10-Q 1 kalu-20230331.htm 10-Q 10-Q
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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 March 31, 2023

 

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 No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes No

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 accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

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 No

As of April 24, 2023, there were 15,977,375 shares of common stock of the registrant outstanding.

 

 


 

TABLE OF CONTENTS

 

PART I

 

 

Item 1. Financial Statements

 

1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

29

Item 4. Controls and Procedures

 

30

 

 

 

PART II

 

 

Item 1. Legal Proceedings

 

31

Item 1A. Risk Factors

 

31

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

31

Item 3. Defaults Upon Senior Securities

 

31

Item 4. Mine Safety Disclosures

 

31

Item 5. Other Information

 

31

Item 6. Exhibits

 

32

 

 

 

SIGNATURES

 

33

 

 


 

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

 

 

As of March 31, 2023

 

 

As of December 31, 2022

 

 

 

(In millions of dollars, except share
and per share amounts)

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

31.5

 

 

$

57.4

 

Receivables:

 

 

 

 

 

 

Trade receivables, net

 

 

365.0

 

 

 

297.2

 

Other

 

 

42.6

 

 

 

73.5

 

Contract assets

 

 

52.9

 

 

 

58.6

 

Inventories

 

 

537.7

 

 

 

525.4

 

Prepaid expenses and other current assets

 

 

30.2

 

 

 

30.5

 

Total current assets

 

 

1,059.9

 

 

 

1,042.6

 

Property, plant and equipment, net

 

 

1,037.8

 

 

 

1,013.2

 

Operating lease assets

 

 

38.8

 

 

 

39.1

 

Deferred tax assets, net

 

 

4.5

 

 

 

7.5

 

Intangible assets, net

 

 

53.9

 

 

 

55.3

 

Goodwill

 

 

18.8

 

 

 

18.8

 

Other assets

 

 

116.0

 

 

 

112.3

 

Total

 

$

2,329.7

 

 

$

2,288.8

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

282.3

 

 

$

305.1

 

Accrued salaries, wages and related expenses

 

 

42.7

 

 

 

45.2

 

Other accrued liabilities

 

 

80.9

 

 

 

68.4

 

Total current liabilities

 

 

405.9

 

 

 

418.7

 

Long-term portion of operating lease liabilities

 

 

35.2

 

 

 

35.4

 

Pension and other postretirement benefits

 

 

69.9

 

 

 

69.3

 

Net liabilities of Salaried VEBA

 

 

16.7

 

 

 

16.5

 

Deferred tax liabilities

 

 

5.7

 

 

 

4.9

 

Long-term liabilities

 

 

82.8

 

 

 

74.7

 

Long-term debt, net

 

 

1,077.9

 

 

 

1,038.1

 

Total liabilities

 

 

1,694.1

 

 

 

1,657.6

 

Commitments and contingencies – Note 7

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, 5,000,000 shares authorized at both March 31, 2023 and
   December 31, 2022;
no shares were issued and outstanding at
   March 31, 2023 and December 31, 2022

 

 

 

 

 

 

Common stock, par value $0.01, 90,000,000 shares authorized at both
   March 31, 2023 and December 31, 2022;
22,809,322 shares issued and
   
15,974,036 shares outstanding at March 31, 2023; 22,776,042 shares
   issued and
15,940,756 shares outstanding at December 31, 2022

 

 

0.2

 

 

 

0.2

 

Additional paid in capital

 

 

1,092.5

 

 

 

1,090.4

 

Retained earnings

 

 

16.7

 

 

 

13.3

 

Treasury stock, at cost, 6,835,286 shares at both March 31, 2023 and
   December 31, 2022

 

 

(475.9

)

 

 

(475.9

)

Accumulated other comprehensive income

 

 

2.1

 

 

 

3.2

 

Total stockholders’ equity

 

 

635.6

 

 

 

631.2

 

Total

 

$

2,329.7

 

 

$

2,288.8

 

 

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 (UNAUDITED)

 

 

 

Quarter Ended March 31,

 

 

 

2023

 

 

2022

 

 

 

(In millions of dollars, except share and per share amounts)

 

Net sales

 

$

807.6

 

 

$

948.8

 

Costs and expenses:

 

 

 

 

 

 

Cost of products sold, excluding depreciation and amortization

 

 

731.1

 

 

 

865.9

 

Depreciation and amortization

 

 

26.3

 

 

 

27.5

 

Selling, general, administrative, research and development

 

 

29.7

 

 

 

30.2

 

Restructuring costs

 

 

1.4

 

 

 

 

Total costs and expenses

 

 

788.5

 

 

 

923.6

 

Operating income

 

 

19.1

 

 

 

25.2

 

Other (expense) income:

 

 

 

 

 

 

Interest expense

 

 

(11.9

)

 

 

(12.2

)

Other income (expense), net – Note 9

 

