KAISER ALUMINUM CORP [KALU] Filings

10-Q 1 kalu-20240630.htm 10-Q 10-Q

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 June 30, 2024


☐	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 July 22, 2024, there were 16,087,112 shares of common stock of the registrant outstanding.

COMMONLY USED OR DEFINED TERMS


Term	Definition
Adjusted EBITDA	Earnings before interest, taxes, depreciation and amortization adjusted for non-run-rate items
Aero/HS Products	2000, 7000 and certain 6000 series alloys products used in the Aerospace, Defense, Space and other end markets requiring high strength applications
Alloy(s)	Certain metals such as copper, zinc, magnesium, manganese and silicon added to primary aluminum to obtain certain attributes
AOCI	Accumulated other comprehensive income (loss)
ASU	Accounting Standards Update
Automotive Extrusions	Extruded aluminum products used in automotive applications
COGS	Cost of products sold, excluding depreciation and amortization
Form 10-Q	This Quarterly Report on Form 10-Q
GAAP	United States Generally Accepted Accounting Principles
GE Products	6000 series alloys products used in the General Engineering end markets
LME	London Metal Exchange
MWTP	Midwest Transaction Price is equal to the LME aluminum price plus a Midwest premium
Newark	Kaiser Aluminum manufacturing facility located in Heath, Ohio, a suburb of Newark, Ohio
OPEB	Other Post Retirement Benefit Plan (Refer to Note 3 – Employee Benefits)
Other products	Cast and aluminum products used in various non-strategic end markets
Packaging	3000 and 5000 series alloys products used in the beverage and food packaging end markets
Revolving Credit Facility	Revolving credit facility with Wells Fargo Bank, National Association, as administrative agent, and the other financial institutions party thereto
Salaried VEBA	Salaried Voluntary Employees' Beneficiary Association (Refer to Note 3 – Employee Benefits)
SEC	Securities and Exchange Commission
Senior Notes	Collectively, the fixed-rate unsecured notes we issued during the years ended December 31, 2019 and 2021 at the following interest rates and aggregate principal amounts, respectively: (i) 4.625% and $500.0 million; and (ii) 4.50% and $550.0 million
Term SOFR	Forward looking term rate based on the Secured Overnight Financing Rate
Trentwood	Kaiser Aluminum manufacturing facility located in Spokane Valley, Washington
Warrick	Kaiser Aluminum manufacturing facility located in Newburgh, Indiana, in the county of Warrick

TABLE OF CONTENTS


PART I
Item 1. Financial Statements		1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3. Quantitative and Qualitative Disclosures About Market Risk		30
Item 4. Controls and Procedures		31

PART II
Item 1. Legal Proceedings		32
Item 1A. Risk Factors		32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		32
Item 3. Defaults Upon Senior Securities		32
Item 4. Mine Safety Disclosures		32
Item 5. Other Information		32
Item 6. Exhibits		33

SIGNATURES		34

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	As of June 30, 2024			As of December 31, 2023
	(In millions of dollars, except share and per share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	70.4		$	82.4
Receivables:
Trade receivables, net		370.1			325.2
Other		13.4			12.4
Contract assets		63.7			58.5
Inventories		446.9			477.2
Prepaid expenses and other current assets		46.0			34.5
Total current assets		1,010.5			990.2
Property, plant and equipment, net		1,084.6			1,052.1
Operating lease assets		29.1			32.6
Deferred tax assets, net		6.0			6.0
Intangible assets, net		47.7			50.0
Goodwill		18.8			18.8
Other assets		119.0			117.7
Total assets	$	2,315.7		$	2,267.4
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	281.8		$	252.7
Accrued salaries, wages and related expenses		48.9			53.0
Other accrued liabilities		65.7			64.3
Total current liabilities		396.4			370.0
Long-term portion of operating lease liabilities		26.3			29.2
Pension and other postretirement benefits		77.6			76.8
Net liabilities of Salaried VEBA		3.8			3.8
Deferred tax liabilities		20.6			13.9
Long-term liabilities		88.3			81.7
Long-term debt, net		1,040.7			1,039.8
Total liabilities		1,653.7			1,615.2
Commitments and contingencies – Note 7
Stockholders’ equity:
Preferred stock, 5,000,000 shares authorized at both June 30, 2024 and December 31, 2023; no shares were issued and outstanding at June 30, 2024 and December 31, 2023		—			—
Common stock, par value $0.01, 90,000,000 shares authorized at both June 30, 2024 and December 31, 2023; 22,922,398 shares issued and 16,087,112 shares outstanding at June 30, 2024; 22,851,077 shares issued and 16,015,791 shares outstanding at December 31, 2023		0.2			0.2
Additional paid in capital		1,111.0			1,104.7
Retained earnings		12.5			10.1
Treasury stock, at cost, 6,835,286 shares at both June 30, 2024 and December 31, 2023		(475.9	)		(475.9	)
Accumulated other comprehensive income		14.2			13.1
Total stockholders’ equity		662.0			652.2
Total liabilities and stockholders' equity	$	2,315.7		$	2,267.4

