Kaiser Aluminum Reports Second Quarter 2008 Financial Results
August 06 2008 - 6:45PM
Business Wire
Kaiser Aluminum Corporation (NASDAQ:KALU) today reported net income
of $22.8 million for the second quarter 2008, compared to net
income of $34.7 million for the second quarter 2007. Earnings per
diluted share were $1.12 and $1.71 for the second quarter 2008 and
2007, respectively. For the six months ended June 30, 2008, the
company reported net income of $61.9 million, compared to $51.8
million for the same period in 2007. Earnings per diluted share
were $3.04 for the six months ended June 30, 2008 compared to $2.56
in the prior year period. Net income and earnings per diluted share
for the six months ended June 30, 2008 were favorably impacted by
unrealized gains on derivative transactions. �We continued to
experience robust demand for aerospace and defense products,� said
Jack A. Hockema, Chairman, President and CEO. �However our results
were negatively impacted by escalating energy related costs and
operating inefficiencies in our rod/bar value stream, which our
energy surcharge and our Kalamazoo initiative are intended to
address.� Consolidated net sales for the second quarter ended June
30, 2008 increased 7 percent to $413.5 million, compared to $385.1
million for the second quarter 2007. The increase primarily
reflects an 8 percent increase in shipments from the Fabricated
Products segment and an increase in Primary Aluminum realized
prices, partially offset by a reduction in Primary Aluminum
shipments due to the fire at Anglesey that significantly reduced
production in the latter half of June 2008. For the six months
ended June 30, 2008, consolidated net sales increased 5 percent to
$812.5 million compared to $777.3 million in the six months ended
June 30, 2007. The increase in net sales is primarily the result of
8 percent higher shipments, partially offset by a reduction in
average realized price from our Fabricated Products segment as well
as lower shipments in the Primary Aluminum segment. Operating
income on a consolidated basis for the second quarter decreased to
$38.0 million from $62.7 million in the prior year period
reflecting weaker results from both Fabricated Products and Primary
Aluminum segments. In addition, the second quarter of 2007
benefited from several non-run-rate gains recorded in the Corporate
segment. Operating income on a consolidated basis for the six
months ended June 30, 2008 increased to $106.1 million compared to
$95.0 million for the six months ended June 30, 2007, partly due to
significant unrealized mark-to-market gains on the company�s
derivative hedging contracts. Fabricated Products Operating income
in Fabricated Products was $42.9 million for the second quarter
2008 compared to $48.1 million in the prior-year period. Operating
income for the six months ended June 30, 2008 was $82.9 million
compared to $89.5 million for the same period in 2007. Operating
income for both the quarter and six months ended June 30, 2007
reflected record results in the Fabricated Products segment.
Operating income in 2008 for both the quarter and six month periods
reflect a favorable impact from an 8 percent increase in shipments,
which was more than offset by unfavorable energy related costs,
operating inefficiencies in the rod/bar value stream and higher
depreciation related to the commissioning of new production assets.
The six month period also was impacted by unfavorable currency
exchange rates and higher major maintenance expense. �We expect our
strong overall shipments trend to continue throughout the second
half 2008, driven by sustained strong aerospace and defense demand
for heat treat plate and other products,� said Mr. Hockema. �Our
new automotive programs and selected export opportunities are
anticipated to partially offset the weakness in domestic automotive
demand, and we anticipate the energy surcharge implemented as of
July 1st will begin to soften the negative impact of volatile
energy costs.� Primary Aluminum Operating income in Primary
Aluminum was $8.1 million for the second quarter 2008, compared to
$14.2 million for the second quarter 2007. The impact of higher
realized aluminum prices net of hedging was more than offset by
lower shipments as a result of the production outage at Anglesey in
June 2008, higher power costs, and the impact of unfavorable
currency exchange rates net of hedging. Operating income for the
six months ended June 30, 2008 was $48.7 million compared to $18.4
million in the prior year period, reflecting $34.1 million of
higher unrealized mark-to-market gains for metal and currency
derivatives. Additionally, the favorable impact of higher realized
prices was more than offset by lower volume due to the production
outage at Anglesey, higher power costs, and the net impact of
unfavorable currency exchange rates net of hedging. The first of
two potlines at Anglesey was restored to full production in late
July. Anglesey is anticipated to begin production on the second
potline in late August and be at full production by the end of
November. The company expects that Anglesey�s property damage and
business interruption insurance will cover financial losses of
Anglesey and its owners although the timing of insurance recoveries
is uncertain and could have a potentially significant impact on
quarterly results. Corporate Highlights The third and final phase
of the heat treat plate expansion program began as planned in June,
resulting in a scheduled production interruption on one heat treat
furnace to expand its capacity. The furnace is expected to be fully
operational by the end of 2008. Other projects are proceeding as
planned. The Kalamazoo facility is on track for completion by late
2009 and is expected to significantly improve the cost structure of
the rod/bar value stream. Additional planned outages are scheduled
in the third quarter of 2008 to install equipment upgrades at our
Los Angeles, Chandler and Tulsa operations. Major maintenance
expense related to planned projects is anticipated to result in
higher costs in Fabricated Products during the third quarter. The
company increased inventory during the second quarter (resulting in
higher working capital and lower cash from operations) to continue
to serve customers during the upcoming scheduled outages. The
company continues to maintain sufficient liquidity to support
expansion plans and strategic initiatives for profitable growth.
