Kaiser Aluminum(KALU) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements Q1 2022 unaudited consolidated financial statements reflect significant year-over-year growth in net sales and income, driven by the Warrick acquisition, alongside balance sheet expansion and positive operating cash flow Consolidated Balance Sheets As of March 31, 2022, total assets and liabilities increased, driven by higher trade receivables, inventories, and accounts payable, reflecting business expansion Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Current Assets | $1,321.4 | $1,205.4 | | Total Assets | $2,541.4 | $2,422.4 | | Total Current Liabilities | $554.6 | $456.7 | | Long-term Debt | $1,036.8 | $1,036.3 | | Total Liabilities | $1,833.2 | $1,729.9 | | Total Stockholders' Equity | $708.2 | $692.5 | Statements of Consolidated Income Q1 2022 net sales surged to $948.8 million from $324.0 million year-over-year, significantly increasing operating income to $25.2 million and net income to $8.1 million Q1 2022 vs Q1 2021 Income Statement (in millions, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net Sales | $948.8 | $324.0 | | Operating Income | $25.2 | $16.9 | | Net Income | $8.1 | $4.5 | | Diluted EPS | $0.51 | $0.28 | Statements of Consolidated Cash Flows Q1 2022 saw positive operating cash flow of $1.4 million, a significant improvement from the prior year, with cash used in investing and financing activities Consolidated Cash Flows (in millions) | Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $1.4 | $(11.4) | | Net cash used in investing activities | $(28.3) | $(626.6) | | Net cash used in financing activities | $(14.9) | $(14.5) | | Net decrease in cash | $(41.8) | $(652.5) | Notes to Interim Consolidated Financial Statements Notes detail accounting policies, balance sheet items, and segment information, highlighting supply chain financing, hedging, environmental accruals, and the new Packaging segment's sales contribution - The company sold trade accounts receivable totaling $407.4 million under supply chain financing arrangements during Q1 2022[34] Net Sales by End Market (in millions) | End Market | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Aero/HS products | $176.6 | $111.7 | | Packaging | $448.0 | $— | | Automotive Extrusions | $63.8 | $57.6 | | GE products | $251.2 | $150.4 | | Other products | $9.2 | $4.3 | | Total net sales | $948.8 | $324.0 | - Subsequent to the quarter end, on April 7, 2022, the company amended its Revolving Credit Facility, increasing the commitment from $375.0 million to $575.0 million and extending the maturity to April 7, 2027[100] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q1 2022's significant sales and volume increase to the Warrick acquisition and strong demand, reiterating full-year VAR and Adjusted EBITDA margin outlooks while maintaining strong liquidity Shipment and Value Added Revenue (VAR) Summary | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Shipments (mmlbs) | 335.4 | 136.9 | | Net Sales ($M) | $948.8 | $324.0 | | VAR ($M) | $370.4 | $171.7 | | VAR per pound ($/lb) | $1.10 | $1.25 | Adjusted EBITDA Reconciliation (in millions) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net income | $8.1 | $4.5 | | Adjustments (Interest, Tax, D&A, etc.) | $44.6 | $25.9 | | Non-run-rate items | $2.3 | $7.1 | | Adjusted EBITDA | $55.0 | $37.5 | - The company reiterates its full-year 2022 outlook, anticipating a year-over-year increase in VAR of 20% to 25% and a consolidated Adjusted EBITDA margin of 17% to 20%[123] - Anticipated capital spending for 2022 is approximately $180.0 million to $200.0 million, with about 60% focused on growth initiatives, including a new roll coat line at the Warrick facility[138] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company manages market risks from commodity and energy price fluctuations through derivatives, with sensitivity analyses indicating potential unrealized losses from adverse price movements - As of March 31, 2022, the company had derivative contracts to hedge sales of approximately 106.3 million pounds of aluminum to be made in the remainder of 2022 and 2023[155] - A sensitivity analysis as of March 31, 2022 indicates: - A $0.10/lb decrease in LME aluminum price would cause a $10.6 million unrealized loss - A $1.00/mmbtu decrease in natural gas prices would cause a $4.7 million unrealized loss - A $5.00/Mwh decrease in electricity prices would cause a $0.8 million unrealized loss[156][159] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal controls, as Warrick operations are integrated - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[161] - No changes in internal control over financial reporting occurred during Q1 2022 that have materially affected, or are reasonably likely to materially affect, internal controls[162] PART II - OTHER INFORMATION Item 1. Legal Proceedings There have been no material developments in the company's legal proceedings since the end of the 2021 fiscal year - The company reports no material developments in legal proceedings since December 31, 2021[164] Item 1A. Risk Factors There have been no material changes to the company's risk factors since the filing of its Annual Report on Form 10-K for the year ended December 31, 2021 - The company reports no material changes in its risk factors since December 31, 2021[165] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase shares in Q1 2022 but withheld 19,643 shares for employee tax obligations, with $93.1 million remaining for future repurchases - No shares were repurchased under the stock repurchase plan in Q1 2022. The company withheld 19,643 shares to cover employee tax obligations[166] - As of March 31, 2022, $93.1 million remained available under the company's stock repurchase program[170] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period Item 4. Mine Safety Disclosures This item is not applicable to the company Item 5. Other Information The company reported no other information for this item Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including incentive plan documents, certifications by the CEO and CFO pursuant to the Sarbanes-Oxley Act, and XBRL data files - Exhibits filed include certifications from the Principal Executive Officer (Keith A. Harvey) and Principal Financial Officer (Neal E. West) as required by Sections 302 and 906 of the Sarbanes-Oxley Act[171]