 2026 |
Zinc |
| 66% |
| 3% |
| — |
| — |
| — |
Copper |
| 58% |
| — |
| — |
| — |
| — |
Magnesium |
| 100% |
| 100% |
| 40% |
| — |
| — |
Silicon |
| 100% |
| — |
| — |
| — |
| — |
Natural Gas |
| 49% |
| 50% |
| 47% |
| 26% |
| 21% |
Electricity |
| 71% |
| 43% |
| — |
| — |
| — |
Foreign Currency Hedges. We are exposed to foreign currency exchange risk related to certain equipment and service agreements with vendors for which payments are due in foreign currency. We, from time-to-time, in the ordinary course of business, use foreign currency forward contracts in order to mitigate the exposure to currency exchange rate fluctuations related to these purchases.
Non-Designated Hedges of Operational Risks
From time-to-time, we enter into commodity contracts that are not designated as hedging instruments to mitigate certain short‑term commodity impacts, as identified. The gain or loss on these derivatives is recognized within COGS.
13
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
Notional Amount of Derivative Contracts
The following table summarizes our derivative positions at September 30, 2022:
Aluminum | Maturity Period | Notional Amount of Contracts (mmlbs) | ||||
Fixed price purchase contracts | October 2022 through December 2023 | 87.9 | ||||
Fixed price sales contracts | October 2022 through December 2022 | 15.0 | ||||
Midwest premium swap contracts1 | October 2022 through December 2023 | 52.3 |
Alloying Metals | Maturity Period | Notional Amount of Contracts (mmlbs) | ||||
Fixed price purchase contracts | October 2022 through November 2023 | 2.0 |
Natural Gas | Maturity Period | Notional Amount of Contracts (mmbtu) | ||||
Fixed price purchase contracts | October 2022 through December 2025 | 3,900,000 |
Electricity | Maturity Period | Notional Amount of Contracts (Mwh) | ||||
Fixed price purchase contracts | October 2022 through December 2022 | 55,225 |
Euro | Maturity Period | Notional Amount of Contracts (euro) | ||||
Fixed price forward contracts | December 2022 through February 2024 | 1,126,066 |
14
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
Loss (Gain)
The following table summarizes the amount of loss (gain) included on our Statements of Consolidated Income (Loss) associated with all derivative contracts (in millions of dollars):
|
| Quarter Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Statements of Consolidated | ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| Income (Loss) Classification | ||||
Total of income and expense line items presented in our Statements of Consolidated Income (Loss) in which the effects of hedges are recorded: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash flow hedges |
| $ | 694.9 |
|
| $ | 677.8 |
|
| $ | 2,459.2 |
|
| $ | 1,613.6 |
|
| Cost of products sold |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loss (gain) recognized in our Statements of Consolidated Income (Loss) related to cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Aluminum |
| $ | 14.2 |
|
| $ | (13.3 | ) |
| $ | 1.4 |
|
| $ | (24.3 | ) |
| Cost of products sold |
Alloying Metals |
|
| — |
|
|
| (0.2 | ) |
|
| — |
|
|
| 0.2 |
|
| Cost of products sold |
Natural gas |
|
| (2.3 | ) |
|
| (0.6 | ) |
|
| (5.1 | ) |
|
| (0.7 | ) |
| Cost of products sold |
Electricity |
|
| (3.8 | ) |
|
| (2.6 | ) |
|
| (5.2 | ) |
|
| (3.3 | ) |
| Cost of products sold |
Total loss (gain) recognized in our Statements of Consolidated Income (Loss) related to cash flow hedges |
| $ | 8.1 |
|
| $ | (16.7 | ) |
| $ | (8.9 | ) |
| $ | (28.1 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Loss (gain) recognized in our Statements of Consolidated Income (Loss) related to non-designated hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Alloying Metals – Realized loss (gain) |
| $ | 0.3 |
|
| $ | (1.2 | ) |
| $ | (0.8 | ) |
| $ | (3.8 | ) |
| Cost of products sold |
Alloying Metals – Unrealized loss |
|
| — |
|
|
| 1.9 |
|
|
| 1.9 |
|
|
| 2.0 |
|
| Cost of products sold |
Total loss (gain) recognized in our Statements of Consolidated Income (Loss) related to non-designated hedges |
| $ | 0.3 |
|
| $ | 0.7 |
|
| $ | 1.1 |
|
| $ | (1.8 | ) |
|
|
15
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
Fair Values of Derivative Contracts
The fair values of our derivative contracts are based upon trades in liquid markets. Valuation model inputs can be verified, and valuation techniques do not involve significant judgment. The fair values of such financial instruments are classified within Level 2 of the fair value hierarchy.
All of our derivative contracts with counterparties are subject to enforceable master netting arrangements. We reflect the fair value of allour derivative contracts on a gross basis on our Consolidated Balance Sheets. The following table presents the fair value of our derivative financial instruments (in millions of dollars):
|
| As of September 30, 2022 |
|
| As of December 31, 2021 |
| ||||||||||||||||||
|
| Assets |
|
| Liabilities |
|
| Net Amount |
|
| Assets |
|
| Liabilities |
|
| Net Amount |
| ||||||
Cash Flow Hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Aluminum – |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Fixed price purchase contracts |
| $ | 0.6 |
|
| $ | (15.5 | ) |
| $ | (14.9 | ) |
| $ | 12.2 |
|
| $ | (1.1 | ) |
| $ | 11.1 |
|
Fixed price sales contracts |
|
| 1.7 |
|
|
| — |
|
|
| 1.7 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Midwest premium swap contracts |
|
| 1.4 |
|
|
| (3.7 | ) |
|
| (2.3 | ) |
|
| 5.5 |
|
|
| (0.1 | ) |
|
| 5.4 |
|
Natural gas – Fixed price purchase contracts |
|
| 9.1 |
|
|
| — |
|
|
| 9.1 |
|
|
| 3.0 |
|
|
| (0.1 | ) |
|
| 2.9 |
|
Electricity – Fixed price purchase contracts |
|
| 2.6 |
|
|
| — |
|
|
| 2.6 |
|
|
| 4.4 |
|
|
| (0.6 | ) |
|
| 3.8 |
|
Foreign currency – Fixed price forward contracts |
|
| — |
|
|
| (0.1 | ) |
|
| (0.1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Total cash flow hedges |
|
| 15.4 |
|
|
| (19.3 | ) |
|
| (3.9 | ) |
|
| 25.1 |
|
|
| (1.9 | ) |
|
| 23.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Non-Designated Hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Alloying Metals – Fixed price purchase contracts |
|
| — |
|
|
| (0.5 | ) |
|
| (0.5 | ) |
|
| 1.6 |
|
|
| (0.1 | ) |
|
| 1.5 |
|
Total non-designated hedges |
|
| — |
|
|
| (0.5 | ) |
|
| (0.5 | ) |
|
| 1.6 |
|
|
| (0.1 | ) |
|
| 1.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total |
| $ | 15.4 |
|
| $ | (19.8 | ) |
| $ | (4.4 | ) |
| $ | 26.7 |
|
| $ | (2.0 | ) |
| $ | 24.7 |
|
The following table presents the total amounts of derivative assets and liabilities on our Consolidated Balance Sheets (see Note 9)(in millions of dollars):
|
| As of September 30, 2022 |
|
| As of December 31, 2021 |
| ||
Derivative assets: |
|
|
|
|
|
| ||
Prepaid expenses and other current assets |
| $ | 11.3 |
|
| $ | 25.0 |
|
Other assets |
|
| 4.1 |
|
|
| 1.7 |
|
Total derivative assets |
| $ | 15.4 |
|
| $ | 26.7 |
|
Derivative liabilities: |
|
|
|
|
|
| ||
Other accrued liabilities |
| $ | (19.5 | ) |
| $ | (1.9 | ) |
Long-term liabilities |
|
| (0.3 | ) |
|
| (0.1 | ) |
Total derivative liabilities |
| $ | (19.8 | ) |
| $ | (2.0 | ) |
Fair Value of Other Financial Instruments
All Other Financial Assets and Liabilities. We believe that the fair values of our accounts receivable, contract assets, accounts payable and accrued liabilities approximate their respective carrying values due to their short maturities and nominal credit risk.
5. Debt and Credit Facility
Senior Notes
During the years ended December 31, 2021, December 31, 2020 and December 31, 2019, we issued fixed rate unsecured notes with varying maturity dates (“Senior Notes”). The carrying valuesstated interest rates and aggregate principal amounts of hedges settling within one year are included in Prepaid expensesour Senior Notes were: (i) 4.50% and other current assets or Other accrued liabilities. Carrying values for hedges settling beyond one year are included in Other assets or Long-term liabilities.
16
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -– UNAUDITED
$500.0 million (“4.625% Senior Notes”). Our Senior Notes do not require us to make any mandatory redemptions or sinking fund payments. The following table summarizes key details of our Senior Notes:
|
|
|
|
|
| Outstanding (in millions of dollars) |
| |||||||
|
| Issuance Date |
| Maturity |
| Effective Interest Rate |
| As of September 30, 2022 |
|
| As of December 31, 2021 |
| ||
4.50% Senior Notes |
| May 2021 |
| June 2031 |
| 4.7% |
| $ | 550.0 |
|
| $ | 550.0 |
|
6.50% Senior Notes1 |
| April/May 2020 |
| May 2025 |
| 6.8% |
|
| — |
|
|
| — |
|
4.625% Senior Notes |
| November 2019 |
| March 2028 |
| 4.8% |
|
| 500.0 |
|
|
| 500.0 |
|
Total debt |
|
|
|
|
|
|
|
| 1,050.0 |
|
|
| 1,050.0 |
|
Unamortized issuance costs |
|
|
|
|
|
|
|
| (12.4 | ) |
|
| (13.7 | ) |
Total carrying amount |
|
|
|
|
|
|
| $ | 1,037.6 |
|
| $ | 1,036.3 |
|
The fair values of financial assets and liabilities are evaluated and measured on a recurring basis. As part of that evaluation process, we review the underlying inputs that are significant tofollowing table presents the fair value measurement of financial instruments to determine if a transfer among hierarchy levels is appropriate. We historically have not had significant transfers into or out of each hierarchy level.
September 30, 2017 | December 31, 2016 | ||||||
(In millions of dollars) | |||||||
Cash and Cash Equivalents | |||||||
Cash and money market funds | $ | 17.3 | $ | 37.9 | |||
Commercial paper | 56.6 | 17.3 | |||||
Total | $ | 73.9 | $ | 55.2 | |||
September 30, 2017 | December 31, 2016 | ||||||
(In millions of dollars) | |||||||
Trade Receivables, Net | |||||||
Billed trade receivables | $ | 138.8 | $ | 138.2 | |||
Unbilled trade receivables | 0.2 | 0.3 | |||||
Trade receivables, gross | 139.0 | 138.5 | |||||
Allowance for doubtful receivables | (0.8 | ) | (0.8 | ) | |||
Trade receivables, net | $ | 138.2 | $ | 137.7 | |||
Inventories | |||||||
Finished products | $ | 64.8 | $ | 73.8 | |||
Work-in-process | 86.1 | 71.7 | |||||
Raw materials | 56.9 | 51.1 | |||||
Operating supplies | 4.4 | 5.0 | |||||
Total | $ | 212.2 | $ | 201.6 | |||
Property, Plant and Equipment, Net | |||||||
Land and improvements | $ | 22.7 | $ | 22.7 | |||
Buildings and leasehold improvements | 90.2 | 88.6 | |||||
Machinery and equipment | 675.0 | 615.1 | |||||
Construction in progress | 27.8 | 34.8 | |||||
Property, plant and equipment, gross | 815.7 | 761.2 | |||||
Accumulated depreciation | (258.2 | ) | (230.6 | ) | |||
Assets held for sale | 0.3 | 0.3 | |||||
Property, plant and equipment, net | $ | 557.8 | $ | 530.9 | |||
Other Accrued Liabilities | |||||||
Uncleared cash disbursements | $ | 7.1 | $ | 5.8 | |||
Accrued income taxes and taxes payable | 9.0 | 4.3 | |||||
Accrued annual contribution to VEBAs | 12.0 | 20.0 | |||||
Accrued interest | 8.4 | 2.9 | |||||
Other | 6.8 | 7.1 | |||||
Total | $ | 43.3 | $ | 40.1 | |||
Long-Term Liabilities | |||||||
Workers' compensation accruals | $ | 25.0 | $ | 25.0 | |||
Long-term environmental accrual – Note 8 | 16.1 | 15.8 | |||||
Long-term portion of contingent contribution to Union VEBA – Note 6 | — | 12.8 | |||||
Other long-term liabilities | 20.8 | 19.6 | |||||
Total | $ | 61.9 | $ | 73.2 |
|
|
|
|
|
| As of September 30, 2022 |
|
| As of December 31, 2021 |
| ||
4.50% Senior Notes |
|
|
|
|
| $ | 399.1 |
|
| $ | 542.6 |
|
4.625% Senior Notes |
|
|
|
|
| $ | 410.4 |
|
| $ | 506.9 |
|
Revolving Credit Facility
In April 2022, we entered into Amendment No. 3 to our revolving credit agreementfacility with JPMorgan ChaseWells Fargo Bank, N.A., asNational Association, the administrative agent, and the other financial institutions party thereto ("Revolving(as amended, the “Revolving Credit Facility"Facility”) provides us with a $300.0 million funding commitment through December 2020. We had $294.4 million of borrowing availability under the. The Revolving Credit Facility at September 30, 2017, based onamong others: (i) increased the commitment from $375.0 million to $575.0 million (of which up to a maximum of $50.0 million may be utilized for letters of credit); (ii) extended the maturity date from the earlier of (a) February 2024 (if certain conditions were met) and (b) October 2024 to April 2027; (iii) removed eligible equipment from the borrowing base determination then in effect. At September 30, 2017, there were no borrowings under theand as collateral; and (iv) updated relevant benchmark provisions to SOFR instead of LIBOR.
