Good day, everyone, and welcome to the Kaiser Aluminum First Quarter 2015 Earnings Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Melinda Ellsworth, Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you. Good afternoon, everyone, and welcome to Kaiser Aluminum’s first quarter 2016 earnings conference call. If you have not yet seen a copy of our earnings release, please visit the Investor Relations page on our website at kaiseraluminum.com. We have also posted a PDF version of the slide presentation for this call. Joining me on the call today are Chief Executive Officer and Chairman, Jack Hockema; President and Chief Operating Officer, Keith Harvey; 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 the 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, 2015. The company undertakes no duty to update any forward-looking statements to conform the statement to actual results or changes in the company’s expectations. In addition, we have included non-GAAP financial information in our discussion. Reconciliations to the most comparable GAAP financial measures are included in the earnings release and in the appendix of the presentation. Any reference in our discussion today to EBITDA means adjusted EBITDA, which excludes non-run rate items for which we'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 today. Our first quarter results continue the trend of improvement driven by strong sales for our Aerospace and automotive applications. Growth in aerospace and high strength value added revenue reflected improved Aerospace plate shipments and as we had anticipated a recovery in sales of our long products following the unexpected fourth quarter destocking. Automotive value added revenue continue to grow as increased shipments for chassis and structural applications more than offset lower shipments of bumper extrusions as older programs rolled-off. We have several new bumper program launches scheduled throughout 2016 that are expected to more than offset reduced volume from the end of life cycle programs. Sales prices in margins benefited from price increases implemented last year, low contained metal cost not passed through on certain high-value added products and favorable market conditions that lowered our scrap raw material costs. As we expected, price pressure on general engineering plate was a partial offset to overall favorable pricing, with a negative effect of approximately $1 million in the first quarter compared to the run rate in the second half last year. Improving underlying manufacturing cost efficiency also contributed to the first quarter results. Trentwood's efficiency and throughput continued to benefit from the previous investments in the phase V expansion and the new casting complex, and we expect to continue to extract additional benefit from these investments throughout 2016 and beyond. In addition, Trentwood has commenced work on the $150 million multiyear investment program, with the first phase of cost efficiency and capacity from this investment program expected to come online in early 2018. Also as anticipated, we continue to experience some growing pains related to the significant increase in sales of automotive products, underlying efficiency across our platform improved approximately $2 million in the first quarter compared sequentially to our second-half run rate performance in these plants last year. Now, I'll turn the call over to Dan for additional color regarding the first quarter results. Dan?

Thanks, Jack. Looking at slide six, total value added revenue in the first quarter grew to $211 million, 7% improvement over the prior year quarter, reflecting a favorable product mix and the continued benefits of price increases that we put in place last year on certain products, as well as lower contained metal costs. Aerospace and high-strength value added revenue improved to 10% over the prior year quarter on higher shipments, favorable mix, and improved pricing. Throughput enhancements from our investments at Trentwood enabled strong heat treat plate shipments, while first-quarter shipments of our long products returned to more normal levels after the destocking that we experienced in the fourth quarter of last year. Automotive value added revenue remained strong, increasing 11% over the first quarter of 2015. The year-over-year growth primarily reflected automotive extrusion shipments for chassis and structural applications that launched during the course of the last year. Compared to the prior year quarter, general engineering value added revenue improved $2 million and, as we continue to deploy capacity for further growth in strategic applications, value added revenue from our other nonstrategic products declined approximately $3 million. First quarter 2016 EBITDA of $55 million was a $9 million improvement over the prior year quarter, reflecting a favorable sales impact of $13 million, partially offset by $2 million of higher major maintenance expense. The year-over-year increases in overhead expense related to growth in our served markets were largely offset by improved underlying manufacturing efficiencies. With the sales improvements and solid cost performance, our EBITDA margin improved to 26.2% of value added revenue. On slide seven, first quarter operating income, as reported, was $45 million. This compares to a consolidating operating loss in the first quarter of 2015 of $459 million, which included $497 million of non-run rate losses primarily…

