Kaiser Aluminum Reports Results for Second Quarter of 2001 |
Updated: Tuesday, July 24, 2001 08:24 AM ET |
SUMMARY OF SEGMENT DETAIL: 2Q2001 vs 2Q2000 Alumina Segment operating loss was $6.0 million, compared to operating income of $16.2 million in the year-ago period. Segment results include a benefit of $15.2 million for business interruption insurance as well as abnormal Gramercy startup costs of $22.0 million. -- Total shipment volumes were up 3% because of routine fluctuations in the timing of shipments. Intersegment shipments were below those of the year-ago period because the curtailment of the company's Northwest smelters has cut internal demand for alumina. Gramercy operated at about 60% of rated capacity during the quarter - and more recently has operated at about 67% of capacity. -- Third-party price realizations were down 9%, reflecting the decline in the market price for primary aluminum, to which alumina prices are contractually linked. -- Operating costs per tonne were unfavorable largely because Gramercy did not perform as well as expected in its interim operating mode. Additional cost factors were non-recurring operating issues at the 49%-owned KJBC facility in Jamaica and higher energy prices. Primary Aluminum -- Segment operating income was $3.9 million, compared to $22.7 million in the year-ago period. Segment results include $4.5 million of excess overhead and fixed costs associated with Northwest curtailments. The company believes such costs are excess to the run rate that could be achieved in the event of an extended curtailment. -- Total shipment volumes were down 49% due largely to the power-related curtailment of the company's Tacoma and Mead, Wash., smelters. The company temporarily curtailed rod production during the quarter. The company's primary aluminum operating rate was approximately 42% as compared to approximately 91% in the year-ago period. -- Third-party price realizations were down 3%, largely reflecting the Northwest smelter curtailments, whose third-party shipments typically capture a Midwest premium price. -- Operating costs per pound were unfavorable because of the excess overhead costs identified above offset somewhat by favorable costs at the 90%-owned Valco and 49%-owned Anglesey smelters. Flat-Rolled Products -- Segment operating income was $3.1 million, compared to $7.2 million in the year-ago period. -- Shipment volumes were down 54% reflecting the company's exit from the can body stock market, as well as weak demand in markets such as general engineering, lid and tab stock, and automotive. The aerospace market continued to be strong. -- Average price realizations were up 34% due to mix. -- Operating costs per pound were higher primarily due to mix, exacerbated by less than favorable cost performance associated with product line transition. Engineered Products -- Segment operating income was $2.4 million, compared to $12.6 million in the year-ago period. -- Shipment volumes were down 29% due to weakness in all markets, particularly truck-trailer. -- Average price realizations were up 11% due to mix. -- Operating costs per pound were up due to higher energy prices and other costs. Corporate -- Segment expense was $17.7 million, compared to $15.2 million in the year-ago period. -- Expense was modestly higher primarily due to increased pension costs for active and retired employees. Other Corporate Matters - Second Quarter 2001 Pacific Northwest Status and Power Sales -- The company has maintained its ability to restart up to approximately 110,000 metric tonnes of its Northwest smelter capacity on or after Oct. 1, 2001, subject to prevailing economics. The company remains open to achieving mutually acceptable terms with the Bonneville Power Administration for continued curtailment. However, short of that, the company is maintaining its option to operate. -- The company recognized additional power sale revenues of approximately $2.5 million. The net impact of power sales was a loss of $5.5 million, after consideration of $8 million of curtailment related expenses. -- Estimated value of remaining power transactions to be sold is approximately $2 - $7 million. -- Cash yet to be received from previous power sales is approximately $45 million. -- The company continues to believe that Pacific Northwest power fundamentals are sound and capable of supporting smelter operations. Overview of Major Q2 Cash Flows -- Beginning cash: $44 million -- Cash in: $123 million -- $75 million power sale proceeds -- $42 million of asbestos insurance receipts -- $2 million of adjusted EBITDA -- $4 million in disposition of property -- Cash out: $101 million -- $43 million of capital spending -- $14 million of interest paid -- $22 million for asbestos claims -- $18 million of cash tax payments -- $4 million of working capital and other -- Ending cash: $66 million Gramercy Rebuild -- Construction is largely complete; plan to reach run rate, with increased capacity and improved efficiency, at end of 2001 or early 2002. -- Capital spending was $26 million, for a cumulative project total of $306 million. -- Total capital spending on the project still estimated to be $300 - $325 million. QAL Transaction -- Still expected to close in third quarter of 2001. -- The company expects after-tax net income benefit of at least $75 million. Asbestos -- Results include pre-tax charge of $45.8 million to reflect an increase in net asbestos liability. -- 108,000 claims pending versus 102,500 at March 31, 2001; of these amounts, the claims subject to settlement agreements were 66,200 in second quarter versus 69,400 in first quarter. -- In Q2, paid approximately $22 million versus insurance proceeds of approximately $42 million. For the first six months of 2001, the company paid approximately $60 million versus insurance proceeds of approximately $65 million. -- Liability of $650.4 million at end of 2Q was offset by estimated insurance receivable of $504.7 million. This compares to March 31, 2001 liability of $486.2 million and insurance receivable of $408.0.
