HOUSTON--(BUSINESS WIRE)--Oct. 25, 2000--Kaiser Aluminum Corporation (NYSE) today reported a net loss of $16.8 million, or $.21 per share, for the third quarter of 2000. Excluding special items, net income for the third quarter of 2000 was $2.1 million, or $.03 per share.
Third-quarter results include a number of previously announced items as well as the following two pre-tax charges: $11.5 million, or $.09 per share, for accelerated maintenance expenditures at the Gramercy, La., alumina refinery and $18.1 million, or $.14 per share, in restructuring charges, primarily reflecting a LIFO inventory adjustment in connection with the company's exit from the aluminum beverage can body stock business as well as specific restructuring initiatives. Results also include $.9 million, or $.01 per share, for a mark-to-market gain on certain aluminum hedging contracts.
Gains and charges for the current and year-ago periods are detailed in tables that supplement the company's income statement.
Results for the third quarter of 2000 compare to a net loss of $39.2 million, or $.49 per share, for the same period of 1999. Results for the year-ago period also included several special items. Excluding those items, the company's net loss in the year-ago period was $9.7 million, or $.12 per share.
For the first nine months of 2000, Kaiser's net income was $5.9 million, or $.07 per share, compared to a net loss of $93.1 million, or $1.17 per share, in the first nine months of 1999. Both periods include previously cited items and mark-to-market impacts.
Net sales in the third quarter and first nine months of 2000 were $537.1 million and $1,645.3 million, compared to $520.3 million and $1,524.7 million for the comparable periods of 1999.
Commenting on the company's third quarter performance, Kaiser President and Chief Executive Officer Raymond J. Milchovich said, ``Whether or not one excludes all the special items, operating income was well above that of the year-ago period, due in large measure to higher shipments and realized prices for primary aluminum. Our fabricating businesses also turned in a solid performance despite some areas of market weakness. On a sequential quarter basis -- excluding special items -- operating income in the third quarter was down somewhat, as strong primary aluminum shipments and higher realized prices for primary and fabricated products were offset by softening demand in the ground transportation market and higher energy costs.'' Additional third-quarter segment and business detail, excluding the impact of special items, is presented below.
Alumina & Bauxite Business Unit -- Segment operating income was essentially flat in relation to that of the year-ago period as improved price realizations were offset by higher natural gas and fuel oil costs and lower shipment volumes. Operating income declined, relative to the second quarter of 2000, primarily because of a timing-related decrease in third-party shipments combined with the higher energy costs. Third-quarter internal shipments declined, relative to both periods, because of reduced internal demand from the company's curtailed smelter operations in the Pacific Northwest. Price realizations for the third quarter were above those of the year-ago period, reflecting improvement in market prices for primary aluminum, to which alumina prices are contractually linked. Excluded from reported segment income is the impact of Gramercy's accelerated maintenance spending; the accelerated spending has eliminated certain maintenance outages, and associated lost production, that would have otherwise been required 12 to 36 months after startup.
Primary Aluminum Business Unit -- Even after excluding the impact of a previously announced power sale, reported segment operating income more than doubled in relation to that of the year-ago period due to higher shipments and realized prices. Higher shipments and realized prices also contributed to the increase in operating income relative to the second quarter of 2000. Despite the June 2000 curtailments at Kaiser's smelters in the Pacific Northwest, volume was strong in the period because of higher, timing-related shipments from Valco and the company's purchase and resale of metal. Internal transfers of primary aluminum were lower in the third quarter than in both comparable periods, reflecting reduced demand from the Trentwood, Wash., rolling mill, which has shifted its mix to lower-volume, higher-margin products. Third-quarter price realizations were modestly above those of both comparable periods, reflecting changes in market prices.
Flat-Rolled Products Business Unit -- Segment operating income was relatively unchanged from that of the year-ago period, as the shift to higher value-added products offset the decrease in volume associated with the unit's exit from the can body stock market. Third-quarter segment operating income declined in relation to the second quarter of 2000 due to an increase in utility costs and a decrease in shipments. Demand for the company's heat-treat products continued to be strong. Excluded from reported segment income are non-cash, pre-tax charges of $9.0 million, primarily consisting of a LIFO inventory adjustment in connection with the company's exit from the can body stock market.
