Kaiser Aluminum Corporation Reports Third Quarter and Nine Months 2022 Financial Results
Kaiser Aluminum Corporation (NASDAQ:KALU) reported third quarter 2022 net sales of $749 million, a slight dip from $751 million in the same period last year due to an 11% decline in shipments. Adjusted net income was $10 million, or $0.60 per diluted share, up from $9 million, or $0.57 per diluted share, a year earlier. The company faced $24 million in incremental costs due to supply chain disruptions, although magnesium supply issues have been resolved. Adjusted EBITDA dropped to $31 million, down from $50 million in Q3 2021, reflecting an 8.8% margin.
- Adjusted net income increased to $10 million, or $0.60 per diluted share, compared to $9 million, or $0.57 per diluted share last year.
- Value added revenue rose 16% to $356 million, primarily due to successful pricing initiatives.
- Magnesium and molten metal supply issues have been resolved, allowing for full operational capacity.
- Net sales decreased to $749 million compared to $751 million last year, reflecting an 11% decline in shipments.
- Adjusted EBITDA fell to $31 million, down from $50 million in Q3 2021, marking a significant decline in margin to 8.8%.
Third Quarter 2022 Highlights:
- Net Sales
$749 Million ; Value Added Revenue$356 Million - Net Income
$3 Million ; Net Income per Diluted Share$0.16 - Adjusted Net Income
$10 Million ; Adjusted Income per Diluted Share$0.60 - Adjusted EBITDA
$31 Million ; Adjusted EBITDA Margin8.8% - Warrick Magnesium and Metal Supply Issues Resolved; Capacity Fully Restored
- Planned Outage at Trentwood Successfully Completed
- Incremental Costs and Inefficiencies of ~
$24 Million Driven by Outage and Supply Chain Issues
FRANKLIN, Tenn., Oct. 19, 2022 (GLOBE NEWSWIRE) -- Kaiser Aluminum Corporation (NASDAQ:KALU), a leading producer of semi-fabricated specialty aluminum products serving customers worldwide with highly-engineered solutions for aerospace and high-strength, packaging, general engineering, custom automotive and other industrial applications, today announced third quarter and first nine months 2022 results.
“While our third quarter 2022 results were significantly impacted by the magnesium and molten metal supply chain issues at our Warrick rolling mill, we have successfully resolved these challenges that have negatively impacted our financial and operational performance for the past several quarters. As we proceed through the remainder of the year, we are positioned to operate on a more normalized basis, albeit in a challenging environment. With these supply chain challenges behind us, we anticipate our adjusted EBITDA and margin in the fourth quarter will be similar to the first half 2022. We remain focused on continuing to address inflationary challenges through pricing and cost reduction initiatives. Although economic uncertainty persists, our end market outlook remains positive and our strategy remains intact. The fundamentals of our aerospace, packaging, general engineering and automotive end markets continue to be solid and we look forward to continuing to execute on our strategic initiatives to deliver long-term value to all of our stakeholders,” said Keith A. Harvey, President and Chief Executive Officer.
Third Quarter 2022 Management Summary
During the quarter, the Company successfully secured and qualified magnesium supplies to meet its requirements, lifting the force majeure in early September and mitigating the impact on production levels and shipments. In addition, the molten metal supply at Warrick has improved to an acceptable level and the Company has access to alternative sources of molten metal supplies to mitigate any further smelter performance issues. The Company’s planned major outage, which included a refurbishment of the large stretcher at its Trentwood facility, was completed on schedule and the Trentwood facility has now resumed full operation. Overall, higher costs and inefficiencies related to these issues resulted in an impact to third quarter adjusted EBITDA of approximately
Value added revenue in the third quarter reflected the benefit of higher pricing together with commodity and freight surcharges, which mitigated the impact of inflationary and commodity costs. Although these pricing initiatives have been successful, the Company continues to incur inflation driven higher energy, manufacturing and employee related costs, which it continues to aggressively address with further pricing increases and cost reduction actions.
