1 unchanged sentence
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
−Removed: June 30, 2020
+Added: September 30, 2020
December 31, 2019
26 unchanged sentences
Stockholders’ equity:
−Removed: Preferred stock, 5,000,000 shares authorized at both June 30, 2020 and December 31, 2019;
−Removed: no shares were issued and outstanding at June 30, 2020 and December 31, 2019
−Removed: Common stock, par value $ 0.01 , 90,000,000 shares authorized at both June 30, 2020 and at December 31, 2019;
−Removed: 22,647,455 shares issued and 15,812,169 shares outstanding at June 30, 2020;
+Added: Preferred stock, 5,000,000 shares authorized at both September 30, 2020 and December 31, 2019;
+Added: no shares were issued and outstanding at September 30, 2020 and December 31, 2019
+Added: Common stock, par value $ 0.01 , 90,000,000 shares authorized at both September 30, 2020 and at December 31, 2019;
+Added: 22,647,455 shares issued and 15,812,169 shares outstanding at September 30, 2020;
22,550,827 shares issued and 15,868,304 shares outstanding at December 31, 2019
1 unchanged sentence
Retained earnings
−Removed: Treasury stock, at cost, 6,835,286 shares at June 30, 2020 and 6,682,523 shares at December 31, 2019, respectively
+Added: Treasury stock, at cost, 6,835,286 shares at September 30, 2020 and 6,682,523 shares at December 31, 2019, respectively
Accumulated other comprehensive loss
2 unchanged sentences
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
−Removed: STATEMENTS OF CONSOLIDATED (LOSS) INCOME (UNAUDITED)
+Added: STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
Quarter Ended
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
+Added: September 30,
(In millions of dollars, except share and per share amounts)
4 unchanged sentences
Restructuring costs
−Removed: Other operating (income) charges, net
+Added: Other operating charges (income), net
Total costs and expenses
2 unchanged sentences
Interest expense
−Removed: Other income (expense), net – Note 10
+Added: Other expense, net – Note 10
(Loss) income before income taxes
−Removed: Income tax provision
−Removed: Net (loss) income
−Removed: Net (loss) income per common share:
+Added: Income tax benefit (provision)
+Added: Net income per common share:
Weighted-average number of common shares outstanding (in thousands):
1 unchanged sentence
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
−Removed: STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
+Added: STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)
Quarter Ended
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
+Added: September 30,
(In millions of dollars)
−Removed: Net (loss) income
Other comprehensive income (loss), net of tax – Note 8:
2 unchanged sentences
Cash flow hedges
−Removed: Fair value hedges
+Added: Foreign currency translation
Other comprehensive income (loss), net of tax
3 unchanged sentences
STATEMENTS OF CONSOLIDATED STOCKHOLDERS ’ EQUITY (UNAUDITED)
−Removed: Six Months Ended June 30, 2020
+Added: Nine Months Ended September 30, 2020
+Added: Outstanding 1
Paid in Capital
14 unchanged sentences
BALANCE, June 30, 2020
−Removed: At June 30, 2020, 358,122 shares were available for awards under the Kaiser Aluminum Corporation 2016 Equity and Incentive Compensation Plan ("2016 Plan").
+Added: Other comprehensive income, net of tax
+Added: Cash dividends declared 3
+Added: Amortization of unearned equity compensation
+Added: BALANCE, September 30, 2020
+Added: At September 30, 2020, 309,181 shares were available for awards under the Kaiser Aluminum Corporation 2016 Equity and Incentive Compensation Plan (“2016 Plan”).
Weighted-average repurchase price (dollars per share) for the quarter ended March 31, 2020 was $ 81.94 .
−Removed: There was no repurchase of common stock for the quarter ended June 30, 2020.
−Removed: At June 30, 2020, $ 93.1 million remained available to repurchase our common shares pursuant to the stock repurchase program.
−Removed: Dividends declared per common share was $ 0.67 for each of the quarters ended March 31, 2020 and June 30, 2020.
+Added: There were no repurchases of common stock during the quarters ended June 30, 2020 and September 30, 2020.
+Added: At September 30, 2020, $ 93.1 million remained available to repurchase our common shares pursuant to the stock repurchase program.
+Added: Dividends declared per common share was $ 0.67 for each of the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020.
The accompanying notes to interim consolidated financial statements are an integral part of these statements.
1 unchanged sentence
STATEMENTS OF CONSOLIDATED STOCKHOLDERS ’ EQUITY CONTINUED (UNAUDITED)
−Removed: Six Months Ended June 30, 2019
+Added: Nine Months Ended September 30, 2019
Comprehensive
15 unchanged sentences
BALANCE, June 30, 2019
−Removed: Weighted-average repurchase price (dollars per share) for the quarters ended March 31, 2019 and June 30, 2019 was $ 98.55 and $ 95.00 .
−Removed: Dividends declared per common share were $ 0.60 for each of the quarters ended March 31, 2019 and June 30, 2019.
+Added: Other comprehensive loss, net of tax
+Added: Issuance of non-vested shares to non-employee directors
+Added: Repurchase of common stock 1
+Added: Cash dividends declared 2
+Added: Amortization of unearned equity compensation
+Added: BALANCE, September 30, 2019
+Added: Weighted-average repurchase price (dollars per share) for the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019 was $ 98.55 , $ 95.00 and $ 92.95 , respectively.
+Added: Dividends declared per common share were $ 0.60 for each of the quarters ended March 31, 2019, June 30, 2019 and September 30, 2019.
The accompanying notes to interim consolidated financial statements are an integral part of these statements.
1 unchanged sentence
STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
(In millions of dollars)
30 unchanged sentences
Repayment of finance lease
−Removed: Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares
+Added: Cancellation of shares to cover employees' tax withholdings upon
+Added: vesting of non-vested shares
Repurchase of common stock
1 unchanged sentence
Net cash provided by (used in) financing activities
−Removed: Net increase (decrease) in cash, cash equivalents and restricted cash during the period
+Added: Net increase in cash, cash equivalents and restricted cash during the period
Cash, cash equivalents and restricted cash at beginning of period
12 unchanged sentences
Restructuring
−Removed: Other Income (Expense), Net
+Added: Other Expense, Net
Income Tax Matters
−Removed: Net (Loss) Income Per Share
+Added: Net Income Per Share
Supplemental Cash Flow Information
30 unchanged sentences
Therefore, our accounting estimates and assumptions may change over time in response to the COVID-19 pandemic and may change materially in future periods.
+Added: We adjust the amount of revenue recognized on all products, regardless of timing of revenue recognition, for variable price consideration, which could include metal market price adjustments, volume related adjustments and sales discounts.
+Added: For the quarter and nine months ended September 30, 2020, we recognized $ 15.0 million in Net sales from performance obligations satisfied in prior periods related to variable consideration from customers.
Adoption of New Accounting Pronouncements
7 unchanged sentences
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”), was issued in August 2018.
−Removed: Under ASU 2018-15, requirements for capitalizing implementation costs incurred in a hosting arrangement (cloud computing) that is a service contract are to be aligned with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.
−Removed: We adopted ASU 2018-15 during the quarter ended March 31, 2020 using the prospective transition approach.
−Removed: The implementation costs we capitalized during the six months ended June 30, 2020 were included in both Prepaid expenses and other current assets and Other assets in our Consolidated Balance Sheets.
−Removed: The corresponding cash flows related to these arrangements were included in Net cash provided by operating activities in our Statements of Consolidated Cash Flows.
+Added: Under ASU 2018-15, requirements for capitalizing implementation costs incurred in a hosting arrangement (cloud
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
+Added: computing) that is a service contract are to be aligned with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.
+Added: We adopted ASU 2018-15 during the quarter ended March 31, 2020 using the prospective transition approach .
+Added: The implementation costs we capitalized during the nine months ended September 30, 2020 we re included in both Prepaid expenses and other current assets and Other assets in our Consolidated Balance Sheets.
+Added: The corresponding cash flows related to these arrangements we re included in Net cash provided by operating activities in our Statements of Consolidated Cash Flows.
Accounting Pronouncements Issued But Not Yet Adopted
2 unchanged sentences
We are currently in the process of evaluating the impact of adopting ASU 2019-12 in 2021, but do not expect it to have a material impact on our consolidated financial statements.
+Added: KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
+Added: NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
Supplemental Balance Sheet Information
−Removed: June 30, 2020
+Added: September 30, 2020
December 31, 2019
32 unchanged sentences
Other long-term liabilities
+Added: At September 30, 2020, the stated last-in, first-out (“LIFO”) value of our inventory exceeded its current cost by $ 4.2 million.
+Added: At December 31, 2019, the current cost of our inventory exceeded its stated LIFO value by $ 11.9 million.
+Added: Based on market conditions during the nine months ended September 30, 2020, we temporarily idled projects within Construction in progress totaling $ 19.9 million as of September 30, 2020, all of which are expected to resume at a future date.
+Added: Of the workers’ compensation accrual for September 30, 2020 and December 31, 2019, $ 29.5 million and $ 26.6 million, respectively, related to our estimate for unpaid claim liabilities, gross of insurance recoverables, and was calculated using a
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
−Removed: At June 30, 2020, the stated LIFO value of our inventory exceeded its current cost by $ 11.0 million.
−Removed: At December 31, 2019, the current cost of our inventory exceeded its stated LIFO value by $ 11.9 million.
−Removed: Based on market conditions during the quarter ended June 30, 2020, we temporarily idled $ 23.9 million of Construction in progress as of June 30, 2020, all of which is expected to resume at a future date.
−Removed: Our workers' compensation accrual was estimated using a discount rate of 1.00 % and 1.75 % at June 30, 2020 and December 31, 2019, respectively.
−Removed: The undiscounted workers' compensation liabilities were estimated at $ 30.3 million and $ 29.2 million as of June 30, 2020 and December 31, 2019, respectively.
+Added: discount rate of 0.50 % and 1.75 % , respectively.
+Added: The undiscounted estimate of unpaid claim liabilities , gross of insurance recoverables , was $ 30.4 million and $ 29.2 million as of September 30, 2020 and December 31, 2019 , respectively.
We determine whether an agreement is a lease at inception.
12 unchanged sentences
Our lease agreements do not contain any material restrictive covenants.