Engineered Products Business Unit -- Operating income declined relative to the year-ago period and the second quarter of 2000 as lower shipment volumes reflected weakness in the ground transportation market. In addition, the unit incurred higher costs for natural gas at many of its plants in relation to the comparable periods. Excluded from reported segment income are non-cash, pre-tax charges of $4.0 million for asset impairment in connection with the company's exit from the air bag canister business.
Asbestos Liability -- The company previously announced a third-quarter charge for an increase in its net asbestos liability. The company believes two key factors differentiate Kaiser from other companies with asbestos liabilities that have been in the news recently: scope of exposure and strength of insurance coverage. The majority of the company's claims relate to products that 1) the company has not sold for more than 20 years, 2) were sold for limited industrial applications for a limited period of time, and 3) represented a non-core business of a former unit and accounted for only a small percentage of the unit's revenues.
The company believes it has substantial insurance coverage for its asbestos liability. Since inception through September 30, 2000, Kaiser has paid approximately $170 million in settlement of claims and related legal costs and collected approximately $105 million of insurance recoveries. During the nine months of 2000, the company paid approximately $48 million in asbestos-related costs and collected approximately $36 million in insurance recoveries. Asbestos-related costs and recoveries are not necessarily matched in any given period because insurance reimbursements have typically lagged claims payments.
As of September 30, 2000, the company has a net liability for asbestos-related costs of approximately $110 million, which consists of a gross liability of approximately $540 million offset by an insurance receivable of approximately $430 million, both of which are reflected on the company's balance sheet. The gross liability reflects not only current pending claims but also an estimate of claims to be filed over a 10-year period, although there are inherent uncertainties in such estimates, as outlined in the company's periodic financial statements filed with the Securities and Exchange Commission. As of September 30, 2000, the company had approximately 115,000 current claims as compared to approximately 110,000 as of June 30, 2000. Approximately 65% of such claims for the period ending September 30, 2000 are covered by agreements under which the company expects to settle such claims over an extended period.
The company continues to manage this issue aggressively and actively monitor claims experience and other related matters.
Other Corporate Matters -- The company also offered additional comments on labor, Northwest power, Gramercy, and liquidity:
- As of October 23, the company had reintegrated members of the United Steelworkers of America back into the five plants that had been affected by a two-year labor dispute. To date, the transition has been very smooth.
- On October 12, the company received a revised contract proposal from the Bonneville Power Administration (BPA) for Northwest power for the 2001-2006 period. The BPA has asked that customers sign these contracts by October 30. As expected, the contract would provide the company with sufficient power to fully operate the Trentwood facility as well as approximately 40% of the combined capacity at the Mead and Tacoma smelting operations. The company currently estimates that the power rate in the new contract will be approximately 20% above that of the current contract. The company is presently evaluating the contract.
- Gramercy is on target for a Phase 1 start-up by the middle of the fourth quarter and for full operation in the first quarter of 2001. Cumulative capital spending on the Gramercy project at the end of the third quarter was $162 million. The company continues to believe that property damage insurance will cover 50% or more of the total cost of the project. At the end of the third quarter, the company had received cumulative insurance proceeds of $207 million, allocated roughly as $73 million for property damage and $134 million for business interruption. Of this cumulative amount, the company's third-quarter insurance receipts were $95 million, which was allocated roughly as $49 million for property damage and $46 million for business interruption.
- Liquidity improved in the third quarter, even as the company continued to fund its share of the Gramercy rebuild project. Kaiser ended the period with $236 million available under its credit agreement -- and no outstanding borrowings. In addition, the company's balance sheet showed $46 million in cash.
``Looking ahead to the fourth quarter,'' said Milchovich, ``we see a variety of favorable and unfavorable factors. We are anticipating higher alumina shipments as we prepare for the Gramercy restart and as we have sold forward virtually all of our expected third-party alumina shipments for the remainder of 2000 and 2001; we believe the heat-treat market is likely to remain solid; and we are confident that the steelworkers' transition back into the workplace will continue progressing smoothly.
``However, primary aluminum shipments may be down slightly on a sequential quarter basis because we do not expect a repeat of the extra shipments from Valco -- and we expect to see continued softness in demand in the ground transportation market. We are most exposed to that ground transportation market in our Engineered Products business, which also typically experiences some seasonal slow-down in order patterns toward the end of the year. In addition, volatility in certain energy prices may present a challenge. Given these expectations, and depending on the prevailing metal price, we currently believe the company's operating results in the fourth quarter of 2000 could be modestly above or below breakeven.''