The accompanying notes to interim consolidated financial statements are an integral part of these statements.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)



	Quarter Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
	(In millions of dollars, except share and per share amounts)
Net sales	$	773.4		$	814.1		$	1,510.9		$	1,621.7
Costs and expenses:
Cost of products sold, excluding depreciation and amortization		690.5			718.4			1,333.4			1,449.5
Depreciation and amortization		29.0			26.4			57.8			52.7
Selling, general, administrative, research and development		31.6			32.2			64.2			61.9
Restructuring costs		6.8			1.2			6.9			2.6
Other operating charges, net		—			—			0.4			—
Total costs and expenses		757.9			778.2			1,462.7			1,566.7
Operating income		15.5			35.9			48.2			55.0
Other (expense) income:
Interest expense		(11.1	)		(12.1	)		(22.6	)		(24.0	)
Other (expense) income, net – Note 9		(0.5	)		(2.5	)		10.4			11.1
Income before income taxes		3.9			21.3			36.0			42.1
Income tax provision		(0.8	)		(3.0	)		(8.3	)		(7.9	)
Net income	$	3.1		$	18.3		$	27.7		$	34.2

Net income per common share:
Basic	$	0.19		$	1.14		$	1.72		$	2.14
Diluted	$	0.19		$	1.14		$	1.69		$	2.12
Weighted-average number of common shares outstanding (in thousands):
Basic		16,072			15,974			16,050			15,957
Diluted		16,398			16,083			16,321			16,090

The accompanying notes to interim consolidated financial statements are an integral part of these statements.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)


	Quarter Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
	(In millions of dollars)						(In millions of dollars)
Net income	$	3.1		$	18.3		$	27.7		$	34.2
Other comprehensive (loss) income, net of tax – Note 8:
Defined benefit plans		(0.1	)		(4.6	)		(0.6	)		(3.9	)
Cash flow hedges		3.3			(2.7	)		1.7			(4.5	)
Other comprehensive income (loss), net of tax		3.2			(7.3	)		1.1			(8.4	)
Comprehensive income	$	6.3		$	11.0		$	28.8		$	25.8

The accompanying notes to interim consolidated financial statements are an integral part of these statements.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED STOCKHOLDERS’ EQUITY (UNAUDITED)

Six Months Ended June 30, 2024


	Common Shares Outstanding1			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, 2023		16,015,791		$	0.2	$	1,104.7		$	10.1		$	(475.9	)	$	13.1		$	652.2
Net income		—			—		—			24.6			—			—			24.6
Other comprehensive loss, net of tax		—			—		—			—			—			(2.1	)		(2.1	)
Common shares issued (including impacts from Long-Term Incentive programs)		56,416			—		—			—			—			—			—
Cancellation of shares to cover tax withholdings upon common shares issued		(16,175	)		—		(1.2	)		—			—			—			(1.2	)
Cash dividends declared2		—			—		—			(12.6	)		—			—			(12.6	)
Amortization of unearned equity compensation		—			—		4.0			—			—			—			4.0
BALANCE, March 31, 2024		16,056,032		$	0.2	$	1,107.5		$	22.1		$	(475.9	)	$	11.0		$	664.9
Net income		—			—		—			3.1			—			—			3.1
Other comprehensive income, net of tax		—			—		—			—			—			3.2			3.2
Common shares issued (including impacts from Long-Term Incentive programs)		38,143			—		0.5			—			—			—			0.5
Cancellation of shares to cover tax withholdings upon common shares issued		(7,063	)		—		(0.6	)		—			—			—			(0.6	)
Cash dividends declared2		—			—		—			(12.7	)		—			—			(12.7	)
Amortization of unearned equity compensation		—			—		3.6			—			—			—			3.6
BALANCE, June 30, 2024		16,087,112		$	0.2	$	1,111.0		$	12.5		$	(475.9	)	$	14.2		$	662.0

At June 30, 2024, 607,964 shares were available for awards under the Kaiser Aluminum Corporation 2021 Equity and Incentive Compensation Plan, as amended and restated.

