Please standby, we are about to begin. Good day everyone and welcome to the Kaiser Aluminum First Quarter 2015 Earnings Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the conference over to Melinda Ellsworth, please go ahead.

Thank you. Good afternoon everyone and welcome to Kaiser Aluminum's first quarter 2015 earnings conference call. If you've not seen a copy of today's earnings release, please visit the Investor Relations page on our website at kaiseraluminum.com. We have also posted a PDF version of the slide presentation for this call. Joining me on the call today are Chairman, President and Chief Executive Officer, Jack Hockema; Executive Vice President and Chief Financial Officer, Dan Rinkenberger; and Vice President and Chief Accounting Officer, Neal West. Before we begin, I'd like to refer you to the first two slides of our presentation and remind you that the statements made by management and the information contained in this presentation that constitute forward-looking statements are based on management's current expectations. For a summary of specific risk factors that could cause results to differ materially from those expressed in the forward-looking statements, please refer to the Company's earnings release and reports filed with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the full year ended December 31, 2014. The Company undertakes no duty to update any forward-looking statements to conform the statement to actual results or changes in the Company's expectations. In addition, we've included non-GAAP financial information in our discussion and reconciliations to the most comparable GAAP financial measures are included in the earnings release and in the appendix of the presentation. Any reference in our discussion today to EBITDA means adjusted EBITDA, which excludes non-run rate items for which we've provided reconciliations in the appendix. At the conclusion of the Company's presentation, we will open the call for questions. I would now like to turn the call over to Jack Hockema. Jack?

Thanks Melinda, welcome to everyone joining us on the call. I'll start today with brief comments on the quarter and Dan will provide further discussion of the results, after that I'll share some thoughts on the market environment and our outlook. Record shipments, record value added revenue and solid manufacturing cost performance drove significantly improved year-over-year results in the first quarter. Shipments for both Heat Treat Plate and total aerospace and high-strength applications established new records as the supply chain inventory overhang for these products continues to abate. We also realized a small improvement in Heat Treat Plate prices in the first quarter, although the year-over-over impact was less than a $1 million, we're encouraged that the pricing environment for spot market sales is slowly improving. Shipments and value added revenue for automotive applications also reached record highs for any quarter, driven primarily by our growing content from new programs, including Ford F-150 launch. In addition to the strong shipments and valued added revenue, there were a number of cost storylines in the first quarter as we noted on the last call in addition to the normal first quarter front loaded annual benefits costs, we incurred costs for signing bonuses related to the new collective bargaining agreements and higher than typical freight costs related to the grid lock at the West Coast ports. The issue at the ports has been resolved and we do not expect further extraordinary costs in the second quarter. Partially offsetting these expenses was lower than normal major maintenance spending due to timing. Despite the inefficiencies expected during the ramp up of several new automotive programs in the quarter, our underlying manufacturing cost efficiency was solid as we continued to improve performance at Trentwood and Kalamazoo. And as we recently announced, our Board authorized an additional $100 million for share repurchases, which followed the 14% dividend increase announced in January, further underscoring our confidence in our business outlook. Through April 27, we had cumulative share repurchases of $39 million in 2015, with $134 million remaining under the repurchase authorization. I'll now turn the call over to Dan for further discussion of the first quarter results. Dan?