During the quarter the company announced a 33 percent increase in
its quarterly dividend to $0.24 per share and a $75 million share
repurchase program. Conference Call Kaiser Aluminum will host a
conference call on August 7, 2008 at 10:00am (Pacific Time) to
discuss second quarter 2008 results. To participate, call the
conference call line at 1-877-440-5785. A link to the simultaneous
web cast can be accessed on the company website at
http://investors.kaiseraluminum.com/events.cfm. A copy of a
presentation will be available for download prior to the start of
the call. An archive of the call will be available at the same
website location until September 7, 2008. Kaiser Aluminum,
headquartered in Foothill Ranch, Calif., is a leading producer of
fabricated aluminum products, serving customers worldwide with
highly-engineered solutions for aerospace and high-strength,
general engineering, and custom automotive and industrial
applications. The company�s North American facilities annually
produce more than 500 million pounds of value-added sheet, plate,
extrusions, forgings, rod, bar and tube products, adhering to
traditions of quality, innovation and service that have been key
components of our culture since the company was founded in 1946.
The company�s stock is included in the Russell 2000� index. For
more information, please visit www.kaiseraluminum.com. F-1101 This
press release contains statements based on management�s current
expectations, estimates and projections that constitute
�forward-looking statements� within the meaning of the Private
Securities Litigation Reform Act of 1995 involving known and
unknown risks and uncertainties that may cause actual results,
performance or achievements of the company to be materially
different from those expressed or implied. Kaiser Aluminum cautions
that such forward-looking statements are not guarantees of future
performance or events and involve significant risks and
uncertainties and that actual events may vary materially from those
expressed or implied in the forward-looking statements as a result
of various factors. These factors include: (a) changes in economic
or aluminum industry business conditions generally, including
global supply and demand conditions; (b) changes in the markets
served by the company, including aerospace, defense, general
engineering, automotive, distribution and other markets, including
changes impacting the volume, price or mix of products sold by the
company; (c) the company�s ability to complete its expansion and
other organic growth projects as planned and by targeted completion
dates; (d) the company�s ability to effectively address escalating
energy related costs and operating inefficiencies through
surcharges and other initiatives; (e) the company�s ability to meet
contractual commitments and obligations to supply products meeting
required specifications; (f) customer performance; (g) uncertainty
with respect to the future operation of Anglesey, including
Anglesey�s ability to successfully restore capacity and assert
insurance claims for the financial losses of Anglesey and its
owners resulting from the recent outage; (h) changes in competitive
factors in the markets served by the company; (i) developments in
technology used by the company, its competitors or its customers;
(j) changes in accounting that may affect the company�s reported
earnings, operating income or results; and (k) 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, 2007. 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. All information in this release is as of the date of
the release. 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. KAISER ALUMINUM
CORPORATION AND SUBSIDIARY COMPANIES � STATEMENTS OF CONSOLIDATED
INCOME (1) (2) (Unaudited) (In millions of dollars except share and
per share amounts) � � � Quarter Ended June 30, Six Months Ended
June 30, � 2008 � 2007 2008 � 2007 Net sales $ 413.5 � $ 385.1 � $
812.5 � $ 777.3 � Costs and expenses: Cost of products sold,
excluding depreciation 352.0 314.0 660.5 651.1 Depreciation and
amortization 3.7 2.7 7.2 5.3 Selling, administrative, research and
development, and general 19.7 19.2 38.5 38.2 Other operating
(benefits) charges, net � .1 � � (13.5 ) � .2 � � (12.3 ) Total