Dividends declared per common share were $0.77 for the quarters ended March 31, 2024 and June 30, 2024.

The accompanying notes to interim consolidated financial statements are an integral part of these statements.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED STOCKHOLDERS’ EQUITY CONTINUED (UNAUDITED)

Six Months Ended June 30, 2023


	Common Shares Outstanding			Common Stock		Additional Paid in Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			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 declared1		—			—		—			(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
Net income		—			—		—			18.3			—			—			18.3
Other comprehensive loss, net of tax		—			—		—			—			—			(7.3	)		(7.3	)
Common shares issued (including impacts from Long-Term Incentive programs)		45,164			—		0.7			—			—			—			0.7
Cancellation of shares to cover tax withholdings upon common shares issued		(6,036	)		—		(0.4	)		—			—			—			(0.4	)
Cash dividends declared1		—			—		—			(12.6	)		—			—			(12.6	)
Amortization of unearned equity compensation		—			—		3.8			—			—			—			3.8
BALANCE, June 30, 2023		16,013,164		$	0.2	$	1,096.6		$	22.4		$	(475.9	)	$	(5.2	)	$	638.1

Dividends declared per common share were $0.77 for the quarters ended March 31, 2023 and June 30, 2023.

The accompanying notes to interim consolidated financial statements are an integral part of these statements.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)


	Six Months Ended June 30,
	2024			2023
	(In millions of dollars)
Cash flows from operating activities1:
Net income	$	27.7		$	34.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment		55.5			49.9
Amortization of definite-lived intangible assets		2.3			2.8
Amortization of debt premium and debt issuance costs		1.1			1.0
Amortization of cloud computing implementation costs		0.6			0.7
Deferred income taxes		6.4			6.6
Non-cash LIFO charge (benefit)		4.5			(4.0	)
Non-cash equity compensation		8.1			7.9
Non-cash asset impairment charge2		3.6			—
Non-cash unrealized loss on derivative positions		2.2			—
Loss (gain) on disposition of property, plant and equipment		0.5			(14.2	)
Bad debt expense		0.3			—
Non-cash postretirement defined benefit plan cost		4.3			6.4
Changes in operating assets and liabilities:
Trade and other receivables		(46.2	)		(17.8	)
Contract assets		(5.2	)		2.3
Inventories (excluding LIFO adjustments)		22.6			31.5
Prepaid expenses and other current assets		(10.9	)		(4.8	)
Accounts payable		16.1			(56.0	)
Accrued liabilities		(3.4	)		2.3
Annual variable cash contributions to Salaried VEBA		(1.1	)		—
Long-term assets and liabilities, net		0.6			(1.0	)
Net cash provided by operating activities		89.6			47.8
Cash flows from investing activities1:
Capital expenditures		(73.7	)		(82.6	)
Purchase of equity securities		(0.1	)		(0.3	)
Proceeds from sale of equity securities		0.2			—
Proceeds from disposition of property, plant and equipment		—			15.2
Net cash used in investing activities		(73.6	)		(67.7	)
Cash flows from financing activities1:
Borrowings under the Revolving Credit Facility		—			210.0
Repayment of borrowings under the Revolving Credit Facility		—			(195.0	)
Repayment of finance lease		(0.9	)		(1.2	)
Cancellation of shares to cover tax withholdings upon common shares issued		(1.8	)		(1.7	)
Cash dividends and dividend equivalents paid		(25.3	)		(25.1	)
Net cash used in financing activities		(28.0	)		(13.0	)
Net decrease in cash, cash equivalents and restricted cash during the period		(12.0	)		(32.9	)
Cash, cash equivalents and restricted cash at beginning of period		100.7			71.3
Cash, cash equivalents and restricted cash at end of period	$	88.7		$	38.4

See Note 12 for supplemental cash flow information.

Non-cash asset impairment charge for the six months ended June 30, 2024 is comprised of: (i) a $3.2 million inventory write-down related to certain alloying metals, and (ii) a $0.4 million impairment charge on land held for sale.