−Removed: The following table presents lease terms and discount rates as of June 30, 2020:
+Added: The following table presents lease terms and discount rates as of September 30, 2020:
Finance Leases
2 unchanged sentences
Weighted-average discount rate
−Removed: KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
−Removed: NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
The following table summarizes the classification of lease assets and lease liabilities on our Consolidated Balance Sheets as of the periods presented (in millions of dollars):
Classification
−Removed: June 30, 2020
+Added: September 30, 2020
December 31, 2019
13 unchanged sentences
Total lease liabilities
−Removed: The following table summarizes the components of lease cost on our Statements of Consolidated (Loss) Income for the periods presented (in millions of dollars):
+Added: KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
+Added: NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
+Added: The following table summarizes the components of lease cost on our Statements of Consolidated Income for the periods presented (in millions of dollars):
Quarter Ended
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
+Added: September 30,
Operating lease cost
4 unchanged sentences
Total lease cost
−Removed: The following table presents the maturity of our lease liabilities as of June 30, 2020 (in millions of dollars):
+Added: The following table presents the maturity of our lease liabilities as of September 30, 2020 (in millions of dollars):
Maturity of Lease Liabilities
10 unchanged sentences
The Adjusted EBITDA targets are determined based on the return on adjusted net assets.
−Removed: Most of our production facilities have similar programs for both
−Removed: KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
−Removed: NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
−Removed: hourly and salaried employees.
−Removed: As of June 30, 2020, we had a liability of $ 3.5 million recorded within Accrued salaries, wages and related expenses for estimated probable future payments relating to the six month performance period of our 2020 STI Plan.
+Added: Most of our production facilities have similar programs for both hourly and salaried employees.
+Added: As of September 30, 2020, we had a liability of $ 3.7 million recorded within Accrued salaries, wages and related expenses for estimated probable future payments relating to the nine month performance period of our 2020 STI Plan.
Pension and Similar Benefit Plans.
7 unchanged sentences
Despite the plan being an unfunded plan, we make an annual contribution to a rabbi trust to fulfill future funding obligations as contemplated by the terms of the plan.
−Removed: The assets in the trust are held in various investment funds at certain registered investment companies and are accounted for as equity investments with changes in fair value recorded within Other income (expense), net (see Note 10).
+Added: The assets in the trust are held in various investment funds at certain registered investment companies and are accounted for as equity investments with changes in fair value recorded within Other expense, net (see Note 10).
Assets of our deferred compensation plan are included in Other assets, classified within Level 2 of the fair value hierarchy and are measured and recorded at fair value based on their quoted market prices.
−Removed: The fair value of these assets at June 30, 2020 and December 31, 2019 was $ 8.8 million and $ 8.1 million, respectively.
+Added: The fair value of these assets at September 30, 2020 and December 31, 2019 was $ 9.1 million and $ 8.1 million, respectively.
Offsetting liabilities relating to the deferred compensation plan are included in Other accrued liabilities and Long-term liabilities.
+Added: KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
+Added: NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
Salaried VEBA Postretirement Obligation.
5 unchanged sentences
Quarter Ended
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
+Added: September 30,
Defined contribution plans 1
3 unchanged sentences
Substantially all of the expense related to employee benefits are in Cost of products sold, excluding depreciation and amortization and other items (“COGS”) with the remaining balance in Selling, general, administrative, research and development (“SG&A and R&D”).
−Removed: The current service cost component of Net periodic postretirement benefit cost relating to Salaried VEBA is included within our Statements of Consolidated (Loss) Income in SG&A and R&D for all periods presented.
−Removed: All other components of Net periodic postretirement benefit cost relating to Salaried VEBA are included within Other income (expense), net, on our Statements of Consolidated (Loss) Income.
+Added: The deferred compensation plan and the current service cost component of Net periodic postretirement benefit cost relating to Salaried VEBA are included within our Statements of Consolidated Income in SG&A and R&D for all periods presented.
+Added: All other components of Net periodic postretirement benefit cost relating to Salaried VEBA are included within Other expense, net, on our Statements of Consolidated Income.
Components of Net Periodic Benefit Cost.
5 unchanged sentences
and (v) amortization of net actuarial differences.
−Removed: Net periodic benefit cost related to our Canadian pension plan was not material for the quarters and six months ended June 30, 2020 and June 30, 2019.
−Removed: KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
−Removed: NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
+Added: Net periodic benefit cost related to our Canadian pension plan was not material for the quarters and nine months ended September 30, 2020 and September 30, 2019.
The following table presents the components of Net periodic postretirement benefit cost relating to Salaried VEBA for the periods presented (in millions of dollars):
Quarter Ended
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
+Added: September 30,
Salaried VEBA 1 :
6 unchanged sentences
We amortize prior service cost on a straight-line basis over the average remaining years of service to full eligibility for benefits of the active plan participants.
+Added: KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
+Added: NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
Derivatives, Hedging Programs and Other Financial Instruments
5 unchanged sentences
Hedging transactions are executed centrally on behalf of all of our operations to minimize transaction costs, monitor consolidated net exposures and allow for increased responsiveness to changes in market factors.
−Removed: Our derivative activities are overseen by a committee ("Hedging Committee"), which is composed of our chief executive officer, chief operating officer, chief financial officer, chief accounting officer, vice president of metal management, treasurer and other officers and employees selected by the chief executive officer.
+Added: Our derivative activities are overseen by a committee (“Hedging Committee”), which is composed of our chief executive officer, chief financial officer, chief accounting officer, vice president of metal management, vice president of economic analysis and strategic planning and other officers and employees selected by the chief executive officer.
The Hedging Committee meets regularly to review commodity price exposure, derivative positions and strategy.
7 unchanged sentences
We manage this risk by allocating hedging transactions among multiple counterparties, using options as part of our hedging activities or both.
−Removed: The aggregate fair value of our derivative instruments that were in a net liability position was $ 14.4 million and $ 7.2 million at June 30, 2020 and December 31, 2019, respectively, and we had no collateral posted as of those dates.
+Added: The aggregate fair value of our derivative instruments that were in a net liability position was $ 4.3 million and $ 7.2 million at September 30, 2020 and December 31, 2019, respectively, and we had no collateral posted as of those dates.
Additionally, our firm-price customer sales commitments create incremental customer credit risk related to metal price movements.
Under certain circumstances, we mitigate this risk by periodically requiring cash collateral from them, which we classify as deferred revenue and include as a component of Other accrued liabilities.
−Removed: Cash collateral posted from our customers was $ 0.5 million and $ 0.2 million as of June 30, 2020 and December 31, 2019, respectively.
−Removed: KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
−Removed: NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
+Added: There was no cash collateral posted from our customers as of September 30, 2020, compared to $ 0.2 million as of December 31, 2019.
Cash Flow Hedges
−Removed: We designate our aluminum and energy derivatives and our forward swap contracts for zinc and copper ("Alloying Metals") used in our fabrication operations as cash flow hedges.
+Added: We designate forward swap contracts for aluminum, energy and, from time-to-time, zinc and copper (“Alloying Metals”), used in our fabrication operations as cash flow hedges.
Unrealized gains and losses associated with our cash flow hedges are deferred in Other comprehensive income (loss), net of tax, and reclassified to COGS when such hedges settle or when it is probable that the original forecasted transactions will not occur by the end of the originally specified time period.
7 unchanged sentences
We use third-party hedging instruments to limit exposure to metal price risk related to the metal pass through lag on some of our products and firm-price customer sales contracts.
+Added: KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
+Added: NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
Alloying Metals Hedges .
12 unchanged sentences
From time-to-time, we enter into commodity and foreign currency exchange contracts that are not designated as hedging instruments to mitigate certain short-term commodity and currency impacts, as identified.
−Removed: For derivative instruments that are not designated as hedging instruments, the gain or loss on these derivatives is recognized within COGS or Other income (expense), net, depending on whether it relates to commodity risk or foreign currency risk, respectively.
−Removed: KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
−Removed: NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
+Added: For derivative instruments that are not designated as hedging instruments, the gain or loss on these derivatives is recognized within COGS or Other expense, net, depending on whether it relates to commodity risk or foreign currency risk, respectively.
+Added: During the quarter ended September 30, 2020, we declassified all outstanding Alloying Metals hedges from their initial designation as cash flow hedges.
+Added: As such, all unrealized gain or loss on these derivatives subsequent to declassification was recognized within COGS.
Notional Amount of Derivative Contracts
−Removed: The following table summarizes our derivative positions at June 30, 2020:
+Added: The following table summarizes our derivative positions at September 30, 2020:
Maturity Period
28 unchanged sentences
Regional premiums represent the premium over the London Metal Exchange price for primary aluminum which is incurred on our purchases of primary aluminum.
−Removed: As of June 30, 2020, we had derivative and/or physical delivery commitments with energy companies in place to cover exposure to fluctuations in prices for approximately 83 % of the expected natural gas purchases for the remainder of 2020, 91 % of the expected natural gas purchases for 2021, 95 % of the expected natural gas purchases for 2022, 93 % of the expected natural gas purchases for 2023, 85 % of the expected natural gas purchases for 2024 and 25 % of the expected natural gas purchases for both 2025 and 2026.
−Removed: As of June 30, 2020, we had derivative and/or physical delivery commitments with energy companies in place to cover exposure to fluctuations in prices for approximately 59 % of our expected electricity purchases for the remainder of 2020, 58 % of our expected electricity purchases for 2021 and 49 % of our expected electricity purchases for 2022.
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
−Removed: The amount of loss (gain) included on our Statements of Consolidated (Loss) Income associated with all derivative contracts consisted of the following for the periods presented (in millions of dollars):
−Removed: Quarter Ended June 30,
−Removed: Six Months Ended June 30,
−Removed: Total of income and expense line items presented in our Statements of Consolidated (Loss) Income in which the effects of cash flow hedges are recorded
−Removed: Loss recognized in our Statements of Consolidated (Loss) Income related to cash flow hedges:
+Added: As of September 30, 2020, we had derivative and/or physical delivery commitments with energy companies in place to cover exposure to fluctuations in prices for approximately 81 % of the expected natural gas purchases for the remainder of 2020, 91 % of the expected natural gas purchases for 2021, 94 % of the expected natural gas purchases for 2022, 93 % of the expected natural gas purchases for 2023, 84 % of the expected natural gas purchases for 2024 and 25 % of the expected natural gas purchases for both 2025 and 2026.
+Added: As of September 30, 2020, we had derivative and/or physical delivery commitments with energy companies in place to cover exposure to fluctuations in prices for approximately 57 % of our expected electricity purchases for the remainder of 2020, 60 % of our expected electricity purchases for 2021 and 50 % of our expected electricity purchases for 2022.