Thanks Jack. Before I comment on our underlying results, I'd like to review the Union VEBA and its accounting treatment in the first quarter. As we mentioned in our last earnings call, as a result of recent labor recognitions with the United Steelworkers, our annual funding obligation to the Union VEBA now definitively expires as of September, 2017. The definitive termination date of our funding obligation triggered an end to the accounting for the Union VEBA as a defined benefit plan in our financial statements. So in the first quarter, we removed the Union VEBA asset, related deferred tax liabilities and accumulated other comprehensive income amounts from our balance sheet. Additionally, we recorded $45 million liability in the first quarter to reflect the estimated remaining annual variable contributions that we expect to make to the Union VEBA for periods through September 2017. This change in accounting treatment resulted in an after-tax charge of $308 million. This is a non-cash charge and we reflected as a non-run rate item just as we have treated all of the non-cash income items related to the Union VEBA over the years. On slide 22 in the appendix, we have provided greater detail on the balance sheet impacts of the accounting change. So to summarize, the main fund -- the same funding obligation we have had to the Union VEBA for nine years now has a definitive ending date, the change in the accounting in the first quarter generated a non-cash non-run rate after-tax charge of $308 million and our balance sheet now more clearly reflects the assets of the Company as well as our remaining obligation to the Union VEBA which we estimate will total approximately $45 million spanning the next three years. Turning to slide 7. First quarter 2015 financials reflected strong underlying…

Thanks, Dan. Turning now to slide nine and our outlook for aerospace and high strength applications. Similar to recent quarters, we are continuing to experience steady abatement of the supply chain inventory overhang that has dampened demand for all of our products serving these applications. The heat treat plate supply chain is nearing equilibrium, although the supply chain for other high strength products continues to experience the effect of the inventory overhang. We continue to anticipate year-over-year 2015 shipments and value added revenue growth in the range of 6% to 8% for these applications, driven by higher commercial airframe build rates as well as reduced drag from the supply chain inventory overhang. In addition to increased shipments for these applications in 2015, we expect an improving price environment for spot market sales of heat treat plate products as the aerospace supply chain inventory overhang continues to abate. As I noted, our pricing for heat treat plate products improved a modest amount in the first quarter. While we do not anticipate significant price appreciation, we expect the year-over-year heat treat plate price comparisons will be increasingly favorable as we move through the year. Regarding automotive extrusions, as we indicated during our last call, we anticipate approximately 15% year-over-year growth in automotive value added revenue, continuing the strong momentum from the step change growth in 2014. Our plants are engaged in a number of program launches fueled by our strong pipeline that will continue to drive the growth. Turning to slide ten and our outlook for general engineering and other industrial applications. Despite tepid first quarter demand, we maintain our expectation for 3% to 4% year-over-year demand growth for the full year for general engineering applications. Order patterns in the second quarter currently support this outlook, but we’re monitoring trends closely and…

Thank you. [Operator Instructions] We will take our first question from Edward Marshall of Sidoti & Company.

Hey guys, how are you doing?

Good, Ed.

So, I guess the first question I had was, you gave some good color on the growth that you anticipate for both aero and automotive. And I’m wondering if as -- especially as aerospace destocking abates, I’m curious if you’d be able to -- and I know you gave some commentary around that, maybe that’s as far as you’ll go, but would you give a breakdown maybe of how much you expect from volume and how much from price? Is it 1% price kind of 5% volume on that 6% in the low end? Is that about right?

No, that’s really, that’s all volume. We’re not building -- yeah, we’re not building anything into our outlook for price increases.

Now did you say that you expected modest price increases on the aero side, so that 6% to 8% --?

Yeah, and modest is underscored in that. When we look at year-over-year versus first quarter and that’s both aero plate and GE -- general engineering plate, it was under a million, it barely rounded to a million. It was closer -- much closer to a half a million than it was a million dollars and we expect that to improve a little bit but not by millions of dollars per quarter. I mean, by the second half of the year, we may have another million dollars a quarter or so. Our contract volume is very, very strong, which is good news, but that mitigates the benefits that we get from price increases as we go forward because our spot business is a smaller proportion of the total.

Got you. And are you thinking the same on the auto, is that 15% really driven by volume?

Yes.

Okay, great. Next question I wanted to ask is on the timing of the major maintenance cost that you had mentioned that didn't hit in Q1. I'm curious, are they pushed to Q2 or were they potentially just stronger last year and had made a tougher comp for you or an easier comp?

