8-K
KAISER ALUMINUM CORP (KALU)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): May 11, 2021
KAISER ALUMINUM CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 1-09447 | 94-3030279 |
|---|---|---|
| (State or Other Jurisdiction<br> <br>of Incorporation) | (Commission<br>File Number) | (IRS Employer<br>Identification No.) |
| 27422 Portola Parkway, Suite 200<br> <br>Foothill Ranch, California | 92610-2831 | |
| --- | --- | |
| (Address of Principal Executive Office) | (Zip Code) |
(949) 614-1740
(Registrant’s telephone number, including area code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br>symbol(s) | Name of each exchange<br>on which registered |
|---|---|---|
| Common Stock, par value $0.01 per share | KALU | Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 7.01. Regulation FD Disclosure.
Kaiser Aluminum Corporation (the “Company”) intends to distribute a confidential offering memorandum (the “Offering Memorandum”) to potential investors relating to the private offering by the Company of $500.0 million aggregate principal amount of senior notes due 2031 (the “New Notes”). The Company intends to use the net proceeds from the offering to redeem all $350.0 million aggregate principal amount of the Company’s existing 6.500% senior notes due 2025 (the “2025 Notes”), and for general corporate purposes, which may include, among other things, capital spending and acquisitions. The consummation of the offering of New Notes is subject to market conditions and there can be no assurance that the offering of New Notes will be consummated.
The Company is furnishing under this Item 7.01 the information included in Exhibit 99.1 (Offering Memorandum Excerpts), which information is excerpted from the Offering Memorandum.
The information furnished pursuant to Item 7.01 of this Current Report on Form 8-K (including Exhibit 99.1) does not constitute an offer to sell or a solicitation of an offer to purchase the New Notes or any other securities and does not constitute an offer, solicitation or sale in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful, nor does it constitute a notice of redemption with respect to the 2025 Notes.
The information furnished pursuant to Item 7.01 of this Current Report on Form 8-K (including Exhibit 99.1) is being furnished and shall not be deemed “filed” under the Securities Exchange Act of 1934, nor shall it be incorporated by reference into any filings under the Exchange Act or under the Securities Act, except to the extent specifically provided in any such filing. The furnishing of information pursuant to this Item 7.01 will not be deemed an admission as to the materiality of any information in this Current Report on Form 8-K that is required to be disclosed solely by Regulation FD.
Item 8.01. Other Events.
On May 11, 2021, the Company issued a press release announcing its intention to offer the New Notes in a private transaction that is exempt from the registration requirements of the Securities Act of 1933. A copy of the press release is attached hereto as Exhibit 99.2, and is incorporated by reference herein.
The information contained in this Item 8.01 of this Current Report on Form 8-K (including Exhibit 99.2) does not constitute an offer to sell or a solicitation of an offer to purchase the New Notes or any other securities and does not constitute an offer, solicitation or sale in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful, nor does it constitute a notice of redemption with respect to the 2025 Notes.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Number | Exhibit |
|---|---|
| 99.1 | Offering Memorandum Excerpts. |
| 99.2 | Press release dated May 11, 2021. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
Forward-Looking Statements
This Current Report on Form 8-K contains statements which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management based on information available to it at the time such statements are made. The Company cautions that any forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors. These factors include: (a) the effectiveness of management’s strategies and decisions, including capital spending strategies and decisions; (b) general economic and business conditions, including the impact of the global outbreak of Coronavirus Disease 2019 and governmental and other actions taken in response, cyclicality, reshoring and other conditions that impact demand drivers in the aerospace/high strength, automotive, general engineering, packaging and other end markets the Company serves; (c) the Company’s ability to participate in mature and anticipated new automotive programs expected to launch in the future and successfully launch new automotive programs; (d) changes or shifts in defense spending due to competing national priorities; (e) pricing, market conditions and the Company’s ability to effectively flex costs in response to changing economic conditions; (f) developments in technology; (g) the impact of the Company’s future earnings, cash flows, financial condition, capital requirements and other factors on its financial strength and flexibility; (h) new or modified statutory or regulatory requirements; (i) the successful integration of the acquired operations and technologies that continue to drive innovative solutions and further advance its capabilities, (j) the completion of purchase price allocation and other adjustments in connection with the Warrick acquisition, and (k) 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, 2020 and Form 10-Q for the quarter ended March 31, 2021. 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.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| KAISER ALUMINUM CORPORATION | ||
|---|---|---|
| Date: May 11, 2021 | By: | /s/ Cherrie I. Tsai |
| Cherrie I. Tsai<br> <br>Vice President, Deputy General Counsel & Corporate Secretary |
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EX-99.1
Exhibit 99.1
Recent developments
Warrick first quarter 2021 operating results
Warrick’s first quarter ended after the completion of the Acquisition on March 31, 2021. We have prepared, and are presenting, estimated ranges of Warrick Shipments and Net sales for the quarter ended March 31, 2021 in good faith based upon our internal estimates. Furthermore, management estimates that Warrick’s operating results during the quarter ended March 31, 2021 were reasonably consistent with prior performance. Such internal estimates have not been subject to our normal financial closing and financial statement preparation processes and do not include the impact of purchase accounting adjustments. As a result, actual results could be different and those differences could be material. Investors should exercise caution in relying on this information.