Kaiser Aluminum Corporation is a leading producer of alumina, primary aluminum, and fabricated aluminum products. MAXXAM Inc. (AMEX) directly and indirectly holds approximately 63% of Kaiser.
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 performance 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.
Statements of Consolidated Income (Loss), Condensed Consolidated Balance Sheets, And Selected Operational and Financial Information Follow
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME (LOSS)
(Unaudited)
(In millions of dollars, except share amounts)
Quarter Ended Nine Months Ended
September 30, September 30,
--------------- -------------------
2000 1999 2000 1999
------ ------ -------- --------
Net Sales $537.1 $520.3 $1,645.3 $1,524.7
------ ------ -------- --------
Costs and expenses:
Cost of products sold 461.6 458.9 1,401.5 1,392.7
Depreciation and
amortization 19.8 20.9 59.0 69.4
Selling, administrative,
research and development
and general 25.3 28.5 77.6 82.9
Labor settlement charge 38.5 -- 38.5 --
Other non-recurring operating
items, net (1) (10.9) 24.1 (22.5) 24.1
------ ------ -------- --------
Total cost and expenses 534.3 532.4 1,554.1 1,569.1
------ ------ -------- --------
Operating income (loss) 2.8 (12.1) 91.2 (44.4)
Other income (expense):
Interest expense (27.0) (27.3) (83.6) (82.4)
Other - net (2) (4.9) (21.8) (1.3) (19.3)
------ ------ -------- --------
Income (loss) before income
taxes and minority interests (29.1) (61.2) 6.3 (146.1)
Benefit (provision) for
income taxes 11.2 21.1 (2.5) 49.9
Minority interests 1.1 .9 2.1 3.1
------ ------ -------- --------
Net income (loss) $(16.8) $(39.2) $5.9 $(93.1)
====== ====== ======== ========
Earnings (loss) per share: (3)
Basic $(.21) $(.49) $.07 $(1.17)
Diluted $(.21) $(.49) $.07 $(1.17)
Weighted average shares
outstanding (000):
Basic 79,556 79,404 79,502 79,312
Diluted 79,556 79,404 79,502 79,312
(1) Results for the quarter and nine-month periods ended September 30,
2000 and 1999, included the following non-recurring operating
income (loss) items (other than the labor settlement). The
business segment to which the items are applicable is indicated
parenthetically.
Quarter Ended Nine Months Ended
September 30, September 30,
--------------- ---------------
2000 1999 2000 1999
------ ------ ------ ------
Net gains on power sales
(Primary Aluminum) $40.5 $ -- $56.3 $ --
Gramercy-related items:
Incremental maintenance
spending
(Bauxite & Alumina) (11.5) -- (11.5) --
Insurance deductibles, etc.
($4 Bauxite & Alumina;
$1 Corporate) -- (5.0) -- (5.0)
Impairment charges associated
with product line exits:
(Flat-Rolled Products) (9.0) -- (9.0) --
(Engineered Products) (4.0) -- (4.7) --
Restructuring initiatives: -- --
(Primary Aluminum) (3.1) -- (3.1) --
(Corporate) (2.0) -- (5.5) --
Micromill impairment
(Micromill) -- (19.1) -- (19.1)
------ ------ ------ ------
Other non-recurring
operating items, net $10.9 $(24.1) $22.5 $(24.1)
====== ====== ====== ======
(2) Results for the quarter and nine-month periods ended September 30,
2000 and 1999, included the following pre-tax gains (losses):
Quarter Ended Nine Months Ended
September 30, September 30,
--------------- ---------------
2000 1999 2000 1999
------ ------ ------ ------
Asbestos-related charges $(43.0) $(15.2) $(43.0) $(53.2)
Gains related to real estate
transactions 39.0 -- 39.0 --
Mark-to-market gains (losses) .9 (5.9) 9.6 (20.0)
Gain on sale of interests
in AKW L.P. -- -- -- 50.5
Other, net (1.8) (.7) (6.9) 3.4
------ ------ ------ ------
Other - net $(4.9) $(21.8) $(1.3) $(19.3)
====== ====== ====== ======
(3) Earnings (loss) per share for the quarter and nine-month periods
ended September 30, 2000 and 1999, excluding material
non-recurring items is recapped as follows:
Quarter Ended Nine Months Ended
September 30, September 30,
--------------- ---------------
2000 1999 2000 1999
------ ------ ------ ------
Earnings (loss) per share,
as reported $(.21) $(.49) $.07 $(1.17)
Less material non-recurring
(gains) losses:
Labor settlement charge .30 -- .30 --
Asbestos-related charges .33 .12 .33 .44
Net gains from power sales (.31) -- (.43) --
Gains related to real
estate transactions (.30) -- (.30) --
Impairment and restructuring
charges .14 -- .17 --
Gramercy-related items:
Incremental maintenance
spending .09 -- .09 --
Charge for insurance
deductible -- .04 -- .04
Mark-to-market (gains)
losses (.01) .05 (.07) .16
Micromill impairment -- .16 -- .16
Gain on sale of interests
in AKW L.P. -- -- -- (.42)
------ ------ ------ ------
$.03 $(.12) $.16 $(.79)
====== ====== ====== ======
The foregoing is for information purposes only and is not intended
to be a surrogate for basic or diluted earnings (loss) per share in
accordance with generally accepted accounting principles.