Thanks, Dan. In light of the ongoing industry discussions around commercial airframe build rates, slide eight provides additional color, following up on our previous comments during the February earnings call. As we indicated in February, Boeing and Airbus have announced reduced production rates for both the Jumbo A380 and the Boeing 747 airframes due to lower demand. Build rates are also being reduced for the large twin-aisle Boeing 777 and A330 airframes as the OEMs transition to production of new models. However, demand continues to grow for high-volume, single-aisle Boeing 737 and Airbus 320 and twin-aisle 787 and A350 airframes and build rates are growing accordingly. The net result is that with an airframe order backlog exceeding nine years, we expect total builds for commercial airframes will continue to grow over the next few years. As we noted during our February call, we had factored this information into our outlook and we reaffirm our forecast for approximately 5% annual demand growth over the next three years for our Aerospace and high-strength applications. Turning to slide nine, our 2016 outlook also remains unchanged for year-over-year value added revenue growth of approximately 5% for Aerospace and high-strength applications. As mentioned in my earlier comments regarding the first quarter, shipments of long products for these applications recovered from the fourth quarter year end destocking and we believe the supply chain inventories are largely in equilibrium. Turning to automotive extrusions, we continue to expect year-over-year value added revenue growth of approximately 10%, reflecting growth and shipments for chassis and structural applications and new program launches throughout the year more than offsetting end of lifecycle bumper extrusion programs that roll off in 2016. Turning to slide 10, although our first quarter shipments for general engineering applications were up year-over-year, our outlook remains unchanged from what…

[Operator Instructions] We will take our first question from Evan Kurtz of Morgan Stanley.

Hi, good afternoon, everyone. Thanks for taking my call.

Hi, Evan.

I had a question for you on this Section [2.01] [ph]; I guess there's a push now from the USW to bring up some blanket tariffs on aluminum imports into the U.S. And I just wanted to get your thoughts on how you see that playing out? Is that something that you see actually moving through? And if so, how does that impact your business?

Well. We're not going to speculate on what happens with primary aluminum prices and regulations. There are a lot of people on this call that know a lot more about that than we do. In terms of the impact on our business, it should be minimal, although, as we mentioned throughout our comments today we did benefit and have been benefiting in the past few months from low contained metal prices that we didn't pass-through on some of our high-value added products. So if we do see a migration upward in the contained metal or the price of P1020 base aluminum that could have some short-term impact on our margins and our spreads.

Got it. Thanks and maybe just one follow-up. Alcoa was out obviously earlier this month with some guidance on aerospace. They actually pointed to a bit of an inventory adjustment issue this year as some of the kind of legacy platform is ramped down faster than some of the newer ones were ramping up and that contrasts a little bit with your outlook for the aerospace industry, and I was wondering if you can maybe provide some insights into why you're able to navigate through this a little bit better, it seems like?

Sure. Well, as I mentioned in my comments, we reported – I didn’t say this part, but we report a few weeks after Alcoa, in February. So they came out with a pretty quick report and an assessment. By the time we got to our call, we had a pretty good sense of what was happening this year. So we built the situation into our outlook when we made our February call and that was really the point of the slide where we show all the build rates we’ve commented on those build rates back in the February call. We’re just reiterating those comments that we already made. So, unlike Alcoa, we had already factored that in the fourth quarter call.

Great. Thanks for the color, guys.

We’ll go to our next question from Edward Marshall of Sidoti & Company.

Hi, guys, how’re doing?

Good, Ed.

Great, Ed.

Good. So, the pass-through – the lower contained metal spread that you get, how sustainable is that? And does it work on a lag? And, in particular, you've mentioned high-value product lines. What product lines are they?