| Three months endedMarch 31, | ||
|---|---|---|
| 2021 | ||
| Shipments (million lbs) | 180-183 | |
| Net Sales (in millions) | $ | 310-315 |
The prospective financial information included above has been prepared by, and is the responsibility of, the Company’s management. This information is not a comprehensive statement of Warrick’s financial results for this period. We do not intend to update this information prior to making our financial statements available. This information may change materially. Neither Deloitte & Touche LLP nor PricewaterhouseCoopers LLP has audited, reviewed, examined, compiled or applied agreed-upon procedures with respect to the prospective financial information included above. Accordingly, neither Deloitte & Touche LLP nor PricewaterhouseCoopers LLP expresses an opinion or any other form of assurance with respect thereto. The PricewaterhouseCoopers LLP report incorporated by reference in this document relates to Warrick Rolling Mill, a carve out of certain operations of Alcoa Warrick LLC’s previously issued financial statements. It does not extend to the prospective financial information included above.
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SUMMARY HISTORICAL FINANCIAL AND OPERATING INFORMATION AND UNAUDITED PRO FORMACOMBINED FINANCIAL INFORMATION
Set forth below is a summary of our (i) historical consolidated financial and operating data for the periods indicated and (ii) unaudited pro forma combined financial information for the period indicated and adjusted to give effect to the Acquisition.
Our summary historical consolidated financial and operating data for the years ended December 31, 2018, 2019 and 2020 and the balance sheet data as of December 31, 2019 and 2020 have been derived from our historical audited consolidated financial statements incorporated by reference into this offering memorandum. Our summary historical consolidated financial and operating data for the quarters ended March 31, 2020 and 2021, and the balance sheet data as of March 31, 2021 are derived from our historical unaudited consolidated financial statements incorporated by reference into this offering memorandum, and include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of this information. We also present summary historical consolidated financial and operating data for the last twelve months ended March 31, 2021, which is derived by adding our historical consolidated financial and operating data for the year ended December 31, 2020 to our historical consolidated financial and operating data for the three months ended March 31, 2021 and subtracting our historical consolidated financial and operating data for the three months ended March 31, 2020.
Our summary unaudited pro forma combined financial information for the last twelve months ended March 31, 2021 has been derived from our historical consolidated financial statements and the Warrick Rolling Mill historical carve-out financial statements incorporated by reference into the offering memorandum. Our summary unaudited pro forma combined financial information for the last twelve months ended March 31, 2021 has been prepared combining period ends that differ by fewer than 93 days and is derived by adding (i) our consolidated historical financial and operating data for the year ended December 31, 2020 to (ii) our consolidated financial and operating data for the three months ended March 31, 2021 and (iii) the Warrick Rolling Mill historical carve-out financial and operating data for the year ended December 31, 2020 and (iv) subtracting our consolidated financial and operating data for the three months ended March 31, 2020.
We do not present any pro forma combined balance sheet information as our March 31, 2021 balance sheet already fully consolidates Warrick Rolling Mill.
