Kaiser Aluminum Corporation · NASDAQ:KALU
Kaiser Aluminum — FY2008 Earnings Presentation
31 slides from Kaiser Aluminum's earnings presentation, Feb 18, 2009
Slide 1: Fourth Quarter and Full-Year 2008 Earnings Conference Call
Fourth Quarter and Full-Year 2008 Earnings Conference Call February 18, 2009
Slide 2: Forward-looking statements
2 The information contained in this presentation includes 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. Such statements include statements regar
Slide 3: Non-run-rate items explanation
3 Non-run-rate items to us are items that, while they may recur from period to period, (1) are particularly material to results, (2) impact costs as a result of external market factors and (3) may not recur in future periods if the same level of underlying performance were to occur. These are certai
Slide 4: Jack Hockema, President, CEO and Chairman
4 Jack Hockema President, CEO and Chairman
Slide 5: 2008 Highlights
2008 Highlights 5 Solid Underlying Operating Income and Continued Financial Strength Consolidated operating income of $116 million excluding significant previously announced non-run-rate and predominately non-cash charges Record full year heat treat plate shipments Strong demand enabled solid result
Slide 6: Dan Rinkenberger, SVP and Chief Financial Officer
6 Dan Rinkenberger Senior Vice President and Chief Financial Officer
Slide 7: Financial Highlights - Consolidated
7 Financial Highlights - Consolidated Solid fourth quarter underlying results despite challenging environment Full year operating income before NRR1 of $116 million on relatively flat revenue reflecting: Strong aerospace and defense demand Higher energy costs Manufacturing inefficiencies Recessionar
Slide 8: Non-Run-Rate Items
8 Non-Run-Rate Items Full year reported operating income of ($91) million included NRR1 charges of ($207) million Mark-to-market loss of ($87) million in 2008 primarily related to a severe decline in metal prices LCM charge of ($66) million due to lower metal prices Impairment charge of ($38) millio
Slide 9: Fabricated Products Cost Pressures Offset Higher Value-Added Sales
9 Fabricated Products Cost Pressures Offset the Impact of Higher Value-Added Sales Fourth Quarter Aerospace and High Strength shipments up approximately 20% over prior year Shipments of other products down 19% versus prior year Full Year 2008 Shipments up slightly from prior year Record heat treat p
Slide 10: Sales Analysis By Application
10 Sales Analysis By Application Record Results in the Aerospace & High Strength Markets Fourth Quarter Record Aerospace & High Strength shipments and value-added revenue2 Weak automotive and industrial end use demand exacerbated by destocking through the entire supply chain Full Year 2008 Record Ae
Slide 11: Primary Aluminum
11 Primary Aluminum Revenue and operating income (before NRR1) negatively impacted by lower production resulting from the mid-year outage at Anglesey Non-cash mark-to-market loss of $81 million reverses a $8 million mark-to- market gain in 2007 Recognized a $38 million asset impairment charge in Q40
Slide 12: 2008 Cash Sources and Uses
2008 Cash Sources and Uses 2008 Cash requirements funded with existing cash, solid operating cash flows and modest revolver borrowings Capital investments of $86 million primarily related to completion of the Trentwood expansion and other facility upgrades, including Kalamazoo Working capital consum
Slide 13: Cash and Liquidity Management
Cash and Liquidity Management Committed $265 million Revolving Credit Facility provides borrowing capacity to operate through economic cycles Credit market conditions continue to limit access to new capital Provide a prudent liquidity cushion to manage through an economic downturn Solid operating ca
Slide 14: Jack Hockema, President, CEO and Chairman
14 Jack Hockema President, CEO and Chairman
Slide 15: Market Outlook