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
SELECTED OPERATION AND FINANCIAL INFORMATION
(Unaudited)
(In millions of dollars, except shipments and prices)
Quarter Ended Nine Months Ended
September 30, September 30,
--------------- -------------------
2000 1999 2000 1999
------ ------ ------ ------
Shipments:
(000 tons)
Alumina (1)
Third Party 484.0 572.4 1,460.4 1,670.8
Intersegment 149.8 191.4 584.1 531.0
-------- -------- -------- --------
Total Alumina 633.8 763.8 2,044.5 2,201.8
-------- -------- -------- --------
Primary Aluminum
Third Party 96.3 75.4 261.8 207.3
Intersegment 34.0 44.6 119.4 130.4
-------- -------- -------- --------
Total Primary
Aluminum 130.3 120.0 381.2 337.7
-------- -------- -------- --------
Flat-Rolled
Products 34.9 54.3 125.7 165.8
-------- -------- -------- --------
Engineered
Products 40.3 42.9 132.3 127.8
-------- -------- -------- --------
Average Realized
Third Party Sales
Price:
Alumina (per ton) $204 $177 $204 $173
Primary Aluminum
(per pound) $.72 $.68 $.71 $.66
Net Sales:
Bauxite and
Alumina (1)
Third Party
(includes net
sales of
bauxite) $106.7 $108.3 $327.7 $308.8
Intersegment 29.0 33.7 115.3 86.3
-------- -------- -------- --------
Total Bauxite &
Alumina 135.7 142.0 443.0 395.1
-------- -------- -------- --------
Primary Aluminum
Third Party 153.6 113.5 411.3 303.1
Intersegment 56.5 65.7 196.1 177.9
-------- -------- -------- --------
Total Primary
Aluminum 210.1 179.2 607.4 481.0
-------- -------- -------- --------
Flat-Rolled
Products 115.4 140.8 390.5 444.4
Engineered
Products 134.3 134.5 438.8 405.8
Minority
Interests 27.1 23.2 77.0 62.6
Eliminations (85.5) (99.4) (311.4) (264.2)
-------- -------- -------- --------
Total Net Sales $537.1 $520.3 $1,645.3 $1,524.7
======== ======== ======== ========
Operating Income
(Loss): (4)(5)
Bauxite &
Alumina (2) $6.3 $4.9 $36.2 $(6.4)
Primary
Aluminum (3) 21.3 10.0 65.4 (10.5)
Flat-Rolled
Products 5.6 5.8 15.9 20.7
Engineered
Products 7.3 12.2 33.2 29.8
Micromill -- (3.2) (.6) (9.5)
Eliminations 4.1 1.1 1.2 6.6
Corporate (14.2) (18.8) (44.1) (51.0)
Labor Settlement
Charge (4) (38.5) -- (38.5) --
Other Non-
Recurring
Operating Items,
Net (5) 10.9 (24.1) 22.5 (24.1)
-------- -------- -------- --------
Total Operating
Income (Loss) $2.8 $(12.1) $91.2 $(44.4)
======== ======== ======== ========
Net Income (Loss) $(16.8) $(39.2) $5.9 $(93.1)
======== ======== ======== ========
Capital
Expenditures $110.7 $10.0 $196.5 $40.3
======== ======== ======== ========
(1) Net sales for the quarter and nine-month periods ended September
30, 2000, included approximately 50,000 tons and 195,000 tons,
respectively, of alumina purchased from third parties and resold
to certain unaffiliated customers and 54,000 tons of alumina
purchased from third parties for the nine-month period ended
September 30, 2000, and transferred to the Company's Primary
aluminum business unit. There were no purchases of alumina from
third parties during the third quarter of 2000 for the Company's
Primary aluminum business unit. Net sales for both the quarter and
nine-month periods ended September 30, 1999, included
approximately 190,000 tons of alumina purchased from third parties
and resold to certain unaffiliated customers and 60,000 tons of
alumina purchased from third parties and transferred to the
Company's Primary aluminum business unit.