Third Quarter 2022 Consolidated Results (Unaudited)* (In millions of dollars, except shipments, realized price and per share amounts) | ||||||||||||||||||||
Quarterly | First Nine Months | |||||||||||||||||||
3Q22 | 2Q22 | 3Q21 | 2022 | 2021 | ||||||||||||||||
Shipments (millions of lbs.) | 282 | 335 | 315 | 952 | 789 | |||||||||||||||
Net sales | $ | 749 | $ | 954 | $ | 751 | $ | 2,652 | $ | 1,816 | ||||||||||
Less hedged cost of alloyed metal1 | (393 | ) | (578 | ) | (445 | ) | (1,550 | ) | (1,021 | ) | ||||||||||
Value added revenue | $ | 356 | $ | 376 | $ | 305 | $ | 1,102 | $ | 795 | ||||||||||
Realized price per pound ($/lb.) | ||||||||||||||||||||
Net sales | $ | 2.66 | $ | 2.85 | $ | 2.38 | $ | 2.78 | $ | 2.30 | ||||||||||
Less hedged cost of alloyed metal | (1.40 | ) | (1.73 | ) | (1.41 | ) | (1.62 | ) | (1.29 | ) | ||||||||||
Value added revenue | $ | 1.26 | $ | 1.12 | $ | 0.97 | $ | 1.16 | $ | 1.01 | ||||||||||
As reported | ||||||||||||||||||||
Operating income (loss) | $ | 3 | $ | (2 | ) | $ | 20 | $ | 26 | $ | 48 | |||||||||
Net income (loss) | $ | 3 | $ | (14 | ) | $ | (2 | ) | $ | (3 | ) | $ | (20 | ) | ||||||
Net income (loss) per share, diluted2 | $ | 0.16 | $ | (0.87 | ) | $ | (0.14 | ) | $ | (0.20 | ) | $ | (1.28 | ) | ||||||
Adjusted3 | ||||||||||||||||||||
Operating income | $ | 6 | $ | 14 | $ | 26 | $ | 47 | $ | 82 | ||||||||||
EBITDA4 | $ | 31 | $ | 41 | $ | 50 | $ | 128 | $ | 147 | ||||||||||
EBITDA margin5 | 8.8 | % | 10.9 | % | 16.5 | % | 11.6 | % | 18.4 | % | ||||||||||
Net income (loss) | $ | 10 | $ | (1 | ) | $ | 9 | $ | 20 | $ | 35 | |||||||||
EPS, diluted2 | $ | 0.60 | $ | (0.03 | ) | $ | 0.57 | $ | 1.23 | $ | 2.21 |
1. Hedged cost of alloyed metal is our Midwest transaction price of aluminum plus the price of alloying elements plus any realized gains and/or losses on settled hedges, related to the metal sold in the referenced period.
2. Diluted shares for EPS are calculated using the treasury stock method.
3. Adjusted numbers exclude non-run-rate items. For all Adjusted numbers and EBITDA refer to Reconciliation of Non-GAAP Measures.
4. Adjusted EBITDA = Consolidated operating income, excluding operating non-run-rate items, plus Depreciation and amortization.
5. Adjusted EBITDA margin = Adjusted EBITDA as a percent of Value Added Revenue.
* Please refer to GAAP financial statements.
Totals may not sum due to rounding.
Third Quarter 2022
Net sales for the third quarter 2022 decreased to
Value added revenue for the third quarter 2022 increased
Reported operating income for the third quarter 2022 was
Reported net income for the third quarter 2022 was
Adjusted EBITDA of
First Nine Months 2022
Net sales for the first nine months 2022 were
Value added revenue for the first nine months 2022 increased
Reported operating income for the first nine months 2022 was approximately
Reported net loss for the first nine months 2022 was
Adjusted EBITDA of
Cash Flow and Liquidity
Adjusted EBITDA of
As of September 30, 2022, the Company had cash and cash equivalents of approximately
The Company anticipates total capital spending of
Conference Call
Kaiser Aluminum Corporation will host a conference call on Thursday, October 20, 2022 at 1:00pm (Eastern Time); 12:00pm (Central Time); 10:00am (Pacific Time), to discuss third quarter and first nine months 2022 results. To participate, the conference call can be directly accessed from the U.S. and Canada at (866) 374-5140, and accessed internationally at (404) 400-0571. The conference call ID number is 67161023. A link to the simultaneous webcast can be accessed on the Company’s website at http://investors.kaiseraluminum.com/events.cfm. A copy of a presentation will be available for download prior to the call and an audio archive will be available on the Company’s website following the call.