+Added: The amount of loss (gain) included on our Statements of Consolidated Income associated with all derivative contracts consisted of the following for the periods presented (in millions of dollars):
+Added: Quarter Ended September 30,
+Added: Nine Months Ended September 30,
+Added: Statements of Consolidated
+Added: Income Classification
+Added: Total of income and expense line items presented in our Statements of Consolidated Income in which the effects of hedges are recorded:
+Added: Cash flow hedges
+Added: Fair value hedges
+Added: Depreciation and amortization
+Added: Fair value hedges
+Added: Other expense, net
+Added: Loss recognized in our Statements of Consolidated Income related to cash flow hedges:
Alloying metals (effective hedges)
−Removed: Alloying metals (reclassification due to forecasted transactions no longer probable of occurring)
−Removed: Total loss recognized in our Statements of Consolidated (Loss) Income related to cash flow hedges
−Removed: Total of income and expense line items presented in our Statements of Consolidated (Loss) Income in which the effects of fair value hedges are recorded
−Removed: (Gain) loss recognized in our Statements of Consolidated (Loss) Income related to fair value hedges:
+Added: Alloying metals (reclassification from AOCI due to forecasted transactions no longer probable of occurring)
+Added: Total loss recognized in our Statements of Consolidated Income related to cash flow hedges
+Added: (Gain) loss recognized in our Statements of Consolidated Income related to fair value hedges:
Foreign exchange contracts
+Added: Depreciation and amortization
+Added: Depreciation and amortization
Excluded component amortized from AOCI
+Added: Depreciation and amortization
Reclassification from AOCI related to early termination of firm commitment
+Added: Other expense, net
Net settlement related to early termination of forward contracts
−Removed: Total gain recognized in our Statements of Consolidated (Loss) Income related to fair value hedges
−Removed: Included within Other income (expense), net in our Statements of Consolidated (Loss) Income.
+Added: Other expense, net
+Added: Total loss recognized in our Statements of Consolidated Income related to fair value hedges
+Added: Loss (gain) recognized in our Statements of Consolidated Income related to non-designated hedges:
+Added: Alloying metals – Realized loss
+Added: Alloying metals – Unrealized gain
+Added: Total (gain) loss recognized in our Statements of Consolidated Income related to non-designated hedges:
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
7 unchanged sentences
The following table presents the fair value of our derivative financial instruments as of the periods presented (in millions of dollars):
−Removed: June 30, 2020
+Added: September 30, 2020
December 31, 2019
1 unchanged sentence
Fixed price purchase contracts
−Removed: Fixed price sales contracts
Midwest premium swap contracts
3 unchanged sentences
Electricity – Fixed price purchase contracts
+Added: Total cash flow hedges
+Added: Non-Designated Hedges:
+Added: Alloying Metals –
+Added: Fixed price purchase contracts
+Added: Fixed price sales contracts
+Added: Total non-designated hedges
The following table presents the total amounts of derivative assets and liabilities on our Consolidated Balance Sheets as of the periods presented (in millions of dollars):
−Removed: June 30, 2020
+Added: September 30, 2020
December 31, 2019
13 unchanged sentences
The amortized cost of available for sale securities approximated their fair value.
−Removed: When applicable, we review our debt investment portfolio for credit loss at least quarterly or when there are changes in credit risk or other potential valuation concerns.
−Removed: Based on market conditions during the quarter ended June 30, 2020, we settled all remaining outstanding available for sale securities upon maturity.
+Added: When applicable, we review our debt investment portfolio for credit loss
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
−Removed: The following table classifies our other financial assets under the appropriate level of the fair value hierarchy as of June 30, 2020 (in millions of dollars):
+Added: at least quarterly or when there are changes in credit risk or other potential valuation concerns .
+Added: B ased on market conditions during the nine months ended September 30, 2020 , we settled all remaining outstanding available for sale securities upon maturity .
+Added: The following table classifies our other financial assets under the appropriate level of the fair value hierarchy as of September 30, 2020 (in millions of dollars):
Cash and cash equivalents
8 unchanged sentences
The restrictions and covenants related to our 6.50% Senior Notes are similar to those governing our pre‑existing 4.625% unsecured senior notes due March 1, 2028 (“4.625% Senior Notes”).
−Removed: The unamortized amount of debt issuance costs relating to the 6.50% Senior Notes as of June 30, 2020 was $ 5.9 million.
−Removed: Interest expense, including amortization of debt issuance costs and debt premium, relating to the 6.50% Senior Notes was $ 4.2 million for the quarter and six months ended June 30, 2020.
+Added: The unamortized amount of debt issuance costs relating to the 6.50% Senior Notes as of September 30, 2020 was $ 5.6 million.
+Added: Interest expense, including amortization of debt issuance costs and debt premium, relating to the 6.50% Senior Notes was $ 6.0 million and $ 10.2 million for the quarter and nine months ended September 30, 2020, respectively.
Interest accrues on the 6.50% Senior Notes beginning April 28, 2020 at a rate of 6.50 % per annum and is payable semiannually on May 1 and November 1 of each year.
2 unchanged sentences
The 6.50% Senior Notes were offered and sold in transactions not required to be registered under the Securities Act of 1933 and are not entitled to any registration rights.
−Removed: The fair value of the outstanding 6.50% Senior Notes, which are Level 1 liabilities calculated based on pricing from trades around the balance sheet date, was approximately $ 365.5 million at June 30, 2020.
+Added: The fair value of the outstanding 6.50% Senior Notes, which are Level 1 liabilities calculated based on pricing from trades around the balance sheet date, was approximately $ 361.5 million at September 30, 2020.
The 6.50% Senior Notes are unsecured obligations and are guaranteed by each of our existing and future domestic subsidiaries that is a borrower or guarantor under the revolving credit facility (see Revolving Credit Facility below).
3 unchanged sentences
In November 2019, we issued $ 500.0 million principal amount of 4.625 % unsecured senior notes due March 1, 2028 at 100 % of the principal amount.
−Removed: The unamortized amount of debt issuance costs as of June 30, 2020 was $ 7.0 million .
−Removed: Interest expense, including amortization of debt issuance costs, relating to the 4.625% Senior Notes was $ 6.0 million and $ 12.0 million for the quarter and six months ended June 30, 2020, respectively.
+Added: The unamortized amount of debt issuance costs as of September 30, 2020 was $ 6.7 million .
+Added: Interest expense, including amortization of debt issuance costs, relating to the 4.625% Senior Notes was $ 6.0 million and $ 18.0 million for the quarter and nine months ended September 30, 2020, respectively.
The effective interest rate of the 4.625% Senior Notes was approximately 4.8 % per annum, taking into account the amortization of debt issuance costs.
−Removed: The fair value of the outstanding 4.625% Senior Notes, which are Level 1 liabilities, was approximately $ 482.2 million and $ 513.5 million at June 30, 2020 and December 31, 2019, respectively.
−Removed: 5.875% Senior Notes.
−Removed: In May 2016, we issued $ 375.0 million principal amount of 5.875 % unsecured senior notes due May 15, 2024 ("5.875% Senior Notes") at 100 % of the principal amount.
−Removed: On December 18, 2019, we redeemed in full all outstanding
+Added: The fair value of the
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
−Removed: 5.875% Senior Notes at a redemption price of 104.406 % of the principal amount.
+Added: outstanding 4.625% Senior Notes, which are Level 1 liabilities, was approximately $ 468.3 million and $ 513.5 million at September 30, 2020 and December 31, 2019, respectively.
+Added: 5.875% Senior Notes.
+Added: In May 2016, we issued $ 375.0 million principal amount of 5.875 % unsecured senior notes due May 15, 2024 (“5.875% Senior Notes”) at 100 % of the principal amount.
+Added: On December 18, 2019, we redeemed in full all outstanding 5.875% Senior Notes at a redemption price of 104.406 % of the principal amount.
The effective interest rate of the 5.875% Senior Notes was approximately 6.1 % per annum, taking into account the amortization of debt issuance costs.
−Removed: Interest expense, including amortization of debt issuance costs, relating to the 5.875% Senior Notes was $ 5.7 million and $ 11.4 million for the quarter and six months ended June 30, 2019 , respectively .
−Removed: The amount of interest expense capitalized as construction in progress was $ 0.2 million and $ 0.4 million during the quarters ended June 30, 2020 and June 30, 2019, respectively.
−Removed: The amount of interest expense capitalized as construction in progress was $ 0.5 million and $ 0.9 million during the six months ended June 30, 2020 and June 30, 2019, respectively.
+Added: Interest expense, including amortization of debt issuance costs, relating to the 5.875% Senior Notes was $ 5.7 million and $ 17.1 million for the quarter and nine months ended September 30, 2019, respectively.
+Added: The amount of interest expense capitalized as construction in progress was $ 0.3 million and $ 0.4 million during the quarters ended September 30, 2020 and September 30, 2019, respectively.
+Added: The amount of interest expense capitalized as construction in progress was $ 0.8 million and $ 1.3 million during the nine months ended September 30, 2020 and September 30, 2019, respectively.
Revolving Credit Facility
Our credit agreement with Wells Fargo Bank, National Association, as administrative agent, and the other financial institutions party thereto (“Revolving Credit Facility”) provides us with a $ 375.0 million funding commitment through October 2024.
−Removed: The table below summarizes availability and usage of our Revolving Credit Facility as determined by a borrowing base calculated as of June 30, 2020 (in millions of dollars except for borrowing rate):
+Added: The table below summarizes availability and usage of our Revolving Credit Facility as determined by a borrowing base calculated as of September 30, 2020 (in millions of dollars except for borrowing rate):
Revolving Credit Facility borrowing commitment
14 unchanged sentences
We continue to pursue remediation activities, primarily to address the historical use of oils containing polychlorinated biphenyls (“PCBs”) at our Spokane, Washington (“Trentwood”) facility.
−Removed: Our remediation efforts are in collaboration with the Washington State Department of Ecology ("Washington State Ecology"), to which we submitted a feasibility study in 2012 of remediation alternatives and from which we received permission to begin certain remediation activities pursuant to a signed work order.
−Removed: As we have finished a number of sections of the work plan, we have received approval from Washington State Ecology on satisfactory completion of those sections.