The following table summarizes availability and usage of our Revolving Credit Facility and $7.8 million was being usedas determined by a borrowing base calculated as of September 30, 2022 (in millions of dollars):
|
|
|
| |
Revolving Credit Facility borrowing commitment |
| $ | 575.0 |
|
Borrowing base availability |
| $ | 572.4 |
|
Less: Outstanding borrowings under Revolving Credit Facility |
|
| — |
|
Less: Outstanding letters of credit under Revolving Credit Facility |
|
| (17.4 | ) |
Remaining borrowing availability |
| $ | 555.0 |
|
Interest Expense
Interest expense relating to support outstanding letters of credit, leaving $286.6 million of net borrowing availability. The interest rate applicable to any overnight borrowings under theour Senior Notes and Revolving Credit Facility would have been 4.50% at September 30, 2017.
|
| Quarter Ended |
|
| Nine Months Ended |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Senior Notes interest expense, including debt issuance cost amortization |
| $ | 12.4 |
|
| $ | 12.4 |
|
| $ | 37.2 |
|
| $ | 36.6 |
|
Revolving Credit Facility commitment fees and finance cost amortization |
|
| 0.6 |
|
|
| 0.3 |
|
|
| 1.6 |
|
|
| 1.2 |
|
Interest expense capitalized as construction in progress |
|
| (0.9 | ) |
|
| (0.2 | ) |
|
| (2.3 | ) |
|
| (0.6 | ) |
Total interest expense |
| $ | 12.1 |
|
| $ | 12.5 |
|
| $ | 36.5 |
|
| $ | 37.2 |
|
17
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -– UNAUDITED
Quarter Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Domestic | $ | 15.7 | $ | 9.1 | $ | 35.8 | $ | 39.5 | |||||||
Foreign | 0.4 | 0.3 | 1.0 | 0.7 | |||||||||||
Total | $ | 16.1 | $ | 9.4 | $ | 36.8 | $ | 40.2 |
6. Employee Benefits
Quarter Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Salaried VEBA1: | |||||||||||||||
Interest cost | $ | 0.8 | $ | 0.7 | $ | 2.3 | $ | 2.2 | |||||||
Expected return on plan assets | (1.0 | ) | (1.0 | ) | (3.1 | ) | (3.0 | ) | |||||||
Amortization of prior service cost | 1.2 | �� | 1.0 | 3.6 | 3.0 | ||||||||||
Amortization of net actuarial loss | 0.2 | 0.1 | 0.6 | 0.3 | |||||||||||
Total net periodic postretirement benefit cost relating to Salaried VEBA | $ | 1.2 | $ | 0.8 | $ | 3.4 | $ | 2.5 |
Quarter Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Included within Fabricated Products: | |||||||||||||||
Deferred compensation plan | $ | 0.1 | $ | 0.1 | $ | 0.3 | $ | 0.2 | |||||||
Defined contribution plans | 1.3 | 1.6 | 6.8 | 6.7 | |||||||||||
Multiemployer pension plans | 1.1 | 1.2 | 3.4 | 3.5 | |||||||||||
Total Fabricated Products | $ | 2.5 | $ | 2.9 | $ | 10.5 | $ | 10.4 | |||||||
Included within All Other: | |||||||||||||||
Deferred compensation plan | 0.4 | 0.4 | 1.1 | 0.6 | |||||||||||
Defined contribution plans | 0.1 | 0.1 | 0.7 | 0.7 | |||||||||||
Net periodic postretirement benefit cost relating to Salaried VEBA | 1.2 | 0.8 | 3.4 | 2.5 | |||||||||||
Loss (gain) on removal of Union VEBA net assets | 0.5 | — | (0.8 | ) | (0.1 | ) | |||||||||
Total All Other | $ | 2.2 | $ | 1.3 | $ | 4.4 | $ | 3.7 | |||||||
Total | $ | 4.7 | $ | 4.2 | $ | 14.9 | $ | 14.1 |
Quarter Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Non-vested common shares and restricted stock units | $ | 1.4 | $ | 1.2 | $ | 3.9 | $ | 3.5 | |||||||
TSR-Based Performance Shares | 1.2 | 1.5 | 3.7 | 4.0 | |||||||||||
CP-Based Performance Shares | 0.8 | 0.4 | 2.0 | 0.9 | |||||||||||
EVA-Based Performance Shares | 0.2 | — | 0.4 | 0.3 | |||||||||||
Total non-cash compensation expense | $ | 3.6 | $ | 3.1 | $ | 10.0 | $ | 8.7 |
Quarter Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Fabricated Products | $ | 1.3 | $ | 1.2 | $ | 3.8 | $ | 3.1 | |||||||
All Other | 2.3 | 1.9 | 6.2 | 5.6 | |||||||||||
Total non-cash compensation expense | $ | 3.6 | $ | 3.1 | $ | 10.0 | $ | 8.7 |
Unrecognized Gross Compensation Costs (in millions of dollars) | Expected Period (in years) Over Which the Remaining Gross Compensation Costs Will Be Recognized | ||||
Non-vested common shares and restricted stock units | $ | 9.6 | 2.6 | ||
TSR-Based Performance Shares | $ | 5.6 | 1.7 | ||
CP-Based Performance Shares | $ | 6.1 | 2.1 | ||
EVA-Based Performance Shares | $ | 1.5 | 2.4 |
Non-Vested Common Shares | Restricted Stock Units | TSR-Based Performance Shares | CP-Based Performance Shares | EVA-Based Performance Shares | ||||||||||||||||||||||||||||||
Shares | Weighted-Average Grant-Date Fair Value per Share | Units | Weighted-Average Grant-Date Fair Value per Unit | Shares | Weighted-Average Grant-Date Fair Value per Share | Shares | Weighted-Average Grant-Date Fair Value per Share | Shares | Weighted-Average Grant-Date Fair Value per Share | |||||||||||||||||||||||||
Outstanding at December 31, 2016 | 114,658 | $ | 69.51 | 61,800 | $ | 74.94 | 394,525 | $ | 90.30 | 63,678 | $ | 80.46 | — | $ | — | |||||||||||||||||||
Granted1 | 11,817 | 86.92 | 92,275 | 76.13 | 65,044 | 97.88 | 65,044 | 79.69 | 32,504 | 79.69 | ||||||||||||||||||||||||
Vested | (46,689 | ) | 71.46 | (8,655 | ) | 76.94 | (94,082 | ) | 83.18 | — | — | — | — | |||||||||||||||||||||
Forfeited1 | (427 | ) | 69.83 | (6,412 | ) | 77.70 | (5,519 | ) | 95.88 | (3,342 | ) | 79.92 | (1,164 | ) | 79.69 | |||||||||||||||||||
Canceled1 | — | — | — | — | (55,288 | ) | 83.18 | — | — | — | — | |||||||||||||||||||||||
Outstanding at September 30, 2017 | 79,359 | $ | 70.96 | 139,008 | $ | 75.72 | 304,680 | $ | 95.31 | 125,380 | $ | 80.07 | 31,340 | $ | 79.69 |
Quarter Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Non-vested common shares | $ | — | $ | — | $ | 86.92 | $ | 86.11 | |||||||
Restricted stock units | $ | 82.33 | $ | — | $ | 76.13 | $ | 75.57 | |||||||
TSR-Based Performance Shares | $ | — | $ | — | $ | 97.88 | $ | 93.02 | |||||||
CP-Based Performance Shares | $ | — | $ | — | $ | 79.69 | $ | 80.46 | |||||||
EVA-Based Performance Shares | $ | — | $ | — | $ | 79.69 | $ | — |
Commitments.
We have a variety of financial commitments, including purchase agreements, forward foreign exchange and forward sales contracts, indebtedness and letters of credit (see NoteEnvironmental Contingencies.
We are subject to a number of environmental laws and regulations, to potential fines or penalties assessed for alleged breaches of such laws and regulations and to potential claims based upon such laws and regulations. We are also subject to legacy environmental contingencies related to activities that occurred at operating facilitiesWe continue to pursue remediation activities, primarily to address the historical use of oils containing polychlorinated biphenyls ("PCBs"(“PCBs”) at our Spokane, Washington ("Trentwood"(“Trentwood”) facility. Our remediation efforts are in collaboration with the Washington State Department of Ecology ("Washington State Ecology"(“Ecology”), to which we submitted a feasibility study in 2012 of remediation alternatives and from which we received permission to begin certain remediation activities pursuant to a signed work order. As weWe have finishedcompleted a number of sections of the work plan weand have received satisfactory completion approval from Washington State Ecology on satisfactory completion of those sections. Additionally, inIn cooperation with Washington State Ecology, we constructed an experimental treatment facility to determine the treatability and evaluate the feasibility of removing PCBs from ground water under the Trentwood facility,facility. In 2015, we constructed a pilot test facility and began treatment operations atinvolving a walnut shell filtration system, which we optimized for maximum PCB capture during 2020. Furthermore, based on advancements in technology, we signed an Amended Agreed Order with Ecology in 2020 to evaluate and implement new technologies for PCB removal from groundwater on a pilot basis. The primary technology we are evaluating is Ultraviolet Light Advanced Oxidation Process. As the test facility in the first half of 2016. As thelong-term success of the new methodology cannot be reasonably determined at this time, it is possible we may need to make upward adjustments to our related accruals as facts and cost estimates regardingas the groundwater treatment method and the operation of the treatment facilitylong term results become available.
Pursuant to a consent agreement with the Ohio Environmental Protection Agency ("OEPA"(“OEPA”), we initiated an investigational study of theour Newark, Ohio ("Newark"(“Newark”) facility related to historical on-site waste disposal. Since 2014,During the quarter ended December 31, 2018, we have completed a number of preliminary steps insubmitted our remedial investigation study to the preparation of completingOEPA for review and approval. The final remedial investigation report was approved by the final risk assessment andOEPA during the quarter ended December 31, 2020. We are currently preparing the required feasibility study, both of which are subjectwe expect to submit to the OEPA for review and approval byduring the OEPA. As work continues and progresses to a final risk assessment and feasibility study, we will establish and update estimates for probable and estimable remediation, if any.quarter ending March 31, 2023. The actual and final remediation cost for remediationestimates will not be fully determinable until a finalthe feasibility study is submitted andhas been accepted by the OEPA and the selected remediation design work plans are prepared,completed, which is expectedwe expect to occur in the next 1214 to 1520 months.
At September 30, 2017,2022, our environmental accrual of $16.9$14.9 million represented our estimate of the incremental remediation cost based on: (i) proposed alternatives in the final feasibility study related to the Trentwood facility; (ii) currently available facts with respect to our Newark facility; and (iii) facts related to certain other locations owned or formerly owned by us. In accordance with approved and proposed remediation action plans, we expect that the implementation and ongoing monitoring could occur over a period of 30 or more years.
As additional facts are developed, feasibility studies are completed, draft remediation plans are modified, necessary regulatory approvals for the implementation of remediation are obtained, alternative technologies are developed and/or other factors change, there may be revisions to management'smanagement’s estimates and actual costs may exceed the current environmental accruals. We believe at this time that it is reasonably possible that undiscounted costs associated with these environmental matters may exceed current accruals by amounts that could be, in the aggregate, up to an estimated $12.2$11.6 million over the remediation period. It is reasonably possible that our recorded estimate will change in the next 12 months.
Warrick Rolling Mill CARO Liability. During thequarter ended March 31, 2022, we identified conditional asset retirement obligations (“CAROs”) related to the future removal and disposal of asbestos that is contained within the Warrick rolling mill facility. We believe that the asbestos is appropriately contained in accordance with current environmental regulations. If the facility were demolished or subject to renovation activities that disturb the asbestos, certain environmental regulations are in place which specify the manner in which the asbestos must be handled and disposed. We are required to record the fair value of CAROs if they can be
18
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
reasonably estimated. As of September 30, 2022, our liability related to these CAROs was $2.3 million and was included within Long‑term liabilities on our Consolidated Balance Sheets.
Other Contingencies.
We are party to various lawsuits, claims, investigations and administrative proceedings that arise in connection with past and current operations. We evaluate such matters on a case-by-case basis and our policy is to vigorouslyQuarter Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Realized (gain) loss: | |||||||||||||||
Aluminum | $ | (4.0 | ) | $ | 0.4 | $ | (13.8 | ) | $ | 4.1 | |||||
Natural gas | 0.2 | 0.9 | 0.3 | 4.2 | |||||||||||
Alloy Hedges | (0.3 | ) | — | (0.2 | ) | — | |||||||||
Foreign exchange | (0.1 | ) | — | (0.1 | ) | — | |||||||||
Total realized (gain) loss1 | $ | (4.2 | ) | $ | 1.3 | $ | (13.8 | ) | $ | 8.3 | |||||
Unrealized (gain) loss: | |||||||||||||||
Aluminum | $ | (10.6 | ) | $ | (1.7 | ) | $ | (15.3 | ) | $ | (11.7 | ) | |||
Natural gas | (0.2 | ) | (0.3 | ) | 1.3 | (5.2 | ) | ||||||||
Total unrealized gain2 | $ | (10.8 | ) | $ | (2.0 | ) | $ | (14.0 | ) | $ | (16.9 | ) |
September 30, 2017 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
DERIVATIVE ASSETS: | |||||||||||||||
Non-Designated Hedges: | |||||||||||||||
Aluminum – | |||||||||||||||
Fixed price purchase contracts | $ | — | $ | 18.4 | $ | — | $ | 18.4 | |||||||
Midwest premium swap contracts | — | 0.8 | — | 0.8 | |||||||||||
Natural gas – Fixed price purchase contracts | — | 0.4 | — | 0.4 | |||||||||||
Designated Hedges: | |||||||||||||||
Alloying metals – Fixed price purchase contracts | — | 0.9 | — | 0.9 | |||||||||||
Total derivative assets1 | $ | — | $ | 20.5 | $ | — | $ | 20.5 | |||||||
September 30, 2017 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
DERIVATIVE LIABILITIES: | |||||||||||||||
Non-Designated Hedges: | |||||||||||||||
Aluminum – | |||||||||||||||
Fixed price sales contracts | $ | — | $ | (0.1 | ) | $ | — | $ | (0.1 | ) | |||||
Midwest premium swap contracts | — | (0.8 | ) | — | (0.8 | ) | |||||||||
Natural gas – Fixed price purchase contracts | — | (0.5 | ) | — | (0.5 | ) | |||||||||
Total derivative liabilities2 | $ | — | $ | (1.4 | ) | $ | — | $ | (1.4 | ) |
December 31, 2016 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
DERIVATIVE ASSETS: | |||||||||||||||
Non-Designated Hedges: | |||||||||||||||
Aluminum – | |||||||||||||||
Fixed price purchase contracts | $ | — | $ | 3.3 | $ | — | $ | 3.3 | |||||||
Midwest premium swap contracts | — | 0.9 | — | 0.9 | |||||||||||
Natural gas – Fixed price purchase contracts | — | 1.6 | — | 1.6 | |||||||||||
Total derivative assets1 | $ | — | $ | 5.8 | $ | — | $ | 5.8 | |||||||
DERIVATIVE LIABILITIES: | |||||||||||||||
Non-Designated Hedges: | |||||||||||||||
Aluminum – | |||||||||||||||
Fixed price purchase contracts | $ | — | $ | (1.1 | ) | $ | — | $ | (1.1 | ) | |||||