It's primarily Aerospace and high-strength product lines. The example that I give is we have a very diverse mix. Everyone wants to talk about heat-treat plate in our aerospace and high-strength product line, but it actually has the lowest spread over metal of any of our products in that category and, for example, it's maybe a couple bucks a pound on plate, whereas when you get to products like our drawn tube it could be $8 or $9 a pound. A lot of our aerospace extrusions are $6 or $7 a pound. So, when you have those kinds of high-value added revenues, you are not going to move your prices for a $0.05 or $0.10 move in metal. So, that's what contributes to the benefit that we get on high-value added products. In contrast, when metal goes the other way it will impact some of those products. So it's on spot pricing where we don't have a contractual pass-through of metal and relates primarily to high-value added products. On lower value added products, like our common alloy rod and bar extrusions, the industry practice is to pass through the metal even though it's all spot pricing. Everyone in the industry basically moves on a monthly basis with where the metal market is moving. Jack Hockema: It's primarily Aerospace and high-strength product lines. The example that I give is we have a very diverse mix. Everyone wants to talk about heat-treat plate in our aerospace and high-strength product line, but it actually has the lowest spread over metal of any of our products in that category and, for example, it's maybe a couple bucks a pound on plate, whereas when you get to products like our drawn tube it could be $8 or $9 a pound. A lot of our aerospace extrusions are $6 or $7 a pound. So, when you have those kinds of high-value added revenues, you are not going to move your prices for a $0.05 or $0.10 move in metal. So, that's what contributes to the benefit that we get on high-value added products. In contrast, when metal goes the other way it will impact some of those products. So it's on spot pricing where we don't have a contractual pass-through of metal and relates primarily to high-value added products. On lower value added products, like our common alloy rod and bar extrusions, the industry practice is to pass through the metal even though it's all spot pricing. Everyone in the industry basically moves on a monthly basis with where the metal market is moving.

Got it. And so, there's no lag function to that at all? It would be just simply what? Edward Marshall: Got it. And so, there's no lag function to that at all? It would be just simply what?

On the high-value added there is a lag when, as metal prices are coming down, there's a lag in terms of reducing prices -- the competitive prices. Of course, we try to hold them up, but if our competitors move, eventually we have to move as well. But the same thing happens going in the other direction when it goes up. There's a lag on the high-value added prices making a move. Eventually, over the longer-term, those typically come into equilibrium, but depending on the product it can take some time. Jack Hockema: On the high-value added there is a lag when, as metal prices are coming down, there's a lag in terms of reducing prices -- the competitive prices. Of course, we try to hold them up, but if our competitors move, eventually we have to move as well. But the same thing happens going in the other direction when it goes up. There's a lag on the high-value added prices making a move. Eventually, over the longer-term, those typically come into equilibrium, but depending on the product it can take some time.

And for conversation's sake you would guess that lag as six months for the year? What kind of lag is that? Edward Marshall: And for conversation's sake you would guess that lag as six months for the year? What kind of lag is that?

It depends on the product and it depends on the magnitude of the move. If it's moving $0.01 or two a month, it could take longer for it to move. If all of a sudden you get $0.20 over a five- or six-week period, everybody will start feeling the heat there and you'll see a lot more pressure to capture some of that.

Got it. You mentioned that there were automotive new program launches in the second half of 2016. Did you -- is there increased content on the new vehicles and what about the pricing structure that you would be servicing into?

In terms of content on the February call, we gave our three year outlook for a 5% compound growth rate in aluminum extrusion content per vehicle. So we see continuing increases in content. You may have seen some recent publicity regarding reduced forecasts for automotive body sheet, where the body in white may not be as prevalent as was thought a couple of years. There is a little bit of impact on extrusions but again we had already built that into our outlook in February, so we’re confident that we have good solid content growth on our applications, which are automotive extrusions.

Okay. And then finally, the last question would be, I believe there is an Airbus contract coming up for renegotiations soon. And I’m wondering if you started those negotiations and if not, do you anticipate that any of the impact in those negotiations from pricing or volume as regards to an award from a competitor that expanded their breadth of their offering?

Sure. Those negotiations are in progress and I won’t comment any further than to say we are confident of our position with all of our major customers.

Okay, great. Thank you guys.

Our next question comes from Tony Rizzuto of Cowen and Company.

Hi, everybody and I appreciate you taking my questions. My first question is on the value added revenue per pound and it was quite good at $1.92. And looking back over time, I think you hit levels back in 2012 and 2013 that were over $2 a pound. And I’m just wondering, Jack, how you feel about that given your history and your knowledge in the industry. And how we should think about upside potential from the aero and high strength standpoint on a per pound basis there? That’s question number one.

Okay. Good. You are not going to give me 14 questions and then let me answer? No, no, I like it this way. Let me answer this one.

Okay, good.