Our summary unaudited pro forma combined financial information is for informational purposes only and does not purport to present what our results of operations and financial condition would have been had the Acquisition actually occurred during such time period, and should not be considered representative of our future results of operations or financial position. While the pro forma financial information does not reflect potential cost savings or synergies that may be achievable in connection with the Acquisition, management’s estimates of certain reductions to costs of products sold expected to be realized following the closing of the Acquisition are illustrated as Management’s Adjustments in the unaudited pro forma combined financial statements included elsewhere in this offering memorandum.
You should read the following summary consolidated financial and operating data in conjunction with our consolidated financial statements and accompanying notes, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk factors” and other information included in our Annual Report on 10-K for the fiscal year ended December 31, 2020 and our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021 incorporated by reference into this offering memorandum, the audited carve-out combined financial statements and accompanying notes of the Warrick Rolling Mill incorporated into this offering memorandum by reference to our Current Report on Form 8-K filed with the April 1, 2021 (as amended on May 7, 2021) as well as the sections entitled “Capitalization” “Risk factors” and “Unaudited pro forma combined financial information” included elsewhere in this offering memorandum.
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| Year EndedDecember 31, | Three MonthsEnded March 31, | Last TwelveMonthsEndedMarch 31, | Pro FormaCombined LastTwelve MonthsEnded March 31, | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in millions of dollars, except shipments) | 2018 | 2019 | 2020 | 2020 | 2021 | 2021 | 2021 | |||||||||||||
| Statement of income data: | ||||||||||||||||||||
| Net sales | $ | 1,585.9 | $ | 1,514.1 | $ | 1,172.7 | $ | 369.3 | $ | 324.0 | $ | 1,127.4 | $ | 2,211.0 | ||||||
| Operating income (loss) | 143.6 | 125.7 | 81.1 | 45.6 | 16.9 | 52.4 | (3.5 | ) | ||||||||||||
| Net income (loss) | 91.7 | 62.0 | 28.8 | 29.1 | 4.5 | 4.2 | (50.0 | ) | ||||||||||||
| Other financial and operating data: | ||||||||||||||||||||
| Value added revenue^(1)^ | $ | 827.9 | $ | 855.5 | $ | 697.1 | $ | 216.6 | $ | 171.7 | $ | 652.2 | $ | 1,152.4 | ||||||
| Hedged cost of alloyed metal^(1)^ | 758.0 | 658.6 | 475.6 | 152.7 | 152.3 | 475.2 | 1,058.6 | |||||||||||||
| Total cash dividends paid | 37.7 | 39.4 | 43.4 | 11.3 | 11.7 | 43.8 | 43.8 | |||||||||||||
| Capital expenditures | 74.1 | 60.2 | 51.9 | 21.1 | 9.1 | 39.9 | 56.9 | |||||||||||||
| Depreciation and amortization expense | 43.9 | 49.1 | 52.2 | 13.2 | 13.5 | 52.5 | 102.0 | |||||||||||||
| Interest expense | 22.7 | 24.6 | 40.9 | 6.1 | 12.3 | 47.1 | 47.1 | |||||||||||||
| Cash provided by (used in) operating activities | 150.2 | 232.3 | 206.9 | 52.4 | (11.4 | ) | 143.1 | N/A | ||||||||||||
| Cash provided by (used in) investing activities | 31.1 | (101.8 | ) | 26.9 | 18.6 | (626.6 | ) | (618.3 | ) | N/A | ||||||||||
| Cash provided by (used in) financing activities | (106.0 | ) | 8.5 | 281.9 | (28.5 | ) | (14.5 | ) | 295.9 | N/A | ||||||||||
| EBITDA^(2)^ | 186.6 | 154.1 | 131.9 | 58.0 | 30.1 | 104.0 | 86.9 | |||||||||||||
| Adjusted EBITDA^(2)^ | 204.8 | 212.7 | 153.8 | 59.4 | 37.5 | 131.9 | 209.1 | |||||||||||||
| Shipments (mm lbs)^(3)^ | 652.4 | 625.0 | 502.4 | 155.6 | 136.9 | 483.7 | 1,158.1 |
Note: Totals may not sum due to rounding.
