UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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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:
(Exact name of registrant as specified in its charter)
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(I.R.S. Employer Identification No.) |
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(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:
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Name of each exchange on which registered |
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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.
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).
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.
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 April 18, 2022, there were
TABLE OF CONTENTS
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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As of March 31, 2022 |
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As of December 31, 2021 |
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(In millions of dollars, except share and per share amounts) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Receivables: |
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Trade receivables, net |
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Other |
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Contract assets |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Operating lease assets |
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Deferred tax assets, net |
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Intangible assets, net |
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Goodwill |
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Other assets |
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Total |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued salaries, wages and related expenses |
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Other accrued liabilities |
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Total current liabilities |
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Long-term portion of operating lease liabilities |
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Pension and other postretirement benefits |
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Net liabilities of Salaried VEBA |
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Deferred tax liabilities |
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Long-term liabilities |
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Long-term debt |
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Total liabilities |
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Commitments and contingencies – Note 6 |
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Stockholders’ equity: |
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Preferred stock, December 31, 2021; March 31, 2022 and December 31, 2021 |
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Common stock, par value $ March 31, 2022 and December 31, 2021; issued and |
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Additional paid in capital |
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Retained earnings |
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Treasury stock, at cost, December 31, 2021 |
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Accumulated other comprehensive income (loss) |
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Total stockholders’ equity |
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Total |
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$ |
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$ |
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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)
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Quarter Ended March 31, |
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2022 |
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2021 |
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(In millions of dollars, except share and per share amounts) |
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Net sales |
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$ |
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$ |
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Costs and expenses: |
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Cost of products sold, excluding depreciation and amortization and other items |
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Depreciation and amortization |
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Selling, general, administrative, research and development |
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Restructuring costs (benefit) |
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— |
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Total costs and expenses |
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Operating income |
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Other expense: |
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Interest expense |
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Other expense, net – Note 8 |
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Income before income taxes |
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Income tax (provision) benefit |
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Net income |
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$ |
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$ |
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Net income per common share: |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted-average number of common shares outstanding (in thousands): |
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Basic |
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Diluted |
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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)
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Quarter Ended March 31, |
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2022 |
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2021 |
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(In millions of dollars) |
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Net income |
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$ |
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$ |
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Other comprehensive income (loss), net of tax – Note 7: |
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Defined benefit pension plan and Salaried VEBA |
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Cash flow hedges |
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Foreign currency translation |
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— |
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Other comprehensive income, net of tax |
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Comprehensive income |
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$ |
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$ |
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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, 2022
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Common Shares Outstanding1,2 |
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Common Stock |
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Additional Paid in Capital |
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Retained Earnings |
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Treasury Stock |
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Accumulated Other Comprehensive Income (Loss) |
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Total |
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(In millions of dollars, except share and per share amounts) |
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BALANCE, December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income, net of tax |
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— |
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— |
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— |
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— |
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— |
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Common shares issued (including impacts from Long-Term Incentive programs) |
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— |
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— |
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— |
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— |
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— |
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— |
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Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares |
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— |
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— |
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— |
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— |
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Cash dividends declared3 |
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— |
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— |
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— |
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— |
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— |
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Amortization of unearned equity compensation |
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— |
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— |
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— |
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— |
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— |
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BALANCE, March 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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1 |
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2 |
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3 |
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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, 2021
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Common Shares Outstanding1 |
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Common Stock |
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Additional Paid in Capital |
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Retained Earnings |
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Treasury Stock |
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Accumulated Other Comprehensive Income (Loss) |
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Total |
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(In millions of dollars, except share and per share amounts) |
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BALANCE, December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Other comprehensive income, net of tax |
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— |
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— |
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— |
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— |