Midwest premium swap contracts | — | (0.2 | ) | — | (0.2 | ) | |||||||||
Natural gas – Fixed price purchase contracts | — | (0.4 | ) | — | (0.4 | ) | |||||||||
Designated Hedges: | |||||||||||||||
Alloying metals – Fixed price purchase contracts | — | (0.1 | ) | — | (0.1 | ) | |||||||||
Total derivative liabilities2 | $ | — | $ | (1.8 | ) | $ | — | $ | (1.8 | ) |
Gross Amounts of Recognized Assets | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts of Assets Presented in the Consolidated Balance Sheets | Gross Amounts Not Offset in the Consolidated Balance Sheets | Net Amount | |||||||||||||||
Counterparty (with netting agreements) | $ | 20.5 | $ | — | $ | 20.5 | $ | 1.4 | $ | 19.1 | |||||||||
Total | $ | 20.5 | $ | — | $ | 20.5 | $ | 1.4 | $ | 19.1 |
Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | Gross Amounts Not Offset in the Consolidated Balance Sheets | Net Amount | |||||||||||||||
Counterparty (with netting agreements) | $ | (1.4 | ) | $ | — | $ | (1.4 | ) | $ | (1.4 | ) | $ | — | ||||||
Total | $ | (1.4 | ) | $ | — | $ | (1.4 | ) | $ | (1.4 | ) | $ | — |
Gross Amounts of Recognized Assets | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts of Assets Presented in the Consolidated Balance Sheets | Gross Amounts Not Offset in the Consolidated Balance Sheets | Net Amount | |||||||||||||||
Counterparty (with netting agreements) | $ | 3.3 | $ | — | $ | 3.3 | $ | 1.0 | $ | 2.3 | |||||||||
Counterparty (with partial netting agreements) | 2.5 | — | 2.5 | 0.7 | 1.8 | ||||||||||||||
Total | $ | 5.8 | $ | — | $ | 5.8 | $ | 1.7 | $ | 4.1 |
Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Consolidated Balance Sheets | Net Amounts of Liabilities Presented in the Consolidated Balance Sheets | Gross Amounts Not Offset in the Consolidated Balance Sheets | Net Amount | |||||||||||||||
Counterparty (with netting agreements) | $ | (1.0 | ) | $ | — | $ | (1.0 | ) | $ | (1.0 | ) | $ | — | ||||||
Counterparty (with partial netting agreements) | (0.8 | ) | — | (0.8 | ) | (0.7 | ) | (0.1 | ) | ||||||||||
Total | $ | (1.8 | ) | $ | — | $ | (1.8 | ) | $ | (1.7 | ) | $ | (0.1 | ) |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Cash and cash equivalents | $ | 17.3 | $ | 56.6 | $ | — | $ | 73.9 | |||||||
Short-term investments | — | 191.4 | — | 191.4 | |||||||||||
Total | $ | 17.3 | $ | 248.0 | $ | — | $ | 265.3 |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Cash and cash equivalents | $ | 37.9 | $ | 17.3 | $ | — | $ | 55.2 | |||||||
Short-term investments | — | 231.0 | — | 231.0 | |||||||||||
Total | $ | 37.9 | $ | 248.3 | $ | — | $ | 286.2 |
Quarter Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Numerator: | |||||||||||||||
Net income | $ | 19.9 | $ | 14.9 | $ | 60.6 | $ | 67.2 | |||||||
Denominator – Weighted-average common shares outstanding (in thousands): | |||||||||||||||
Basic1 | 16,834 | 17,841 | 17,072 | 17,858 | |||||||||||
Add: dilutive effect of non-vested common shares, restricted stock units, performance shares and stock options | 326 | 334 | 291 | 323 | |||||||||||
Diluted2 | 17,160 | 18,175 | 17,363 | 18,181 | |||||||||||
Net income per common share, Basic: | $ | 1.18 | $ | 0.84 | $ | 3.55 | $ | 3.76 | |||||||
Net income per common share, Diluted: | $ | 1.16 | $ | 0.82 | $ | 3.49 | $ | 3.70 |
Quarter Ended | Nine Months Ended | ||||||||||
September 30, | September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Non-vested common shares, restricted stock units and performance shares | 3 | 3 | 3 | 2 | |||||||
Total excluded | 3 | 3 | 3 | 2 |
Nine Months Ended | |||||||
September 30, | |||||||
2017 | 2016 | ||||||
Number of common shares repurchased | 806,307 | 170,304 | |||||
Weighted-average repurchase price (dollars per share) | $ | 80.60 | $ | 81.04 | |||
Total cost of repurchased common shares (in millions of dollars) | $ | 64.9 | $ | 13.8 |
Quarter Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales: | |||||||||||||||
Fabricated Products | $ | 332.8 | $ | 320.6 | $ | 1,044.4 | $ | 998.7 | |||||||
Segment operating income (loss): | |||||||||||||||
Fabricated Products | $ | 53.7 | $ | 42.1 | $ | 149.9 | $ | 172.1 | |||||||
All Other | (13.9 | ) | (12.3 | ) | (39.2 | ) | (39.6 | ) | |||||||
Total operating income | $ | 39.8 | $ | 29.8 | $ | 110.7 | $ | 132.5 | |||||||
Interest expense | (5.3 | ) | (5.5 | ) | (16.4 | ) | (14.7 | ) | |||||||
Other income (expense), net | 1.5 | — | 3.1 | (10.4 | ) | ||||||||||
Income before income taxes | $ | 36.0 | $ | 24.3 | $ | 97.4 | $ | 107.4 | |||||||
Depreciation and amortization: | |||||||||||||||
Fabricated Products | $ | 10.1 | $ | 8.8 | $ | 28.9 | $ | 26.2 | |||||||
All Other | 0.1 | 0.2 | 0.4 | 0.5 | |||||||||||
Total depreciation and amortization | $ | 10.2 | $ | 9.0 | $ | 29.3 | $ | 26.7 | |||||||
Capital expenditures: | |||||||||||||||
Fabricated Products | $ | 16.3 | $ | 15.0 | $ | 55.7 | $ | 57.1 | |||||||
All Other | 0.1 | 0.1 | 0.4 | 0.3 | |||||||||||
Total capital expenditures | $ | 16.4 | $ | 15.1 | $ | 56.1 | $ | 57.4 |
September 30, 2017 | December 31, 2016 | ||||||
Assets: | |||||||
Fabricated Products | $ | 1,007.9 | $ | 969.4 | |||
All Other1 | 414.8 | 474.1 | |||||
Total assets | $ | 1,422.7 | $ | 1,443.5 |
Quarter Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales: | |||||||||||||||
Aero/HS products | $ | 150.2 | $ | 156.1 | $ | 483.2 | $ | 500.7 | |||||||
Automotive Extrusions | 52.7 | 46.5 | 161.6 | 143.6 | |||||||||||
GE products | 115.9 | 105.6 | 361.1 | 318.3 | |||||||||||
Other products | 14.0 | 12.4 | 38.5 | 36.1 | |||||||||||
Total net sales | $ | 332.8 | $ | 320.6 | $ | 1,044.4 | $ | 998.7 |
Quarter Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Income taxes paid: | |||||||||||||||
Domestic | $ | 0.3 | $ | 0.1 | $ | 0.7 | $ | 0.4 | |||||||
Foreign | — | — | 0.1 | 0.5 | |||||||||||
Total income taxes paid | $ | 0.3 | $ | 0.1 | $ | 0.8 | $ | 0.9 |
Quarter Ended | Nine Months Ended | ||||||||||
September 30, | September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Percentage of total primary aluminum supply (lbs): | |||||||||||
Supply from our top five major suppliers | 86 | % | 84 | % | 85 | % | 84 | % | |||
Supply from our largest supplier | 35 | % | 28 | % | 36 | % | 32 | % | |||
Supply from our second and third largest suppliers | 35 | % | 33 | % | 33 | % | 31 | % |
Nine Months Ended | |||||||
September 30, | |||||||
2017 | 2016 | ||||||
(In millions of dollars) | |||||||
Interest paid | $ | 10.0 | $ | 6.7 | |||
Non-cash investing and financing activities (included in Accounts payable): | |||||||
Unpaid purchases of property and equipment | $ | 3.4 | $ | 2.4 | |||
Stock repurchases not yet settled | $ | — | $ | 0.2 | |||
Acquisition of property and equipment through capital leasing arrangements | $ | 0.3 | $ | — | |||
Components of cash, cash equivalents and restricted cash: | September 30, 2017 | September 30, 2016 | |||||
Cash and cash equivalents | $ | 73.9 | $ | 72.9 | |||
Restricted cash included in Prepaid expenses and other current assets1 | 0.3 | 0.3 | |||||
Restricted cash included in Other assets1 | 12.9 | 11.7 | |||||
Total cash, cash equivalents and restricted cash shown in the Statements of Consolidated Cash Flows | $ | 87.1 | $ | 84.9 |
Quarter Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Interest income | $ | — | $ | — | $ | — | $ | 0.1 | |||||||
Realized gain on investments | 0.8 | 0.1 | 2.2 | 0.4 | |||||||||||
Loss on extinguishment of debt1 | — | — | — | (11.1 | ) | ||||||||||
All other income (expense), net | 0.7 | (0.1 | ) | 0.9 | 0.2 | ||||||||||
Other income (expense), net | $ | 1.5 | $ | — | $ | 3.1 | $ | (10.4 | ) |
7. Accumulated Other Comprehensive (Loss) Income
The following table presents the changes in the accumulated balances for each component of Accumulated other comprehensive (loss) income ("AOCI") for each period presentedAOCI (in millions of dollars):
|
| Quarter Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Defined Benefit Pension Plans and Salaried VEBA: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
| $ | (19.6 | ) |
| $ | (18.4 | ) |
| $ | (21.4 | ) |
| $ | (19.8 | ) |
Amortization of net actuarial loss1 |
|
| — |
|
|
| 0.1 |
|
|
| — |
|
|
| 0.3 |
|
Amortization of prior service cost1 |
|
| 1.2 |
|
|
| 0.9 |
|
|
| 3.7 |
|
|
| 2.6 |
|
Less: income tax expense2 |
|
| (0.2 | ) |
|
| (0.2 | ) |
|
| (0.9 | ) |
|
| (0.7 | ) |
Other comprehensive income, net of tax |
|
| 1.0 |
|
|
| 0.8 |
|
|
| 2.8 |
|
|
| 2.2 |
|
Ending balance |
| $ | (18.6 | ) |
| $ | (17.6 | ) |
| $ | (18.6 | ) |
| $ | (17.6 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash Flow Hedges: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
| $ | (1.7 | ) |
| $ | 24.8 |
|
| $ | 17.7 |
|
| $ | 1.1 |
|
Unrealized (loss) gain on cash flow hedges |
|
| (9.8 | ) |
|
| 29.8 |
|
|
| (18.2 | ) |
|
| 72.1 |
|
Less: income tax benefit (expense) |
|
| 2.2 |
|
|
| (7.0 | ) |
|
| 4.2 |
|
|
| (17.0 | ) |
Net unrealized (loss) gain on cash flow hedges |
|
| (7.6 | ) |
|
| 22.8 |
|
|
| (14.0 | ) |
|
| 55.1 |
|
Reclassification of unrealized loss (gain) upon settlement of cash flow hedges |
|
| 8.1 |
|
|
| (16.7 | ) |
|
| (8.9 | ) |
|
| (28.1 | ) |
Less: income tax (expense) benefit2 |
|
| (1.9 | ) |
|
| 3.9 |
|
|
| 2.1 |
|
|
| 6.7 |
|
Net loss (gain) reclassified from AOCI to Net income (loss) |
|
| 6.2 |
|
|
| (12.8 | ) |
|
| (6.8 | ) |
|
| (21.4 | ) |
Other comprehensive (loss) income, net of tax |
|
| (1.4 | ) |
|
| 10.0 |
|
|
| (20.8 | ) |
|
| 33.7 |
|
Ending balance3 |
| $ | (3.1 | ) |
| $ | 34.8 |
|
| $ | (3.1 | ) |
| $ | 34.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign Currency Translation: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Beginning balance |
| $ | — |
|
| $ | (0.1 | ) |
| $ | — |
|
| $ | — |
|
Other comprehensive income (loss), net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.1 | ) |
Ending balance |
| $ | — |
|
| $ | (0.1 | ) |
| $ | — |
|
| $ | (0.1 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total AOCI ending balance |
| $ | (21.7 | ) |
| $ | 17.1 |
|
| $ | (21.7 | ) |
| $ | 17.1 |
|
Quarter Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Salaried VEBA and defined benefit pension plan: | ||||||||||||||||
Beginning balance | $ | (35.4 | ) | $ | (29.8 | ) | $ | (37.1 | ) | $ | (31.3 | ) | ||||
Amortization of net actuarial loss1 | 0.2 | 0.1 | 0.6 | 0.3 | ||||||||||||
Amortization of prior service cost1 | 1.2 | 1.0 | 3.6 | 3.0 | ||||||||||||
Less: income tax expense2 | (0.5 | ) | (0.4 | ) | (1.6 | ) | (1.2 | ) | ||||||||
Net amortization reclassified from AOCI to Net income | 0.9 | 0.7 | 2.6 | 2.1 | ||||||||||||
Translation impact on Canadian pension plan AOCI balance | (0.1 | ) | — | (0.1 | ) | 0.1 | ||||||||||
Other comprehensive income, net of tax | 0.8 | 0.7 | 2.5 | 2.2 | ||||||||||||
Ending balance | $ | (34.6 | ) | $ | (29.1 | ) | $ | (34.6 | ) | $ | (29.1 | ) | ||||
Available for sale securities: | ||||||||||||||||
Beginning balance | $ | 1.1 | $ | 0.2 | $ | 0.8 | $ | (0.1 | ) | |||||||
Unrealized gain on available for sale securities | 1.0 | 0.9 | 3.1 | 1.3 | ||||||||||||
Less: income tax expense | (0.4 | ) | (0.4 | ) | (1.2 | ) | (0.5 | ) | ||||||||
Net unrealized gain on available for sale securities | 0.6 | 0.5 | 1.9 | 0.8 | ||||||||||||
Reclassification of unrealized gain upon sale of available for sale securities3 | (0.5 | ) | (0.3 | ) | (2.1 | ) | (0.3 | ) | ||||||||
Less: income tax benefit2 | 0.2 | 0.1 | 0.8 | 0.1 | ||||||||||||
Net unrealized gain reclassified from AOCI to Net income | (0.3 | ) | (0.2 | ) | (1.3 | ) | (0.2 | ) | ||||||||
Other comprehensive income, net of tax | 0.3 | 0.3 | 0.6 | 0.6 | ||||||||||||
Ending balance | $ | 1.4 | $ | 0.5 | $ | 1.4 | $ | 0.5 | ||||||||
Other: | ||||||||||||||||
Beginning balance | $ | — | $ | (0.3 | ) | $ | (0.4 | ) | $ | (0.3 | ) | |||||
Unrealized gain | 1.1 | 0.1 | 1.4 | 0.2 | ||||||||||||
Less: income tax expense | (0.4 | ) | — | (0.5 | ) | (0.1 | ) | |||||||||
Net gain | 0.7 | 0.1 | 0.9 | 0.1 | ||||||||||||
Gain reclassified from AOCI to Net income | (0.3 | ) | — | — | — | |||||||||||
Less: income tax benefit2 | 0.1 | — | — | — | ||||||||||||
Net gain reclassified from AOCI to Net income | (0.2 | ) | — | — | — | |||||||||||
Other comprehensive income, net of tax | 0.5 | 0.1 | 0.9 | 0.1 | ||||||||||||
Ending balance | $ | 0.5 | $ | (0.2 | ) | $ | 0.5 | $ | (0.2 | ) | ||||||
Total AOCI ending balance | $ | (32.7 | ) | $ | (28.8 | ) | $ | (32.7 | ) | $ | (28.8 | ) |
19
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -– UNAUDITED
8. Other Income (Expense), Net
Other income (expense), net consisted of the following (in millions of dollars):
|
| Quarter Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Interest income |
| $ | 0.4 |
|
| $ | 0.1 |
|
| $ | 0.6 |
|
| $ | 0.2 |
|
Net periodic postretirement benefit cost |
|
| (1.4 | ) |
|
| (1.2 | ) |
|
| (4.3 | ) |
|
| (3.0 | ) |
Unrealized (loss) gain on equity securities |
|
| (0.3 | ) |
|
| — |
|
|
| (1.4 | ) |
|
| — |
|
Gain (loss) on extinguishment of debt |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (35.9 | ) |
Gain (loss) on disposition of property, plant and equipment |
|
| 8.4 |
|
|
| — |
|
|
| 6.3 |
|
|
| (0.1 | ) |
Post-acquisition funding received from Alcoa Corporation1 |
|
| 6.0 |
|
|
| — |
|
|
| 6.0 |
|
|
| — |
|
All other, net |
|
| (0.4 | ) |
|
| (0.1 | ) |
|
| 0.2 |
|
|
| 0.6 |
|
Other income (expense), net |
| $ | 12.7 |
|
| $ | (1.2 | ) |
| $ | 7.4 |
|
| $ | (38.2 | ) |
9. Income Tax Matters
The income tax (provision) benefitconsisted of the following (in millions of dollars):
|
| Quarter Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Domestic |
| $ | (1.0 | ) |
| $ | (8.8 | ) |
| $ | 0.9 |
|
| $ | 8.5 |
|
Foreign |
|
| (0.1 | ) |
|
| 0.4 |
|
|
| (1.2 | ) |
|
| (1.1 | ) |
Total |
| $ | (1.1 | ) |
| $ | (8.4 | ) |
| $ | (0.3 | ) |
| $ | 7.4 |
|
The income tax (provision) benefit for the quarters ended September 30, 2022 and Non-Guarantor Financial Information
The difference between the effective tax rate and the projected blended statutory tax rate for the quarter ended September 30, 2021 was primarily due to an increase of 116% of taxable income for a change in forecasted earnings and its impact on the annual effective tax rate, partially offset by a decrease of 2% related to the valuation allowance for certain state net operating losses and a decrease of 1% for the recognition of excess tax benefits from stock-based compensation.