Company Description
Kaiser Aluminum Corporation, headquartered in Franklin, Tenn., is a leading producer of semi-fabricated specialty aluminum products, serving customers worldwide with highly-engineered solutions for aerospace and high-strength, packaging, general engineering, custom automotive, and other industrial applications. The Company’s North American facilities produce value-added plate, sheet, coil, extrusions, rod, bar, tube, and wire products, adhering to traditions of quality, innovation, and service that have been key components of the culture since the Company was founded in 1946. The Company’s stock is included in the Russell 2000® index and the S&P Small Cap 600® index.
Available Information
For more information, please visit the Company’s website at www.kaiseraluminum.com. The website includes a section for investor relations under which the Company provides notifications of news or announcements regarding its financial performance, including Securities and Exchange Commission (SEC) filings, investor events, and earnings and other press releases. In addition, all Company filings submitted to the SEC are available through a link to the section of the SEC’s website at www.sec.gov, which includes: Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and Proxy Statements for the Company’s annual stockholders’ meetings, and other information statements as filed with the SEC. In addition, the Company provides a webcast of its quarterly earnings calls and certain events in which management participates or hosts with members of the investment community.
Non-GAAP Financial Measures
This earnings release contains certain non-GAAP financial measures. A “non-GAAP financial measure” is defined as a numerical measure of a company’s financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets, or statements of cash flow of the Company. Pursuant to the requirements of Regulation G, the Company has provided a reconciliation of non-GAAP financial measures to the most directly comparable financial measure in the accompanying tables.
The non-GAAP financial measures used within this earnings release are value added revenue, adjusted operating income, adjusted EBITDA, adjusted net income, and adjusted earnings per diluted share which exclude non-run-rate items and ratios related thereto. As more fully described in these reports, “non-run-rate” items are items that, while they may occur from period to period, are particularly material to results, impact costs primarily as a result of external market factors and may not occur in future periods if the same level of underlying performance were to occur. These measures are presented because management uses this information to monitor and evaluate financial results and trends and believes this information to also be useful for investors. Reconciliations of certain forward looking non-GAAP financial measures to comparable GAAP measures are not provided because certain items required for such reconciliations are outside of our control and/or cannot be reasonably predicted or provided without unreasonable effort.
Forward-Looking Statements
This press release contains statements which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management based on information available to it at the time such statements are made. Kaiser Aluminum cautions that any forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors. These factors include: (a) the effectiveness of management's strategies and decisions, including strategic investments, capital spending strategies processes and countermeasures implemented to address operational and supply chain challenges, and the execution of those strategies; (b) general economic and business conditions, including the impact of geopolitical factors and governmental and other actions taken in response, cyclicality, reshoring, labor challenges, supply interruptions, including the most recent disruptions resulting from the supply demand imbalances in the magnesium and silicon markets, and other conditions that impact demand drivers in the aerospace/high strength, automotive, general engineering, packaging and other end markets the Company serves; (c) the Company’s ability to participate in mature and anticipated new automotive programs expected to launch in the future and successfully launch new automotive programs; (d) changes or shifts in defense spending due to competing national priorities; (e) pricing, market conditions and the Company’s ability to effectively execute its commercial and labor strategies, pass through cost increases, including the institution of surcharges, and flex costs in response to changing economic conditions and inflation; (f) developments in technology; (g) the impact of the Company's future earnings, cash flows, financial condition, capital requirements and other factors on its financial strength and flexibility; (h) new or modified statutory or regulatory requirements; (i) the successful integration of the acquired operations and technologies continue to drive innovative solutions and further advance its capabilities and (j) other risk factors summarized in the Company's reports filed with the Securities and Exchange Commission, including the Company's Form 10-K for the year ended December 31, 2021. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.
