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Kaiser Aluminum Corporation Reports Third Quarter and Year-to-Date 2010 Financial Results

/ Source: GlobeNewswire

    FOOTHILL RANCH, Calif., Oct. 25, 2010 (GLOBE NEWSWIRE) --Kaiser Aluminum Corporation (Nasdaq:KALU) today reported net income of $6 million and earnings per diluted share of $0.29 for the third quarter ended September 30, 2010 compared to $23 million and earnings per diluted share of $1.14 for the quarter ended September 30, 2009. Both periods included pre-tax, non-run-rate items, including non-cash mark-to-market gains on derivative positions of approximately $15 million in the third quarter 2010 and $27 million in the third quarter of 2009 and an increase in the environmental accrual of $14 million in the third quarter of 2010. Excluding the impact of pre-tax, non-run-rate items, adjusted net income was $6 million, or $0.32 earnings per diluted share, for the third quarter of 2010 compared to adjusted net income and earnings per diluted share of $6 million and $0.27, respectively, for the prior year quarter.

    For the nine months ended September 30, 2010, reported net income was $14 million or $0.74 of earnings per diluted share compared to $46 million or $2.31 million per diluted share in the prior year period. Adjusting for pre-tax, non-run-rate and predominantly non-cash items, earnings per diluted share for the nine months ended September 30, 2010 improved to $1.47 from $1.39 for the prior year period.

    Third Quarter Summary Comments

    "Consistent with our outlook, market conditions in the third quarter remained similar to the first half of 2010. Third quarter operating results reflected normal seasonal weakness for our general engineering applications and higher costs associated with planned major maintenance projects. Our quarterly results were further impacted by short-term manufacturing inefficiencies brought on by lower volume, production delays and continued ramp-up of the new Kalamazoo extrusion facility," said Jack A. Hockema, President, CEO and Chairman. "On a comparative basis, adjusted operating income for our Fabricated Products business increased 15% from the prior year quarter and 25% year-to-date. The increase reflects higher demand levels and improvements in manufacturing cost efficiencies across our platform."

    "We are very encouraged by the progress we've made at our new Kalamazoo facility. The product quality capability has exceeded our high expectations. When fully operational, this facility will provide a significant improvement in our competitive position. We are also very excited about the recently announced acquisition of the Nichols Wire facility and the pending acquisition of the Alexco assets. These acquisitions further strengthen our platform and will drive additional growth by providing product line extensions and capabilities to more broadly meet the needs of our aerospace and general engineering served market segments," continued Mr. Hockema.

    The Company reported consolidated operating income before non-run-rate items of $14 million in the third quarter 2010, a sequential decline of $12 million from the second quarter 2010, reflecting seasonal weakness and cost inefficiencies, but slightly higher than the $13 million reported in the prior-year period. Non-run-rate items in each quarter included significant non-cash, mark-to-market gains or losses on derivative hedging positions. Consolidated operating income as reported was $13 million for the third quarter of 2010 compared to $4 million for the second quarter and $43 million for the prior-year quarter.

    For the nine months ended September 30, 2010, consolidated operating income before non-run-rate items was $56 million compared to $54 million for the prior year period as improved shipments and cost structure for the Fabricated Products segment was partially offset by a reduction of Anglesey-related earnings. Reported operating income was $32 million for the nine months ended September 30, 2010 compared to $85 million for the prior year period, reflecting non-run-rate items comprised of an increase in the environmental accrual in the third quarter 2010 and non-cash, mark-to-market gains or losses on derivative hedging positions.

    The Fabricated Products segment operating income adjusted for non-run-rate items was $23 million in the third quarter 2010 compared to $35 million in the second quarter 2010. The sequential decline reflected seasonally weaker demand for general engineering applications, higher planned major maintenance expenses and short-term manufacturing inefficiencies due to lower volume, production delays and continued ramp-up of the new Kalamazoo extrusion facility. Compared to the prior year quarter, segment operating income adjusted for non-run-rate items increased by $3 million or 15% reflecting the impact of higher value added revenue on stronger shipments across all end market applications partially offset by short-term manufacturing inefficiencies. Non-run-rate items occurred in all periods, including a $13 million increase in the environmental accrual in the third quarter 2010. Operating income as reported was $6 million in the third quarter 2010, compared to $33 million in the second quarter 2010 and $26 million in the prior year period.

    Operating income in the Fabricated Products segment for the nine months ended September 30, 2010, adjusted for non-run-rate items, was $85 million, a $17 million or 25% improvement over the comparable 2009 period due to stronger demand and significant year-over-year improvement in manufacturing cost efficiencies. Numerous non-run-rate items existed in both nine-month periods, nearly all of which were non-cash. Operating income in the Fabricated Products segment as reported for the nine months ended September 30, 2010 was $62 million compared to $59 million in the prior year period. 

    Outlook

    "We are increasingly encouraged by the prospects for the aerospace market. Airframe manufacturers have announced plans for increased production, and the long-term fundamentals remain strong with solid order backlogs and growing aircraft build rates. Although we expect airframe manufacturers to continue working through surplus inventories, we anticipate destocking to abate as build rates ramp up in 2011," said Mr. Hockema.