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— |
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Common shares issued (including impacts from Long-Term Incentive programs) |
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— |
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— |
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— |
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— |
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— |
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— |
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Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares |
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( |
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— |
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( |
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— |
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— |
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— |
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( |
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Cash dividends declared2 |
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— |
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— |
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— |
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( |
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— |
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— |
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( |
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Amortization of unearned equity compensation |
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— |
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— |
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— |
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— |
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— |
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BALANCE, March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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1 |
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2 |
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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)
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Quarter Ended March 31, |
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2022 |
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2021 |
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(In millions of dollars) |
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Cash flows from operating activities1: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation of property, plant and equipment |
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Amortization of definite-lived intangible assets |
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Amortization of debt premium and debt issuance costs |
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Deferred income taxes |
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Non-cash equity compensation |
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Loss on disposition of property, plant and equipment |
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— |
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Changes in operating assets and liabilities, net of effects of acquisition: |
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Trade and other receivables |
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( |
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Contract assets |
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( |
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( |
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Inventories |
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( |
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( |
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Prepaid expenses and other current assets |
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( |
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( |
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Accounts payable |
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Accrued liabilities |
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Annual variable cash contributions to Salaried VEBA |
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— |
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Long-term assets and liabilities, net |
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( |
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( |
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Net cash provided by (used in) operating activities |
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( |
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Cash flows from investing activities1: |
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Capital expenditures |
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( |
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( |
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Cash payment for acquisition of the Warrick rolling mill |
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— |
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( |
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Net cash used in investing activities |
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( |
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( |
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Cash flows from financing activities1: |
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Repayment of finance lease |
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( |
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Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares |
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( |
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( |
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Cash dividends and dividend equivalents paid |
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( |
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( |
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Net cash used in financing activities |
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( |
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( |
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Net decrease in cash, cash equivalents and restricted cash during the period |
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( |
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( |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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1 |
See Note 11 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
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9 |
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10 |
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Derivatives, Hedging Programs and Other Financial Instruments |
12 |
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15 |
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16 |
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18 |
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18 |
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19 |
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20 |
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21 |
7
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
1. Basis of Presentation and Recent Accounting Pronouncements
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, 2021. 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 2022 fiscal year. The financial information as of December 31, 2021 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, 2021.
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.
Supply Chain Financing. We are party 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 our discretion when we determine that the cost of these arrangements is less than the cost of servicing our receivables with existing debt. Under the terms of the agreements, we retain no rights or interest, have no obligations with respect to the sold receivables and do not service the receivables after the sale. As such, these transactions are being accounted for as a sale. During the quarter ended March 31, 2022, we sold trade accounts receivable totaling $
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 costs already incurred or for immediate financial support, with no future related costs, are recognized as income in the period in which it is receivable.
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
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
8
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
Rate (“LIBOR”). Our adoption of Topic 848 did not have a material impact on our consolidated financial statements and we will continue to assess contract modifications in accordance with Topic 848.
2.
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As of March 31, 2022 |
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As of December 31, 2021 |
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(In millions of dollars) |
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Trade Receivables, Net |
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|
|
Billed trade receivables |
|
$ |
|
|
|
$ |
|
|
Allowance for doubtful receivables |
|
|
( |
) |
|
|
( |
) |
Trade receivables, net |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Inventories1 |
|
|
|
|
|
|
|
|
Finished products |
|
$ |
|
|
|
$ |
|
|
Work-in-process |
|
|
|
|
|
|
|
|
Raw materials |
|
|
|
|
|
|
|
|
Operating supplies |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Property, Plant and Equipment, Net |
|
|
|
|
|
|
|
|
Land and improvements |
|
$ |
|
|
|
$ |
|
|
Buildings and leasehold improvements |
|
|
|
|
|
|
|
|
Machinery and equipment |
|
|
|
|
|
|
|
|
Construction in progress2 |
|
|
|
|
|
|
|
|
Property, plant and equipment, gross |
|
|
|
|
|
|
|
|
Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Assets held for sale |
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Other Accrued Liabilities |
|
|
|
|
|
|
|
|
Uncleared cash disbursements |
|
$ |
|
|
|
$ |
|
|
Accrued income taxes and other taxes payable |
|
|
|
|
|
|
|
|
Accrued interest |
|
|
|
|
|
|
|
|
Short-term environmental accrual – Note 6 |
|
|
|
|
|
|
|
|
Other – Note 4 |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Long-Term Liabilities |
|
|
|
|
|
|
|
|
Workers' compensation accrual |
|
$ |
|
|
|
$ |
|
|
Long-term environmental accrual – Note 6 |
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
1 |
At March 31, 2022 and December 31, 2021 the current cost of our inventory exceeded its stated last-in, first-out (“LIFO”) value by $ |
2 |
Based on market conditions, we temporarily idled projects within Construction in progress totaling $ |
3. Employee Benefits
Defined Contribution Plans
We sponsor defined contribution 401(k) savings plans for certain hourly and salaried employees. Employees may contribute a portion of their compensation to the plans and we match a specified percentage of these contributions in equivalent form of the
9
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
investments elected by the employee. Additionally, we make fixed annual contributions for certain hourly and salaried employees