Kaiser Aluminum Corporation

Welcome to the fourth quarter 2020 earnings conference call. My name is John. I'll be your operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. During a question-and-answer session, if you do have a question, press star then 1 on your touchtone phone. And now I'll turn the call over to Melinda Ellsworth.

Thank you. Good afternoon, everyone, and welcome to Kaiser Aluminum's fourth quarter and full year 2020 earnings conference call. If you've 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 President and Chief Executive Officer Keith Harvey, Senior Vice President and Chief Financial Officer Neil 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, 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. Reconciliations of certain forward-looking non-GAAP financial measures to comparable GAAP measures are not provided because certain items required for such reconciliations are outside of our control and or cannot be reasonably predicted or provided without unreasonable effort. 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 Keith Harvey. Keith?

Thanks, Melinda, and welcome everyone to Kaiser Aluminum's fourth quarter and four-year 2020 earnings call. Our fourth quarter and second half results were slightly more favorable to the outlook we had previously provided due to strength in the automotive and general industrial business in the course. We delivered strong performance under severe business conditions as we navigated the significant decline in commercial aerospace demand during the back half of the year, while managing strong demand for our general engineering automotive and defense products. For the full year of 2020, value-added revenue of $697 million was down approximately 19% compared to our 2019 results, reflecting a strong first quarter followed by significant COVID-19-related disruptions to our operations and end markets during the remainder of the year. Despite the significant decline in value-added revenue, we reported full-year adjusted EBITDA of $154 million, an EBITDA margin at a solid 22% in an extremely challenging environment. Our results reflect solid execution of our business cycle strategy and our ability to quickly flex cost and operating levels as we responded to rapidly changing business conditions throughout the year. Aero and high-strength demand experienced the most significant decline year-over-year, reflecting the global pandemic's impact on commercial airline travel, delays in recertification of the Boeing 737 MAX, and destocking within the supply chain. Value-added revenue for our aero and high-strength applications for the full year 2020 was down 28% compared to a record 2019, reflecting record performance in the first corner and strong contractual commitments that carried us through the remainder of the year. While commercial aerospace demand fell sharply in the second half, we continued to see strong demand for our products in the defense industry specifically from the Joint Strike Fighter program and other legacy military aircraft programs throughout the year. Automotive extrusion demand remained strong following temporary COVID-19 related supply chain shutdowns in the second quarter. Planned program launches for multiple new platforms ramped up during the second half. New programs were awarded and overall demand improved as North American vehicle build rates increased to 13 million vehicles from 12.3 million vehicles, as the industry had previously forecast. Value-added revenue for our general engineered products reflected steady underlying demand, driven in part by strength in semiconductor and automotive applications, strong customer preference for our Kaiser Select plate, and restocking in the supply chain. Pricing remained stable. At Kaiser, as with many other companies that successfully navigated the year in an extremely challenging environment, we owe much of our success to our people and the way they followed our playbook and executed on our strategy. There were a number of accomplishments I'd like to share. First and foremost, we operated our business safely. Not only did our organization quickly move to mitigate the spread of COVID-19 in our facilities, we did so by executing with record safety performance for the entire year. It's a significant accomplishment and a testament to our people and the strength of our culture. Our long-term planning process facilitated a smooth CEO succession, as well as the transition of other key senior management positions in the company. We continue to maintain rigorous customer satisfaction metrics and strong customer relationships as we continue to deliver leading products and services to our customers. Our strong balance sheet and financial flexibility facilitated our ability to maintain our quarterly dividend and to opportunistically pursue further growth with our pending acquisition of the Warwick Rolling Mill, which is expected to close on March 31st. I'm very proud of the performance of the Kaiser team given the unprecedented challenges we faced in 2020. I will now turn the call over to Neal to review additional detail for the fourth quarter and full year 2020, and then I'll return to discuss our outlook for 2021. Neal? Thanks, Gabe.