−Removed: Additionally, in cooperation with Washington State Ecology, to determine the treatability and evaluate the feasibility of removing PCBs from ground water under the Trentwood facility, we constructed an experimental treatment facility and began treatment operations in 2016.
+Added: Our remediation efforts are in collaboration with the Washington State Department of Ecology (“Ecology”), to which we submitted a feasibility study in 2012 of remediation alternatives and from which we received permission to begin certain remediation activities pursuant to a signed work order.
+Added: We have completed a number of sections of the work plan and have received satisfactory completion approval from Ecology on those sections.
+Added: Additionally, in cooperation with Ecology, to determine the treatability and evaluate the feasibility of removing PCBs from ground water under the Trentwood facility, we constructed an experimental treatment facility and began treatment operations in 2015.
+Added: During the quarter ended September 30, 2020, we increased our environmental accrual by $ 3.8 million based on a minimum cost estimate to implement a full‑scale experimental treatment facility for ground water PCB contaminants.
As the long-term success of the new methodology cannot be reasonably determined at this time, it is possible we may need to make upward adjustments to our related accruals and cost estimates as the long-term results become available.
+Added: KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
+Added: NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
During 2013, at the request of the Ohio Environmental Protection Agency (“OEPA”), we initiated an investigational study of the Newark, Ohio (“Newark”) facility related to historical on-site waste disposal.
2 unchanged sentences
The actual and final cost for remediation will not be fully determinable until a final feasibility study is submitted and accepted by the OEPA and work plans are prepared, which is expected to occur in the next 12 to 24 months.
−Removed: KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
−Removed: NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
During 2020, following the issuance of information requests under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), to which we responded, United States Environmental Protection Agency (“USEPA”) issued a general notice letter to us alleging that we are a potentially responsible party under CERCLA for response and other potential remedial actions concerning property owned by us near our former smelter site in Mead, Spokane County, Washington.
On February 21, 2020, we responded to the general notice letter and we continue to have discussions with USEPA regarding potential resolution of the matter.
−Removed: Final resolution is not yet certain, however, based on currently available facts and our assessment of the likely remediation actions to be taken, we established a $ 1.9 million short-term environmental accrual during the six months ended June 30, 2020.
−Removed: At June 30, 2020, our environmental accrual of $ 18.2 million represented our estimate of the incremental remediation cost based on:
+Added: On August 6, 2020, we entered into an administrative settlement agreement and an order on consent for removal actions, the first phase of which is estimated to be complete within the next three months .
+Added: Final resolution is not yet certain, however, based on currently available facts and our assessment of the likely remediation actions to be taken, we established a provision of $ 1.9 million during the nine months ended September 30, 2020, of which a $ 1.2 million environmental accrual remained as of September 30, 2020.
+Added: It is possible we may need to make upward adjustments to our related accruals and cost estimates in the future upon reaching a final resolution with the USEPA.
+Added: At September 30, 2020, our environmental accrual of $ 20.7 million represented our estimate of the incremental remediation cost based on:
(i) proposed alternatives in the final feasibility study related to the Trentwood facility;
16 unchanged sentences
Quarter Ended
−Removed: Six Months Ended
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
Defined Benefit Pension Plan and Salaried VEBA:
3 unchanged sentences
income tax expense 2
−Removed: Net amortization reclassified from AOCI to Net (loss) income
+Added: Net amortization reclassified from AOCI to Net income
Translation impact on Canadian pension plan AOCI balance
8 unchanged sentences
income tax benefit 2
−Removed: Net gain reclassified from AOCI to Net (loss) income
−Removed: Other comprehensive loss, net of tax
+Added: Net gain reclassified from AOCI to Net income
+Added: Other comprehensive income (loss), net of tax
Ending balance
5 unchanged sentences
Reclassification of unrealized loss upon settlement of cash flow hedges 4
−Removed: Reclassification due to forecasted sales no longer probable 4
+Added: Reclassification due to forecasted transactions no longer probable of occurring 4
income tax expense 2
−Removed: Net loss reclassified from AOCI to Net (loss) income
+Added: Net loss reclassified from AOCI to Net income
Other comprehensive income (loss), net of tax
2 unchanged sentences
Beginning balance
−Removed: Unrealized gain (loss) on fair value hedges
−Removed: income tax (expense) benefit
−Removed: Net unrealized gain (loss) on fair value hedges
−Removed: Excluded component amortized from OCI to Net (loss) income 5
+Added: Unrealized loss on fair value hedges
+Added: income tax benefit
+Added: Net unrealized loss on fair value hedges
+Added: Excluded component amortized from OCI to Net income 5
Reclassification due to cancellation of firm commitment 5
income tax expense 2
−Removed: Net loss reclassified from AOCI to Net (loss) income
−Removed: Other comprehensive gain, net of tax
+Added: Net loss reclassified from AOCI to Net income
+Added: Other comprehensive income, net of tax
Ending balance
6 unchanged sentences
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
−Removed: Amounts amortized out of AOCI relating to Salaried VEBA adjustments were included within Other income (expense) , net , as a component of Net periodic postretirement benefit cost relating to Salaried VEBA.
−Removed: Income tax amounts reclassified out of AOCI were included as a component of Income tax provision.
−Removed: Amounts reclassified out of AOCI relating to sales of available for sale securities were included as a component of Other income (expense), net.
+Added: Amounts amortized out of AOCI relating to Salaried VEBA adjustments were included within Other expense , n et , as a component of Net periodic postretirement benefit cost relating to Salaried VEBA.
+Added: Income tax amounts reclassified out of AOCI were included as a component of Income tax benefit (provision).
+Added: Amounts reclassified out of AOCI relating to sales of available for sale securities were included as a component of Other expense, net.
We use the specific identification method to determine the amount reclassified out of AOCI.
−Removed: Amounts reclassified out of AOCI relating to cash flow hedges were included as a component of COGS.
−Removed: As of June 30, 2020, we estimate a net mark-to-market loss before tax of $ 8.8 million in AOCI will be reclassified into Net (loss) income upon settlement within the next 12 months.
−Removed: Amounts reclassified out of AOCI relating to amortizing the excluded component of fair value hedges were included as a component of depreciation expense.
−Removed: Amounts reclassified out of AOCI related to cancellation of firm commitment were included as a component of Other income (expense), net.
−Removed: As of June 30, 2020, the amount in AOCI that will be reclassified into Net (loss) income within the next 12 months was immaterial.
+Added: As of September 30, 2020, we estimate a net mark-to-market loss before tax of $ 0.6 million in AOCI will be reclassified into Net income upon settlement within the next 12 months.
+Added: As of September 30, 2020, the amount in AOCI that will be reclassified into Net income within the next 12 months was immaterial.
Restructuring
−Removed: During the quarter ended June 30, 2020, global restrictions on air travel and other changes in global travel patterns as a result of the Coronavirus Disease 2019 ("COVID-19") pandemic negatively impacted short and mid-term commercial aerospace demand within our Aero/HS products end market applications.
+Added: During the nine months ended September 30, 2020, global restrictions on air travel and other changes in global travel patterns as a result of the COVID-19 pandemic negatively impacted short and mid-term commercial aerospace demand within our aerospace and high strength (“Aero/HS products”) end market applications.
We therefore initiated a restructuring plan that consisted of a reduction in force during the quarter ended June 30, 2020.
−Removed: Employee costs related to the reduction in force were included within Restructuring costs in our Statements of Consolidated (Loss) Income and consisted of severance, voluntary buyout packages, outplacement services, estimated medical costs and associated payroll costs .
−Removed: Substantially all of the costs associated with the restructuring efforts initiated during the quarter ended June 30, 2020 were incurred and expensed as of June 30, 2020.
−Removed: Cash payments associated with the reduction in force are estimated to extend through 2022.
+Added: During the quarter ended September 30, 2020, we initiated additional reduction in force measures under the restructuring plan as a result of the continued negative impacts from the COVID-19 pandemic.
+Added: Employee costs related to the restructuring plan were included within Restructuring costs in our Statements of Consolidated Income and consisted of severance, voluntary buyout packages, outplacement services, estimated medical costs and associated payroll costs .
+Added: Substantially all of the costs associated with the restructuring efforts initiated during the quarters ended June 30, 2020 and September 30, 2020 were incurred and expensed as of June 30, 2020 and September 30, 2020, respectively.
+Added: Cash payments associated with the restructuring plan are estimated to extend through 2022.
The following table summarizes the activity relating to our restructuring plan liabilities (in millions of dollars):
−Removed: Six Months Ended June 30, 2020
+Added: Nine Months Ended
+Added: September 30, 2020
Beginning balance
Restructuring costs
−Removed: Cash payments
+Added: Cash payments and other adjustments
Ending balance
−Removed: Other Income (Expense) , Net
−Removed: Other income (expense) , net, consisted of the following for the periods presented (in millions of dollars):
+Added: Other Expense , Net
+Added: Other expense , net, consisted of the following for the periods presented (in millions of dollars):
Quarter Ended
−Removed: Six Months Ended
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
Interest income
3 unchanged sentences
All other income (expense), net
−Removed: Other income (expense), net
+Added: Other expense, net
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
1 unchanged sentence
Income Tax Matters
−Removed: The provision for in come taxes consisted of the following for the periods presented (in millions of dollars):
+Added: The (benefit) provision for in come taxes consisted of the following for the periods presented (in millions of dollars):
Quarter Ended
−Removed: Six Months Ended
−Removed: The income tax provision for the quarters ended June 30, 2020 and June 30, 2019 was $ 1.3 million and $ 7.3 million, respectively, reflecting an effective tax rate of ( 24 %) and 27 %, respectively.
−Removed: The difference between the effective tax rate and the projected blended statutory tax rate for the quarter ended June 30, 2020 was primarily due to:
−Removed: (i) an increase of $ 1.0 million (or 19 % of taxable income) to the valuation allowance for certain state net operating losses and (ii) an increase of $ 1.9 million (or 37 % of taxable income) for a change in forecasted earnings and its impact on the annual effective tax rate.
−Removed: The difference between the effective tax rate and the projected blended statutory tax rate for the quarter ended June 30, 2019 was primarily due to:
−Removed: (i) an increase of $ 0.5 million ( 2 % of taxable income) related to non-deductible compensation expense and (ii) an increase of $ 0.2 million ( 1 % of taxable income) related to unrecognized tax benefits, including interest and penalties.
−Removed: The income tax provision for the six months ended June 30, 2020 and June 30, 2019 was $ 10.9 million and $ 17.1 million, respectively, reflecting an effective tax rate of 33 % and 27 % respectively.