 

13.6

 

 

 

(1.6

)

Income before income taxes

 

 

20.8

 

 

 

11.4

 

Income tax provision

 

 

(4.9

)

 

 

(3.3

)

Net income

 

$

15.9

 

 

$

8.1

 

Net income per common share:

 

 

 

 

 

 

Basic

 

$

1.00

 

 

$

0.51

 

Diluted

 

$

0.99

 

 

$

0.51

 

Weighted-average number of common shares outstanding (in thousands):

 

 

 

 

 

 

Basic

 

 

15,940

 

 

 

15,866

 

Diluted

 

 

16,096

 

 

 

16,038

 

 

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 (UNAUDITED)

 

 

 

Quarter Ended March 31,

 

 

2023

 

2022

 

 

 

(In millions of dollars)

 

Net income

 

$

15.9

 

 

$

8.1

 

Other comprehensive income (loss), net of tax – Note 8:

 

 

 

 

 

 

Defined benefit plans

 

 

0.7

 

 

 

0.9

 

Cash flow hedges

 

 

(1.8

)

 

 

17.1

 

Other comprehensive (loss) income, net of tax

 

 

(1.1

)

 

 

18.0

 

Comprehensive income

 

$

14.8

 

 

$

26.1

 

 

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 EQUITY (UNAUDITED)

Quarter Ended March 31, 2023

 

 

 

Common
Shares
Outstanding
1

 

 

Common
Stock

 

 

Additional
Paid in Capital

 

 

Retained
Earnings

 

 

Treasury
Stock

 

 

Accumulated
Other
Comprehensive
Income

 

 

Total

 

 

 

(In millions of dollars, except share and per share amounts)

 

BALANCE, December 31, 2022

 

 

15,940,756

 

 

$

0.2

 

 

$

1,090.4

 

 

$

13.3

 

 

$

(475.9

)

 

$

3.2

 

 

$

631.2

 

Net income

 

 

 

 

 

 

 

 

 

 

 

15.9

 

 

 

 

 

 

 

 

 

15.9

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1.1

)

 

 

(1.1

)

Common shares issued (including impacts from
   Long-Term Incentive programs)

 

 

49,128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancellation of shares to cover employees' tax
   withholdings upon vesting of non-vested shares

 

 

(15,848

)

 

 

 

 

 

(1.3

)

 

 

 

 

 

 

 

 

 

 

 

(1.3

)

Cash dividends declared2

 

 

 

 

 

 

 

 

 

 

 

(12.5

)

 

 

 

 

 

 

 

 

(12.5

)

Amortization of unearned equity compensation

 

 

 

 

 

 

 

 

3.4

 

 

 

 

 

 

 

 

 

 

 

 

3.4

 

BALANCE, March 31, 2023

 

 

15,974,036

 

 

$

0.2

 

 

$

1,092.5

 

 

$

16.7

 

 

$

(475.9

)

 

$

2.1

 

 

$

635.6

 

 

1
At March 31, 2023, 524,804 shares were available for awards under the Kaiser Aluminum Corporation 2021 Equity and Incentive Compensation Plan (“2021 Plan”).
2
Dividends declared per common share were $0.77 for the quarter ended March 31, 2023.

 

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 STOCKHOLDERS EQUITY CONTINUED (UNAUDITED)

Quarter Ended March 31, 2022

 

 

 

Common
Shares
Outstanding

 

 

Common
Stock

 

 

Additional
Paid in Capital

 

 

Retained
Earnings

 

 

Treasury
Stock

 

 

Accumulated
Other
Comprehensive
(Loss) Income

 

 

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
   Long-Term Incentive programs)

 

 

58,641

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cancellation of shares to cover employees' tax
   withholdings upon vesting of non-vested shares

 

 

(19,643

)

 

 

 

 

 

(1.9

)

 

 

 

 

 

 

 

 

 

 

 

(1.9

)

Cash dividends declared1

 

 

 

 

 

 

 

 

 

 

 

(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

 

 

1
Dividends declared per common share were $0.77 for the quarter ended March 31, 2022.

 

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)

 

 

 

Quarter Ended March 31,

 

 

 

2023

 

 

2022

 

 

 

(In millions of dollars)

 

Cash flows from operating activities1:

 

 

 

 

 

 

Net income

 

$

15.9

 

 

$

8.1

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation of property, plant and equipment

 

 

24.9

 

 

 

24.0

 

Amortization of definite-lived intangible assets

 

 

1.4

 

 

 

3.5

 

Amortization of debt premium and debt issuance costs

 

 

0.5

 

 

 

0.6

 

Deferred income taxes

 

 

4.1

 

 

 

2.0

 

Non-cash equity compensation

 

 

3.4

 

 

 

4.0

 

(Gain) loss on disposition of property, plant and equipment

 

 

(15.0

)

 

 

0.3

 