| As ofDecember 31, | As ofMarch 31, | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in millions of dollars) | 2019 | 2020 | 2021 | ||||||||||||||||||
| Balance sheet data: | |||||||||||||||||||||
| Total assets | $ | 1,526.2 | $ | 1,864.7 | $ | 2,152.8 | |||||||||||||||
| Cash and short term investments | 343.0 | 780.3 | 128.0 | ||||||||||||||||||
| Total stockholders’ equity | 733.9 | 732.4 | 735.0 | ||||||||||||||||||
| Long-term borrowings (at face value), including amounts due within one year | 500.0 | 850.0 | 850.0 | ||||||||||||||||||
| (1) | Value added revenue represents net sales less the hedged cost of alloyed metal. Hedged cost of alloyed metal is our Midwest Price, which<br>reflects the primary aluminum supply and demand dynamics in North America, plus the cost of alloying elements plus any realized gains and/or losses on settled hedges related to the metal sold in the referenced period. Value added revenue is not<br>intended to be used as an alternative to any measure of the Company’s performance in accordance with GAAP. The following table reconciles value added revenue to the most directly comparable financial measure, which is net sales: | ||||||||||||||||||||
| --- | --- | ||||||||||||||||||||
| Year EndedDecember 31, | Three MonthsEndedMarch 31 | Last TwelveMonthsEnded March 31, | Pro FormaCombined LastTwelve MonthsEnded March 31, | ||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (in millions of dollars) | 2018 | 2019 | 2020 | 2020 | 2021 | 2021 | 2021 | ||||||||||||||
| Net sales | $ | 1,585.9 | $ | 1,514.1 | $ | 1,172.7 | $ | 369.3 | $ | 324.0 | $ | 1,127.4 | $ | 2,211.0 | |||||||
| Less: Hedged cost of alloyed metal | (758.0 | ) | (658.6 | ) | (475.6 | ) | (152.7 | ) | (152.3 | ) | (475.2 | ) | (1,058.6 | ) | |||||||
| Value added revenue | $ | 827.9 | $ | 855.5 | $ | 697.1 | $ | 216.6 | $ | 171.7 | $ | 652.2 | $ | 1,152.4 |
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| (2) | EBITDA is defined as net income plus income tax, interest expense and depreciation and amortization. Adjusted EBITDA is defined as EBITDA<br>(less) add other (income) expense, net and adjusted for non-run rate items. Non run rate items are items that, while they may recur from period to period, (i) are particularly material to results,<br>(ii) affect costs primarily as a result of external market factors, and (iii) may not recur in future periods if the same level of underlying performance were to occur. However, non-run rate items<br>are not infrequent or unusual. Non run rate items are part of our business and operating environment but are worthy of being highlighted for the benefit of the readers of the financial statements. Our intent is to allow readers of the financial<br>statements to consider our results both in light of and separately from items such as unrealized mark-to-market gains or losses on derivatives related to fluctuations in<br>underlying metal and energy prices and currency exchange rates, lower of cost or market inventory write-downs and gains or losses related to the Salaried VEBA. Our management uses EBITDA and Adjusted EBITDA to monitor and evaluate financial results<br>and trends, and we believe that this information may be useful for investors. However, EBITDA and Adjusted EBITDA are not intended to be used as an alternative to any measure of the Company’s performance in accordance with GAAP. The following<br>table reconciles EBITDA and Adjusted EBITDA to the most directly comparable financial measure, which is net income: | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Year EndedDecember 31, | Three MonthsEndedMarch 31, | Last TwelveMonthsEndedMarch 31, | Pro FormaCombinedLast TwelveMonthsEnded March 31, | |||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (in millions of dollars) | 2018 | 2019 | 2020 | 2020 | 2021 | 2021 | 2021 | |||||||||||||
| Net income (loss) | $ | 91.7 | $ | 62.0 | $ | 28.8 | $ | 29.1 | $ | 4.5 | $ | 4.2 | $ | (50.0 | ) | |||||
| Income tax provision (benefit) | 28.3 | 18.4 | 10.0 | 9.6 | (0.3 | ) | 0.1 | (12.1 | ) | |||||||||||
| Interest expense | 22.7 | 24.6 | 40.9 | 6.1 | 12.3 | 47.1 | 47.1 | |||||||||||||
| Depreciation and amortization | 43.9 | 49.1 | 52.2 | 13.2 | 13.5 | 52.5 | 102.0 | |||||||||||||