The income tax (provision) benefit for the nine months ended September 30, 2022 and September 30, 2021 was $(0.3) million and $7.4 million, respectively, reflecting an effective tax rate of (14%) and 27%, respectively. The difference between the effective tax rate and the projected blended statutory tax rate for the nine months ended September 30, 2022 was primarily due to: (i) a decrease of 42% related to a Federal Research and Development Credit; (ii) a decrease of 11% for the recognition of excess book benefits from stock-based compensation; (iii) a decrease of 4% related to the valuation allowance for certain state net operating losses; and (iv) a decrease of 2% for related to unrecognized tax benefits, including interest and penalties, partially offset by an increase related to permanent items of 21%, including non-deductible compensation expense and foreign withholding tax.
The difference between the effective tax rate and the projected blended statutory tax rate for the nine months ended September 30, 2021 was primarily due to: (i) an increase of 4% related to the valuation allowance for certain state net operating losses; (ii) an increase of 3% related to tax credits; (iii) an increase of 2% for the recognition of excess tax benefits from stock-based compensation; and (iv) an increase of 2% for a change in state tax rate due to the Warrick acquisition, partially offset by a decrease related to permanent items of 7%, including non-deductible compensation expense and foreign withholding tax.
20
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
Our gross unrecognized benefits relating to uncertain tax positions were $5.0 million and $4.1 million at September 30, 2022 and December 31, 2021, respectively, of which, $5.0 million and $4.1 million would be recorded through our income tax provision and thus, impact the effective tax rate at September 30, 2022 and December 31, 2021, respectively, if the gross unrecognized tax benefits were to be recognized.
We do not expect our gross unrecognized tax benefits to significantly change within the next 12 2016 ("Indenture") with Wells Fargo Bank, National Association, as trustee ("Trustee").months.
Basic net income (loss) per share is computed by dividing distributed and undistributed net income (loss) allocable to common shares by the weighted-average number of common shares outstanding during the applicable period. The obligationsbasic weighted-average number of common shares outstanding during the Parentperiod excludes non-vested share-based payment awards. Diluted net income (loss) per share was calculated under the Indenture are guaranteed by Kaiser Aluminum Investments Company, Kaiser Aluminum Fabricated Products, LLC and Kaiser Aluminum Washington, LLC, ("Guarantor Subsidiaries"). An additional Guarantor Subsidiary, Kaiser Aluminum Alexco, LLC, merged with and into Kaiser Aluminum Fabricated Products, LLC during the first quarter of 2017. All Guarantor Subsidiaries are 100% owned by the Parent. The guarantees are full and unconditional and joint and several but have customary releases in the following situations: (i) the sale of the Guarantor Subsidiary or all of its assets; (ii) the declaration of a Guarantor Subsidiary as an unrestricted subsidiary under the Indenture; (iii) the termination or release of the Guarantor Subsidiary's guarantee of certain other indebtedness; or (iv) our exercise of legal defeasance or covenant defeasance or the discharge of our obligations under the Indenture.
The following table sets forth the computation of operationbasic and cash flows for eachdiluted net income (loss) per share (in millions of (a) Parent, (b)dollars, except share and per share amounts):
|
| Quarter Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 2.5 |
|
| $ | (2.3 | ) |
| $ | (3.2 | ) |
| $ | (20.2 | ) |
Denominator – Weighted-average common shares outstanding (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
|
| 15,926 |
|
|
| 15,852 |
|
|
| 15,897 |
|
|
| 15,831 |
|
Add: dilutive effect of non-vested common shares, restricted stock units and performance shares1 |
|
| 103 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Diluted |
|
| 16,029 |
|
|
| 15,852 |
|
|
| 15,897 |
|
|
| 15,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net income (loss) per common share, Basic: |
| $ | 0.16 |
|
| $ | (0.14 | ) |
| $ | (0.20 | ) |
| $ | (1.28 | ) |
Net income (loss) per common share, Diluted: |
| $ | 0.16 |
|
| $ | (0.14 | ) |
| $ | (0.20 | ) |
| $ | (1.28 | ) |
11. Supplemental Cash Flow Information
|
| Nine Months Ended September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
| (In millions of dollars) |
| |||||
Interest paid |
| $ | 34.2 |
|
| $ | 35.9 |
|
Non-cash investing and financing activities (included in Accounts payable): |
|
|
|
|
|
| ||
Unpaid purchases of property and equipment |
| $ | 40.6 |
|
| $ | 10.1 |
|
|
|
|
|
|
|
| ||
Supplemental lease disclosures: |
|
|
|
|
|
| ||
Operating lease liabilities arising from obtaining operating lease assets |
| $ | 2.7 |
|
| $ | 24.3 |
|
Cash paid for amounts included in the measurement of operating lease liabilities |
| $ | 7.3 |
|
| $ | 5.7 |
|
Finance lease liabilities arising from obtaining finance lease assets |
| $ | 0.4 |
|
| $ | 2.1 |
|
21
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS -– UNAUDITED
|
| As of September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
|
| (In millions of dollars) |
| |||||
Components of cash, cash equivalents and restricted cash: |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 129.3 |
|
| $ | 295.7 |
|
Restricted cash included in Other assets1 |
|
| 14.2 |
|
|
| 13.8 |
|
Total cash, cash equivalents and restricted cash presented on our Statements of Consolidated Cash Flows |
| $ | 143.5 |
|
| $ | 309.5 |
|
12. Business, Product and Geographical Area Information
Our primary line of business is the production of semi-fabricated specialty aluminum mill products, such as bare and coated coils, plate and sheet and extruded and drawn products, for the following end market applications: (i) aerospace and high strength (“Aero/HS products”); (ii) beverage and food packaging products (“Packaging”); (iii) automotive (“Automotive Extrusions”); (iv) general engineering (“GE products”); and (v) other industrial (“Other products”). We operate 13 focused production facilities in the United States and one in Canada. Our chief operating decision maker reviews and evaluates our business as a single operating segment.
The following table presents Net sales by end market applications and by timing of control transfer (in millions of dollars):
|
| Quarter Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Aero/HS products |
| $ | 140.8 |
|
| $ | 142.0 |
|
| $ | 492.8 |
|
| $ | 387.6 |
|
Packaging |
|
| 341.5 |
|
|
| 367.3 |
|
|
| 1,240.2 |
|
|
| 726.1 |
|
Automotive Extrusions |
|
| 60.6 |
|
|
| 50.1 |
|
|
| 196.0 |
|
|
| 163.3 |
|
GE products |
|
| 200.3 |
|
|
| 187.1 |
|
|
| 699.2 |
|
|
| 518.4 |
|
Other products |
|
| 5.7 |
|
|
| 4.1 |
|
|
| 23.7 |
|
|
| 20.2 |
|
Total net sales |
| $ | 748.9 |
|
| $ | 750.6 |
|
| $ | 2,651.9 |
|
| $ | 1,815.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Timing of revenue recognition: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Products transferred at a point in time |
| $ | 630.2 |
|
| $ | 613.6 |
|
| $ | 2,165.1 |
|
| $ | 1,419.5 |
|
Products transferred over time |
|
| 118.7 |
|
|
| 137.0 |
|
|
| 486.8 |
|
|
| 396.1 |
|
Total net sales |
| $ | 748.9 |
|
| $ | 750.6 |
|
| $ | 2,651.9 |
|
| $ | 1,815.6 |
|
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 70.7 | $ | 3.2 | $ | — | $ | 73.9 | ||||||||||
Short-term investments | — | 191.4 | — | — | 191.4 | |||||||||||||||
Receivables: | ||||||||||||||||||||
Trade receivables, net | — | 133.1 | 5.1 | — | 138.2 | |||||||||||||||
Intercompany loans receivable | 55.6 | 0.1 | 0.6 | (56.3 | ) | — | ||||||||||||||
Other | — | 14.6 | 0.8 | — | 15.4 | |||||||||||||||
Inventories | — | 208.5 | 8.6 | (4.9 | ) | 212.2 | ||||||||||||||
Prepaid expenses and other current assets | 0.1 | 31.0 | 0.4 | — | 31.5 | |||||||||||||||
Total current assets | 55.7 | 649.4 | 18.7 | (61.2 | ) | 662.6 | ||||||||||||||
Investments in and advances to subsidiaries | 1,107.0 | 41.9 | — | (1,148.9 | ) | — | ||||||||||||||
Property, plant and equipment, net | — | 527.6 | 30.2 | — | 557.8 | |||||||||||||||
Long-term intercompany loans receivable | — | — | 10.5 | (10.5 | ) | — | ||||||||||||||
Deferred tax assets, net | — | 113.9 | — | 4.8 | 118.7 | |||||||||||||||
Intangible assets, net | — | 25.3 | — | — | 25.3 | |||||||||||||||
Goodwill | — | 18.8 | — | — | 18.8 | |||||||||||||||
Other assets | — | 39.5 | — | — | 39.5 | |||||||||||||||
Total | $ | 1,162.7 | $ | 1,416.4 | $ | 59.4 | $ | (1,215.8 | ) | $ | 1,422.7 | |||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Accounts payable | $ | 1.4 | $ | 86.8 | $ | 6.2 | $ | — | $ | 94.4 | ||||||||||
Intercompany loans payable | — | 56.2 | 0.1 | (56.3 | ) | — | ||||||||||||||
Accrued salaries, wages and related expenses | — | 37.2 | 1.8 | — | 39.0 | |||||||||||||||
Other accrued liabilities | 8.3 | 41.0 | 1.1 | (7.1 | ) | 43.3 | ||||||||||||||
Total current liabilities | 9.7 | 221.2 | 9.2 | (63.4 | ) | 176.7 | ||||||||||||||
Net liabilities of Salaried VEBA | — | 27.8 | — | — | 27.8 | |||||||||||||||
Deferred tax liabilities | — | — | 3.3 | — | 3.3 | |||||||||||||||
Long-term intercompany loans payable | — | 10.5 | — | (10.5 | ) | — | ||||||||||||||
Long-term liabilities | — | 59.3 | 2.6 | — | 61.9 | |||||||||||||||
Long-term debt | 369.4 | — | — | — | 369.4 | |||||||||||||||
Total liabilities | 379.1 | 318.8 | 15.1 | (73.9 | ) | 639.1 | ||||||||||||||
Total stockholders' equity | 783.6 | 1,097.6 | 44.3 | (1,141.9 | ) | 783.6 | ||||||||||||||
Total | $ | 1,162.7 | $ | 1,416.4 | $ | 59.4 | $ | (1,215.8 | ) | $ | 1,422.7 |
The following table presents geographic information for income taxes paid (in millions of dollars)
|
| Quarter Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Income taxes paid: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Domestic |
| $ | 0.3 |
|
| $ | — |
|
| $ | 2.7 |
|
| $ | 1.2 |
|
Foreign |
|
| 1.6 |
|
|
| 0.2 |
|
|
| 2.6 |
|
|
| 0.8 |
|
Total income taxes paid |
| $ | 1.9 |
|
| $ | 0.2 |
|
| $ | 5.3 |
|
| $ | 2.0 |
|
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 52.9 | $ | 2.3 | $ | — | $ | 55.2 | ||||||||||
Short-term investments | — | 231.0 | — | — | 231.0 | |||||||||||||||
Receivables: | ||||||||||||||||||||
Trade receivables, net | — | 133.1 | 4.6 | — | 137.7 | |||||||||||||||
Intercompany receivables | 85.8 | 0.1 | 0.6 | (86.5 | ) | — | ||||||||||||||
Other | — | 11.4 | 0.5 | — | 11.9 | |||||||||||||||
Inventories | — | 197.5 | 8.0 | (3.9 | ) | 201.6 | ||||||||||||||
Prepaid expenses and other current assets | 0.1 | 18.0 | 0.9 | (0.5 | ) | 18.5 | ||||||||||||||
Total current assets | 85.9 | 644.0 | 16.9 | (90.9 | ) | 655.9 | ||||||||||||||
Investments in and advances to subsidiaries | 1,012.4 | 40.1 | — | (1,052.5 | ) | — | ||||||||||||||
Property, plant and equipment, net | — | 499.5 | 31.4 | — | 530.9 | |||||||||||||||
Long-term intercompany receivables | 80.2 | — | 4.9 | (85.1 | ) | — | ||||||||||||||
Deferred tax assets, net | — | 154.9 | — | 4.8 | 159.7 | |||||||||||||||
Intangible assets, net | — | 26.4 | — | — | 26.4 | |||||||||||||||
Goodwill | — | 37.2 | — | — | 37.2 | |||||||||||||||
Other assets | — | 33.4 | — | — | 33.4 | |||||||||||||||
Total | $ | 1,178.5 | $ | 1,435.5 | $ | 53.2 | $ | (1,223.7 | ) | $ | 1,443.5 | |||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Accounts payable | $ | 2.2 | $ | 68.9 | $ | 4.7 | $ | — | $ | 75.8 | ||||||||||
Intercompany payable | — | 86.4 | 0.1 | (86.5 | ) | — | ||||||||||||||
Accrued salaries, wages and related expenses | — | 47.2 | 1.9 | — | 49.1 | |||||||||||||||
Other accrued liabilities | 2.9 | 52.6 | (0.7 | ) | (14.7 | ) | 40.1 | |||||||||||||
Total current liabilities | 5.1 | 255.1 | 6.0 | (101.2 | ) | 165.0 | ||||||||||||||
Net liabilities of Salaried VEBA | — | 28.6 | — | — | 28.6 | |||||||||||||||
Deferred tax liabilities | — | — | 3.3 | — | 3.3 | |||||||||||||||
Long-term intercompany payable | — | 85.1 | — | (85.1 | ) | — | ||||||||||||||
Long-term liabilities | — | 70.5 | 2.7 | — | 73.2 | |||||||||||||||
Long-term debt | 368.7 | — | — | — | 368.7 | |||||||||||||||
Total liabilities | 373.8 | 439.3 | 12.0 | (186.3 | ) | 638.8 | ||||||||||||||
Total stockholders' equity | 804.7 | 996.2 | 41.2 | (1,037.4 | ) | 804.7 | ||||||||||||||
Total | $ | 1,178.5 | $ | 1,435.5 | $ | 53.2 | $ | (1,223.7 | ) | $ | 1,443.5 |
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||
Net sales | $ | — | $ | 325.9 | $ | 26.3 | $ | (19.4 | ) | $ | 332.8 | |||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of products sold: | ||||||||||||||||||||
Cost of products sold, excluding depreciation and amortization and other items | — | 261.6 | 24.0 | (18.4 | ) | 267.2 | ||||||||||||||
Unrealized gain on derivative instruments | — | (10.8 | ) | — | — | (10.8 | ) | |||||||||||||
Depreciation and amortization | — | 9.7 | 0.5 | — | 10.2 | |||||||||||||||
Selling, general, administrative, research and development: | ||||||||||||||||||||
Selling, general, administrative, research and development | 1.0 | 23.5 | 0.8 | (0.6 | ) | 24.7 | ||||||||||||||
Net periodic postretirement benefit cost relating to Salaried VEBA | — | 1.2 | — | — | 1.2 | |||||||||||||||
Loss on removal of Union VEBA net assets | — | 0.5 | — | — | 0.5 | |||||||||||||||
Total selling, general, administrative, research and development | 1.0 | 25.2 | 0.8 | (0.6 | ) | 26.4 | ||||||||||||||
Total costs and expenses | 1.0 | 285.7 | 25.3 | (19.0 | ) | 293.0 | ||||||||||||||
Operating (loss) income | (1.0 | ) | 40.2 | 1.0 | (0.4 | ) | 39.8 | |||||||||||||
Other (expense) income: | ||||||||||||||||||||
Interest expense | (5.0 | ) | (0.4 | ) | — | 0.1 | (5.3 | ) | ||||||||||||
Other income, net | — | 1.3 | 0.3 | (0.1 | ) | 1.5 | ||||||||||||||
(Loss) income before income taxes | (6.0 | ) | 41.1 | 1.3 | (0.4 | ) | 36.0 | |||||||||||||
Income tax provision | — | (18.0 | ) | (0.4 | ) | 2.3 | (16.1 | ) | ||||||||||||
Earnings in equity of subsidiaries | 25.9 | 0.6 | — | (26.5 | ) | — | ||||||||||||||