costs and expenses � 375.5 � � 322.4 � � 706.4 � � 682.3 �
Operating income 38.0 62.7 106.1 95.0 Other income (expense):
Interest expense (.3 ) (.6 ) (.5 ) (1.2 ) Other income (expense),
net � .6 � � 1.1 � � 1.2 � � 2.3 � Income before income taxes 38.3
63.2 106.8 96.1 Provision for income taxes � (15.5 ) � (28.5 ) �
(44.9 ) � (44.3 ) Net income $ 22.8 � $ 34.7 � $ 61.9 � $ 51.8 �
Earnings per share � Basic: Net income per share $ 1.14 � $ 1.73 �
$ 3.09 � $ 2.59 � Earnings per share � Diluted : Net income per
share $ 1.12 � $ 1.71 � $ 3.04 � $ 2.56 � Weighted average number
of common shares outstanding (000): Basic � 20,042 � � 20,013 � �
20,034 � � 20,007 � Diluted � 20,409 � � 20,237 � � 20,391 � �
20,209 � � (1)��The consolidated financial statements include the
statements of the Company and its wholly owned subsidiaries and a
49% interest in Anglesey Aluminium Limited (�Anglesey�), which owns
an aluminum smelter in the United Kingdom. � (2)��Please refer to
the Company�s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2008 for additional detail regarding the items in the
table. KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES �
SELECTED OPERATIONAL AND FINANCIAL INFORMATION (1) (2) (Unaudited)
(In millions of dollars except shipments and average realized
third-party sales price) � � Quarter Ended June 30, Six Months
Ended June 30, 2008 � 2007 2008 � 2007 Shipments (millions of
pounds): Fabricated Products 148.4 137.9 300.2 277.9 Primary
Aluminum � 36.8 � � 39.4 � � 73.8 � � 78.5 � 185.2 177.3 374.0
356.4 Average Realized Third Party Sales Price (per pound):
Fabricated Products $ 2.42 $ 2.40 $ 2.36 $ 2.41 Primary Aluminum $
1.48 $ 1.37 $ 1.41 $ 1.38 Net Sales: Fabricated Products $ 359.2 $
331.1 $ 708.4 $ 669.1 Primary Aluminum � 54.3 � � 54.0 � � 104.1 �
� 108.2 � Total Net Sales $ 413.5 $ 385.1 $ 812.5 $ 777.3 Segment
Operating Income: Fabricated Products $ 42.9 $ 48.1 $ 82.9 $ 89.5
Primary Aluminum 8.1 14.2 48.7 18.4 Corporate and Other (12.9 )
(13.1 ) (25.3 ) (25.2 ) Other Operating Benefits (Charges), Net �
(.1 ) � 13.5 � � (.2 ) � 12.3 � Total Operating Income $ 38.0 $
62.7 $ 106.1 $ 95.0 Net Income $ 22.8 $ 34.7 $ 61.9 $ 51.8 Capital
Expenditures, (net of change in accounts payable) $ 23.3 $ 20.3 $
38.3 $ 27.7 � (1)��The consolidated financial statements include
the statements of the Company and its wholly owned subsidiaries and
a 49% interest in Anglesey Aluminium Limited (�Anglesey�), which
owns an aluminum smelter in the United Kingdom. � (2)��Please refer
to the Company�s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2008 for additional detail regarding the items in
the table. KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES �
CONDENSED CONSOLIDATED BALANCE SHEETS (1) (2) (Unaudited) (In
millions of dollars) � � June 30, 2008 December 31, 2007 Assets
Current assets (3) 470.9 454.6 Investments in and advances to
unconsolidated affiliate 44.5 41.3 Property, plant, and equipment �
net 253.3 222.7 Net assets in respect of VEBAs 134.8 134.9 Deferred
tax assets � net 232.8 268.6 Other assets � 76.5 � � 43.1 � Total $
1,212.8 � $ 1,165.2 � Liabilities & Stockholders� Equity
Current liabilities 154.3 165.4 Long-term liabilities 57.5 57.0 �
Commitments and contingencies � Stockholders� equity: Common stock
.2 .2 Additional capital 953.2 948.9 Retained earnings 169.3 116.1
Common stock owned by Union VEBA subject to transfer restrictions,
at reorganization value (116.4 ) (116.4 ) Accumulative other
comprehensive income (loss) � (5.3 ) � (6.0 ) Total stockholders�
equity � 1,001.0 � � 942.8 � Total $ 1,212.8 � $ 1,165.2 � �
(1)��The consolidated financial statements include the statements
of the Company and its wholly owned subsidiaries and a 49% interest
in Anglesey Aluminium Limited (�Anglesey�), which owns an aluminum
smelter in the United Kingdom. � (2)��Please refer to the Company�s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2008
for additional detail regarding the items in the table. �
(3)��Includes Cash and cash equivalents of $27.4 and $68.7,
Inventories of $238.2 and $207.6, and net Trade receivables of
$114.4 and $96.5 at June 30, 2008, and December 31, 2007,
respectively.
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