Investor Relations and Public Relations Contact: | |
Melinda C. Ellsworth | |
Kaiser Aluminum Corporation | |
(949) 614-1757 |
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME (LOSS) (UNAUDITED) (1)
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
(In millions of dollars, except share and per share amounts) | ||||||||||||||||
Net sales | $ | 748.9 | $ | 750.6 | $ | 2,651.9 | $ | 1,815.6 | ||||||||
Costs and expenses: | ||||||||||||||||
Cost of products sold, excluding depreciation and amortization and other items | 694.9 | 677.8 | 2,459.2 | 1,613.6 | ||||||||||||
Depreciation and amortization | 25.8 | 24.9 | 80.4 | 64.2 | ||||||||||||
Selling, general, administrative, research and development | 25.2 | 28.1 | 82.9 | 90.8 | ||||||||||||
Restructuring costs (benefit) | — | — | — | (0.8 | ) | |||||||||||
Other operating charges, net | — | — | 3.2 | — | ||||||||||||
Total costs and expenses | 745.9 | 730.8 | 2,625.7 | 1,767.8 | ||||||||||||
Operating income | 3.0 | 19.8 | 26.2 | 47.8 | ||||||||||||
Other expense: | ||||||||||||||||
Interest expense | (12.1 | ) | (12.5 | ) | (36.5 | ) | (37.2 | ) | ||||||||
Other income (expense), net | 12.7 | (1.2 | ) | 7.4 | (38.2 | ) | ||||||||||
Income (loss) before income taxes | 3.6 | 6.1 | (2.9 | ) | (27.6 | ) | ||||||||||
Income tax (provision) benefit | (1.1 | ) | (8.4 | ) | (0.3 | ) | 7.4 | |||||||||
Net income (loss) | $ | 2.5 | $ | (2.3 | ) | $ | (3.2 | ) | $ | (20.2 | ) | |||||
Net income (loss) per common share: | ||||||||||||||||
Basic | $ | 0.16 | $ | (0.14 | ) | $ | (0.20 | ) | $ | (1.28 | ) | |||||
Diluted2 | $ | 0.16 | $ | (0.14 | ) | $ | (0.20 | ) | $ | (1.28 | ) | |||||
Weighted-average number of common shares outstanding (in thousands): | ||||||||||||||||
Basic | 15,926 | 15,852 | 15,897 | 15,831 | ||||||||||||
Diluted2 | 16,029 | 15,852 | 15,897 | 15,831 |
1. Please refer to the Company's Form 10-Q for the quarter ended September 30, 2022 for detail regarding the items in the table.
2. Diluted shares for EPS are calculated using the treasury stock method and were excluded from the computation of net loss per share for all periods presented as their inclusion would have been anti-dilutive.
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (1)
As of September 30, 2022 | As of December 31, 2021 | |||||||
(In millions of dollars, except share and per share amounts) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 129.3 | $ | 303.2 | ||||
Receivables: | ||||||||
Trade receivables, net | 311.5 | 332.7 | ||||||
Other | 56.9 | 53.0 | ||||||
Contract assets | 51.0 | 63.2 | ||||||
Inventories | 538.1 | 404.6 | ||||||
Prepaid expenses and other current assets | 40.9 | 48.7 | ||||||
Total current assets | 1,127.7 | 1,205.4 | ||||||
Property, plant and equipment, net | 989.6 | 955.2 | ||||||
Operating lease assets | 41.4 | 46.2 | ||||||
Deferred tax assets, net | 6.6 | 3.4 | ||||||
Intangible assets, net | 56.7 | 67.7 | ||||||
Goodwill | 39.3 | 39.3 | ||||||
Other assets | 112.3 | 105.2 | ||||||
Total | $ | 2,373.6 | $ | 2,422.4 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 337.3 | $ | 351.4 | ||||
Accrued salaries, wages and related expenses | 42.4 | 46.9 | ||||||
Other accrued liabilities | 88.5 | 58.4 | ||||||
Total current liabilities | 468.2 | 456.7 | ||||||
Long-term portion of operating lease liabilities | 37.3 | 40.8 | ||||||
Pension and other postretirement benefits | 91.8 | 92.5 | ||||||
Net liabilities of Salaried VEBA | 19.8 | 20.6 | ||||||
Deferred tax liabilities | 4.7 | 10.5 | ||||||
Long-term liabilities | 72.2 | 72.5 | ||||||
Long-term debt | 1,037.6 | 1,036.3 | ||||||
Total liabilities | 1,731.6 | 1,729.9 | ||||||
Commitments and contingencies | ||||||||
Stockholders' equity: | ||||||||
Preferred stock, 5,000,000 shares authorized at both September 30, 2022 and December 31, 2021; no shares were issued and outstanding at September 30, 2022 and December 31, 2021 | — | — | ||||||
Common stock, par value | 0.2 | 0.2 | ||||||
Additional paid in capital | 1,087.2 | 1,078.9 | ||||||
Retained earnings | 52.2 | 93.0 | ||||||
Treasury stock, at cost, 6,835,286 shares at both September 30, 2022 and December 31, 2021 | (475.9 | ) | (475.9 | ) | ||||
Accumulated other comprehensive loss | (21.7 | ) | (3.7 | ) | ||||
Total stockholders' equity | 642.0 | 692.5 | ||||||
Total | $ | 2,373.6 | $ | 2,422.4 |
1. Please refer to the Company's Form 10-Q for the quarter ended September 30, 2022 for detail regarding the items in the table.