Net income | $ | 19.9 | $ | 23.7 | $ | 0.9 | $ | (24.6 | ) | $ | 19.9 | |||||||||
Comprehensive income | $ | 21.5 | $ | 25.3 | $ | 0.9 | $ | (26.2 | ) | $ | 21.5 |
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||
Net sales | $ | — | $ | 1,019.7 | $ | 85.4 | $ | (60.7 | ) | $ | 1,044.4 | |||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of products sold: | ||||||||||||||||||||
Cost of products sold, excluding depreciation and amortization and other items | — | 805.8 | 75.0 | (58.1 | ) | 822.7 | ||||||||||||||
Unrealized gain on derivative instruments | — | (14.0 | ) | — | — | (14.0 | ) | |||||||||||||
Depreciation and amortization | — | 27.7 | 1.6 | — | 29.3 | |||||||||||||||
Selling, general, administrative, research and development: | ||||||||||||||||||||
Selling, general, administrative, research and development | 3.4 | 67.2 | 5.7 | (1.6 | ) | 74.7 | ||||||||||||||
Net periodic postretirement benefit cost relating to Salaried VEBA | — | 3.4 | — | — | 3.4 | |||||||||||||||
Gain on removal of Union VEBA net assets | — | (0.8 | ) | — | — | (0.8 | ) | |||||||||||||
Total selling, general, administrative, research and development | 3.4 | 69.8 | 5.7 | (1.6 | ) | 77.3 | ||||||||||||||
Goodwill impairment | — | 18.4 | — | — | 18.4 | |||||||||||||||
Total costs and expenses | 3.4 | 907.7 | 82.3 | (59.7 | ) | 933.7 | ||||||||||||||
Operating (loss) income | (3.4 | ) | 112.0 | 3.1 | (1.0 | ) | 110.7 | |||||||||||||
Other (expense) income: | ||||||||||||||||||||
Interest expense | (15.3 | ) | (1.2 | ) | — | 0.1 | (16.4 | ) | ||||||||||||
Other income, net | — | 2.7 | 0.5 | (0.1 | ) | 3.1 | ||||||||||||||
(Loss) income before income taxes | (18.7 | ) | 113.5 | 3.6 | (1.0 | ) | 97.4 | |||||||||||||
Income tax provision | — | (43.0 | ) | (0.9 | ) | 7.1 | (36.8 | ) | ||||||||||||
Earnings in equity of subsidiaries | 79.3 | 1.8 | — | (81.1 | ) | — | ||||||||||||||
Net income | $ | 60.6 | $ | 72.3 | $ | 2.7 | $ | (75.0 | ) | $ | 60.6 | |||||||||
Comprehensive income | $ | 64.6 | $ | 76.3 | $ | 2.7 | $ | (79.0 | ) | $ | 64.6 |
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||
Net sales | $ | — | $ | 313.9 | $ | 26.6 | $ | (19.9 | ) | $ | 320.6 | |||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of products sold: | ||||||||||||||||||||
Cost of products sold, excluding depreciation and amortization and other items | — | 250.0 | 23.7 | (19.0 | ) | 254.7 | ||||||||||||||
Unrealized gain on derivative instruments | — | (2.0 | ) | — | — | (2.0 | ) | |||||||||||||
Depreciation and amortization | — | 8.5 | 0.5 | — | 9.0 | |||||||||||||||
Selling, general, administrative, research and development: | ||||||||||||||||||||
Selling, general, administrative, research and development | 0.9 | 24.0 | 1.3 | (0.6 | ) | 25.6 | ||||||||||||||
Net periodic postretirement benefit cost relating to Salaried VEBA | — | 0.8 | — | — | 0.8 | |||||||||||||||
Total selling, general, administrative, research and development | 0.9 | 24.8 | 1.3 | (0.6 | ) | 26.4 | ||||||||||||||
Other operating charges, net | — | 2.7 | — | — | 2.7 | |||||||||||||||
Total costs and expenses | 0.9 | 284.0 | 25.5 | (19.6 | ) | 290.8 | ||||||||||||||
Operating (loss) income | (0.9 | ) | 29.9 | 1.1 | (0.3 | ) | 29.8 | |||||||||||||
Other (expense) income: | ||||||||||||||||||||
Interest (expense) income | (5.7 | ) | 0.1 | — | 0.1 | (5.5 | ) | |||||||||||||
Other (expense) income, net | (0.1 | ) | 0.1 | 0.1 | (0.1 | ) | — | |||||||||||||
(Loss) income before income taxes | (6.7 | ) | 30.1 | 1.2 | (0.3 | ) | 24.3 | |||||||||||||
Income tax provision | — | (11.6 | ) | (0.3 | ) | 2.5 | (9.4 | ) | ||||||||||||
Earnings in equity of subsidiaries | 21.6 | 0.7 | — | (22.3 | ) | — | ||||||||||||||
Net income | $ | 14.9 | $ | 19.2 | $ | 0.9 | $ | (20.1 | ) | $ | 14.9 | |||||||||
Comprehensive income | $ | 16.0 | $ | 20.3 | $ | 0.9 | $ | (21.2 | ) | $ | 16.0 |
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||
Net sales | $ | — | $ | 976.9 | $ | 80.6 | $ | (58.8 | ) | $ | 998.7 | |||||||||
Costs and expenses: | ||||||||||||||||||||
Cost of products sold: | ||||||||||||||||||||
Cost of products sold, excluding depreciation and amortization and other items | — | 753.1 | 70.3 | (56.3 | ) | 767.1 | ||||||||||||||
Lower of cost or market inventory write-down | — | 4.9 | — | — | 4.9 | |||||||||||||||
Unrealized gain on derivative instruments | — | (16.9 | ) | — | — | (16.9 | ) | |||||||||||||
Depreciation and amortization | — | 25.2 | 1.5 | — | 26.7 | |||||||||||||||
Selling, general, administrative, research and development: | ||||||||||||||||||||
Selling, general, administrative, research and development | 3.3 | 71.4 | 6.5 | (2.0 | ) | 79.2 | ||||||||||||||
Net periodic postretirement benefit cost relating to Salaried VEBA | — | 2.5 | — | — | 2.5 | |||||||||||||||
Gain on removal of Union VEBA net assets | — | (0.1 | ) | — | — | (0.1 | ) | |||||||||||||
Total selling, general, administrative, research and development | 3.3 | 73.8 | 6.5 | (2.0 | ) | 81.6 | ||||||||||||||
Other operating charges, net | — | 2.8 | — | — | 2.8 | |||||||||||||||
Total costs and expenses | 3.3 | 842.9 | 78.3 | (58.3 | ) | 866.2 | ||||||||||||||
Operating (loss) income | (3.3 | ) | 134.0 | 2.3 | (0.5 | ) | 132.5 | |||||||||||||
Other (expense) income: | ||||||||||||||||||||
Interest (expense) income | (15.9 | ) | 1.1 | — | 0.1 | (14.7 | ) | |||||||||||||
Other (expense) income, net | (11.1 | ) | 0.6 | 0.2 | (0.1 | ) | (10.4 | ) | ||||||||||||
(Loss) income before income taxes | (30.3 | ) | 135.7 | 2.5 | (0.5 | ) | 107.4 | |||||||||||||
Income tax provision | — | (51.1 | ) | (0.7 | ) | 11.6 | (40.2 | ) | ||||||||||||
Earnings in equity of subsidiaries | 97.5 | 1.3 | — | (98.8 | ) | — | ||||||||||||||
Net income | $ | 67.2 | $ | 85.9 | $ | 1.8 | $ | (87.7 | ) | $ | 67.2 | |||||||||
Comprehensive income | $ | 70.1 | $ | 88.7 | $ | 1.9 | $ | (90.6 | ) | $ | 70.1 |
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||
Net cash (used in) provided by operating activities | $ | (12.8 | ) | $ | 137.4 | $ | 6.9 | $ | — | $ | 131.5 | |||||||||
Cash flows from investing activities: | ||||||||||||||||||||
Capital expenditures | — | (55.7 | ) | (0.4 | ) | — | (56.1 | ) | ||||||||||||
Purchase of available for sale securities | — | (196.0 | ) | — | — | (196.0 | ) | |||||||||||||
Proceeds from disposition of available for sale securities | — | 237.2 | — | — | 237.2 | |||||||||||||||
Proceeds from disposal of property, plant and equipment | — | 0.6 | — | — | 0.6 | |||||||||||||||
Intercompany loans receivable | 110.4 | — | (5.6 | ) | (104.8 | ) | — | |||||||||||||
Net cash provided by (used in) investing activities | 110.4 | (13.9 | ) | (6.0 | ) | (104.8 | ) | (14.3 | ) | |||||||||||
Cash flows from financing activities: | ||||||||||||||||||||
Repayment of capital lease | — | (0.2 | ) | — | — | (0.2 | ) | |||||||||||||
Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares | (4.5 | ) | — | — | — | (4.5 | ) | |||||||||||||
Repurchase of common stock | (66.7 | ) | — | — | — | (66.7 | ) | |||||||||||||
Cash dividends and dividend equivalents paid | (26.4 | ) | — | — | — | (26.4 | ) | |||||||||||||
Intercompany loans payable | — | (104.8 | ) | — | 104.8 | — | ||||||||||||||
Net cash used in financing activities | (97.6 | ) | (105.0 | ) | — | 104.8 | (97.8 | ) | ||||||||||||
Net increase in cash, cash equivalents and restricted cash during the period | — | 18.5 | 0.9 | — | 19.4 | |||||||||||||||
Cash, cash equivalents and restricted cash at beginning of period | — | 65.1 | 2.6 | — | 67.7 | |||||||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | — | $ | 83.6 | $ | 3.5 | $ | — | $ | 87.1 |
Parent | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Consolidating Adjustments | Consolidated | ||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||
Net cash provided by operating activities | $ | 189.7 | $ | 109.3 | $ | 8.4 | $ | (200.0 | ) | $ | 107.4 | |||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||
Capital expenditures | — | (55.6 | ) | (1.8 | ) | — | (57.4 | ) | ||||||||||||||
Purchase of available for sale securities | — | (201.1 | ) | — | — | (201.1 | ) | |||||||||||||||
Proceeds from disposition of available for sale securities | — | 30.0 | — | — | 30.0 | |||||||||||||||||
Intercompany loans receivable1 | (205.6 | ) | 106.0 | (3.7 | ) | 103.3 | — | |||||||||||||||
Net cash (used in) provided by in investing activities | (205.6 | ) | (120.7 | ) | (5.5 | ) | 103.3 | (228.5 | ) | |||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||
Repayment of principal and redemption premium of 8.25% Senior Notes | (206.0 | ) | — | — | — | (206.0 | ) | |||||||||||||||
Issuance of 5.875% Senior Notes | 375.0 | — | — | — | 375.0 | |||||||||||||||||
Cash paid for debt issuance costs | (6.8 | ) | — | — | — | (6.8 | ) | |||||||||||||||
Proceeds from stock option exercises | 1.0 | — | — | — | 1.0 | |||||||||||||||||
Repayment of capital lease | — | — | (0.1 | ) | — | (0.1 | ) | |||||||||||||||
Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares | (2.8 | ) | — | — | — | (2.8 | ) | |||||||||||||||
Repurchase of common stock | (13.6 | ) | — | — | — | (13.6 | ) | |||||||||||||||
Cash dividends and dividend equivalents paid | (24.4 | ) | — | — | — | (24.4 | ) | |||||||||||||||
Cash dividends paid to Parent | — | (200.0 | ) | — | 200.0 | — | ||||||||||||||||
Intercompany loans payable1 | (106.5 | ) | 209.3 | 0.5 | (103.3 | ) | — | |||||||||||||||
Net cash provided by financing activities | 15.9 | 9.3 | 0.4 | — | 96.7 | — | 122.3 | |||||||||||||||
Net (decrease) increase in cash, cash equivalents and restricted cash during the period | — | (2.1 | ) | 3.3 | — | 1.2 | ||||||||||||||||
Cash, cash equivalents and restricted cash at beginning of period | — | 83.0 | 0.7 | — | 83.7 | |||||||||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | — | $ | 80.9 | $ | 4.0 | $ | — | $ | 84.9 |
13. Subsequent Events
Dividend Declaration
22
Item 2.
ManagementForward-Looking Statements
This Item should be read in conjunction with Part I, Item 1.
The following discussion and analysis of our financial condition and results of operations ("MD&A") is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in the following sections:
Non-GAAP Financial Measures
This information 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 generally accepted accounting principles (“GAAP”) in the statements of income, balance sheets or statements of cash flows of the company. We have provided a reconciliation of non‑GAAP financial measures to the most directly comparable financial measure in the accompanying tables. We have also provided discussion of the reasons we believe that presentation of the non-GAAP financial measures provide useful information to investors, as well as any additional ways in which we use the non-GAAP financial measures. The non-GAAP financial measures used in the following discussions are value added revenue (“VAR”), adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) and ratios related thereto. 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.
In the discussion of operating results below, we refer to certain items as non-run-rate“non-run-rate items.” For purposes of such discussion, non-run-rate items are items that, while they may recur from period-to-period: (i) are particularly material to results; (ii) affect costs primarily as a result of external market factors; and (iii) may not recur in future periods if the same level of underlying performance were to occur. Non-run-rate items are part of our business and operating environment but are worthy of being highlighted for the benefit of readers of our financial statements. Our intent is to allow users of the financial statements to consider our results both in light of and separately from items such as unrealized mark-to-market gains or losses on derivatives related to fluctuations in underlying metal and energy prices and currency exchange rates, lower of cost or market inventory write-downs, non-cash impairments, the impact of discount rate changes on workers' compensation liabilities, legacy environmental expenses related to predecessor operations and gains or losses related to the voluntary employee beneficiary associations ("VEBAs").items. For a reconciliation of operating income (loss) excluding non-run-rate itemsAdjusted EBITDA to operatingNet income (loss), see "Resultsbelow in “Results of Operations -
Metal Pricing Policies
A fundamental part of our business model is to remain neutral to the impact from fluctuations in the market price for aluminum and certain alloys, thereby earning profit predominately from the conversion of aluminum into semi-fabricated mill products. We refer to this as metal“metal price neutrality.” We purchase primary and scrap, or recycled, aluminum, our main raw material, and alloys at prices that fluctuate on a monthly basis, and our pricing policies generally allow us to pass the underlying cost of metal aluminum and alloys
23
through to our customers so that we remain neutral to metal pricing. ForHowever, for some of our higher value added revenueVAR products sold on a spot basis,
Our pricing policies and hedging program are intended to significantly reduce or eliminate the impact on our profitability of fluctuations in underlying metal price of primary and scrap, or recycled, aluminum, our main raw material, and alloys so that our earnings are predominantly associated with the conversion of aluminum to semi-fabricatedsemi‑fabricated mill products. To allow users of our financial statements to consider the impact of metalaluminum and alloy cost on our Net sales, we disclose Net sales as well as value added revenue,VAR, which is Net sales less the Hedged Cost of Alloyed Metal. The HedgedAs used in this discussion, “Hedged Cost of Alloyed MetalMetal” is the cost of our metal inputsaluminum at the average Midwest Transaction Price of aluminum ("(“Midwest Price"Price”) plus the cost of alloying elements and any realized gains and/or losses on settled hedges related to the metal sold in the referenced period. The average Midwest Price of aluminum reflects supply and the primary aluminum supply/demand dynamics for primary aluminum in North America. For a reconciliation of value added revenueVAR to Net sales, see "Resultsbelow in “Results of Operations - SegmentSelected Operational and Financial Information.”