−Removed: The difference between the effective tax rate and the projected blended statutory tax rate for the six months ended June 30, 2020 was primarily due to:
−Removed: (i) an increase of $ 0.8 million (or 2 % of taxable income) related to non-deductible compensation expense;
−Removed: (ii) an increase of $ 1.3 million (or 4 % of taxable income) to the valuation allowance for certain state net operating losses, partially offset by (i) a decrease of $ 0.6 million (or 2 % of taxable income) for the recognition of excess tax benefits from stock-based compensation.
−Removed: The difference between the effective tax rate and the projected blended statutory tax rate for the six months ended June 30, 2019 was primarily due to:
−Removed: (i) an increase of $ 0.9 million (or 2 % of taxable income) related to non-deductible compensation expense;
−Removed: (ii) an increase of $ 0.8 million (or 1 % of taxable income) to the valuation allowance for certain state net operating losses, partially offset by (i) a decrease of $ 0.5 million (or 1 % of taxable income) for the recognition of excess tax benefits from stock-based compensation.
−Removed: Our gross unrecognized benefits relating to uncertain tax positions were $ 3.9 million and $ 4.1 million at June 30, 2020 and December 31, 2019, respectively, of which, $ 0.4 million and $ 0.9 million would be recorded through our income tax provision and thus impact the effective tax rate at June 30, 2020 and December 31, 2019, respectively, if the gross unrecognized tax benefits were to be recognized.
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
+Added: The income tax (benefit) provision for the quarters ended September 30, 2020 and September 30, 2019 was ($ 0.7 ) million and $ 8.7 million, respectively, reflecting an effective tax rate of 222 % and 26 %, respectively.
+Added: The difference between the effective tax rate and the projected blended statutory tax rate for the quarter ended September 30, 2020 was primarily due to a decrease of $ 0.7 million (or 211 % of taxable income) for a change in forecasted earnings and its impact on the annual effective tax rate, partially offset by an increase of $ 0.1 million (or 22 % of taxable income) to the valuation allowance for certain state net operating losses.
+Added: The difference between the effective tax rate and the projected blended statutory tax rate for the quarter ended September 30, 2019 was primarily due to an increase of $ 0.5 million (or 2 % of taxable income) related to non-deductible compensation expense.
+Added: The income tax provision for the nine months ended September 30, 2020 and September 30, 2019 was $ 10.2 million and $ 25.8 million, respectively, reflecting an effective tax rate of 31 % and 26 % respectively.
+Added: The difference between the effective tax rate and the projected blended statutory tax rate for the nine months ended September 30, 2020 was primarily due to:
+Added: (i) an increase of $ 1.2 million (or 4 % of taxable income) related to non-deductible compensation expense and (ii) an increase of $ 1.3 million (or 4 % of taxable income) to the valuation allowance for certain state net operating losses, partially offset by a decrease of $ 0.7 million (or 2 % of taxable income) for the recognition of excess tax benefits from stock-based compensation.
+Added: The difference between the effective tax rate and the projected blended statutory tax rate for the nine months ended September 30, 2019 was primarily due to:
+Added: (i) an increase of $ 1.5 million (or 2 % of taxable income) related to non-deductible compensation expense and (ii) an increase of $ 0.6 million (or 1 % of taxable income) to the valuation allowance for certain state net operating losses, partially offset by a decrease of $ 0.6 million (or 1 % of taxable income) for the recognition of excess tax benefits from stock-based compensation.
+Added: Our gross unrecognized benefits relating to uncertain tax positions were $ 3.9 million and $ 4.1 million at September 30, 2020 and December 31, 2019, respectively, of which, $ 0.4 million and $ 0.9 million would be recorded through our income tax provision and thus impact the effective tax rate at September 30, 2020 and December 31, 2019, respectively, if the gross unrecognized tax benefits were to be recognized.
We do not expect our gross unrecognized tax benefits to significantly change within the next 12 months.
On March 27, 2020, Congress enacted the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act to provide certain relief as a result of the COVID-19 pandemic.
−Removed: We are currently evaluating how provisions in the CARES Act will impact our consolidated financial statements.
−Removed: Net (Loss) Income Per Share
−Removed: Basic net (loss) income per share is computed by dividing distributed and undistributed net (loss) income allocable to common shares by the weighted-average number of common shares outstanding during the applicable period.
+Added: We continue to evaluate if and how provisions in the CARES Act will impact our consolidated financial statements.
+Added: Net Income Per Share
+Added: Basic net income per share is computed by dividing distributed and undistributed net income allocable to common shares by the weighted-average number of common shares outstanding during the applicable period.
The basic weighted-average number of common shares outstanding during the period excludes non-vested share-based payment awards.
−Removed: Diluted net (loss) income per share was calculated under the treasury stock method for the quarters and six months ended June 30, 2020 and June 30, 2019, which in both periods was more dilutive than the two-class method.
+Added: Diluted net income per share was calculated under the treasury stock method for the quarters and nine months ended September 30, 2020 and September 30, 2019, which in both periods was more dilutive than the two-class method.
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
−Removed: The following table sets forth the computation of basic and diluted net (loss) income per share for the periods presented (in millions of dollars, except share and per share amounts):
+Added: The following table sets forth the computation of basic and diluted net income per share for the periods presented (in millions of dollars, except share and per share amounts):
Quarter Ended
−Removed: Six Months Ended
−Removed: Net (loss) income
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
Denominator – Weighted-average common shares outstanding (in thousands):
dilutive effect of non-vested common shares, restricted stock units and performance shares 1
−Removed: Net (loss) income per common share, Basic:
−Removed: Net (loss) income per common share, Diluted:
+Added: Net income per common share, Basic:
+Added: Net income per common share, Diluted:
Quantities in the following discussion are denoted in whole shares.
−Removed: For the quarter ended June 30, 2020, approximately 71,000 potentially dilutive shares were excluded from the computation of net loss per share as their effect would have been anti-dilutive.
−Removed: During the six months ended June 30, 2020, approximately 38,000 shares were excluded from the weighted-average diluted shares computation as their inclusion would have been anti-dilutive.
−Removed: During the quarter and six months ended June 30, 2019, approximately 9,000 and 5,000 shares, respectively, were excluded from the weighted-average diluted shares computation as their inclusion would have been anti-dilutive.
+Added: During the quarter and nine months ended September 30, 2020, approximately 69,000 shares and 41,000 shares, respectively, were excluded from the weighted-average diluted shares computation as their inclusion would have been anti-dilutive.
+Added: During both the quarter and nine months ended September 30, 2019, approximately 7,000 shares were excluded from the weighted-average diluted shares computation as their inclusion would have been anti-dilutive.
Supplemental Cash Flow Information
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
(In millions of dollars)
7 unchanged sentences
Finance lease liabilities arising from obtaining finance lease assets
−Removed: June 30, 2020
−Removed: June 30, 2019
+Added: September 30, 2020
+Added: September 30, 2019
(In millions of dollars)
4 unchanged sentences
Total cash, cash equivalents and restricted cash presented on our Statements of Consolidated Cash Flows
−Removed: KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
−Removed: NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
We are required to keep on deposit certain amounts that are pledged or held as collateral relating to workers’ compensation and other agreements.
1 unchanged sentence
From time to time, such restricted funds could be returned to us or we could be required to pledge additional cash.
+Added: KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
+Added: NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
Business, Product and Geographical Area Information
−Removed: Our primary line of business is the production of semi-fabricated specialty aluminum mill products, such as aluminum plate and sheet and extruded and drawn products, primarily used in aerospace and high strength ("Aero/HS products"), automotive ("Automotive Extrusions"), general engineering ("GE products") and other industrial ("Other products").
+Added: Our primary line of business is the production of semi-fabricated specialty aluminum mill products, such as aluminum plate and sheet and extruded and drawn products, primarily used in Aero/HS products, automotive (“Automotive Extrusions”), general engineering (“GE products”) and other industrial (“Other products”).
We operate 12 focused production facilities in the United States and one in Canada.
2 unchanged sentences
Quarter Ended
−Removed: Six Months Ended
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
Aero/HS products
10 unchanged sentences
Quarter Ended
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: September 30,
+Added: September 30,
Income taxes paid:
2 unchanged sentences
Dividend Declaration.
−Removed: On July 14, 2020 , we announced that our Board of Directors declared a cash dividend of $ 0.67 per common share.
−Removed: As such, we expect to pay approximately $ 10.7 million (including dividend equivalents) on or about August 14, 2020 to stockholders of record and the holders of certain restricted stock units at the close of business on July 24, 2020 .
+Added: On October 13, 2020 , we announced that our Board of Directors declared a cash dividend of $ 0.67 per common share.
+Added: As such, we expect to pay approximately $ 10.8 million (including dividend equivalents) on or about November 13, 2020 to stockholders of record and the holders of certain restricted stock units at the close of business on October 23, 2020 .
Management ’ s Discussion and Analysis of Financial Condition and Results of Operations
16 unchanged sentences
Our MD&A is presented in the following sections:
−Removed: Highlights of the Quarter Ended June 30, 2020;
+Added: Highlights of the Quarter Ended September 30, 2020;
Results of Operations;
21 unchanged sentences
A fundamental part of our business model is to remain neutral to the impact from fluctuations in the market price for aluminum, thereby earning profit predominately from the conversion of aluminum into semi-fabricated mill products.
−Removed: We refer to this as "metal price neutrality." We purchase primary and scrap, or recycled, aluminum, our main raw material, at prices that fluctuate on a monthly basis, and our pricing policies generally allow us to pass the underlying cost of metal through to our customers so that we remain neutral to metal pricing.
+Added: We refer to this as “ metal price neutrality.
+Added: ” We purchase primary and scrap, or recycled, aluminum, our main raw material, at prices that fluctuate on a monthly basis, and our pricing policies generally allow us to pass the underlying cost of metal through to our customers so that we remain neutral to metal pricing.
However, for some of our higher VAR products sold on a spot basis, competitive dynamics may limit the amount and/or delay the timing of selling price increases to recover our increased aluminum costs, resulting in a lag up to several months during which we may be exposed to metal price risk.
22 unchanged sentences
Our newest facility, which we acquired in 2018, is located in Columbia, New Jersey, and focuses on multi-material advanced manufacturing methods and techniques, which include multi-axis computer numerical control (“CNC”) machining, additive manufacturing (“3D Printing”), welding and fabrication for demanding aerospace and defense, automotive, high tech and general industrial applications.