    "Demand for our general engineering, automotive and industrial applications continues to reflect a slow recovery. We do not anticipate any meaningful restocking of service center inventories until the economic recovery is strong enough to stimulate a sustainable increase in real demand. Despite these conditions, automotive build rates are steadily increasing, and we are capturing new programs driven by vehicle light weighting to meet CAFE (Corporate Average Fuel Efficiency) regulations.

    "Overall, we are pleased with the Company's long-term positioning and outlook. The full benefit of our Trentwood expansion has yet to be realized, and the Alexco and Nichols Wire acquisitions provide additional aerospace growth potential. Our new Kalamazoo facility is proving capable of delivering exceptional product quality and will advance our competitive cost position. In addition, the facility provides capacity and cost-efficient sourcing for growth in automotive applications.

    "In the short-term, we anticipate that fourth quarter shipments and value added revenue will be slightly lower than the third quarter as a result of normal year-end seasonality. Planned major maintenance will continue into the fourth quarter at a cost comparable to the third quarter. Nevertheless we expect manufacturing efficiencies to improve in the fourth quarter as we return to levels experienced during the first half of 2010," concluded Mr. Hockema.

    Conference Call

    Kaiser Aluminum Corporation will host a conference call on Monday, October 25, 2010, at 10:00am (Pacific Time); 12:00pm (Central Time); and 1:00pm (Eastern Time), to discuss third quarter 2010 results. To participate, the conference call can be directly accessed from the U.S. and Canada at (800) 580-5706, and accessed internationally at (913) 312-0703. A link to the simultaneous webcast can be accessed on the Company's website at . A copy of a presentation will be available prior to the start of the call and an audio archive will be available on the Company's website following the conference call.

    Kaiser Aluminum Corporation, headquartered in Foothill Ranch, Calif., is a leading producer of semi-fabricated specialty 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 produce value added sheet, plate, extrusions, rod, bar, wire 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 and the S&P SmallCap 600® index.

    The Kaiser Aluminum Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6081

    Available Information

    For more information, please visit the Company's web site at www.kaiseraluminum.com. The web site includes a section for investor relations under which the Company provides notifications of news or announcements regarding its financial performance, including Securities and Exchange Commission (SEC) filings, investor events, press and earnings releases. In addition, all Company filings submitted to the SEC are available through a link to the section of the SEC web site at which includes: Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Proxy Statements for the Company's annual stockholder's meetings and other information statements as filed with the SEC. In addition, the Company provides a webcast of its quarterly earnings calls and certain events in which management participates in or hosts with members of the investment community.

    Non-GAAP Financial Measures

    This earnings release contains certain non-GAAP financial measures. A "non-GAAP financial measure" is defined as a numerical measure of a company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets or statements of cash flow of the company. Pursuant to the requirements of Regulation G, the Company has provided a reconciliation of non-GAAP financial measures to the most directly comparable financial measure in the accompanying tables.

    The non-GAAP financial measures used within this earnings release are operating profit, net income and earnings per diluted share, excluding non-run-rate, non-operating gains and losses, and earnings before interest, tax, depreciation and amortization or EBITDA. These measures are presented because management uses this information to monitor and evaluate financial results and trends and believes this information to also be useful for investors.

    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 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 the demand in the market segments served by the Company, including aerospace, defense, general engineering, automotive, distribution and other market segments, including changes impacting the volume, price or mix of products sold by the Company and the Company's ability to flex production consistent with changing demand levels; (b) pressure to reduce defense spending and demand for the Company's products used in defense applications as the U.S. and other governments are faced with competing national priorities; (c) the Company's ability to successfully consummate the pending acquisition of Alexco assets; (d) the Company's ability to integrate acquired operations, continue to realize manufacturing efficiencies and remain a low cost producer, (e) the Company's ability to successfully identify and execute its long term strategic growth initiatives and internal and external growth opportunities; (f) the Company's ability to efficiently deploy assets to collateralize existing and future financing requirements; (g) the Company's ability to meet contractual commitments and obligations to supply products meeting required specifications; (h) changes in competitive factors in the markets served by the Company, including developments in technology used by the Company, its competitors or its customers and changes in applicable laws and regulatory requirements which negatively impact the Company's competitive position; (i) the Company's ability to lower energy costs, realize manufacturing efficiencies and complete its expansion and organic growth projects, equipment and facility upgrades to improve manufacturing and cost efficiencies and product expansions as planned and by targeted completion dates, including the start-up and operation of the Company's new rod and bar extrusion facility in Kalamazoo, Michigan; and (j) 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, 2009 and Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission for the quarter ended March 31, 2010. 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.

     

    Reconciliation of Non-GAAP Measures

    The following table presents a reconciliation of non-GAAP measures presented in the earnings release for the quarter ended September 30, 2010:

    The following table presents a reconciliation of non-GAAP measures presented in the earnings release for the quarter ended September 30, 2009:

    CONTACT: Kaiser Aluminum Corporation Investor Relations Contact: Melinda C. Ellsworth (949) 614-1757 FD Public Relations Contact: Dave Quast (646) 421-5341