15 Market Outlook Automotive Extrusions Aerospace / High Strength General Engineering Cast Billet Custom Other % of sales 6.2 48.2 37 1.1 7.5 General Engineering 37% Aerospace / High Strength 48% Automotive Extrusions 6% Other Custom 8% Cast Billet 1% Aerospace & Defense Expect continuing strong dem
Slide 16: Managing through Economic Uncertainty - Positioning
16 Managing through Economic Uncertainty - Positioning Well Positioned With Financial Strength and Solid Market Presence Solid balance sheet, liquidity and financial flexibility Strong market presence Focus on demanding applications where we have competitive strength Differentiated as the supplier o
Slide 17: Managing through Economic Uncertainty - 2009 Focus
17 Managing through Economic Uncertainty - 2009 Focus 2009 Focus on Efficiency, Liquidity, Customer Satisfaction & Growth Manufacturing efficiency Restore order in manufacturing operations Flex production and resources with demand Liquidity Reduce inventory Allocate capital with priority on efficien
Slide 18: Summary
18 Summary Strong underlying 2008 results 2nd best Fabricated Products operating income (x-NRR) in history Record Aero/HS shipments Well-positioned to manage through market cycles Strong balance sheet and committed bank financing Strong market position supported by multi-year customer contracts Taki
Slide 19: Q&A
KAISER ALUMINUM Q&A
Slide 20: Closing Comments
20 Strong underlying 2008 results Long-term fundamentals remain positive Well-positioned to manage through market cycles Closing Comments
Slide 21: Kaiser Aluminum
KAISER ALUMINUM
Slide 22: Appendix
KAISER ALUMINUM Appendix 22
Slide 23: Company Summary
23 Leading North American fabricated aluminum products manufacturing company serving global markets Annually produce over 500 million pounds of fabricated products Reputation for Best In Class customer satisfaction Broad product offering of sheet, plate, rod, bar, tube, extrusions and forgings Empha
Slide 24: Mark-to-Market and Metal Profits & LIFO
24 Mark-to-Market Derivatives are being marked-to- market with non-cash gains and losses recognized in income (versus deferred and recognized at the same time as when the underlying products are purchased or sold) The impact in Fabricated Products is driven primarily by natural gas positions The imp
Slide 25: Corporate & Other
25 Corporate & Other 1 Primarily reflects amortization of the fair value of equity-based compensation 2 Totals may not sum due to rounding 3 Reflects non-cash net periodic VEBA benefit income (expense) and legacy environmental expenses 4 NRR is an abbreviation for Non-Run-Rate
Slide 26: Reported to Adjusted Operating Income Bridge
26 Reported to Adjusted Operating Income Bridge 1 Totals may not sum due to rounding 2 Refer to the most recent 10-K for a detailed breakdown of 'Other Operating Benefits / (Charges)'
Slide 27: Operating Margin Trends - Fabricated Products
Operating Margin Trends - Fabricated Products We manage the business to grow EVA; decisions to optimize EVA may reduce margins When measuring margin, EBITDA per pound is a better metric than margin as % of sales revenue which is impacted by metal price volatility 2008 Impacted by: Favorable value ad
Slide 28: Sales Analysis By Application (2006 vs. 2007)
28 Sales Analysis By Application (2006 vs. 2007) 1 Includes automotive, custom products and billet 2 Totals may not sum due to rounding 3 Value added Revenue is = Net Sales - Cost of alloyed metal; also known as 'spread revenue'
Slide 29: Sales Analysis By Application (2007 vs. 2008)
29 Sales Analysis By Application (2007 vs. 2008) 1 Includes automotive, custom products and billet 2 Totals may not sum due to rounding 3 Value added revenue = Net Sales - Cost of alloyed metal; also known as 'spread revenue'
Slide 30: Historical Perspective on Market Cyclicality
30 Historical Perspective on Market Cyclicality Long Term Contracts Mitigate Effect of Potential Downturn Served market segments contracted ~30% from peak to trough in the post 9/11 deep and long recession Kaiser's enriched product mix and book of heat treat plate contracts should mitigate the effec
Slide 31: Kaiser Aluminum
KAISER ALUMINUM