Business Unit Information" below.
We manufacture and sell semi-fabricated specialty aluminum mill products for the following end market applications: (i) aerospace and high strength ("(“Aero/HS products"products”); automotive ("Automotive Extrusions"(ii) aluminum beverage and food packaging (“Packaging”); (iii) general engineering ("(“GE products"products”); (iv) automotive (“Automotive Extrusions”); and (v) other industrial ("(“Other products"products”). Our fabricated aluminum mill products include flat-rolled (plate, sheet and sheet)coil), extruded (rod, bar, hollows and shapes), drawn (rod, bar, pipe, tube and wire) and certain cast aluminum products. The sophistication of our products is due to the metallurgy and physical properties of the metal and the special characteristics that are required for particular end uses. We strategically choose to serve technically challenging applications for which we can deploy our core metallurgical and process technology capabilities to produce highly engineered mill products with differentiated characteristics that present opportunities for us to receive premium pricing and to create long-term profitable growth.
With respect to the global market for flat-rolled aluminum mill products, our focus is on heat treat plate and sheet for applications that require higher strength and other desired product attributes that cannot be achieved by common alloy rolled products. The primary end market applications of flat-rolled heat treat plate and sheet, which are produced at our rolling mill in Spokane, Washington (“Trentwood”), are Aero/HS products (which we sell globally) and GE products (which we predominantly sell within North America). Similarly,On March 31, 2021, with the completion of our acquisition of Alcoa Warrick LLC and certain assets comprising the aluminum casting and rolling mill facility located in Warrick County, Indiana (collectively, “Warrick”), we expanded our flat-rolled aluminum products to include bare and coated aluminum coil for can stock applications in the beverage and food packaging industry in North America. Our Packaging products require demanding attributes and can be further processed to include coating and slitting depending on customer specifications.
In the areas of aluminum extrusions, we focus on demanding Aero/HS products, GE products and Automotive Extrusions and GE products 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. We primarily serve North American demand for extruded mill products.
We have long-standing relationships with our customers, which consist primarily of blue-chip companies including leading aerospace and automotive manufacturers, tier one aerospace and automotive suppliers, food and beverage packaging manufacturers and metal service centers. Approximately 50%72% of our shipments is sold direct to the manufacturers or tier one suppliers and approximately 50%28% is sold to metal service centers. In our served markets, we seek to be the supplier of choice by pursuing "Best“Best in Class"Class” customer satisfaction driven by quality, availability, service and delivery performance. We strive tobelieve we differentiate our product portfolio through our broad product offering and our KaiserSelect
24
Molten Metal and Magnesium Supply Chain Issues
As we have previously discussed, Warrick has faced specific challenges with the aerospace and defense industries' consumptionSeptember 2021 force majeure declaration of fabricated aluminum products is driven by factors that include levels of airframe build rates, the mix of aircraft modelsits primary magnesium supplier, US Magnesium, LLC (“US Mag”), which resulted in a significant reduction in deliveries while we were also being built and defense spending. Unanticipated changes in build rates and mix of aircraft models being built can trigger re-stocking or de-stocking throughout the long aerospace supply chain, temporarily impacting demand for our Aero/HS products. Growth in demand for aerospace plate has exceeded demand growth for other forms of Aero/HS products as aircraft manufacturers have migrated to monolithic component design, where a single
After successfully securing and qualifying magnesium from additional sources, on September 6, 2022 we announced that we had lifted our force majeure declaration and have now sourced Warrick's magnesium requirements through 2023 and beyond. Our supply base is now well diversified and not reliant on any one single supplier or geographical region. In addition, the molten metal supply at Warrick has improved to an acceptable level and we have access to alternative sources of molten metal to further diversify our Warrick metal supply and mitigate the risk of any further smelter operational disruptions.
Highlights of the quarter ended September 30, 20172022 include:
Results of Operations
Consolidated Results of Operations
Net Sales.
Net sales totaledNet sales totaled $2,651.9 million and $1,815.6 million for the nine months ended September 30, 2022 and September 30, 2021, respectively, reflecting a 163.7 million pound (21%) increase in shipment volume and a $0.48/lb (21%) increase in average realized sales price per pound. The shipment volume increase reflected: (i) a 142.5 million pound (40%) increase in Packaging reflecting a full nine months of shipments during 2022 as a result of our Warrick acquisition, which was completed on March 31, 2021; (ii) a 12.8 million pound (11%) increase in Aero/HS products reflecting continued strength in demand for our business jet and defense related applications, and improving demand for commercial aerospace as we continue to see the recovery in air travel and higher shipments for bumper programs and (ii)of new aircraft from both major airframe producers; (iii) a 1.310.5 million pound or 2%,(5%) increase in GE products reflecting the continued solidstrong underlying demand for our GE applications, partially offset bysemiconductor plate and industrial and machine tools; and (iv) a 2.11.0 million pound or 4%, decrease(1%) increase in Aero/HS products due to aerospaceAutomotive Extrusions, which was relatively flat over prior year, driven by the shortage of semiconductors and other supply chain destocking and a slower-than-anticipated ramp-up of newly installed equipment and controls at Trentwood.issues that has impacted the North American automotive production levels. The increase in average realized sales price per pound reflected a $0.13/$0.33/lb or 15%,(26%) increase in average Hedged Cost of Alloyed Metal prices per pound, partially offset by a $0.07/lb, or 5%, decrease in average value added revenue per pound. The decrease in average value added revenue per pound reflected: (i) competitive price pressure on spot sales of Aero/HS products and (ii) a leaner value added product mix with less volume of Aero/HS products and more volume of Automotive Extrusions and GE products. See the table in "
Cost of Products Sold, Excluding Depreciation and Amortization and Other Items.
Cost of products sold, excluding depreciation and amortization and other items for the quarter ended September 30,25
$677.8 million, or 79%90% of Net sales, for the quarter ended September 30, 2016.2021. The increase of $12.5$17.1 million was comprisedreflected a $69.1 million increase in net manufacturing conversion and other costs, partially offset by a $52.0 million decrease in Hedged Cost of a $21.1Alloyed Metal.Of the $52.0 million increasedecrease in Hedged Cost of Alloyed Metal, partially offset by a $8.6$46.9 million reductionwas due to lower shipment volume and $5.1 million was due to lower hedged metal prices, see above in net manufacturing conversion and other costs.our “Net Sales” discussion for further details. The reduction$69.1 million increase in net manufacturing conversion and other costs reflected: (i) a $3.3$34.9 million improvementincrease related to lower utilization of scrap, or recycled aluminum, and higher alloy input costs per unit of production, which includes the majority of the magnesium and molten metal supply chain issues as discussed above in raw material“Molten Metal and Magnesium Supply Chain Issues”; (ii) a $26.7 million increase in manufacturing costs due to favorable scrap pricinglower efficiencies and usage; (ii) $1.3 million of lower planned major maintenance expense; andhigher employee related costs; (iii) a $5.1 million decrease in manufacturing, LIFO and other costs, partially offset by a $1.1$5.6 million increase in costs related to product mix. Of the $21.1 million increase in Hedged Cost of Alloyed Metal, $20.1 million was due to higher hedged metal pricesenergy costs; and (iv) $1.0 million was due toof higher shipment volume, as discussedbenefits and overhead costs. For a further discussion of the comparative results of operations for the quarters ended September 30, 2022 and September 30, 2021, see below in "
Cost of products sold, excluding depreciation and amortization and other items for the nine months ended September 30, 20172022 totaled $822.7$2,459.2 million, or 79%93% of Net sales, compared to $767.1$1,613.6 million, or 77%89% of Net sales, for the nine months ended September 30, 2016.2021. The increase of $55.6$845.6 million was comprised ofreflected: (i) a $65.1$529.0 million increase in Hedged Cost of Alloyed Metal partially offset byand (ii) a $9.5$316.6 million reductionincrease in net manufacturing conversion and other costs. Of the $529.0 million increase in Hedged Cost of Alloyed Metal, $317.1 million was due to higher hedged metal prices and $211.9 million was due to higher shipment volume, see above in our “Net Sales” discussion for further details. The reduction$316.6 million increase in net manufacturing conversion and other costs reflected: (i) a $9.3$174.6 million improvementincrease related to higher sales, primarily due to a full nine months of shipments during 2022 as a result of our Warrick acquisition, which was completed on March 31, 2021; (ii) a $63.2 million increase in raw materialmanufacturing costs due to favorable scrap pricinglower efficiencies and usage; (ii) $1.1higher employee related costs; (iii) $42.8 million of lower planned major maintenance expense;higher benefits and (iii) a $3.4overhead costs; and (iv) $27.9 million decrease in manufacturing, LIFOof higher energy, freight and othermetal costs partially offsetdriven by a $4.5 million increase in costs relatedinflation, transportation bottlenecks and supply chain inefficiencies. Principal factors contributing to higher shipment volumeour inflationary pressures include supply chain disruptions, labor shortages and product mix. Of the $65.1 million increase in Hedged Cost of Alloyed Metal, $56.7 million was due to higher hedged metal prices and $8.4 million was due to higher shipment volume, as discussed in "
Selling, General, Administrative, Research and Development (“SG&A and R&D”). SG&A and R&D expense totaled $25.2 million and $28.1 million for the quarters ended September 30, 2022 and September 30, 2021, respectively, and $82.9 million and $90.8 million for nine months ended September 30, 2022 and September 30, 2021, respectively. The decrease during the quarter ended September 30, 2022 was primarily due to a $3.2 million decrease in legal, consulting and outsourced services expense primarily related to the completion of Warrick integration activities. The decrease for the nine months ended September 30, 2022 compared with September 30, 2021 was due primarily to a $14.8 million decrease in legal, consulting and outsourced services expense primarily related to the completion of Warrick integration activities, partially offset by: (i) a $4.2 million increase due to the addition of Warrick operations and (ii) a $2.9 million increase in salaries and benefits.
Restructuring Cost or Market Inventory Write-Down
Other Operating Charges, Net. Other operating charges, net, of $3.2 million for the nine months ended September 30, 2022 was primarily due to the impairment of our favorable commodity contract intangible asset. See Note 1 of Notes to Interim Consolidated Financial Statements included in this Report for information on our inventory lower of cost or market value adjustments.
Interest Expense. See Note 65 of Notes to Interim Consolidated Financial Statements included in this Report for disclosure regardinga discussion of our debt and credit facilities that were in effect during the Salaried VEBAquarters and net periodic postretirement benefit cost relating thereto.
Other Income (Expense), Net.See Note 48 of Notes to Interim Consolidated Financial Statements included in this Report for details.
Income (Expense), Net.
Selected Operational and Business UnitFinancial Information
The following data should be read in conjunction with our consolidated financial statements and the notes thereto included in Part I, Item 1. "Financial Statements"“Financial Statements” of this Report. Interim results are not necessarily indicative of those for a full year.
26
The table below provides selected operational and financial information (in millions of dollars):
|
| Quarter Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net income (loss) |
| $ | 2.5 |
|
| $ | (2.3 | ) |
| $ | (3.2 | ) |
| $ | (20.2 | ) |
Interest expense |
|
| 12.1 |
|
|
| 12.5 |
|
|
| 36.5 |
|
|
| 37.2 |
|
Other (income) expense, net |
|
| (12.7 | ) |
|
| 1.2 |
|
|
| (7.4 | ) |
|
| 38.2 |
|
Income tax provision (benefit) |
|
| 1.1 |
|
|
| 8.4 |
|
|
| 0.3 |
|
|
| (7.4 | ) |
Depreciation and amortization |
|
| 25.8 |
|
|
| 24.9 |
|
|
| 80.4 |
|
|
| 64.2 |
|
Non-run-rate items: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Restructuring cost (benefit) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.8 | ) |
Adjustments to plant-level LIFO1 |
|
| 2.7 |
|
|
| (0.3 | ) |
|
| 15.3 |
|
|
| 10.9 |
|
Mark-to-market loss on derivative instruments2 |
|
| — |
|
|
| 2.0 |
|
|
| 1.9 |
|
|
| 2.1 |
|
Non-cash asset impairment charge |
|
| — |
|
|
| — |
|
|
| 3.2 |
|
|
| — |
|
Environmental expenses3 |
|
| — |
|
|
| 0.2 |
|
|
| 0.1 |
|
|
| 0.2 |
|
Acquisition (credits) costs4 |
|
| (0.1 | ) |
|
| 3.8 |
|
|
| 0.4 |
|
|
| 22.2 |
|
Total non-run-rate items |
|
| 2.6 |
|
|
| 5.7 |
|
|
| 20.9 |
|
|
| 34.6 |
|
Adjusted EBITDA |
| $ | 31.4 |
|
| $ | 50.4 |
|
| $ | 127.5 |
|
| $ | 146.6 |
|
Adjusted EBITDA for the quarter ended September 30, 2022 was $19.0 million lower than Adjusted EBITDA for the quarter ended September 30, 2021. Adjusted EBITDA for the quarter ended September 30, 2022 was impacted by approximately $24.0 million of incremental cost related to supply chain issues in connection with molten metal and magnesium supplies, see above in “Molten Metal and Magnesium Supply Chain Issues,” manufacturing inefficiencies related to the Warrick magnesium related curtailment and the Trentwood planned outage. In addition, the current quarter was impacted by higher major maintenance, manufacturing, energy and employee related cost, which were partially offset by improved pricing and commodity and freight surcharges. See above in “Consolidated Results of Operations” for further details.
Adjusted EBITDA for the nine months ended September 30, 2022 was $19.1 million lower than Adjusted EBITDA for the nine months ended September 30, 2021. Adjusted EBITDA for the nine months ended September 30, 2022 reflected the full nine months of our packaging operations, which were offset by approximately $54.0 million of incremental costs associated with magnesium and metal supply chain issues and higher transportation costs. In addition, we had inflation driven higher energy, manufacturing and employee related cost that were not fully recovered through pricing increases.