The major maintenance is always very lumpy. Typically the first quarter is a low major maintenance spending quarter. Last year frankly was atypical, where we had a lot more major maintenance spending and as I recall, that was in part because we were ramping up the Phase 5 expansion and have some major maintenance expenses associated with that at Trentwood. So it wasn't that unusual to have a low number in the first quarter. We think that the second quarter will be back more to a normal run rate in terms of major maintenance.

Okay. And then as to potentially give you maybe a forum to kind of talk about either the longer-term plan here about running at a 23% EBITDA margin and wanting to get that upwards of near 25%, maybe some of the steps and kind of the timing to maybe when you think you can actually achieve higher EBITDA margins through the business even though they're running at a pretty clip right now?

We continue with our outlook that we believe this platform has the capability to get value-added revenue in the high-800s and margins in the high-20s, but the margin growth from where we are will basically be primarily leverage and manufacturing cost efficiencies. We see a path, if demand goes where we expect demand to go with some of the outlook we gave on the last call in all of our segments, we expect to reach those kind of numbers longer-term in both leverage and manufacturing cost efficiency to get up into the high-20s. I'm not going to give you a prediction of when that's going to happen, but there's really no price of any consequence built into that outlook. It's really efficiency and leverage from volume.

Okay, fair enough. Thank you, guys.

And we will take our next question from Timna Tanners with Bank of America.

Hey, good morning to you, guys, and good afternoon here I guess. How are you doing? I feel like it wouldn't be a Kaiser call if I didn't ask you about -- a little bit more about your underleverage position and what you are planning to do. I know you alluded to more investments. It sounds like organic investments in addition to still returning cash to shareholders. So just wondered if you will provide any more color on that and the M&A environment as you are seeing it. Some of your competitors have been making acquisitions and just wondering if you’d participate or how you weighed in on this. Thanks.

Our priorities always remain the same. Number one is organic investment, number two is inorganic growth being very selective for opportunities that can create shareholder value and while there have been some of those happening and we've looked at some of those, none of those have met our criteria for being able to create the kind of shareholder value we will look for from a Kaiser perspective. And then beyond that, we move onto our regular dividends which we've increased pretty steadily here over the past few years and maintained over the long-term. And then the share repurchases which we've been doing consistently over the past three years and had pretty heavy share repurchases here early this year. So our priorities haven't really changed.

Sure. And you asked a little bit about the underleverage of the company. I mean, in our mind we think that we have the ability to lever higher, but we don't need to rush to incur debt just to increase cash at this point. And clearly we do have the intent to be delivering excess cash to shareholders, but I think it is a journey for us to go and see different balance sheet structure with our cash and debt, slightly different from where we are today.

Okay. So you haven't seen anything yet, but are you still looking and let all options and is the M&A environment still interesting or can you say if there is lot of opportunities out there?

I wouldn’t say that there are lot of opportunities, but there are never a lot of opportunities. I wouldn't say that it's a lot different from what we've seen over the past three or four years. We're consistently looking at opportunities and we've looked at most of the opportunities, there have been transactions here over the past year or two. So, yeah, we're in there. We're looking, but again it goes back to, we like the business model we have and we are going to be very disciplined. And if we are going to pull the trigger on something, we are going to have a clear view as to how that's going to create incremental shareholder value beyond the platform that we have because we're confident that we can create good shareholder value with the platform that we have.

Okay. That makes sense. You alluded to the F-150 within your discussion of greater auto exposure, are you allowed to talk about any of the other platforms that you are working on? Can you characterize them for us?

It’s really widespread, Timna. We've said on calls in the past that when we look at it, our portfolio of product release spans the breadth of all vehicles produced in North America. So be it the domestic three or the new domestics as they are now called, so it's really a variety of platforms, a variety of applications. The biggest one right now is the F-150, the biggest incrementally, but there are a number of other programs, bumper programs and other structural components and even some where we supply forging stock that goes into control arms where we're not even a first tier supplier. So it’s a variety of applications. The F-150 is the big one, but we're on numerous platforms. We probably have 10 different platforms that we're launching right now beyond the F-150.