| EBITDA | $ | 186.6 | $ | 154.1 | $ | 131.9 | $ | 58.0 | $ | 30.1 | $ | 104.0 | $ | 86.9 | ||||||
| Other expense, net^(a)^ | 0.9 | 20.7 | 1.4 | 0.8 | 0.4 | 1.0 | 11.5 | |||||||||||||
| Non-run-rate items: | ||||||||||||||||||||
| Restructuring charge (benefit) | — | — | 7.5 | (0.7 | ) | 6.8 | 6.8 | |||||||||||||
| Adjustments to plant-level LIFO^(b)^ | (3.1 | ) | 3.4 | 2.4 | (0.7 | ) | (2.9 | ) | 0.2 | 0.2 | ||||||||||
| Mark-to-market loss (gain) on derivative<br>instruments^(c)^ | 17.7 | 5.8 | (2.6 | ) | 0.1 | (0.3 | ) | (3.0 | ) | (3.0 | ) | |||||||||
| Workers’ compensation (benefit) cost due to change in discount rate | (0.5 | ) | 0.8 | 1.8 | 0.7 | — | 1.1 | 1.1 | ||||||||||||
| Goodwill impairment^(d)^ | — | 25.2 | — | — | — | — | — | |||||||||||||
| Environmental expense^(e)^ | 1.7 | 1.7 | 5.3 | 0.5 | — | 4.8 | 4.8 | |||||||||||||
| Asset impairment charges | 1.4 | 0.9 | 0.5 | — | — | 0.5 | 0.5 | |||||||||||||
| Acquisition costs^(f)^ | — | — | 5.5 | — | 11.0 | 16.5 | 16.5 | |||||||||||||
| Purchase accounting inventory benefit | — | — | — | — | — | — | (0.2 | ) | ||||||||||||
| Reduced cost of aluminum^(g)^ | — | — | — | — | — | — | 81.6 | |||||||||||||
| Reduced cost of electrical power^(g)^ | — | — | — | — | — | — | 2.3 | |||||||||||||
| Non-cash net periodic post retirement service cost relating to Salaried<br>VEBAs | 0.1 | 0.1 | 0.1 | — | — | 0.1 | 0.1 | |||||||||||||
| Adjusted EBITDA | $ | 204.8 | $ | 212.7 | $ | 153.8 | $ | 59.4 | $ | 37.5 | $ | 131.9 | $ | 209.1 |
Note: Totals may not sum due to rounding.
| (a) | Other expense (income), net in 2019 includes loss on extinguishment of our 5.875% Senior Notes due 2024 during the fourth quarter of fiscal<br>year 2019, which includes a $16.5 million premium paid to redeem the notes and a $3.8 million write-off of unamortized debt issuance costs associated with the notes. |
|---|
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| (b) | We manage our business on a monthly last-in, first-out<br>(“LIFO”) basis at each plant, but report inventory externally on an annual LIFO basis in accordance with GAAP on a consolidated basis. This amount represents the conversion from GAAP LIFO applied on a consolidated basis to monthly LIFO<br>applied on a plant-by-plant basis. |
|---|---|
| (c) | Mark-to-market (gain) loss on derivative instruments<br>represents: (i) the reversal of mark-to-market (gain) loss on hedges entered into prior to the adoption of Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities and settled in the periods presented above; (ii) (gain) loss on<br>non-designated commodity hedges; and (iii) reclassifications out of Accumulated other comprehensive loss due to forecasted transactions no longer probable of occurring. Adjusted EBITDA reflects the<br>realized (gain) loss of such settlements. |
| --- | --- |
| (d) | The goodwill impairment in 2019 was driven by a change in valuation of the additive manufacturing business, which was determined to have a<br>longer term horizon for development and acceptance than anticipated at the time of acquisition. See Note 4 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the<br>fiscal year ended December 31, 2020, which is incorporated by reference into this offering memorandum. |
| --- | --- |
| (e) | Environmental expenses are related to legacy activities at operating facilities prior to July 6, 2006. |
| --- | --- |
| (f) | Acquisition costs are acquisition-related transaction costs primarily comprised of professional fees. |
| --- | --- |
| (g) | Management adjustments to reflect the reduced cost of aluminum and electrical power resulting from negotiated rates that more closely align<br>with market pricing as part of, and effective immediately following, the close of the Warrick Rolling Mill acquisition. |
| --- | --- |
| (3) | Amounts represents pounds shipped. |
| --- | --- |
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information is derived from our historical consolidated financial statements and the Warrick Rolling Mill historical carve-out financial statements, and is adjusted to give effect to the Acquisition and Kaiser Aluminum’s accounting policies.