Reconciliation of Non-GAAP Measures - Consolidated
(Unaudited)
(In millions of dollars, except share and per share amounts)
Quarterly | First Nine Months | ||||||||||||||||||
3Q22 | 2Q22 | 3Q21 | 2022 | 2021 | |||||||||||||||
GAAP net income (loss) | $ | 2.5 | $ | (13.8 | ) | $ | (2.3 | ) | $ | (3.2 | ) | $ | (20.2 | ) | |||||
Interest expense | 12.1 | 12.2 | 12.5 | 36.5 | 37.2 | ||||||||||||||
Other (income) expense, net | (12.7 | ) | 3.7 | 1.2 | (7.4 | ) | 38.2 | ||||||||||||
Income tax provision (benefits) | 1.1 | (4.1 | ) | 8.4 | 0.3 | (7.4 | ) | ||||||||||||
GAAP operating income (loss) | 3.0 | (2.0 | ) | 19.8 | 26.2 | 47.8 | |||||||||||||
Mark-to-market loss1 | — | 2.9 | 2.0 | 1.9 | 2.1 | ||||||||||||||
Restructuring costs (benefits) | — | — | — | — | (0.8 | ) | |||||||||||||
Acquisition (credits) costs2 | (0.1 | ) | (0.1 | ) | 3.8 | 0.4 | 22.2 | ||||||||||||
Non-cash asset impairment charge | — | 3.2 | — | 3.2 | — | ||||||||||||||
Other operating NRR loss (gain)3,4 | 2.7 | 10.0 | (0.1 | ) | 15.4 | 11.1 | |||||||||||||
Operating income, excluding operating NRR items | 5.6 | 14.0 | 25.5 | 47.1 | 82.4 | ||||||||||||||
Depreciation and amortization | 25.8 | 27.1 | 24.9 | 80.4 | 64.2 | ||||||||||||||
Adjusted EBITDA5 | $ | 31.4 | $ | 41.1 | $ | 50.4 | $ | 127.5 | $ | 146.6 | |||||||||
GAAP net income (loss) | $ | 2.5 | $ | (13.8 | ) | $ | (2.3 | ) | $ | (3.2 | ) | $ | (20.2 | ) | |||||
Operating NRR items | 2.6 | 16.0 | 5.7 | 20.9 | 34.6 | ||||||||||||||
Non-operating NRR items6 | 1.0 | 0.9 | 0.5 | 2.8 | 37.5 | ||||||||||||||
Tax impact of above NRR items | 3.5 | (3.6 | ) | 5.3 | (0.8 | ) | (16.4 | ) | |||||||||||
Adjusted net income (loss) | $ | 9.6 | $ | (0.5 | ) | $ | 9.2 | $ | 19.7 | $ | 35.5 | ||||||||
Net income (loss) per share, diluted7 | $ | 0.16 | $ | (0.87 | ) | $ | (0.14 | ) | $ | (0.20 | ) | $ | (1.28 | ) | |||||
Adjusted earnings (loss) per diluted share7 | $ | 0.60 | $ | (0.03 | ) | $ | 0.57 | $ | 1.23 | $ | 2.21 |
1. Mark-to-market loss on derivative instruments represents: (i) the reversal of mark-to-market loss on hedges entered into prior to the adoption of Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities and settled in the periods presented above and (ii) loss on non-designated commodity hedges. Adjusted EBITDA reflects the realized loss of such settlements.
2. Acquisition (credits) costs are non-run-rate acquisition-related transaction items, which include professional fees, as well as non-cash hedging charges recorded in connection with our Warrick acquisition.
3. NRR is an abbreviation for Non-Run-Rate; NRR items are pre-tax.
4. Other operating NRR items primarily represent the impact of adjustments to plant-level LIFO and environmental expenses.
5. Adjusted EBITDA = Consolidated operating income, excluding operating NRR items, plus Depreciation and amortization.
6. Non-operating NRR items represents the impact of non-cash net periodic benefit cost related to the Salaried VEBA excluding service cost and debt refinancing charges.
7. Diluted shares for EPS are calculated using the treasury stock method.
FAQ
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