Okay. The only other question I had was, I saw headline a little while ago saying that Alaris had been qualified in China for heat treated plate for the -- I think by Boeing for aerospace applications. And I just wondered, is that a new competitor then in the mix? How do you look at that? You said it is getting less competitive out there and destocking, but are there in absolute terms more competitors?

Yeah, there are more competitors, there are lot of people that continue to come in on the fringe and challenge the highly qualified suppliers that have been there for a long time. So that always happens. The reason the competitive pressure is receding is that demand is stronger because the inventory overhang that was depressing demand with destocking has now receded. So we've seen less frantic behavior by some competitors trying to book business with price.

So are you worried about these fringe suppliers, I wasn't clear on that?

Well, we are always cautious about new suppliers coming in and frankly that's behind our strategy that we've had in place for a long time. We’ve recognized there is going to be pressure over the long-term and it's imperative that we become more and more cost efficient anticipating long-term price pressure. But beyond that we work hard to differentiate our products and that's what Kaiser Select is all about. So we really – first of all, the mature first tier suppliers all supply very good products, high quality products compared to the newcomers to the business, so all of us have a big advantage over the people trying to get in with price. But beyond that we’ve differentiated ourselves with additional attributes in the products that we supply that give benefits to our customers that protect our price or give us, in some cases price premiums.

Okay. Thank you.

And we will take our next question from Phil Gibbs with KeyBanc Capital Markets.

Hi, good. Good morning.

Hi, Phil.

Hi, Phil.

I had a question on the general engineering pricing, is that level of pricing, that $0.85 a pound a good number to be using going forward given what you’re seeing in spot plate?

Somehow I knew you were going to ask that Phil.

I wear my heart on my sleeve.

The real answer is, if you can tell me what rod and bar demand will be, I will give you a better fix on what that price is going to be, because the biggest factor in that aggregated general engineering price that we display is product mix. And the reason that it spiked up in the first quarter this year versus the first quarter last year, if you look year-over-year, shipments were down in general engineering and price per pound was up, and the reason shipments were down is that rod and bar volume was down. The volume in all other applications was basically flat for other products and general engineering was basically flat and we had a tiny bit of price improvement in general engineering plate, but 90% of that change year-over-year in the average price for general engineering is a fact that rod and bar was a smaller percentage of the mix, and it sells at a price roughly half the average price of all the products in that basket of products.

So, you had less rod and bar in Q1 relative to plate in extrusions?

Yeah, that was because real demand from a distributor standpoint was flat, however last year they were restocking rod and bar, this year inventories were basically flat. So we had artificial demand for rod and bar first quarter of last year because of restocking by service centers.

Okay. That make sense. And as we look into Q2 from Q1, you said you had some reduced major maintenance expenses in Q1. Are we expecting to see a pickup in conversion cost from those items in Q1 or in Q2 or is it not going to be until later in the year where we see major maintenance pickup.

Well, in other words, if you go back to – if you start with this first quarter as a reference point, there was a lot of noise in there. We had $4 million or $5 million of unusual cost or unusual for a quarter cost because of the full year benefits accruals that we always have at the beginning of the year, because of the extraordinary freight costs we had related to the West Coast situation and because of the signing bonuses related the collective bargaining agreements. So we had $4 million, $5 million there contrasted by roughly $3 million or so of lower major maintenance than we had year-over-year. So those basically will wash out as we move into the second quarter. So hopefully our – the conversion cost impact will basically be the same or perhaps a little better in the second quarter than the first quarter, but I wouldn’t see a sea change.

Got it. Pretty helpful on that. I appreciate it. And as far as the benefits from efficiency improvements, I think you had mentioned maybe a 100 basis points of improvement year-on-year from some of the investments that you made last year and maybe late in 2013. So are we expecting that to remain the case?