The unaudited pro forma combined financial information has been prepared utilizing period ends that differ by fewer than 93 days and is derived by adding (i) our consolidated historical financial and operating data for the year ended December 31, 2020 to (ii) our consolidated financial and operating data for the three months ended March 31, 2021 and (iii) the Warrick Rolling Mill historical carve-out financial and operating data for the year ended December 31, 2020 and (iv) subtracting our consolidated financial and operating data for the three months ended March 31, 2020. We do not present any pro forma combined balance sheet information as our March 31, 2021 balance sheet already fully consolidates Warrick Rolling Mill.
The following unaudited pro forma combined financial information should be read in conjunction with the following financial statements and notes thereto, all of which are incorporated by reference into this offering memorandum:
| • | our audited consolidated financial statements as of and for the year ended December 31, 2020; |
|---|---|
| • | our unaudited consolidated financial statements as of and for the three months ended March 31, 2021; |
| --- | --- |
| • | our unaudited consolidated financial statements as of and for the three months ended March 31, 2020; and |
| --- | --- |
| • | the audited carve-out financial statements of the Warrick Rolling Mill as of and for the year ended<br>December 31, 2020. |
| --- | --- |
The pro forma adjustments reported in this unaudited pro forma combined financial information are based upon available information and certain assumptions that our management believes are reasonable. The unaudited pro forma combined financial information is presented for informational purposes only and is not intended to represent or be indicative of what the results of operations or financial condition would have been had the Acquisition actually occurred on the dates indicated, nor is it meant to be indicative of future results of operations or financial condition for any future period or as of any future date. The unaudited pro forma combined financial information should be read in conjunction with “Risk factors” and “Summary—Summary historical financial and operating information and Unaudited pro forma combined financial information” included elsewhere in this offering memorandum.
Assumptions underlying the pro forma adjustments are described in the accompanying notes.
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Pro Forma Combined Statement of Income
for the Last Twelve Months Ended March 31, 2021
(Unaudited)
| Kaiser | Warrick | Management Adjustments | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in millions of dollars) | Last TwelveMonths EndedMarch 31,2021 | Year EndedDecember 31,2020 | Pro FormaAdjustments | Pro FormaCombined | Metals Pricing | Utilities | AdjustedCombined | ||||||||||||||
| Net sales | $ | 1,127.4 | $ | 1,115.6 | $ | (32.0 | )A B | $ | 2,211.0 | $ | — | $ | — | $ | 2,211.0 | ||||||
| Costs and expenses: | |||||||||||||||||||||
| Cost of products sold, excluding depreciation and amortization and other items | 917.2 | 1,098.3 | (25.1 | ) A C | 1,990.4 | (81.6 | ) G | (2.3 | ) G | 1,906.5 | |||||||||||
| Depreciation and amortization | 52.5 | 28.4 | 21. | 1 D E | 102.0 | — | — | 102.0 | |||||||||||||
| Selling, general, administrative, research and development | 99.1 | 16.8 | — | 115.9 | — | — | 115.9 | ||||||||||||||
| Restructuring costs | 6.8 | — | — | 6.8 | — | — | 6.8 | ||||||||||||||
| Other operating income, net | (0.6 | ) | — | — | (0.6 | ) | — | — | (0.6 | ) | |||||||||||
| Total costs and expenses | 1,075.0 | 1,143.5 | (4.0 | ) | 2,214.5 | (81.6 | ) | (2.3 | ) | 2,130.6 | |||||||||||
| Operating income (loss) | 52.4 | (27.9 | ) | (28.0 | ) | (3.5 | ) | 81.6 | 2.3 | 80.4 | |||||||||||
| Other income (expense): | |||||||||||||||||||||
| Interest expense | (47.1 | ) | — | — | (47.1 | ) | — | — | (47.1 | ) | |||||||||||
| Other (expense) income, net | (1.0 | ) | (17.7 | ) | 7.2 | B | (11.5 | ) | — | — | (11.5 | ) | |||||||||
| Income (loss) before income taxes | 4.3 | (45.6 | ) | (20.9 | ) | (62.2 | ) | 81.6 | 2.3 | 21.7 | |||||||||||
| Income tax (provision) benefit | (0.1 | ) | 7.3 | 4.9 | F | 12.1 | (19.2 | ) | (0.5 | ) | (7.7 | ) | |||||||||
| Net income (loss) | $ | 4.2 | $ | (38.3 | ) | $ | (15.9 | ) | $ | (50.0 | ) | $ | 62.4 | $ | 1.7 | $ | 14.1 |
The accompanying notes are an integral part of this unaudited pro forma combined financial information.