27
The following table provides our shipment and VAR information (in millions of dollars, except shipments and VAR per pound) by end market applications:
|
| Quarter Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||||
Aero/HS Products: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Shipments (mmlbs) |
| 38.0 |
|
| 42.1 |
|
| 131.8 |
|
| 119.0 |
| ||||||||||||||||||||
|
| $ |
|
| $ / lb |
|
| $ |
|
| $ / lb |
|
| $ |
|
| $ / lb |
|
| $ |
|
| $ / lb |
| ||||||||
Net sales |
| $ | 140.8 |
|
| $ | 3.71 |
|
| $ | 142.0 |
|
| $ | 3.37 |
|
| $ | 492.8 |
|
| $ | 3.74 |
|
| $ | 387.6 |
|
| $ | 3.26 |
|
Less: Hedged Cost of Alloyed Metal |
|
| (55.0 | ) |
|
| (1.45 | ) |
|
| (60.5 | ) |
|
| (1.43 | ) |
|
| (215.0 | ) |
|
| (1.63 | ) |
|
| (155.2 | ) |
|
| (1.31 | ) |
VAR |
| $ | 85.8 |
|
| $ | 2.26 |
|
| $ | 81.5 |
|
| $ | 1.94 |
|
| $ | 277.8 |
|
| $ | 2.11 |
|
| $ | 232.4 |
|
| $ | 1.95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Packaging: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Shipments (mmlbs) |
| 147.5 |
|
| 173.6 |
|
| 502.0 |
|
| 359.5 |
| ||||||||||||||||||||
|
| $ |
|
| $ / lb |
|
| $ |
|
| $ / lb |
|
| $ |
|
| $ / lb |
|
| $ |
|
| $ / lb |
| ||||||||
Net sales |
| $ | 341.5 |
|
| $ | 2.32 |
|
| $ | 367.3 |
|
| $ | 2.12 |
|
| $ | 1,240.2 |
|
| $ | 2.47 |
|
| $ | 726.1 |
|
| $ | 2.02 |
|
Less: Hedged Cost of Alloyed Metal |
|
| (194.4 | ) |
|
| (1.32 | ) |
|
| (241.3 | ) |
|
| (1.39 | ) |
|
| (793.2 | ) |
|
| (1.58 | ) |
|
| (468.2 | ) |
|
| (1.30 | ) |
VAR |
| $ | 147.1 |
|
| $ | 1.00 |
|
| $ | 126.0 |
|
| $ | 0.73 |
|
| $ | 447.0 |
|
| $ | 0.89 |
|
| $ | 257.9 |
|
| $ | 0.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Automotive Extrusions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Shipments (mmlbs) |
| 24.1 |
|
| 19.6 |
|
| 71.4 |
|
| 70.4 |
| ||||||||||||||||||||
|
| $ |
|
| $ / lb |
|
| $ |
|
| $ / lb |
|
| $ |
|
| $ / lb |
|
| $ |
|
| $ / lb |
| ||||||||
Net sales |
| $ | 60.6 |
|
| $ | 2.51 |
|
| $ | 50.1 |
|
| $ | 2.56 |
|
| $ | 196.0 |
|
| $ | 2.75 |
|
| $ | 163.3 |
|
| $ | 2.32 |
|
Less: Hedged Cost of Alloyed Metal |
|
| (34.3 | ) |
|
| (1.42 | ) |
|
| (29.0 | ) |
|
| (1.48 | ) |
|
| (119.8 | ) |
|
| (1.68 | ) |
|
| (89.7 | ) |
|
| (1.27 | ) |
VAR |
| $ | 26.3 |
|
| $ | 1.09 |
|
| $ | 21.1 |
|
| $ | 1.08 |
|
| $ | 76.2 |
|
| $ | 1.07 |
|
| $ | 73.6 |
|
| $ | 1.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
GE Products: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Shipments (mmlbs) |
| 69.6 |
|
| 75.8 |
|
| 237.2 |
|
| 226.7 |
| ||||||||||||||||||||
|
| $ |
|
| $ / lb |
|
| $ |
|
| $ / lb |
|
| $ |
|
| $ / lb |
|
| $ |
|
| $ / lb |
| ||||||||
Net sales |
| $ | 200.3 |
|
| $ | 2.88 |
|
| $ | 187.1 |
|
| $ | 2.47 |
|
| $ | 699.2 |
|
| $ | 2.95 |
|
| $ | 518.4 |
|
| $ | 2.29 |
|
Less: Hedged Cost of Alloyed Metal |
|
| (105.5 | ) |
|
| (1.52 | ) |
|
| (111.7 | ) |
|
| (1.48 | ) |
|
| (406.1 | ) |
|
| (1.71 | ) |
|
| (294.3 | ) |
|
| (1.30 | ) |
VAR |
| $ | 94.8 |
|
| $ | 1.36 |
|
| $ | 75.4 |
|
| $ | 0.99 |
|
| $ | 293.1 |
|
| $ | 1.24 |
|
| $ | 224.1 |
|
| $ | 0.99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Other Products: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Shipments (mmlbs) |
| 2.7 |
|
| 4.1 |
|
| 10.0 |
|
| 13.1 |
| ||||||||||||||||||||
|
| $ |
|
| $ / lb |
|
| $ |
|
| $ / lb |
|
| $ |
|
| $ / lb |
|
| $ |
|
| $ / lb |
| ||||||||
Net sales |
| $ | 5.7 |
|
| $ | 2.11 |
|
| $ | 4.1 |
|
| $ | 1.00 |
|
| $ | 23.7 |
|
| $ | 2.37 |
|
| $ | 20.2 |
|
| $ | 1.54 |
|
Less: Hedged Cost of Alloyed Metal |
|
| (4.0 | ) |
|
| (1.48 | ) |
|
| (2.7 | ) |
|
| (0.66 | ) |
|
| (15.4 | ) |
|
| (1.54 | ) |
|
| (13.2 | ) |
|
| (1.01 | ) |
VAR |
| $ | 1.7 |
|
| $ | 0.63 |
|
| $ | 1.4 |
|
| $ | 0.34 |
|
| $ | 8.3 |
|
| $ | 0.83 |
|
| $ | 7.0 |
|
| $ | 0.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Total: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Shipments (mmlbs) |
| 281.9 |
|
| 315.2 |
|
| 952.4 |
|
| 788.7 |
| ||||||||||||||||||||
|
| $ |
|
| $ / lb |
|
| $ |
|
| $ / lb |
|
| $ |
|
| $ / lb |
|
| $ |
|
| $ / lb |
| ||||||||
Net sales |
| $ | 748.9 |
|
| $ | 2.66 |
|
| $ | 750.6 |
|
| $ | 2.38 |
|
| $ | 2,651.9 |
|
| $ | 2.78 |
|
| $ | 1,815.6 |
|
| $ | 2.30 |
|
Less: Hedged Cost of Alloyed Metal |
|
| (393.2 | ) |
|
| (1.40 | ) |
|
| (445.2 | ) |
|
| (1.41 | ) |
|
| (1,549.5 | ) |
|
| (1.62 | ) |
|
| (1,020.6 | ) |
|
| (1.29 | ) |
VAR |
| $ | 355.7 |
|
| $ | 1.26 |
|
| $ | 305.4 |
|
| $ | 0.97 |
|
| $ | 1,102.4 |
|
| $ | 1.16 |
|
| $ | 795.0 |
|
| $ | 1.01 |
|
Outlook
While our financial and operational performance for the past several quarters have been significantly impacted by the magnesium and molten metal supply chain issues at our Warrick rolling mill, we have successfully resolved these challenges and as we proceed through the remainder of the year, we are positioned to operate on a more normalized basis, albeit in a challenging environment. With these major supply chain challenges behind us, we anticipate our Adjusted EBITDA and Adjusted EBITDA margin (Adjusted EBITDA as a percentage of VAR) in the fourth quarter ended December 31, 2022 will be similar to the first half of 2022. We remain focused on continuing to address inflationary challenges through pricing and cost reduction initiatives. Although economic uncertainty persists, our end market outlook remains positive. Longer-term, our strategy remains unchanged and we are well positioned for continued long-term growth with a diversified portfolio. The fundamentals of our Aero/HS products, Packaging, GE products and Automotive Extrusions end markets continue to be solid and we look forward to continuing to execute on our strategic initiatives to deliver long-term value to all of our stakeholders.
28
Liquidity and Capital Resources
Summary
The following table summarizes our liquidity (in millions of dollars):
|
| As of September 30, 2022 |
|
| As of December 31, 2021 |
| ||
Available cash and cash equivalents |
| $ | 129.3 |
|
| $ | 303.2 |
|
Borrowing availability under Revolving Credit Facility, net of letters of credit1 |
|
| 555.0 |
|
|
| 367.3 |
|
Total liquidity |
| $ | 684.3 |
|
| $ | 670.5 |
|
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Segment operating income | $ | 53.7 | $ | 42.1 | $ | 149.9 | $ | 172.1 | |||||||
Impact to segment operating income of non-run-rate items: | |||||||||||||||
Adjustments to plant-level LIFO1 | (2.0 | ) | (4.1 | ) | (3.9 | ) | (2.2 | ) | |||||||
Mark-to-market gain on derivative instruments | 10.8 | 2.0 | 14.0 | 16.9 | |||||||||||
Non-cash lower of cost or market inventory write-down2 | — | — | — | (4.9 | ) | ||||||||||
Workers' compensation cost due to discounting | 0.1 | (0.1 | ) | (0.1 | ) | — | |||||||||
Goodwill impairment3 | — | — | (18.4 | ) | — | ||||||||||
Asset impairment charges3 | — | (2.7 | ) | — | (2.8 | ) | |||||||||
Environmental expenses | (0.2 | ) | — | (0.2 | ) | — | |||||||||
Total non-run-rate items | 8.7 | (4.9 | ) | (8.6 | ) | 7.0 | |||||||||
Segment operating income excluding non-run-rate items | $ | 45.0 | $ | 47.0 | $ | 158.5 | $ | 165.1 |
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||||||
Aero/HS Products: | |||||||||||||||||||||||||||||||
Shipments (mmlbs) | 53.4 | 55.5 | 172.8 | 179.2 | |||||||||||||||||||||||||||
$ | $ / lb | $ | $ / lb | $ | $ / lb | $ | $ / lb | ||||||||||||||||||||||||
Net sales | $ | 150.2 | $ | 2.81 | $ | 156.1 | $ | 2.81 | $ | 483.2 | $ | 2.80 | $ | 500.7 | $ | 2.79 | |||||||||||||||
Less: Hedged Cost of Alloyed Metal | (51.8 | ) | (0.97 | ) | (47.5 | ) | (0.85 | ) | (162.7 | ) | (0.95 | ) | (152.7 | ) | (0.85 | ) | |||||||||||||||
Value added revenue | $ | 98.4 | $ | 1.84 | $ | 108.6 | $ | 1.96 | $ | 320.5 | $ | 1.85 | $ | 348.0 | $ | 1.94 | |||||||||||||||
Automotive Extrusions: | |||||||||||||||||||||||||||||||
Shipments (mmlbs) | 24.5 | 22.6 | 75.9 | 70.8 | |||||||||||||||||||||||||||
$ | $ / lb | $ | $ / lb | $ | $ / lb | $ | $ / lb | ||||||||||||||||||||||||
Net sales | $ | 52.7 | $ | 2.15 | $ | 46.5 | $ | 2.06 | $ | 161.6 | $ | 2.13 | $ | 143.6 | $ | 2.03 | |||||||||||||||
Less: Hedged Cost of Alloyed Metal | (23.8 | ) | (0.97 | ) | (18.9 | ) | (0.84 | ) | (72.9 | ) | (0.96 | ) | (58.0 | ) | (0.82 | ) | |||||||||||||||
Value added revenue | $ | 28.9 | $ | 1.18 | $ | 27.6 | $ | 1.22 | $ | 88.7 | $ | 1.17 | $ | 85.6 | $ | 1.21 | |||||||||||||||
GE Products: | |||||||||||||||||||||||||||||||
Shipments (mmlbs) | 64.1 | 62.8 | 203.1 | 190.5 | |||||||||||||||||||||||||||
$ | $ / lb | $ | $ / lb | $ | $ / lb | $ | $ / lb | ||||||||||||||||||||||||
Net sales | $ | 115.9 | $ | 1.81 | $ | 105.6 | $ | 1.68 | $ | 361.1 | $ | 1.78 | $ | 318.3 | $ | 1.67 | |||||||||||||||
Less: Hedged Cost of Alloyed Metal | (63.3 | ) | (0.99 | ) | (52.6 | ) | (0.84 | ) | (195.9 | ) | (0.97 | ) | (157.9 | ) | (0.83 | ) | |||||||||||||||
Value added revenue | $ | 52.6 | $ | 0.82 | $ | 53.0 | $ | 0.84 | $ | 165.2 | $ | 0.81 | $ | 160.4 | $ | 0.84 | |||||||||||||||
Other Products: | |||||||||||||||||||||||||||||||
Shipments (mmlbs) | 7.6 | 7.4 | 20.9 | 22.1 | |||||||||||||||||||||||||||
$ | $ / lb | $ | $ / lb | $ | $ / lb | $ | $ / lb | ||||||||||||||||||||||||
Net sales | $ | 14.0 | $ | 1.84 | $ | 12.4 | $ | 1.68 | $ | 38.5 | $ | 1.84 | $ | 36.1 | $ | 1.63 | |||||||||||||||
Less: Hedged Cost of Alloyed Metal | (7.4 | ) | (0.97 | ) | (6.2 | ) | (0.84 | ) | (20.3 | ) | (0.97 | ) | (18.1 | ) | (0.82 | ) | |||||||||||||||
Value added revenue | $ | 6.6 | $ | 0.87 | $ | 6.2 | $ | 0.84 | $ | 18.2 | $ | 0.87 | $ | 18.0 | $ | 0.81 | |||||||||||||||
Total: | |||||||||||||||||||||||||||||||
Shipments (mmlbs) | 149.6 | 148.3 | 472.7 | 462.6 | |||||||||||||||||||||||||||
$ | $ / lb | $ | $ / lb | $ | $ / lb | $ | $ / lb | ||||||||||||||||||||||||
Net sales | $ | 332.8 | $ | 2.22 | $ | 320.6 | $ | 2.16 | $ | 1,044.4 | $ | 2.21 | $ | 998.7 | $ | 2.16 | |||||||||||||||
Less: Hedged Cost of Alloyed Metal | (146.3 | ) | (0.97 | ) | (125.2 | ) | (0.84 | ) | (451.8 | ) | (0.96 | ) | (386.7 | ) | (0.84 | ) | |||||||||||||||
Value added revenue | $ | 186.5 | $ | 1.25 | $ | 195.4 | $ | 1.32 | $ | 592.6 | $ | 1.25 | $ | 612.0 | $ | 1.32 |
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating loss | $ | (13.9 | ) | $ | (12.3 | ) | $ | (39.2 | ) | $ | (39.6 | ) | |||
Impact to operating loss of non-run-rate items: | |||||||||||||||
Net periodic post retirement benefit cost relating to Salaried VEBA | (1.2 | ) | (0.8 | ) | (3.4 | ) | (2.5 | ) | |||||||
(Loss) gain on removal of Union VEBA net assets | (0.5 | ) | — | 0.8 | 0.1 | ||||||||||
Total non-run-rate items | (1.7 | ) | (0.8 | ) | (2.6 | ) | (2.4 | ) | |||||||
Operating loss excluding non-run-rate items | $ | (12.2 | ) | $ | (11.5 | ) | $ | (36.6 | ) | $ | (37.2 | ) |
September 30, 2017 | December 31, 2016 | ||||||
Available cash and cash equivalents | $ | 73.9 | $ | 55.2 | |||
Short-term investments | 191.4 | 231.0 | |||||
Net borrowing availability under Revolving Credit Facility after letters of credit | 286.6 | 275.3 | |||||
Total liquidity | $ | 551.9 | $ | 561.5 |
We place our cash in bank deposits and money market funds with high credit quality financial institutions,institutions. Cash equivalents primarily consist of money market funds, which invest primarily in commercial paper and time deposits of prime quality, short-term repurchase agreements and U.S. government agency notes. Short-term investments represent holdings in investment-grade commercial paper with a maturity at the time of purchase of greater than 90 days.
See Note 311 of Notes to Interim Consolidated Financial Statements included in this Report). Report for information regarding restricted cash at September 30, 2022.
There were no borrowings under our Revolving Credit Facility as of both September 30, 2017, or as of2022 and December 31, 2016.
Cash Flows
The following table summarizes our cash flows from operating, investing and financing activities for each period presented (in millions of dollars):
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Total cash provided by (used in): | |||||||
Operating activities: | |||||||
Fabricated Products | $ | 194.3 | $ | 158.8 | |||
All Other | (62.8 | ) | (51.4 | ) | |||
Total cash provided by operating activities | $ | 131.5 | $ | 107.4 | |||
Investing activities: | |||||||
Fabricated Products | $ | (55.4 | ) | $ | (57.2 | ) | |
All Other | 41.1 | (171.3 | ) | ||||
Total cash used in investing activities | $ | (14.3 | ) | $ | (228.5 | ) | |
Financing activities: | |||||||
Fabricated Products | $ | (0.2 | ) | $ | (0.1 | ) | |
All Other | (97.6 | ) | 122.4 | ||||
Total cash (used in) provided by financing activities | $ | (97.8 | ) | $ | 122.3 |
|
| Nine Months Ended September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Total cash (used in) provided by: |
|
|
|
|
|
| ||
Operating activities |
| $ | (58.6 | ) |
| $ | 33.3 |
|
Investing activities |
| $ | (71.7 | ) |
| $ | (639.5 | ) |
Financing activities |
| $ | (43.2 | ) |
| $ | 121.4 |
|
Cash used in operating activities for the nine months ended September 30, 2017, Fabricated Products segment2022 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 inventory of $133.5 million due primarily to higher inventory pounds at our Warrick facility as a result of the force majeure and to satisfy the planned outage at our Trentwood facility, as well as a higher per pound inventory cost and (ii) a decrease in accounts payable of $40.6 million and a decrease in trade receivables of $17.3 million, both of which were primarily due to a decrease in metal price.