(2) Operating income (loss) for the quarter and nine-month periods
ended September 30, 2000, included estimated business interruption
insurance recoveries totaling $23.8 and $89.6, respectively.
Operating income (loss) for both the quarter and nine-month
periods ended September 30, 1999, included estimated business
interruption insurance recoveries totaling $22.0. Additionally,
depreciation was suspended for the Gramercy facility, as a result
of the July 5, 1999, incident. Depreciation expense for the
Gramercy facility for the six months ended June 30, 1999, was
approximately $6.0.
(3) Operating income (loss) for the quarter and nine-month periods
ended September 30, 1999, included potline restart costs of $1.9
and $11.5, respectively.
(4) The allocation of the labor settlement charges to the Company's
business segments was as follows: Bauxite and Alumina - $2.1,
Primary aluminum - $15.9, Flat-rolled products - $18.2; and
Engineered products - $2.3.
(5) Results for the quarter and nine-month periods ended September 30,
2000 and 1999, included the following non-recurring operating
items (other than the labor settlement). The business segment to
which the items are applicable is indicated parenthetically.
Pre-tax Income (Loss)
----------------------------------
Quarter Ended Nine Months Ended
September 30, September 30,
-------------- -----------------
2000 1999 2000 1999
------ ------ ------ ------
Net gains on power
sales (Primary
Aluminum) $40.5 $ -- $56.3 $ --
Gramercy-related items:
Incremental
maintenance spending
(Bauxite & Alumina) (11.5) -- (11.5) --
Insurance
deductibles, etc.
($4 Bauxite &
Alumina; $1
Corporate) -- (5.0) -- (5.0)
Impairment charges
associated with
product line exits:
(Flat-Rolled
Products) (9.0) -- (9.0) --
(Engineered Products) (4.0) -- (4.7) --
Restructuring
initiatives: -- --
(Primary Aluminum) (3.1) -- (3.1) --
(Corporate) (2.0) -- (5.5) --
Micromill impairment
(Micromill) -- (19.1) -- (19.1)
----- ----- ----- -----
Other non-recurring
operating items, net $10.9 $(24.1) $22.5 $(24.1)
===== ===== ===== =====
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions of dollars)
September 30, December 31,
2000 1999
------------- ------------
Assets (Unaudited)
Current assets (1) $962.6 $973.9
Investments in and advances
to unconsolidated affiliates 73.6 96.9
Property, plant, and
equipment - net 1,128.1 1,053.7
Deferred income taxes 464.6 440.0
Other assets 679.2 634.3
-------- --------
Total $3,308.1 $3,198.8
======== ========
Liabilities & Stockholders' Equity
Current liabilities (2) $663.2 $637.9
Long-term liabilities 829.6 727.1
Accrued postretirement
medical benefit obligation 668.9 678.3
Long-term debt (3) 957.8 972.5
Minority interests 116.7 117.7
Commitments and contingencies -- --
Stockholders' equity 71.9 65.3
-------- --------
Total $3,308.1 $3,198.8
======== ========
(1) Includes Cash and cash equivalents of $46.5 and $21.2 at September
30, 2000, and December 31, 1999, respectively.
(2) Includes current portion of long-term debt of $1.5 and $.3 at
September 30, 2000, and December 31, 1999, respectively.
(3) There were no outstanding borrowings under KACC's Credit
Agreement at September 30, 2000. Outstanding borrowings under
the Credit Agreement at December 31, 1999 were $10.4.