Notes – Transaction Accounting Adjustments
Explanation of the adjustments to the unaudited pro forma combined statement of income are as follows:
| A. | The Company recognizes customer payments of shipping and handling costs as a reduction of cost of products sold, while Warrick Rolling Mill<br>recognized these payments as a component of revenue. Therefore, this adjustment conforms the presentation of shipping and handling costs to the Company’s presentation. |
|---|---|
| B. | Warrick Rolling Mill maintained accounts receivable supply chain financing arrangements in the U.S. to provide additional sources of working<br>capital. The accounts receivables were sold and de-recognized from its combined balance sheet with any fees associated with the programs recorded in its combined statements of loss and comprehensive loss as<br>Other expense, net. At times, a portion of such fees would be reimbursed by Warrick Rolling Mill’s customers and recognized as Sales and as Other expense, net. This adjustment conforms the presentation of such reimbursed fees to the<br>Company’s presentation as only an offset to Other expense, net. |
| --- | --- |
| C. | Represents a reduction in Cost of products sold resulting from purchase accounting inventory adjustments. |
| --- | --- |
7
| D. | Reflects transaction accounting adjustments to amortization to reflect amortization expense that would have been recorded on intangible assets<br>if the Acquisition occurred at the beginning of the accounting period as shown in the table below (in millions of dollars, except amortization periods): | |||||
|---|---|---|---|---|---|---|
| EstimatedFairValue | EstimatedUsefulLife inYears | AmortizationExpense for theYear EndedDecember 31, 2020 | ||||
| --- | --- | --- | --- | --- | --- | --- |
| Favorable lease contract | $ | 7.0 | 120 | $ | 0.1 | |
| Favorable commodity contract | 11.0 | 2 | 5.5 | |||
| Customer relationships | 38.5 | 12 | 3.2 | |||
| Identifiable intangibles | $ | 56.5 | $ | 8.8 | ||
| Historical amortization expense | — | |||||
| Transaction accounting adjustment to amortization | $ | 8.8 | ||||
| E. | Reflects transaction accounting adjustments to depreciation to reflect depreciation expense that would have been recorded on the fixed assets<br>acquired if the Acquisition occurred at the beginning of the accounting period, as shown below (in millions of dollars, except depreciation periods): | |||||
| --- | --- | |||||
| EstimatedFair Value | AverageUseful Life inYears | DepreciationExpense forthe YearEndedDecember 31,2020 | ||||
| --- | --- | --- | --- | --- | --- | --- |
| Land and improvements | $ | 3.8 | 1.8 | $ | 2.1 | |
| Building and leasehold improvements | 59.3 | 5.1 | 11.6 | |||
| Machinery and Equipment | 296.6 | 11.0 | 27.0 | |||
| Construction in Progress | 29.7 | n/a | — | |||
| Property, plant and equipment | $ | 389.4 | $ | 40.7 | ||
| Historical depreciation expense | 28.4 | |||||
| Transaction accounting adjustment to depreciation | $ | 12.3 | ||||
| F. | Reflects the income tax net benefit effect of the transaction accounting adjustments based on the applicable statutory rates associated with<br>the respective adjustments. | |||||
| --- | --- | |||||
| G. | The Warrick Rolling Mill historically purchased aluminum and electrical power from Alcoa’s smelter and power plant, respectively. Alcoa<br>historically sold to the Warrick Rolling Mill aluminum from the smelter at the smelter’s cost and electrical power from the power plant at negotiated prices between the parties. Aluminum and electrical power are reflected at these prices in<br>Warrick Rolling Mill’s historical combined financial statements. As part of the Acquisition and effective immediately following the close of the Acquisition, the Company negotiated pricing for aluminum and electrical power at alternative rates<br>that more closely align with market pricing. The table above reflects a reduction to cost of products sold representing the cost of aluminum and electrical power under the negotiated pricing as if the negotiated contract pricing had been in place at<br>January 1, 2020, and at a statutory tax rate of 24%. | |||||
| --- | --- |
8
EX-99.2
Exhibit 99.2
Kaiser Aluminum Corporation Announces Proposed Private Placement of New Senior Notes
FOOTHILL RANCH, Calif., May 11, 2021 (GLOBE NEWSWIRE) — Kaiser Aluminum Corporation (Nasdaq: KALU) announced today that it plans to offer $500.0 million aggregate principal amount of senior notes due 2031 (the “notes”) in a private transaction that is exempt from the registration requirements of the Securities Act of 1933 (the “Act”).