−Removed: Our consolidated Net sales for the six months ended June 30, 2020 totaled $645.0 million on 274.2 million pounds shipped from our facilities.
−Removed: We employed approximately 2,690 people at June 30, 2020.
+Added: Our consolidated Net sales for the nine months ended September 30, 2020 totaled $900.7 million on 383.1 million pounds shipped from our facilities.
+Added: We employed approximately 2,585 people at September 30, 2020.
We have long-standing relationships with our customers, which consist primarily of blue-chip companies including leading aerospace and automotive manufacturers, tier one aerospace and automotive suppliers and metal service centers.
18 unchanged sentences
Risk Factors in Part II of this Report.
−Removed: Highlights of the quarter ended June 30, 2020 include:
−Removed: Announced executive leadership succession plan, following a deliberate, multi-year planning process, pursuant to which Jack A.
−Removed: Hockema will transition from Chief Executive Officer ("CEO") to Executive Chairman and Keith A.
−Removed: Harvey, our current President and Chief Operating Officer, will succeed Mr.
−Removed: Hockema as CEO and become a member of the board of directors, each effective July 31, 2020;
−Removed: Issued $350.0 million aggregate principal amounts of our 6.50% unsecured senior notes due May 1, 2025 ("6.50% Senior Notes") for enhanced flexibility and to further strengthen our liquidity safety net;
−Removed: VAR declined compared to the quarter ended June 30, 2019, reflecting lower demand across our end markets due to the impact of the COVID-19 pandemic;
−Removed: Combined cash and cash equivalents and net borrowing availability under our Revolving Credit Facility was $992.9 million as of June 30, 2020;
−Removed: We paid cash dividends and dividend equivalents of $0.67 per share or $10.6 million during the quarter ended June 30, 2020.
+Added: Highlights of the quarter ended September 30, 2020 include:
+Added: Strong rebound in Automotive Extrusions following auto supply chain shutdowns driven by the COVID-19 pandemic during the quarter ended June 30, 2020;
+Added: GE products remains strong despite normal seasonal demand weakness;
+Added: Commercial aerospace demand declined sharply on weaker business conditions, partially mitigated by continued strength in demand for defense applications;
+Added: Combined cash and cash equivalents and net borrowing availability under our Revolving Credit Facility was $1,003.4 million as of September 30, 2020;
+Added: We paid cash dividends and dividend equivalents of $0.67 per share or $10.8 million during the quarter ended September 30, 2020.
Results of Operations
Consolidated Results of Operations
−Removed: Net sales totaled $275.7 million and $375.3 million for the quarters ended June 30, 2020 and June 30, 2019, respectively, reflecting a 37.1 million pound (24%) decrease in shipment volume and a $0.09/lb (4%) decrease in average realized sales price per pound.
−Removed: The shipment volume decrease primarily reflected:
−Removed: (i) a 15.8 million pound (25%) decrease in Aero/HS products, which predominantly reflects the impact of production suspension of commercial aerospace at Boeing and Airbus;
−Removed: (ii) a 13.2 million pound (58%) decrease in Automotive Extrusions as virtually every North American automotive manufacturer temporarily shut down operations due to the COVID-19 pandemic;
−Removed: (iii) a 4.5 million pound (7%) decrease in GE products primarily related to the disruption caused by the COVID-19 pandemic;
−Removed: and (iv) a 3.6 million pound (57%) decrease in Other products reflecting our planned exit from non-strategic applications.
−Removed: The decrease in average realized sales price per pound reflected a $0.22/lb (21%) decrease in average Hedged Cost of Alloyed Metal price per pound, partially offset by a $0.13/lb (10%) increase in VAR per pound due to the customer mix of Aero/HS and GE products.
+Added: Net sales totaled $255.7 million and $374.9 million for the quarters ended September 30, 2020 and September 30, 2019, respectively, reflecting a 45.3 million pound (29%) decrease in shipment volume and an $0.08/lb (3%) decrease in average realized sales price per pound.
+Added: The shipment volume decrease reflected:
+Added: (i) a 39.8 million pound (59%) decrease in Aero/HS products compared to the quarter ended September 30, 2019, primarily due to the impact of the COVID-19 pandemic on commercial aerospace demand;
+Added: (ii) a 3.7 million pound (63%) decrease in Other products reflecting our planned exit from non-strategic applications;
+Added: and (iii) a 3.0 million pound (5%) decrease in GE products reflecting seasonal demand weakness normally experienced in the second half of the year, partially offset by a 1.2 million pound (5%) increase in Automotive Extrusions reflecting new program launches that began to ramp up as the automotive supply chain returned to production following the shutdown during the prior quarter ended June 30, 2020 related to the COVID-19 pandemic.
+Added: The decrease in average realized sales price per pound reflected an $0.11/lb (11%) decrease in average Hedged Cost of Alloyed Metal price per pound, partially offset by a $0.03/lb (2%) increase in VAR per pound due to the mix within Aero/HS and GE products and approximately $15.0 million of additional Net sales associated with provisions under multi-year contracts with our customers, as discussed further in Note 1 of Notes to Consolidated Financial Statements included in this Report.
See the table in “ Selected Operational and Financial Information” below for further details.
−Removed: Net sales totaled $645.0 million and $770.5 million for the six months ended June 30, 2020 and June 30, 2019, respectively, reflecting a 44.1 million pound (14%) decrease in shipment volume and a $0.07/lb (3%) decrease in average realized sales price per pound.
−Removed: The shipment volume decrease primarily reflected:
−Removed: (i) a 16.4 million pound (13%) decrease in Aero/HS products reflecting lower demand for our aerospace products;
−Removed: (ii) a 14.5 million pound (30%) decrease in Automotive Extrusions reflecting the impact of temporary automotive plant closures;
+Added: Net sales totaled $900.7 million and $1,145.4 million for the nine months ended September 30, 2020 and September 30, 2019, respectively, reflecting an 89.4 million pound (19%) decrease in shipment volume and a $0.07/lb (3%) decrease in average realized sales price per pound.
+Added: The shipment volume decrease reflected:
+Added: (i) a 56.2 million pound (28%) decrease in Aero/HS products reflecting the impact of the pandemic on demand for our aerospace applications;
+Added: (ii) a 13.3 million pound (19%) decrease in Automotive Extrusions reflecting the impact of temporary automotive plant closures during the quarter ended June 30, 2020;
(iii) an 11.8 million pound (61%) decrease in Other products reflecting our planned exit from non-strategic applications;
−Removed: and (iv) a 5.1 million pound (4%) decrease in GE products.
−Removed: The decrease in average realized sales price per pound reflected a $0.16/lb (15%) decrease in average Hedged Cost of Alloyed Metal prices per pound, partially offset by a $0.09/lb (7%) increase in VAR per pound due primarily to the customer mix of Aero/HS and GE products.
+Added: and (iv) an 8.1 million pound (4%) decrease in GE products.
+Added: The decrease in average realized sales price per pound reflected a $0.13/lb (12%) decrease in average Hedged Cost of Alloyed Metal prices per pound, partially offset by a $0.06/lb (4%) increase in VAR per pound due primarily to the mix within Aero/HS and GE products.
See the table in “ Selected Operational and Financial Information” below for further details.
Cost of Products Sold, Excluding Depreciation and Amortization and Other Items.
−Removed: Cost of products sold, excluding depreciation and amortization and other items for the quarter ended June 30, 2020 totaled $224.5 million, or 81% of Net sales, compared to $303.5 million, or 81% of Net sales, for the quarter ended June 30, 2019.
+Added: Cost of products sold, excluding depreciation and amortization and other items for the quarter ended September 30, 2020 totaled $208.4 million, or 82% of Net sales, compared to $298.6 million, or 80% of Net sales, for the quarter ended September 30, 2019.
The decrease of $90.2 million reflected a $58.9 million decrease in Hedged Cost of Alloyed Metal and a $31.3 million decrease in net manufacturing conversion and other costs.
−Removed: Of the $64.8 million decrease in Hedged Cost of Alloyed Metal, $25.2 million was due to lower hedged metal prices and $39.6 million was due to lower shipment volume, as discussed above in " Net Sales.
−Removed: " The $14.2 million decrease in net manufacturing conversion and other costs was due primarily to:
−Removed: (i) the flexing of manufacturing costs to meet reduced end market demand and (ii) lower planned major maintenance costs as the planned downtime at our Trentwood facility during the quarter ended June 30, 2019 did not repeat in the quarter ended June 30, 2020.
−Removed: See " Selected Operational and Financial Information" below for a further discussion of the comparative results of operations for the quarters ended June 30, 2020 and June 30, 2019.
−Removed: Cost of products sold, excluding depreciation and amortization and other items for the six months ended June 30, 2020 totaled $511.1 million, or 79% of Net sales, compared to $618.6 million, or 80% of Net sales, for the six months ended June 30, 2019.
−Removed: The decrease of $107.5 million reflected an $89.0 million decrease in Hedged Cost of Alloyed Metal and an $18.5 million decrease in net manufacturing conversion and other costs.
−Removed: Of the $89.0 million decrease in Hedged Cost of Alloyed Metal, $41.5 million was due to lower hedged metal prices and $47.5 million was due to lower shipment volume, as discussed above in " Net Sales.
+Added: Of the $58.9 million decrease in Hedged Cost of Alloyed Metal, $47.0 million was due to lower shipment volume, as discussed above in “ Net Sales,” and $11.9 million was due to lower hedged metal prices .
The $31.3 million decrease in net manufacturing conversion and other costs reflected:
−Removed: (i) a $12.1 million decrease due primarily to the flexing of manufacturing costs to meet reduced end market demand, as well as inefficiencies during the six months ended June 30, 2019 that did not repeat in the six months ended June 30, 2020 related to the transition from end-of-life automotive programs to new programs and (ii) a $6.4 million decrease in major maintenance costs associated primarily with both planned and unplanned downtime at our Trentwood facility during the quarters ended June 30, 2019 and March 31, 2019, respectively, that did not repeat during the six months ended June 30, 2020.
−Removed: See " Selected Operational and Financial Information" below for a further discussion of the comparative results of operations for the six months ended June 30, 2020 and June 30, 2019.
