Kaiser Aluminum Corporation

Ladies and gentlemen, thank you for standing by and welcome to the Kaiser Aluminum Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference may be recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your hosts. Melinda Ellsworth. Madam, you may begin.

Thank you. Good afternoon, everyone, and welcome to Kaiser Aluminum's second quarter and first half 2020 earnings conference call. If you have not seen a copy of our 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 year ended December 31, 2019 and Form 10-Qs for the quarters ended March 31, 2020 and June 30, 2020. The company undertakes no duty to update any forward-looking statements to conform the statement to actual results or changes in the company's expectations. 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 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 Hackema. Jack?

Thanks, Melinda. Welcome to everyone joining us on the call today. I want to begin today by acknowledging our recently announced Executive Succession Plan. Following a multi-year planning process, I will step down as CEO on July 31, and Keith Harvey will assume the role of President and CEO of Kaiser Aluminum, while I'll remain on the Board of Directors as Executive Chairman. Keith and I have worked together for the past 25 years developing and implementing the culture and strategy that have positioned Kaiser as the highly respected industry leader it is today. Keith has had full responsibility for the operations of the company as president and COO since 2015. And during that time, he's focused on building a strong and deep management team as we work through a planned transition for him to assume the additional duties of CEO. Keith is highly respected within the industry and the company. And the announcement of a strong internal candidate of CEO has been met with enthusiasm by our customers and employees alike. I'm confident in Keith's ability to lead the company to continued growth and I congratulate him on his new position. Turn to slide six. As we communicated during the April earnings call and through extensive investor engagement since then, our business model is predicated on maximizing opportunities during the expanding economy as well as being well prepared for unexpected economic adversity. To that end, recognizing the cyclicality of our end markets and inevitable economic downturns, our ongoing financial strategy focuses on management of liquidity and debt leverage. We manage our liquidity to provide funding for sustaining and strategic investments and dividends through the full business cycle. Following the additional capital raise we completed in late April, we have approximately $1 billion of liquidity, which provides a strong safety net. as well as positioning us to capitalize on attractive investment opportunities. As a key element of our financial strategy, we also seek to maintain leverage at or below a ratio of two times net debt to normalized EBITDA. In order to fund attractive strategic initiatives, we would allow greater than two times leverage, but only if we have a clear plan to delever to two times or less. Turning to slide seven, our capital allocation priorities are unchanged. Our top priority continues to be organic investment. With the change in demand for commercial aerospace plate, the $375 million Trentwood expansion project has been placed on hold until market conditions justify the expansion. As noted during our first quarter earnings call, we temporarily curtailed capital spending to fund only critical sustaining projects while we assess the implications of COVID-19. With approximately $1 billion of liquidity, we are positioned to be proactive in funding attractive organic investments to further enhance efficiency and advance our competitive position. Our second priority is inorganic investment, where our strategy remains unchanged. We are constantly on the lookout to acquire businesses that we understand, that are complementary to our existing portfolio and that can be acquired at a price that creates long-term shareholder value. During times of economic distress, there may be acquisition opportunities and we are positioned with financial flexibility to consider attractive opportunities. Our third priority is the regular quarterly dividend. We consistently test our long-term ability to sustain and increase our dividend and we have evaluated a multitude of scenarios for the COVID-19 economy. In all possible scenarios that we envision, we have confirmed that the current dividend is sustainable. Our fourth and last priority is share repurchases which we curtailed in March. Share repurchases deploy excess liquidity beyond what is required for organic and inorganic investments as well as dividends. In addition, if projected leverage exceeds two times normalized EBITDA, we would seek to delever before repurchasing shares. While the COVID-19 economy is an unwelcome development, we are confident in the long-term prospects for the company and are well positioned to capitalize on opportunities to further strengthen our prospects for long-term profitable growth. We have successfully navigated challenging market conditions in the past, emerging stronger and better positioned to compete, and we believe we will do so again when this market rebounds. We'll now turn the call to Keith, who will review the current state of the business second quarter results in our outlook. Keith? Thank you, Jack.