SUMMARY OF SEGMENT OUTLOOK: 3Q2001 vs 2Q2001
Business Shipment Price Operating Operating
Unit Volumes Realizations Costs Income
----------------------------------------------------------------------
Alumina Flat Market Flat/favorable Flat/favorable
driven
----------------------------------------------------------------------
Primary
Aluminum Down Market Flat Flat
driven
----------------------------------------------------------------------
Flat-Rolled
Products Flat Flat Flat/favorable Flat/favorable
----------------------------------------------------------------------
Engineered
Products Flat/down Flat Flat/favorable Flat/favorable
----------------------------------------------------------------------
Corporate -- -- Flat --
----------------------------------------------------------------------
Alumina -- Total shipment volumes are likely to be flat. -- Third-party price realizations are contractually linked to LME aluminum prices generally on a one-to-three month lag. As a result, recent weakness in LME prices would tend to dampen alumina price realizations in the third quarter. -- Operating are expected to be better but will largely be determined by the speed at which Gramercy completes its technology changeover. A planned maintenance outage at Alpart is expected to be somewhat offset by improved energy costs at all three alumina refineries. Primary Aluminum -- Shipment volumes are likely to be down modestly, reflecting curtailment of aluminum rod production at the Tacoma, Wash., smelter. -- Price realizations are reflective of commodity pricing as determined by LME and Midwest markets. Kaiser realizations also typically reflect some product premiums. -- Costs are expected to be flat. Flat-Rolled Products -- Shipment volumes are likely to be affected by the prospect of continued weakness in general engineering and lid & tab stock - offset somewhat by the prospect of continued firm demand in the aerospace market. -- Average price realizations are likely to be flat, reflecting a product mix reasonably similar to that of the second quarter. -- Costs are likely to be flat/favorable as the facility adjusts more efficiently to the mix shift. Engineered Products -- Shipment volumes are likely to be flat/down, reflecting continued weakness in ground transportation markets as well as seasonality. -- Average price realizations are likely to be flat due to relatively stable mix. -- Costs are expected to be flat/favorable due to moderation in energy prices. Corporate -- Corporate expenses are likely to remain flat/favorable as the company continues to seek reductions in overhead expenses. Company press releases may contain statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The company cautions that any such forward-looking statements are not guarantees of future results and involve significant risks and uncertainties, and that actual results may vary materially from those expressed or implied in the forward-looking statements as a result of various factors.
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME (LOSS)
(Unaudited)
(In millions of dollars, except share amounts)
Quarter Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2001 2000 2001 2000
--------- --------- ----------- ---------
Net sales $446.8 $552.8 $927.1 $1,128.5
--------- --------- ----------- ---------
Costs and expenses:
Cost of products sold 418.8 469.5 863.3 960.2
Depreciation
and amortization 22.2 19.6 43.5 39.2
Selling, administrative,
research and
development and general 25.4 25.8 52.7 52.3
Other non-recurring
operating items,
net(1) 8.0 (13.6) (220.2) (11.6)
--------- --------- ----------- ---------
Total cost and
expenses 474.4 501.3 739.3 1,040.1
--------- --------- ----------- ---------
Operating income
(loss) (27.6) 51.5 187.8 88.4
Other income
(expense):
Interest expense (27.1) (28.2) (55.0) (56.6)
Other - net(2) (51.7) (6.5) (44.4) 3.6
--------- --------- ----------- ---------
Income (loss) before
income taxes and
minority interests (106.4) 16.8 88.4 35.4
Benefit (provision)
for income taxes 41.5 (6.4) (34.5) (13.7)
Minority interests .8 .6 1.6 1.0
--------- --------- ----------- ---------
Net income (loss) $(64.1) $11.0 $55.5 $22.7
========= ========= =========== =========
Earnings (loss)
per share:
Basic/Diluted $(.80) $.14 $.70 $.29
Weighted average shares
outstanding (000):
Basic/Diluted 79,780 79,541 79,696 79,474
(1) Operating income (loss) for the quarter and six-month period
ended June 30, 2001 and 2000, included the following items.
The business segment to which the items are applicable is
indicated.
