Kaiser Aluminum Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the Kaiser Aluminum First Quarter 2020 earnings call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you need to press star 1 on your telephone. If you require further assistance during the program, please press star then 0. I would now like to introduce the host of this conference call, Ms. Melinda Ellsworth. You may begin.

Thank you. Good afternoon, everyone, and welcome to Kaiser Aluminum's first quarter 2020 earnings conference call. If you have not seen a copy of today's earnings release, please visit the investor relations page on our website at kaiseraluminum.com. We have also posted a PDF version of the slide presentation for this call. Joining me on the call today are Chief Executive Officer and Chairman Jack Hakema, President and Chief Operating Officer Keith Harvey, Senior Vice President and Chief Financial Officer, Neal West, and Vice President and Chief Accounting Officer, Jennifer Huey. Before we begin, I'd like to refer you to the first three slides of our presentation and remind you that the statements made by management and the information contained in this presentation that constitute forward-looking statements are based on management's current expectations. For a summary of specific risk factors, that could cause results to differ materially from those expressed in the forward-looking statements, please refer to the company's earnings release and reports filed with the Securities and Exchange Commission, including the company's annual report on Form 10-K for the full year ended December 31, 2019 and Form 10-Q for the three months ended March 31, 2020. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results In addition, we have included non-GAAP financial information in our discussion. Reconciliations to the most comparable GAAP financial measures are included in the earnings release and in the appendix of the presentation. Any reference in our discussion today to EBITDA means adjusted EBITDA, which excludes non-run rate items for which we've provided reconciliations in the appendix. At the conclusion of the company's presentation, we will open the call for questions. I would now like to turn the call over to Jack Hakema. Jack?

Thanks, Melinda. Hope everyone is in health and safety today. Welcome for joining us on the call. While our comments would normally focus on our record first quarter results, today Keith, Neal, and I will focus on our preparedness and actions addressing the pandemic. Turning to slide six. Adherence to our long-standing business cycle strategy has prepared us well for unexpected economic adversity. Execution of the strategy depends upon a strong preferred supplier position, ability to quickly flex our variable costs, strong liquidity, and conservative leverage. Liquidity and leverage are the most critical features of the business cycle strategy. We focus on maintaining sufficient liquidity to fund our tactical and strategic needs through a severe economic downturn. In every board meeting, we review our five-year contingency liquidity plan assuming a deep recession to ensure that as we make strategic investments, we have sufficient liquidity to remain strong through the economic cycles. Our guidelines for leverage are designed to provide financial flexibility and access to diverse sources of capital. Turning to slide eight, in the current situation, the health and safety of our employees is and continues to be our first priority. We are classified as an essential business, enabling all of our facilities to continue operations as they comply with social distancing and CDC guidelines. We've implemented steps to protect our employees and visitors to our sites, and where possible, our employees are working remotely. Keith will provide additional color regarding our operations and our procedures to maintain a safe... Thank you very much. Our first action was to suspend share repurchases in mid-March. We're flexing our variable costs consistent with changing business activity, but then our costs of goods sold, metal costs are 100% variable, and more than two-thirds of non-metal costs are variable. Also in April, we'd be again limiting capital spending to sustaining projects, which under normal circumstances would average approximately $35 million per year. However, with reduced activity level, there is less wear on equipment and the level of sustaining capex will decline in line with the reduced activity level. Any investments beyond sustaining projects must meet our standards for preserving a liquidity safety net and conservative leverage. In February, we announced a $375 million multi-year project at Trentwood and indicated that the timing would be subject to market conditions. We will continue to monitor market conditions to decide the timing, including the initial $145 million investment in a new plate stretcher. During a recession, there may be potential acquisitions to consider. We will adhere to the same disciplined approach as in the past, employing the same filters we applied in evaluating prior potential acquisitions. Must be a business that we understand and be compatible with our existing business, must have a winning strategy and be capable of achieving a defensible competitive position, must have a transaction price consistent with creating long-term shareholder value, and importantly, must meet our liquidity safety net and leverage guidelines. Turning to slide 10 and demonstrating the underlying strength and potential of the business, we had record EBITDA and EBITDA margin in the first quarter following our record results in 2019. While Keith will provide a 2020 outlook on our commercial aerospace and military applications until there is more clarity surrounding the COVID-19 economy, we will suspend providing a full year 2020 outlook. Now, Keith and Neal will update you on the current situation and review the first quarter 2020 results. Keith? Thanks, Jack.