+Added: (i) a $39.1 million decrease related to lower sales and a reduction of manufacturing costs to meet reduced end market application demand and (ii) $7.0 million of lower benefits and overhead costs, partially offset by:
+Added: (i) an increase of $10.3 million in other manufacturing costs due to lower manufacturing efficiencies;
+Added: (ii) an increase of $3.5 million in environmental costs associated with on-going historical environmental cleanup;
+Added: and (iii) an increase of $1.0 million related to major maintenance.
+Added: See “ Selected Operational and Financial Information” below for a further discussion of the comparative results of operations for the quarters ended September 30, 2020 and September 30, 2019.
+Added: Cost of products sold, excluding depreciation and amortization and other items for the nine months ended September 30, 2020 totaled $719.5 million, or 80% of Net sales, compared to $917.2 million, or 80% of Net sales, for the nine months ended September 30, 2019.
+Added: The decrease of $197.7 million reflected a $147.9 million decrease in Hedged Cost of Alloyed Metal and a $49.8 million decrease in net manufacturing conversion and other costs.
+Added: Of the $147.9 million decrease in Hedged Cost of Alloyed Metal, $95.1 million was due to lower shipment volume, as discussed above in “ Net Sales,” and $52.8 million was due to lower hedged metal prices.
+Added: The $49.8 million decrease in net manufacturing conversion and other costs reflected:
+Added: (i) a $54.8 million decrease related to lower sales and a reduction of manufacturing costs to meet reduced end market application demand;
+Added: (ii) $11.8 million of lower benefits and overhead costs;
+Added: and (iii) a $5.3 million reduction in major maintenance, partially offset by:
+Added: (i) an increase of $18.0 million in other manufacturing costs due to lower manufacturing efficiencies and (ii) an increase of $3.3 million in environmental costs associated with on-going historical environmental cleanup.
+Added: See “ Selected Operational and Financial Information” below for a further discussion of the comparative results of operations for the nine months ended September 30, 2020 and September 30, 2019.
Selling, General, Administrative, Research and Development ( “ SG&A and R&D ” ).
−Removed: SG&A and R&D expense totaled $22.7 million and $27.2 million for the quarters ended June 30, 2020 and June 30, 2019, respectively, and $46.6 million and $52.4 million for the six months ended June 30, 2020 and June 30, 2019, respectively.
−Removed: The decrease during the quarter ended June 30, 2020 was due primarily to:
−Removed: (i) a $2.7 million reduction in employee incentive programs;
−Removed: (ii) a $1.3 million reduction in salaries and benefits, including consulting costs;
−Removed: (iii) a $1.1 million reduction in travel costs;
−Removed: and (iv) a $0.7 million reduction in miscellaneous selling and marketing costs;
−Removed: partially offset by an increase in environmental expenses of $1.5 million.
−Removed: The decrease for the six months ended June 30, 2020 compared with June 30, 2019 was due primarily to:
+Added: SG&A and R&D expense totaled $21.3 million and $23.3 million for the quarters ended September 30, 2020 and September 30, 2019, respectively, and $67.9 million and $75.7 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.
+Added: The decrease during the quarter ended September 30, 2020 was due primarily to:
+Added: (i) a $1.1 million reduction in salaries and benefits and (ii) a $0.6 million reduction in employee incentive programs.
+Added: The decrease for the nine months ended September 30, 2020 compared with
+Added: September 30, 2019 was due primarily to:
(i) a $ 3.1 million reduction in employee incentive programs;
−Removed: (ii) a $2.1 million reduction in salaries and benefits, including consulting costs;
−Removed: (iii) a $1.3 million reduction in travel costs;
−Removed: and (iv) a $1.3 million reduction in miscellaneous selling and marketing costs;
−Removed: partially offset by an increase in environmental expenses of $1.9 million.
+Added: 8 million reduction in salaries and benefits;
+Added: and (iii) a $ 2.2 million reduction in travel costs.
Restructuring Costs.
−Removed: Restructuring costs for the quarter ended June 30, 2020 totaled $11.9 million and were primarily comprised of employee - related costs for severance, voluntary buyout packages, outplacement services, estimated medical costs and associated payroll tax costs.
See Note 9 of Notes to Interim Consolidated Financial Statements included in this Report for further information regarding the restructuring plan.
−Removed: Other Operating (Income) Charges, net .
−Removed: Other operating (income) charges, net, consisted of $1.1 million of income and $0.1 million of charges for both the quarters and six months ended June 30, 2020 and June 30, 2019, respectively.
−Removed: During the quarter and six months ended June 30, 2020, our subsidiary, Kaiser Aluminum Canada Limited, recognized a total of $1.1 million of payroll subsidies under the Canada Emergency Wage Subsidy Program.
+Added: Other Operating Charges (Income), Net .
+Added: Other operating charges (income), net, was $0.3 million of charges for the quarter ended September 30, 2020 and $0.8 million of income for the nine months ended September 30, 2020.
+Added: There were no Other operating (income) charges, net, for the quarter ended September 30, 2019 and $0.1 million of charges for the nine months ended September 30, 2019.
+Added: During the quarter ended September 30, 2020, we recognized $0.4 million of impairment charges related to property, plant and equipment, which was partially offset by $0.1 million of payroll subsidies received by our subsidiary Kaiser Aluminum Canada Limited (“KACL”) under the Canada Emergency Wage Subsidy (“CEWS”) Program.
+Added: During the nine months ended September 30, 2020, KACL recognized a total of $1.3 million of payroll subsidies under the CEWS Program, which was partially offset by a $0.5 million impairment charge related to property, plant and equipment.
Interest Expense.
Interest expense represents cash and non-cash interest expense incurred on our unsecured senior notes and our revolving credit facility, net of capitalized interest.
−Removed: Interest expense was $10.5 million and $5.8 million for the quarters ended June 30, 2020 and June 30, 2019, respectively, and $16.6 million and $11.5 million for the six months ended June 30, 2020 and June 30, 2019, respectively.
+Added: Interest expense was $12.1 million and $5.8 million for the quarters ended September 30, 2020 and September 30, 2019, respectively, and $28.7 million and $17.3 million for the nine months ended September 30, 2020 and September 30, 2019, respectively.
See Note 6 of Notes to Interim Consolidated Financial Statements included in this Report for a discussion of:
−Removed: (i) our debt and credit facilities that were in effect during each of the quarters and six months ended June 30, 2020 and June 30, 2019 and (ii) interest expense capitalized as part of construction in progress.
−Removed: Other Income (Expense), Net.
+Added: (i) our debt and credit facilities that were in effect during each of the quarters and nine months ended September 30, 2020 and September 30, 2019 and (ii) interest expense capitalized as part of construction in progress.
+Added: Other Expense, Net.
See Note 10 of Notes to Interim Consolidated Financial Statements included in this Report for details.
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Quarter Ended
−Removed: Six Months Ended
−Removed: Net (loss) income
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
Interest expense
−Removed: Other (income) expense, net
−Removed: Income tax provision
+Added: Other expense, net
+Added: Income tax (benefit) provision
Depreciation and amortization
2 unchanged sentences
Adjustments to plant-level LIFO 1
−Removed: Mark-to-market loss on derivative instruments 2
+Added: Mark-to-market (gain) loss on derivative instruments 2
Workers' compensation cost due to discounting
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This line item represents the conversion from GAAP LIFO applied on a consolidated basis to monthly LIFO applied on a plant-by-plant basis.
−Removed: Mark-to-market loss on derivative instruments for 2020 and 2019 represents:
+Added: Mark-to-market (gain) loss on derivative instruments for 2020 and 2019 represents:
(i) the reversal of mark-to-market loss (gain) on commodity hedges entered into prior to the adoption of Accounting Standards Update (“ASU”) No.
2017-12, Derivatives and Hedging (Topic 815):
−Removed: Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12") and settled in the periods presented above;
+Added: Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”) and
+Added: settled in the periods presented above ;
(ii) loss (gain) on non-designated commodity hedges ;
and (iii) reclassifications out of Accumulated other comprehensive loss due to forecasted transactions no longer probable of occurring.
−Removed: Adjusted EBITDA reflects the realized gains and losses related to these derivatives upon settlement.
+Added: Adjusted EBITDA reflects the realized gains and loss es related to these derivatives upon settlement.
Non-run-rate environmental expenses are related to legacy activities at operating facilities prior to July 6, 2006.
See Note 7 of Notes to Interim Consolidated Financial Statements included in this Report for additional information relating to the environmental expenses.
−Removed: Adjusted EBITDA for the quarter ended June 30, 2020 was $13.1 million lower than Adjusted EBITDA for the quarter ended June 30, 2019, reflecting a $21.6 million sales impact, partially offset by reductions in overhead and other costs and $4.7 million of lower planned major maintenance costs.
−Removed: Adjusted EBITDA for the six months ended June 30, 2020 was $9.9 million lower than Adjusted EBITDA for the six months ended June 30, 2019 due to a $21.1 million sales impact, partially offset by reductions in overhead and other costs and $6.3 million of lower planned major maintenance costs.
+Added: Adjusted EBITDA for the quarter ended September 30, 2020 was $26.5 million lower than Adjusted EBITDA for the quarter ended September 30, 2019, primarily reflecting:
+Added: (i) a $23.3 million sales impact inclusive of the $15.0 million as discussed in “Net sales” above and (ii) an $8.8 million reduction in operating leverage, partially offset by a $4.7 million increase due to our flexing of costs in line with reduced volume.
+Added: Adjusted EBITDA for the nine months ended September 30, 2020 was $36.4 million lower than Adjusted EBITDA for the nine months ended September 30, 2019 primarily reflecting:
+Added: (i) a $44.4 million sales impact and (ii) a $15.4 million reduction in operating leverage, partially offset by a $21.3 million reduction in overhead and benefits costs.
The table below provides our shipment and VAR information (in millions of dollars, except shipments and VAR per pound) by end market applications for each period presented:
Quarter Ended
−Removed: Six Months Ended
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
Aero/HS Products:
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Hedged Cost of Alloyed Metal
−Removed: As we noted during the quarter ended March 31, 2020, VAR for large commercial aerospace and defense applications is anticipated to be down approximately 15% to 20% from full year 2019 results.
−Removed: The two businesses combined represent approximately 50% of our total VAR.
−Removed: For the second half of 2020, we anticipate total VAR will be down approximately 10% to 15% from the quarter ended June 30, 2020, with EBITDA as a percentage of VAR in the mid-teens.
−Removed: Compared to the quarter ended June 30, 2020, we expect VAR in the second half of 2020 for Aero/HS products will be lower as large commercial aerospace shipments were heavily weighted to the first half of 2020.