Quarter Ended Six Months Ended
June 30, June 30,
----------------- ----------------
2001 2000 2001 2000
------ ----- ------ ------
Net gains (losses) on
power sales
(Primary aluminum) $(5.5) $15.8 $222.7 $15.8
Restructuring initiatives -
Corporate (.5) (1.5) (.5) (3.5)
Bauxite & Alumina (2.0) -- (2.0) --
Impairment charge
associated with
product line exit
(Engineered products) -- (.7) -- (.7)
------ ----- ------ ------
Other non-recurring
items $(8.0) $13.6 $220.2 $11.6
====== ===== ====== ======
(2) Other income (expense) for the quarter and six-month period
ended June 30, 2001 and 2000, included the following pre-tax
gains (losses):
Quarter Ended Six Months Ended
June 30, June 30,
----------------- ----------------
2001 2000 2001 2000
------ ----- ------ ------
Mark-to-market gains
(losses) $3.1 $(6.0) $18.4 $8.4
Asbestos related
charges (45.8) -- (53.3) --
Adjustment to
environmental
liabilities (8.0) -- (8.0) --
MetalSpectrum investment
write-off (2.8) -- (2.8) --
Other, net 1.8 (.5) 1.3 (4.8)
------ ----- ------ ------
Other - net $(51.7) $(6.5) $(44.4) $3.6
====== ===== ====== ======
(3) Earnings (loss) per share for the quarter and six-month period
ended June 30, 2001 and 2000, excluding material special items
is recapped as follows:
Quarter Ended Six Months Ended
June 30, June 30,
------------- -----------------
2001 2000 2001 2000
----- ---- ----- ----
Earnings (loss) per
share, as reported $(.80) $.14 $.70 $.29
Less material
special (gains)
losses:
Net (gains) losses
on power sales .04 (.12) (1.70) (.12)
Excess overhead
and other fixed
costs associated
with curtailed
Northwest smelting
operations .03 -- .08 --
Mark-to-market
(gains) losses (.02) .05 (.14) (.06)
Asbestos-related
charges .35 -- .41 --
Adjustment to
environmental
liabilities .06 -- .06 --
Abnormal Gramercy
start-up costs .17 -- .31 --
Additional Gramercy
business interruption
("BI") recoveries (.12) -- (.12) --
MetalSpectrum
investment
write-off .02 -- .02 --
Restructuring and
impairment charges .02 .01 .02 .02
----- ---- ----- ----
$(.25) $.08 $(.36) $.13
===== ==== ===== ====
The foregoing is for information purposes only and is not intended
to be a surrogate for basic or diluted earnings per share in
accordance with generally accepted accounting principles.
(4) The following presents the Company's estimate of its recurring
EBITDA (at current economics) for the quarter and six-month
period ended June 30, 2001:
Quarter Six-months
---------- -----------
EBITDA (excluding
other non-recurring
items) $2.6 $11.1
Remove special
costs
(benefits) --
Excess overhead
and other fixed
costs associated
with curtailed
Northwest smelting
operations 4.5 10.5
Abnormal Gramercy
start-up costs 22.0 41.0
Additional Gramercy
B.I. recoveries (15.2) (15.2)
----- -----
Adjusted EBITDA at
current economics $13.9 $47.4
===== =====
The foregoing is for information purposes only and is not intended
to be a surrogate for cash flow from operations, net income or any
other measure of performance in accordance with generally accepted
accounting principles.