The accompanying notes to interim consolidated financial statements are an integral part of these statements.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

NOTES INDEX


Note 1	Basis of Presentation and Recent Accounting Pronouncements	8
Note 2	Supplemental Balance Sheet Information	9
Note 3	Employee Benefits	10
Note 4	Restructuring	11
Note 5	Derivatives, Hedging Programs and Other Financial Instruments	12
Note 6	Debt and Credit Facility	15
Note 7	Commitments and Contingencies	17
Note 8	Accumulated Other Comprehensive Income (Loss)	18
Note 9	Other (Expense) Income, Net	19
Note 10	Income Tax Matters	19
Note 11	Earnings Per Share	20
Note 12	Supplemental Cash Flow Information	20
Note 13	Business, Product, and Geographical Area Information	21
Note 14	Subsequent Events	21

Notes Index

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

1. Basis of Presentation and Recent Accounting Pronouncements

This Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Unless the context otherwise requires, references in these notes to interim consolidated financial statements - unaudited to “Kaiser,” “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 GAAP and the rules and regulations of the 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. We have reclassified certain items in prior periods to conform to current classifications. The results of operations for our interim periods are not necessarily indicative of the results of operations that may be achieved for the entire 2024 fiscal year. The financial information as of December 31, 2023 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, 2023.

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.

Accounting Pronouncements Issued But Not Yet Adopted

Disclosure Improvements. In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-06 (“ASU 2023-06”), Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The guidance amends GAAP to reflect updates and simplifications to certain disclosure requirements referred to the FASB by the SEC. The amendments in ASU 2023-06 will become effective on the date which the SEC’s removal of the related disclosure becomes effective. If by June 30, 2027, the SEC does not remove the related disclosure, the pending amendment will be removed from ASC 2023-06 and it will not be effective. Adoption of ASU 2023-06 is expected to modify the disclosure and presentation requirements only and is not expected to have a material impact on our consolidated financial statements.

Segment Reporting. In November 2023, the FASB issued ASU No. 2023-07 (“ASU 2023-07”), Improvements to Reportable Segment Disclosures. The guidance primarily will require enhanced disclosures about significant segment expenses. All disclosure requirements under ASU 2023-07 and existing segment disclosures in ASC 280, Segment Reporting are also required for public entities with a single reportable segment. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. A retrospective approach is required to be applied to all prior periods presented in the financial statements. We plan to adopt the provisions of ASU 2023-07 in the fourth quarter of fiscal 2024 and continue to evaluate the disclosure requirements related to the new standard.

Income Taxes. In December 2023, the FASB issued ASU No. 2023-09 (“ASU 2023-09”), Improvements to Income Tax Disclosures. The guidance is intended to improve income tax disclosure requirements by requiring (i) consistent categories and greater disaggregation of information in the rate reconciliation and (ii) the disaggregation of income taxes paid by jurisdiction. The guidance makes several other changes to the income tax disclosure requirements. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and is required to be applied prospectively with the option of retrospective application. We plan to adopt the provisions of ASU 2023-09 in the fourth quarter of fiscal 2025 and continue to evaluate the disclosure requirements related to the new standard.

Notes Index

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

2. Supplemental Balance Sheet Information


	As of June 30, 2024			As of December 31, 2023
	(In millions of dollars)
Trade Receivables, Net
Billed trade receivables	$	370.9		$	325.8
Allowance for doubtful receivables		(0.8	)		(0.6	)
Trade receivables, net	$	370.1		$	325.2

Inventories1
Finished products	$	72.1		$	89.3
Work-in-process		210.2			210.8
Raw materials		148.0			161.5
Operating supplies		16.6			15.6
Inventories	$	446.9		$	477.2

Property, Plant and Equipment, Net
Land and improvements	$	37.2		$	38.0
Buildings and leasehold improvements		241.6			238.4
Machinery and equipment		1,279.7			1,265.3
Construction in progress		240.1			173.7
Property, plant and equipment, gross		1,798.6			1,715.4
Accumulated depreciation and amortization		(715.5	)		(663.7	)
Land held for sale		1.5			0.4
Property, plant and equipment, net	$	1,084.6		$	1,052.1

Other Assets
Assets to be conveyed associated with Warrick acquisition	$	56.8		$	56.8
Restricted cash – Note 12		18.3			18.3
Long-term replacement parts		17.3			16.7
Other		26.6			25.9
Other assets	$	119.0		$	117.7

Other Accrued Liabilities
Uncleared cash disbursements	$	20.0		$	15.7
Accrued income taxes and other taxes payable		10.8			9.5
Accrued annual contribution to Salaried VEBA		—			1.1