−Removed: We expect normal seasonal demand weakness for our GE products and anticipate VAR for our automotive applications to be similar to the quarter ended March 31, 2020 as customers return to more normal operations, and new program launches resume.
−Removed: Our second half of 2020 outlook for VAR and EBITDA as a percentage of VAR anticipates that the quarter ended September 30, 2020 will be lower than the quarter ended December 31, 2020 due to timing of aerospace shipments and approximately $4.0 million of higher major maintenance costs related to timing of planned projects.
+Added: Looking to the balance of the year, we reiterate our outlook for the second half of 2020 that we communicated during the quarter ended June 30, 2020.
+Added: We continue to anticipate total VAR to be down approximately 10% to 15% compared to the quarter ended June 30, 2020 driven by lower commercial aerospace and business jet sales, offset by continued strength in demand for our defense, automotive and general engineering applications with EBITDA as a percentage of VAR in the mid-teens.
+Added: We continue to anticipate a slow recovery for large commercial aerospace applications driven by longer than expected recertification of the Boeing 737 MAX, slower recovery in domestic and international air travel and destocking in the supply chain.
+Added: As a result, we expect our VAR for commercial aerospace applications to be down approximately 30% to 35% from our 2019 results.
+Added: This compares to the previously anticipated decline of approximately 20% to 25% year-over-year.
+Added: Longer term, consistent with the outlook published by Boeing and Airbus, we anticipate that it could be two to four years before large commercial aerospace demand returns to levels similar to 2019.
+Added: Demand for our defense applications remains strong and is expected to continue in 2021, driven by continued growth in the F‑35 joint strike fighter and other legacy and rotary military aircraft programs.
+Added: Strong demand for Automotive Extrusions is expected to continue to be driven by growth in aluminum content and North American vehicle build rates, currently projected to increase from 12.9 million vehicles in 2020 to over 15.2 million vehicles in 2021.
+Added: Overall, we are well positioned to continue to navigate challenging market conditions and capitalize on opportunities to further strengthen our prospects for long-term profitable growth.
+Added: Total liquidity remains strong at $1.0 billion and our disciplined capital allocation priorities and our financial guidelines remain unchanged.
+Added: Although there remains uncertainty as we look forward, at this time we believe that overall 2020 will be the trough and as business conditions improve, we expect to emerge from the current environment stronger and better positioned to compete over the longer-term.
Liquidity and Capital Resources
The following table summarizes our liquidity as of the periods presented (in millions of dollars):
+Added: September 30,
Available cash and cash equivalents
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Total liquidity
−Removed: Borrowing availability under the Revolving Credit Facility as determined by a borrowing base calculated as of June 30, 2020 and December 31, 2019.
+Added: Borrowing availability under the Revolving Credit Facility as determined by a borrowing base calculated as of September 30, 2020 and December 31, 2019.
We place our cash in bank deposits and money market funds with high credit quality financial institutions.
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Due to the current economic situation, we have intentionally reduced our holdings in Short‑term investments.
−Removed: See Note 13 of Notes to Interim Consolidated Financial Statements included in this Report for information regarding restricted cash at June 30, 2020.
+Added: See Note 13 of Notes to Interim Consolidated Financial Statements included in this Report for information regarding restricted cash at September 30, 2020.
We and certain of our subsidiaries have a credit agreement with Wells Fargo Bank, National Association, as administrative agent, and the other financial institutions party thereto (“Revolving Credit Facility”) (see Note 6 of Notes to Interim Consolidated Financial Statements included in this Report).
−Removed: There were no borrowings under our Revolving Credit Facility as of June 30, 2020, or as of December 31, 2019.
+Added: There were no borrowings under our Revolving Credit Facility as of September 30, 2020, or as of December 31, 2019.
The following table summarizes our cash flows from operating, investing and financing activities for each period presented (in millions of dollars):
−Removed: Six Months Ended June 30,
+Added: Nine Months Ended September 30,
Total cash provided by (used in):
2 unchanged sentences
Financing activities
−Removed: Cash provided by operating activities for the six months ended June 30, 2020 reflected:
+Added: Cash provided by operating activities for the nine months ended September 30, 2020 reflected:
(i) a decrease in trade and other receivables of $43.4 million driven primarily by lower Net sales;
−Removed: (ii) a reduction in contract assets of $13.0 million driven primarily by timing of shipments related to revenue on products recognized over-time;
−Removed: and (iii) a decrease in accounts payable of $28.7 million driven predominantly by the volume of metal purchases.
−Removed: Cash provided by operating activities for the six months ended June 30, 2019 reflected:
−Removed: (i) a reduction in contract assets of $8.0 million driven primarily by timing of shipments related to revenue on products recognized over-time;
−Removed: (ii) an increase in inventory of $16.0 million due partially to the planned and unplanned downtime at our Trentwood facility during the quarters ended June 30, 2019 and March 31, 2019, respectively, as well as the transition to new Automotive Extrusions programs;
−Removed: and (iii) a decrease in accounts payable of $13.4 million driven predominantly by the volume of metal purchases.
−Removed: See Statements of Consolidated Cash Flows included in this Report for further details on our cash flows from operating, investing and financing activities for the quarters ended June 30, 2020 and June 30, 2019.
+Added: (ii) a decrease in accounts payable of $27.6 million driven predominantly by the volume of metal purchases;
+Added: and (iii) a reduction in contract assets of $19.8 million driven primarily by timing and volume of shipments related to revenue on products recognized over-time.
+Added: Cash provided by operating activities for the nine months ended September 30, 2019 reflected a decrease in inventory of $22.6 million, offset by a decrease in accounts payable of $21.9 million driven by decreases in the quantity and price of metal purchases.
+Added: See Statements of Consolidated Cash Flows included in this Report for further details on our cash flows from operating, investing and financing activities for the nine months ended September 30, 2020 and September 30, 2019.
Sources of Liquidity
2 unchanged sentences
We do not believe that covenants contained in the Revolving Credit Facility are reasonably likely to limit our ability to raise additional debt or equity should we choose to do so during the next 12 months, nor do we believe it is likely that during the next 12 months we will trigger the availability threshold that would require measuring and maintaining a fixed charge coverage ratio.
−Removed: At July 20, 2020, there were no borrowings under the Revolving Credit Facility.
−Removed: As of June 30, 2020, we recognized $2.1 million in employer payroll tax deferrals under the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, of which, 50% will be paid in 2021 and 50% will be paid in 2022.
+Added: At October 16, 2020, there were no borrowings under the Revolving Credit Facility.
+Added: As of September 30, 2020, we recognized $4.8 million in employer payroll tax deferrals under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, of which, 50% will be paid in 2021 and 50% will be paid in 2022.
See Note 9 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019 for a description of our Revolving Credit Facility.
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Payments Due by Period
−Removed: Less than 1 year
−Removed: More than 5 years
Principal and interest on 6.50% Senior Notes
See Note 6 of Notes to Interim Consolidated Financial Statements included in this Report for further details with respect to the 6.50% Senior Notes.
−Removed: We do not believe that covenants in the indenture s governing the unsecured senior notes are likely to limit our ability to obtain additional debt or equity financing should we choose to do so during the next 12 months.
+Added: We do not believe that covenants in the indentures governing the unsecured senior notes are likely to limit our ability to obtain additional debt or equity financing should we choose to do so during the next 12 months.
Capital Expenditures and Investments
16 unchanged sentences
Holders of performance shares are not paid a quarterly dividend equivalent, but instead are entitled to receive, in connection with the issuance of underlying shares of common stock for performance shares that ultimately vest, a one-time payment equal to the dividends such holder would have received if the number of such shares of common stock so issued had been held of record by such holder from the date of grant of such performance shares through the date of such issuance.
−Removed: See our Statements of Consolidated Stockholders' Equity and Note 15 of Notes to Interim Consolidated Financial Statements included in this Report for information regarding dividends paid during the quarters ended June 30, 2020 and June 30, 2019, and declared subsequent to June 30, 2020.
+Added: See our Statements of Consolidated Stockholders’ Equity and Note 15 of Notes to Interim Consolidated Financial Statements included in this Report for information regarding dividends paid during the quarters ended September 30, 2020 and September 30, 2019, and declared subsequent to September 30, 2020.
Repurchases of Common Stock
In response to prevailing economic conditions, we suspended repurchases of common stock as of March 18, 2020.
−Removed: See our Statements of Consolidated Stockholders' Equity included in this Report for information regarding repurchases of common stock during the quarters and six months ended June 30, 2020 and June 30, 2019 and the amount authorized and available for future repurchases of common stock under our stock repurchase program.
−Removed: See our Statements of Consolidated Stockholders' Equity included in this Report for information regarding minimum statutory tax withholding obligations arising during the quarters and six months ended June 30, 2020 and June 30, 2019, in connection with the vesting of non-vested shares, restricted stock units and performance shares.
+Added: See our Statements of Consolidated Stockholders’ Equity included in this Report for information regarding repurchases of common stock during the quarters and nine months ended September 30, 2020 and September 30, 2019 and the amount authorized and available for future repurchases of common stock under our stock repurchase program.
+Added: See our Statements of Consolidated Stockholders’ Equity included in this Report for information regarding minimum statutory tax withholding obligations arising during the quarters and nine months ended September 30, 2020 and September 30, 2019, in connection with the vesting of non-vested shares, restricted stock units and performance shares.
Environmental Commitments and Contingencies
1 unchanged sentence
Contractual Obligations, Commercial Commitments and Off-Balance Sheet Arrangements
−Removed: During the quarter ended June 30, 2020, we granted additional stock-based awards to executive officers, certain key employees and non-employee directors under our equity incentive plan.
+Added: During the nine months ended September 30, 2020, we granted additional stock-based awards to executive officers, certain key employees and non-employee directors under our equity incentive plan.
Additional awards are expected to be made in future years.
See “ Debt ” above for an update to our contractual obligations as of December 31, 2019 with respect to our 6.50% Senior Notes .
+Added: During the quarter ended September 30, 2020, we cancelled equipment purchase commitments of $41.3 million that had been reported as purchase obligations within the contractual obligations and commercial commitments table under the 1-3 years category within Part II, Item 7.
+Added: "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2019.
Except as otherwise disclosed herein, there has been no material change in our contractual obligations, commercial commitments or off-balance sheet arrangements other than in the ordinary course of business since December 31, 2019.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.