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
SELECTED OPERATIONAL AND FINANCIAL INFORMATION
(Unaudited)
(In millions of dollars, except shipments and prices)
Quarter Ended Six Months Ended
June 30, June 30,
------------------ ---------------------
2001 2000 2001 2000
------- ------- -------- ---------
Shipments:
(000 metric tons)
Alumina (1)
Third Party 664.9 538.9 1,328.9 976.4
Intersegment 51.9 156.7 234.8 434.3
------- ------- -------- ---------
Total
Alumina 716.8 695.6 1,563.7 1,410.7
------- ------- -------- ---------
Primary
Aluminum (2)
Third party 62.8 86.1 126.7 165.5
Intersegment .5 37.5 2.0 85.4
------- ------- -------- ---------
Total Primary
Aluminum 63.3 123.6 128.7 250.9
------- ------- -------- ---------
Flat-Rolled
Products (2) 17.8 39.0 42.8 90.8
------- ------- -------- ---------
Engineered
Products (2) 31.3 44.3 64.2 91.6
------- ------- -------- ---------
Average realized
third-party sales
price:
Alumina
(per ton) $190 $208 $192 $213
Primary
aluminum
(per pound) $.69 $.71 $.71 $.75
Net Sales
Bauxite and
Alumina
Third Party
(including net
sales of
bauxite) $132.7 $122.2 $270.3 $229.8
Intersegment 9.9 29.5 45.9 86.3
------- ------- -------- ---------
Total Bauxite
and Alumina 142.6 151.7 316.2 316.1
------- ------- -------- ---------
Primary
Aluminum (2)
Third party 96.1 135.3 199.1 273.3
Intersegment .8 57.5 3.3 139.6
------- ------- -------- ---------
Total Primary
Aluminum 96.9 192.8 202.4 412.9
------- ------- -------- ---------
Flat-Rolled
Products 76.9 125.4 172.8 283.3
Engineered
Products 115.9 148.7 236.5 312.4
Commodities
Marketing (1.0) (4.1) (3.6) (20.2)
Minority
Interests 26.2 25.3 52.0 49.9
Eliminations (10.7) (87.0) (49.2) (225.9)
------- ------- -------- ---------
Total Net
Sales $446.8 $552.8 $927.1 $1,128.5
======= ======= ======== =========
Operating
Income
(Loss):
Bauxite and
Alumina (3) $(6.0) $16.2 $(12.8) $43.7
Primary
Aluminum 3.9 22.7 8.4 64.7
Flat-Rolled
Products 3.1 7.2 6.3 10.3
Engineered
Products 2.4 12.6 5.1 25.9
Commodities
Marketing (7.0) (6.8) (9.0) (34.4)
Eliminations 1.7 1.2 5.5 (2.9)
Corporate and
Other (17.7) (15.2) (35.9) (30.5)
Other Non-Recurring
Operating
Items (4) (8.0) 13.6 220.2 11.6
------- ------- -------- ---------
Total Operating
Income (Loss) $(27.6) $51.5 $187.8 $88.4
======= ======= ======== =========
Net Income
(Loss) $(64.1) $11.0 $55.5 $22.7
======= ======= ======== =========
Capital
Expenditures $42.8 $69.1 $86.8 $85.8
======= ======= ======== =========
(1) Net sales for the quarter and six-month period ended June 30,
2001, included approximately 26,400 tons and 66,100 tons of
alumina purchased from third parties. Net sales for the
quarter and six-month period ended June 30, 2000 included
approximately 83,000 tons and 199,000 tons of alumina
purchased from third parties.
(2) Beginning in the first quarter of 2001, the Flat-rolled
products business unit began purchasing its own primary
aluminum rather than relying on the Primary aluminum business
unit to supply its aluminum requirements thru production or
third party purchases. The Engineered products business unit
was already responsible for purchasing the majority of its
primary aluminum requirements. During the quarter and
six-month period ended June 30, 2001, the Primary aluminum
business unit purchased approximately 6,600 tons and 23,800
tons of primary aluminum from third parties to meet existing
third party commitments.
(3) During the quarter and six-month period ended June 30, 2001
approximately $22.0 and $41.0, respectively, of abnormal
Gramercy start-up costs were incurred. Operating income (loss)
for both the quarter and six-month period ended June 30, 2001,
also included additional accrued business interruption
recoveries related to the Gramercy facility of $15.2 based on
a recent agreement with KACC's insurers. Depreciation was
suspended for the Gramercy facility during the six months of
2000 as a result of the July 1999 incident. Depreciation
expense for the Gramercy facility for the first six months of
1999 was $6.0.
(4) Results for the quarter and six-month period ended June 30,
2001 and 2000, included significant non-recurring operating
items. See Note 1 to Statements of Consolidated Income (loss).
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions of dollars)
June 30, Dec. 31,
2001 2000
-------- --------
Assets (Unaudited)
Current assets (1) $903.7 $1,012.1
Investments in and
advances to
unconsolidated
affiliates 74.2 77.8
Property, plant
and equipment - net 1,219.1 1,176.1
Deferred income taxes 446.3 454.2
Other assets 699.5 622.9
-------- --------
Total $3,342.8 $3,343.1
======== ========
Liabilities & Stockholders' Equity
Current liabilities (2) $882.8 $841.4
Long-term liabilities 870.1 703.7
Accrued postretirement
medical benefit obligation 647.6 656.9
Long-term debt 698.8 957.8
Minority interests 113.9 101.1
Commitments and contingencies -- --
Stockholders' equity 129.6 82.2
-------- --------
Total $3,342.8 $3,343.1
======== ========
(1) Includes Cash and cash equivalents of $65.6 and $23.4 at June
30, 2001 and December 31, 2000, respectively.
(2) Includes current portion of long-term debt of $224.5 and $31.6
at June 30, 2001 and December 31, 2000, respectively. There
were no outstanding borrowings under KACC's Credit Agreement
at June 30, 2001. Outstanding borrowings under KACC's Credit
Agreement were $30.4 at December 31, 2000.
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