Changes in operating assets and liabilities, net of effects of acquisition:

 

 

 

 

 

 

Trade and other receivables

 

 

(36.9

)

 

 

(97.1

)

Contract assets

 

 

5.7

 

 

 

(11.7

)

Inventories

 

 

(12.3

)

 

 

(26.9

)

Prepaid expenses and other current assets

 

 

(1.2

)

 

 

(2.5

)

Accounts payable

 

 

(22.6

)

 

 

92.9

 

Accrued liabilities

 

 

10.3

 

 

 

6.5

 

Long-term assets and liabilities, net

 

 

1.5

 

 

 

(2.3

)

Net cash (used in) provided by operating activities

 

 

(20.3

)

 

 

1.4

 

Cash flows from investing activities1:

 

 

 

 

 

 

Capital expenditures

 

 

(41.1

)

 

 

(28.3

)

Proceeds from disposition of property, plant and equipment

 

 

15.2

 

 

 

 

Net cash used in investing activities

 

 

(25.9

)

 

 

(28.3

)

Cash flows from financing activities1:

 

 

 

 

 

 

Borrowings under the Revolving Credit Facility

 

 

119.5

 

 

 

 

Repayment of borrowings under the Revolving Credit Facility

 

 

(80.1

)

 

 

 

Repayment of finance lease

 

 

(0.6

)

 

 

(0.5

)

Cancellation of shares to cover employees' tax withholdings upon
vesting of non-vested shares

 

 

(1.3

)

 

 

(1.9

)

Cash dividends and dividend equivalents paid

 

 

(12.5

)

 

 

(12.5

)

Net cash provided by (used in) financing activities

 

 

25.0

 

 

 

(14.9

)

Net decrease in cash, cash equivalents and restricted cash during the period

 

 

(21.2

)

 

 

(41.8

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

71.3

 

 

 

317.0

 

Cash, cash equivalents and restricted cash at end of period

 

$

50.1

 

 

$

275.2

 

 

1
See Note 12 for supplemental cash flow information.

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

Note 1

 

Basis of Presentation

8

Note 2

 

Supplemental Balance Sheet Information

9

Note 3

 

Employee Benefits

9

Note 4

 

Restructuring

11

Note 5

 

Derivatives, Hedging Programs and Other Financial Instruments

11

Note 6

 

Debt and Credit Facility

14

Note 7

 

Commitments and Contingencies

15

Note 8

 

Accumulated Other Comprehensive Income

17

Note 9

 

Other Income (Expense), Net

17

Note 10

 

Income Tax Matters

18

Note 11

 

Net Income Per Share

18

Note 12

 

Supplemental Cash Flow Information

19

Note 13

 

Business, Product and Geographical Area Information

19

Note 14

 

Subsequent Events

20

 

 

 

7


Notes Index

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

 

1. Basis of Presentation

This Quarterly Report on Form 10-Q (this “Report”) should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Unless the context otherwise requires, references in these notes to interim consolidated financial statements - unaudited to “Kaiser Aluminum Corporation,” “we,” “us,” “our,” “the Company” and “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 principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable for interim periods and, therefore, do not include all information and footnotes required by GAAP for complete financial statements. In management’s opinion, all adjustments (which include normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for our interim periods are not necessarily indicative of the results of operations that may be achieved for the entire 2023 fiscal year. The financial information as of December 31, 2022 is derived from our audited consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2022.

Use 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.

 

8


Notes Index

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

 

2. Supplemental Balance Sheet Information

 

 

 

As of March 31, 2023

 

 

As of December 31, 2022

 

 

 

(In millions of dollars)

 

Trade Receivables, Net

 

 

 

 

 

 

Billed trade receivables

 

$

365.6

 

 

$

297.7

 

Allowance for doubtful receivables

 

 

(0.6

)

 

 

(0.5

)

Trade receivables, net

 

$

365.0

 

 

$

297.2

 

 

 

 

 

 

 

Inventories1

 

 

 

 

 

 

Finished products

 

$

124.8

 

 

$

98.0

 

Work-in-process

 

 

183.0

 

 

 

242.5

 

Raw materials

 

 

217.9

 

 

 

174.0

 

Operating supplies

 

 

12.0

 

 

 

10.9

 

Total

 

$

537.7

 

 

$

525.4

 

 

 

 

 

 

 

Property, Plant and Equipment, Net

 

 

 

 

 

 

Land and improvements

 

$

37.9

 

 

$

28.4

 

Buildings and leasehold improvements

 

 

195.5

 

 

 

185.5

 

Machinery and equipment

 

 

1,243.6

 

 

 

1,232.7

 

Construction in progress2

 

 

159.8

 

 

 

141.3

 

Property, plant and equipment, gross

 

 

1,636.8

 

 

 

1,587.9

 

Accumulated depreciation and amortization

 

 

(599.0

)