The notes will be guaranteed by each of Kaiser Aluminum’s existing and future domestic subsidiaries that is a borrower or guarantor under Kaiser Aluminum’s revolving credit facility.
Kaiser Aluminum intends to use the net proceeds from the offering of the notes to redeem all $350 million aggregate principal amount of Kaiser Aluminum’s existing 6.500% senior notes due 2025 (the “2025 notes”), and for general corporate purposes, which may include, among other things, capital spending and acquisitions. The consummation of the offering of the notes is subject to market conditions.
On May 11, 2021, Kaiser Aluminum provided conditional notice of its intent to redeem the 2025 notes on May 21, 2021. The redemption will be conditional upon successful completion of the offering of the notes. This press release does not constitute a notice of redemption with respect to the 2025 notes.
The notes and the related guarantees have not been and will not be registered under the Act or the securities laws of any other place and may not be offered or sold in the United States absent registration or an applicable exemption therefrom. The notes will be offered only to persons reasonably believed to be qualified institutional buyers under Rule 144A and to non-U.S. persons outside the United States under Regulation S.
This press release does not constitute an offer to sell or a solicitation of an offer to buy the securities, and shall not constitute an offer, solicitation or sale of any securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. This notice is being issued pursuant to and in accordance with Rule 135c under the Act.
Forward-Looking Statements
This press release contains statements which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management based on information available to it at the time such statements are made. Kaiser Aluminum cautions that any forward-looking statements are not guarantees of future performance and involve
significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors. These factors include: (a) the effectiveness of management’s strategies and decisions, including capital spending strategies and decisions; (b) general economic and business conditions, including the impact of the global outbreak of Coronavirus Disease 2019 and governmental and other actions taken in response, cyclicality, reshoring and other conditions that impact demand drivers in the aerospace/high strength, automotive, general engineering, packaging and other end markets Kaiser Aluminum serves; (c) Kaiser Aluminum’s ability to participate in mature and anticipated new automotive programs expected to launch in the future and successfully launch new automotive programs; (d) changes or shifts in defense spending due to competing national priorities; (e) pricing, market conditions and Kaiser Aluminum’s ability to effectively flex costs in response to changing economic conditions; (f) developments in technology; (g) the impact of Kaiser Aluminum’s future earnings, cash flows, financial condition, capital requirements and other factors on its financial strength and flexibility; (h) new or modified statutory or regulatory requirements; (i) the successful integration of the acquired operations and technologies that continue to drive innovative solutions and further advance its capabilities, (j) the completion of purchase price allocation and other adjustments in connection with the Warrick acquisition, and (k) other risk factors summarized in Kaiser Aluminum’s reports filed with the Securities and Exchange Commission, including Kaiser Aluminum’s Form 10-K for the year ended December 31, 2020 and Form 10-Q for the quarter ended March 31, 2021. Kaiser Aluminum undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in Kaiser Aluminum’s expectations.
Investor Relations and Public Relations Contact:
Melinda C. Ellsworth
Kaiser Aluminum Corporation
(949) 614-1757