Cash provided by operating activities provided $194.3 million of cash. Cash provided infor the nine months ended September 30, 2017 was primarily related to:2021 reflected results of business activity described above within “Consolidated Results of Operations,” as well as the following working capital changes: (i) $149.9 million of operating income; (ii) depreciation and amortization of $28.9 million; (iii) goodwill impairment of $18.4 million; and (iv) an increase in accounts payable of $21.7 million driven predominantly by the timing of metal purchases. Cash provided by operating activities was partially offset by: (i) adjustments for other non-cash items of $11.3 million; (ii) an increase in inventory of $10.6 million; and (iii) an increase in trade and other receivables of $0.9 million.
See Statements of Consolidated Cash Flows included in this Report for further details on our cash flows from operating, income excluding non-run-rate items, see "Results of Operations –
29
Sources of Liquidity
We believe our available cash and cash equivalents, short-term investments, borrowing availability under the Revolving Credit Facility and funds generated from operations are our most significant sources of liquidity.liquidity, and that our Revolving Credit Facility and unsecured notes have covenants that allow us to operate our business with limited restrictions and significant flexibility for the foreseeable future. While we believe these sources will be sufficient to finance our working capital requirements, planned capital expenditures, and investments, debt service obligations and other cash requirements for at least the next twelve12 months, and while we also believe that alternative sources of liquidity will remain available in the event we seek to add liquidity for opportunistic or other reasons in the future, our ability to fund such cash requirements will depend upon our future operating performance (which will be affected by prevailing economic conditions) and financial, business and other factors, some of which are beyond our control.
October 16, 2017 | September 30, 2017 | ||||||
Revolving Credit Facility borrowing commitment | $ | 300.0 | $ | 300.0 | |||
Borrowing base availability | $ | 290.9 | $ | 294.4 | |||
Less: Outstanding borrowings under Revolving Credit Facility | — | — | |||||
Less: Outstanding letters of credit under Revolving Credit Facility | (7.8 | ) | (7.8 | ) | |||
Net remaining borrowing availability | $ | 283.1 | $ | 286.6 | |||
Borrowing rate (if applicable)1 | 4.50 | % | 4.50 | % |
We do not believe that covenants contained in the Revolving Credit Facility are reasonably likely to limit our ability to raise additional debt or equity should we choose to do so during the next 12 months, nor do we believe it is likely that during the next 12 months we will trigger the availability threshold that would require measuring and maintaining a fixed charge coverage ratio.
See Note 39 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 20162021 for information regardinga description of our Revolving Credit Facility.
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 September 30, 2022 constituted approximately 49% of our net sales. See "Contractual Obligations, Commercial Commitments and Off-Balance Sheet Arrangements –
Debt
See Note 9 of Notes to Consolidated Financial Statements included in Part II, Item 7. "Management's Discussion8. “Financial Statements and Analysis of Financial Condition and Results of Operations"Supplementary Data” in our Annual Report on Form 10-K for the year ended December 31, 20162021 for mandatory principal and cash interest payments on the outstanding borrowings.
We do not believe that covenants in the indentureindentures governing the 5.875%4.50% Senior Notes due 2031 (“4.50% Senior Notes”) and 4.625% Senior Notes due 2028 (“4.625% Senior Notes”) are reasonably likely to limit our ability to obtain additional debt or equity financing should we choose to do so during the next 12 months.
Capital Expenditures and Investments
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, we strategically allocateenvironment. A significant portion of our capital spending on projectsover the past several years related to maintain and improvethe modernization project at our competitive position. Objectives are to target significant improvement in our manufacturing cost efficiency and product quality. Capacity expansion typically is an additional benefit of most projectsTrentwood facility, which focused on cost and quality.
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 2018 and beyond. The Trentwood efficiency and modernization initiative was announced in December 2015 and as2022 of September 30, 2017 approximately half$165.0 million to $175.0 million, of the $150.0 million had been spent.
30
Capital investmentinvestments will be funded using cash generated from operations, available cash and cash equivalents, short-term investments, borrowings under the Revolving Credit Facility and/or other third-party financing arrangements. The level of anticipated capital expenditures may be adjusted from time to timetime-to-time depending on our business plans, our price outlook for fabricated aluminum products, our ability to maintain adequate liquidity and other factors. No assurance can be provided as to the timing of any such expenditures or the operational benefits expected therefrom.
Dividends
We have consistently paid a quarterly cash dividend since the second quarter of 2007 to holders of our common stock, including holders of restricted stock, and have increased the dividend in each year since 2011. Nevertheless, as in the past, the future declaration and payment of dividends, if any, will be at the discretion of our Board of Directors and will depend on a number of factors, including our financial and operating results, financial position and anticipated cash requirements and contractual restrictions under our revolving credit facility,Revolving Credit Facility, the indenture for our 5.875%4.50% Senior Notes and 4.625% Senior Notes or other indebtedness we may incur in the future. We can give no assurance that dividends will be declared and paid in the future. See Note 39 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 20162021 for additional information about restrictions on dividend payments contained in the Revolving Credit Facility and in the indenture for our 5.875% Senior Notes.
We also pay quarterly dividend equivalents to the holders of certain restricted stock units and performance shares.units. Holders of performance shares granted beginning in 2014 are not paid a quarterly dividend equivalent, but instead are entitled to receive, in connection with the issuance of underlying shares of common stock for performance shares that ultimately vest, a one-time payment equal to the dividends such holder would have received if the number of such shares of common stock so issued had been held of record by such holder from the date of grant of such performance shares through the date of such issuance.
See our Statements of Common Stock
Repurchases of Common Stock
We suspended share repurchases as of March 2020. We will continue to assess share repurchases as a part of our capital allocation priorities and strategic investment opportunities identified to support further growth in our business. At September 30, 2022, $93.1 million remained authorized and available for future repurchases of common stock under our stock repurchase program.
See Note 7our Statements of Notes to Interim Consolidated Financial StatementsStockholders’ Equity included in this Report for information regardingregarding: (i) repurchases of common stock during the quarters ended September 30, 2022 and September 30, 2021 and (ii) minimum statutory tax withholding obligations arising during the nine monthsquarters ended September 30, 20172022 and September 30, 20162021 in connection with the vesting of non-vestednon‑vested shares, restricted stock units and performance shares.
Environmental Commitments and Contingencies
See Note 86 of Notes to Interim Consolidated Financial Statements included in this Report for information regarding our environmental commitments and contingencies.
Contractual Obligations, Commercial Commitments and Off-Balance Sheet Arrangements
During the nine months ended September 30, 2017,2022, we granted additional stock-based awards to executive officers and certain members of management and our non-employee directorskey employees under our equity incentive plans (seeplan. Additional awards are expected to be made in future years.
Commitment fees on our Revolving Credit Facility increased due to the incremental $200.0 million of borrowing capacity associated with Amendment No. 3 of our Revolving Credit Facility. See Note 75 of Notes to Interim Consolidated Financial Statements included in this Report). Additional awards are expected to be made in future years.
Except as otherwise disclosed herein,in this Report, there has been no material change in our contractual obligations, commercial commitments or off-balance sheet arrangements other than in the ordinary course of business since December 31, 2016.
31
Critical Accounting Estimates and Policies
Our consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates and such differences could be material.
Our significant accounting policies are discussed in Note 1 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended
December 31,There have been no other material changes in our critical accounting estimates and policies since December 31, 2016.
New Accounting Pronouncements
For a discussion of recently adopted and recently issued but not yet adopted accounting pronouncements, see "
Available Information
Our website is located at
www.kaiseraluminum.com. The website includes a section for investor relations under which we provide notifications of news or announcements regarding our financial performance, including Securities and Exchange CommissionItem 3.
Quantitative and Qualitative Disclosures About Market RiskThe following quantitative and qualitative disclosures about market risk should be read in conjunction with Note 4 and Note 7 of Notes to Interim Consolidated Financial Statements included in this Report. Our operating results are sensitive to changes in the prices of primary aluminum, certain alloying metals, natural gas, electricity and electricity,foreign currency, and also depend to a significant degree upon the volume and mix of all products sold. As discussed more fully in Note 9 of Notessold to Interim Consolidated Financial Statements included in this Report, wecustomers. We have historically utilized hedging transactions to lock in a specified price or range of prices for certain products which we sell or consume in our production process, and to mitigate our exposure to changes in energy prices.
Aluminum
During the nine months ended September 30, 20172022 and September 30, 2016,2021, settlements of derivative contracts covering 136.7209.8 million pounds and 163.6122.7 million pounds, respectively, hedged Fabricated Products shipments sold on pricing terms that created metalaluminum price risk for us. At September 30, 2017,2022, we had derivative contracts with respect to approximately 47.1 million pounds, 76.4 million pounds, 24.748.2 million pounds and 1.024.7 million pounds to hedge sales to be made in the remainder of 2017, 2018, 2019,2022 and each of 2020 and 2021,2023, respectively, on pricing terms that create metalaluminum price risk for us.
Based on the aluminum derivative positions held by us to hedge firm-price customer sales agreements, we estimate that a $0.10 per pound$0.10/lb decrease in the LMELondon Metal Exchange (“LME”) market price of aluminum as of September 30, 20172022 and December 31, 2016,2021, with all other variables held constant, would have resulted in an unrealized mark-to-market loss of $15.0$7.3 million and $14.8$8.0 million, respectively, with corresponding changes to the net fair value of our aluminum derivative positions. Additionally, we estimate that a $0.01 per pound$0.05/lb decrease in the Midwest premium for aluminum as of September 30, 2022 and December 31, 2021, with all other variables held constant, would have resulted in an unrealized mark-to-market loss of $1.5$2.6 million asand $4.0 million, respectively, with corresponding changes to the net fair value of both September 30, 2017 and December 31, 2016.
32
Alloying Metals
We are exposed to the risk of fluctuating prices of certain alloying metals, especially copper, zinc and zinc,magnesium, to the extent that changes in their prices do not highly correlate with price changes for aluminum. Copper, zinc, magnesium and certain other metals are used in our remelt operations to cast rolling ingot and extrusion billet with the proper chemistry for our products. From time to time‑to‑time, we enter into forward contract swaps and/or physical delivery commitments with third parties to mitigate our risk from fluctuations in the prices of alloying metals, including copper and zinc.these alloys. As of September 30, 2017,2022, we had forward swap contracts with settlement dates designed to align with the timing of scheduled purchases of zinc and copper ("Alloy Hedges"(“Alloying Metals”) by our manufacturing facilities. Our Alloy Hedges are designated and qualify as cash flow hedges. See Note 9 of Notes to Interim Consolidated Financial Statements included in this Report for additional information relating to these Alloy Hedges. We estimate that a $0.10 per pound$0.10/lb decrease in the LME market price of zincAlloying Metals as of September 30, 20172022 and December 31, 2016,2021, with all other variables held constant, would have resulted in an unrealized mark-to market loss of $0.3 million and $0.4 million, respectively. We estimate that a $0.10 per pound decrease in the Commodity Exchange ("COMEX") market price of copper as of September 30, 2017, with all other variables
Energy
We are exposed to the risk of fluctuating prices for natural gas and electricity. We, from time to time,time-to-time, in the ordinary course of business, enter into hedging transactions and/or physical delivery commitments with firm prices with third parties to mitigate our risk from fluctuations in natural gas and electricity prices.
Foreign Currency
As of September 30, 2022, we hedged certain lease transactions and equipment purchases fordenominated in euros using forward swap contracts with settlement dates through February 2024. We estimate that a 10% decrease in the remainderSeptember 30, 2022 exchange rate of 2017, 55%euros to U.S. dollars would have resulted in a $0.1 million unrealized mark-to-market loss with corresponding changes to the net fair value of the expected electricity purchases for both 2018 and 2019 and 18% of the expected electricity purchases for 2020.
Item 4.
Controls and ProceduresEvaluation of Disclosure Controls and Procedures.
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is processed, recorded, summarized and reported within the time periods specified in theChanges in Internal Control Over Financial Reporting.
We had no changes in our internal control over financial reporting during the nine months ended September 30,33
PART II – OTHER INFORMATION
Item 1.
Legal ProceedingsReference is made to Part I, Item 3. "Legal Proceedings"“Legal Proceedings” included in our Annual Report on Form 10-K for the year ended December 31, 20162021 for information concerning material legal proceedings with respect to the Company. There have been no material developments since December 31, 2016.
Item 1A.
Risk FactorsReference is made to Part I, Item 1A. "Risk Factors"“Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 20162021 for information concerning risk factors. There have been no material changes in risk factors since December 31, 2016.
Item 2.
Unregistered Sales of Equity Securities and Use of ProceedsThe following table provides information regarding our repurchases of our common shares during the quarter ended September 30, 2017:
|
| Equity Incentive Plan |
|
| Stock Repurchase Plan |
| ||||||||||||||
|
| Total |
|
| Average |
|
| Total |
|
| Average |
|
| Maximum |
| |||||
July 1, 2022 - July 31, 2022 |
|
| 11,958 |
|
| $ | 74.85 |
|
|
| — |
|
| $ | — |
|
| $ | 93.1 |
|
August 1, 2022 - August 31, 2022 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 93.1 |
|
September 1, 2022 - September 30, 2022 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 93.1 |
|
Total |
|
| 11,958 |
|
| $ | 74.85 |
|
|
| — |
|
| $ | — |
|
| n/a |
|
Amended and Restated 2016 Equity and Performance Incentive Plan | Stock Repurchase Plan | |||||||||||||||||
Total Number of Shares Purchased1 | Average Price per Share | Total Number of Shares Purchased2 | Average Price per Share | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Programs (millions)2 | ||||||||||||||
July 1, 2017 - July 31, 2017 | — | $ | — | 7,571 | $ | 91.57 | $ | 124.5 | ||||||||||
August 1, 2017 - August 31, 2017 | — | — | 5,750 | 96.12 | $ | 123.9 | ||||||||||||
September 1, 2017 - September 30, 2017 | — | — | 5,000 | 99.40 | $ | 123.4 | ||||||||||||
Total | — | $ | — | 18,321 | $ | 95.13 | N/A |
See Note 39 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 20162021 for additional information about restrictions on dividend payments contained in our revolving credit facility with Wells Fargo Bank, National Association, as administrative agent, and the Revolving Credit Facilityother financial institutions party thereto and in the indenture for our 5.875% Senior Notes.
Item 3.
Defaults Upon Senior SecuritiesNone.
Item 4.
Mine Safety DisclosuresNot applicable.
Item 5.
Other InformationNone.
34
Item 6.
ExhibitsExhibit | Provided | Incorporated by Reference | ||||||||||
No. | Exhibit Description | Herewith | Form | File Number | Exhibit | Filing Date | ||||||
31.1 | ||||||||||||
X | ||||||||||||
31.2 | X | |||||||||||
32.1 | X | |||||||||||
32.2 | X | |||||||||||
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema | X | ||||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation | X | ||||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition | X | ||||||||||
101.LAB | Inline XBRL Taxonomy Extension Label | X | ||||||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation |
X | ||||||||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | X |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
KAISER ALUMINUM CORPORATION | |||
/s/ Neal E. West | |||
Neal E. West | |||
Executive Vice President and Chief Financial Officer (Principal Financial Officer) | |||
/s/ | |||
Jennifer Huey | |||
Vice President and Chief Accounting Officer (Principal Accounting Officer) | |||
Date: October 27, 2017
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