Well, rather than give you an expectation, let me give you some data on the first quarter. In the remarks, we said we had solid manufacturing efficiency despite drag from automotive, the ramp ups of all these new programs we have underway. Our automotive plants from an efficiency standpoint compared to our average for the full year of 2014 were roughly $2 million to $3 million or weaker in terms of cost performance. But we offset that with improved cost performance in the rest of the system, primarily Trentwood, but also in Kalamazoo, but a number of other plants also stepped up with some improvements year-over-year. So we really had $2 million to $3 million drag or almost 1% drag from automotive and we offset that with improvements in the rest of the system. So as we go forward, we still have a lot of launches, so we are going to continue to have some drag from automotive, although we see that receding as the year goes on. So is it going to be one point year-over-year, I am not sure what the numbers are going to be, but we expect we are going to see improving cost efficiency as the year goes on.

Okay. Appreciate it. Thanks so much.

And we will take our next question from Josh Sullivan with Sterne, Agee.

Afternoon, Jack, Dan, Melinda.

Hi, Josh.

Hi, Josh.

Hi.

With pricing improving there, I mean is there any reason to think pricing wouldn’t return to the high points in the previous cycles such as 2012 and 2013?

Yes, absolutely. Unequivocally, we will not return to those levels. And the reason it won’t return to those levels and if you go back and look at some of our transcripts from early last year, we went into this in a lot of detail, but part of it is we are working on new contracts, but there is degradation compared to the old contracts, because we went through a period with low demand in the 2010, 2011 period of time where a lot of our big contract customers were not meeting their minimums and there were additional pricing that we received as a consequence of the lower than contracted volumes in some areas. So there was artificially high pricing that we don’t expect to repeat, because as I just said, the contract volume now is running very, very strong and we expect that all of our contract customers are going to be meeting and exceeding their minimums as we go forward. So we don’t expect to see a return to those levels. And we expect the spot prices, while we expect we are going to see them improve, we don’t expect them to get back to where we were in that 2012 period when there was a lot of artificial demand from restocking in the aerospace supply chain that built that overhang that we have now, but also in general engineering and other areas. So no, we do not expect to get back to those levels. We basically think what you see now on plate pricing, we think it will get a little bit better, but it’s going to be similar to this for the long-term. That’s what our plans are based on and even with that we are still confident. As I answered on a previous question, still confident we can get margins in the high 20s with leverage in with cost efficiencies.

Okay. And then where are you on utilization of Phase 5 expansion and maybe you don’t want to give an exact number, but maybe if you can kind of give us an idea of where you are year-over-year?

Well, we’ve been setting records on heat treat plate shipments almost every quarter, I think maybe four or five quarters in a row now. There may have been one more as a blip that we didn’t set a record for a quarter, so we’ve been steadily increasing our shipments. We’re running relatively close to capacity on plate right now, but our efficiencies continue to improve as we continue to get benefits, which we’ve said will be over a longer-term, efficiency benefits from Phase 5 and from the new casting complex. So we expect to see continued growth in our capacity there, just from those investments.

Okay. And then maybe strategically, when you’re looking out ahead, how do you make that decision between going to Phase 6 versus just more efficiency out of your current assets?

Well, it’s something we look at continuously. We have pretty well defined what that next phase of expansion is and we continue to talk to our customers and continue to monitor market conditions and when we believe the time is right, again, with considering all the variables, we’ll pull the trigger on that. We’ve not made that decision now, but at some point, we expect that we will make that decision.

Okay. And then just last one, can you just remind us on the NOLs and what your thoughts are for utilizing those going forward and then I’ll jump off? Thanks.

Well, I guess the best thing I would say is, you have your own estimates of pre-tax income that we’ll have in the future. And you can quantify the NOLs, and there were $606 million of NOLs or pre-tax income that could be shielded at the beginning of the year. So, and then it’s all virtually all US based, so -- and that’s where our income is earned primarily. So, you can kind of do your own math to figure out how long it would take to consume them.

