KAISER ALUMINUM CORP [KALU] Filings

10-Q 1 kalu-20230331.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 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.

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.

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.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED STOCKHOLDERS’ EQUITY (UNAUDITED)

Quarter Ended March 31, 2023


	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, 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

At March 31, 2023, 524,804 shares were available for awards under the Kaiser Aluminum Corporation 2021 Equity and Incentive Compensation Plan (“2021 Plan”).

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.

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

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.

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

See Note 12 for supplemental cash flow information.

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	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

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.

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	)