And we will take our next question from Steve Levenson with Stifel.

Thanks. Hello, everybody.

Hi, Steve.

You mentioned 10 new automotive platforms, are those current models or are they 2016 or even ‘17 models?

The ones we’re ramping up on now would be ‘16 models, ‘16 and ‘17, I’m getting a signal, ‘17 also, but that’s what we’re ramping up on now, but there are a lot more in the pipeline, I mean we’ve got ‘18 models too that are in the pipeline, we’re not actually ramping up on those, but we’re starting to prepare those and prepare for production a couple of years from now.

Okay. Thank you. So that means we’re really not seeing much because the real demand doesn’t start until little bit later in the year, is that correct?

Yeah. Clearly, I mean, for example, the F-150 on Ford’s call, they indicated that they expect that volume to ramp up as we go through the year, that the first quarter was a little light in terms of sales of the F-150. So the F-150 is going to ramp up, but other programs are coming on pretty consistently as we go through the year and the same thing happened last year. Last year, we had sales stronger in the second half, auto sales stronger in the second half of the year than the first half of the year and that’s with lower builds. So we’ve a pretty persistent pattern of growth in terms of content as we go forward and we expect that to continue.

Okay, thanks. And on aerospace, is the increase in value added revenue coming mostly from the increased units with the Airframers or Boeing and Airbus and the regional guys are producing or are you still – do you still have opportunities to capture additional content?

Well, our content is relatively well baked in. There are some exceptions where they are still looking on some new models in terms of how they will source it. But we basically have our pretty generic product in terms of aerospace that we supply that they use across a multitude of platforms. So we more so have a volume contract than we do a part by part contract, although there are some exceptions where we supply it to specific parts.

Right. I didn’t know if there was something, as you said, something specific that you were getting contracts for, I know, I had an email discussion with Melinda the other day about the aluminum center wing box on the 777x, so thanks there. With the weak GDP number, do you think that will result in any further destocking in general engineering in this quarter or even the third quarter or do you think that’s really unrelated to demand for aluminum?

Yeah. It’s hard to say. I mean, we were frankly surprised at the weakness in demand other than semiconductor and general engineering in the first quarter and couldn’t really tell how much of that was economy related and how much of that was really related to declining metal prices and people holding off on orders, trying to wait for a lower metal price. But we’ve started out pretty strong here in the second quarter with bookings in general engineering. So right now, it looks pretty solid and we’re sticking with our outlook for 3% to 4% general engineering demand growth year-over-year, but as I said in my earlier remarks, we continue to monitor that very, very closely. I mean, it is very fickle, and our lead times are short, so it’s really hard to predict.

Okay. Thank you very much.

[Operator Instructions] Our next question is a follow-up from Phil Gibbs with KeyBanc Capital Markets.

Thanks. Are you benefitting right now from the natural gas prices that we’re seeing, meaning at the 250 mark or are there some hedges in place this year that won’t let you fully get to that until maybe ’16?

Yes and yes. We have hedges that actually go out as far, I think we even gotten a portion of 2017 hedged at this point. ‘15 is about fully hedged as we would hedge or we don’t hedge 100%, but we hedge a pretty heavy portion and ‘16 is already pretty heavily hedged as well , ’17, we’re probably in the area of 30% or 40% of it hedged. So we’ve hedged those prices pretty far out, but the reason I say, yes, are we benefitting the hedge prices on ‘15 or lower than the hedge prices that we had on ’14. So yes, we’re getting some benefits, but we’re not down to realized cost equivalent to 250.

Got you. Thank you.

And at this time, there are no questions from the phone lines.

Okay. Thanks, everyone for joining us on the call today. We think we had a good start for the year and we’re looking forward to updating you again during our second quarter conference call in July. Thanks.

And this does conclude today’s conference call. Thank you again for your participation and have a wonderful day.