On the value added revenue per pound, my standard answer and that standard answer applies today is that almost all of that is mix - is product mix. So, certainly if we have more aerospace and high strength in our mix that will raise it. And conversely if we have more general engineering and automotive that will lower the overall value added revenue per pound. When you look at aerospace and high strength as a single entity, the same thing holds true. It goes back to my conversation about the price on heat treat plate versus the price on long products. I picked out extrusions and tube but basically all long products have a significantly higher average value added revenue per pound than does plate. So, again, almost always my answer is, if value added revenue per pound changed in these big buckets that we show is because the mix changed inside the buckets. When you go back to comparing to 2012 however, there is a significant price degradation on heat treat plate in particular. I don’t think we’ve put it in an earnings call – Melinda will nod at me or give me a signal if I’m wrong, but in our investor presentation we’ve actually included a slide that bridges 2015 to 2012. It bridges total value added revenue, EBITDA, and margin showing the impact of heat treat plate price and the impact of everything else, leverage, cost, and mix and price on products other than heat treat plate. And what it shows is, I forget the exact number, but it’s in the high 60s, I believe, the amount of heat treat plate price that we’ve lost between 2012 and 2015. I’m sorry – she is reminding me it’s 2007, not 2012. So, 2007 was the very peak. So it’s not as much as high 60s versus 2012, but it still is a significant change in heat treat place prices. You remember we were going through 2012 and 2013, and then we had a significant downturn in our heat treat plate prices as we entered 2014. So that’s part of the explanation when you’re looking back to 2012.

Okay. That's helpful. I appreciate that. And as you shift into on the automotive side and automotive extrusions and as you’re building out new platforms and replacing some of the older platforms, should we expect that that per pound value added revenue – obviously the mix is changing, so how should we think about that going forward?

It’s really the same answer. There is a tremendous amount of mix inside that automotive basket, and the example that I’ve used before is driveshaft tubing sells for $3 or $4 a pound, I’m pulling off the top of my head here – value added revenue but multiple dollars per pound, where the rest of the automotive products are less than $1 a pound. And so as driveshaft tubing changes as a percent of the mix, it will really drive that value added revenue per pound. In terms of the new programs coming on replacing the programs falling off, as you would expect, it’s the automotive business and a lot of extruders have awakened. So there is more competitive pressure than there was four or five years ago when we were bidding those old programs. But we are looking at prices and margins in the same ballpark as the programs that are rolling off.

Okay. Very helpful. And I also have a question about your EBITDA margin. Obviously excellent in the quarter, 26.2%. I don’t think I’ve seen it that high over the period that we have the model going back, which is quite a ways. And I’m just wondering how you’re thinking about that and the sustainability of that margin and the efficiencies that – you’ve got a lot of moving parts as you continue through the different phases of the Trentwood expansion and operational efficiencies there. But can you give us some commentary as to how you see that playing out? Nearer term and then over the medium to longer-term, too, Jack, if you will?

Got it, got it. I’m glad you asked the question, so let me elaborate. When I look at these things, especially when you’re talking about margins and pricing, I like to look sequentially. So, for example, if you look at last year, we saw significant price appreciation in the second half of the year versus the first half. And we saw some cost degradation when we had growing pains that really hit us in the second half of the year in automotive. And we had a major equipment outage – a planned outage, if you remember, at Trentwood in the third quarter that also impacted things. So, if you look at the margin, we were up around 4% in the first quarter compared to where we were in the run rate in the second half of last year. And I’ll just give you two major components of that. The first component is, even though we lost some price on general engineering plate, I talked about the $1 million in my comments compared to the second half run rate, we actually gained about 1% overall in our sales margins over actual metal cost. And there are two parts to that. There is a little bit of a tail on the price increases that we implemented last year, so we got a little of benefit carrying over that may not have been there early in the third quarter last year. But we’ve got lower contained metal costs that gave us some benefit. But the other part that was a bigger impact in the first quarter was that the scrap market turned in our favor and we were able to be – the availability and the pricing or the discounts on scrap raw materials were much more favorable, so that gave us a…

Okay. And my final question – this is very helpful, Jack. And my final question is, do you have – at this point, can you share with us any major operating dislocations or outages that you might be planning for the second or third quarters?

No. We are all knocking on wood here. So we don’t see anything right now.

Okay. There is nothing planned in terms of anything like that?

No. Nothing significant planned.

Either at Trentwood or Kalamazoo or any of your other operations?

No, no. No, in fact, we had some impact actually in the first quarter. We had a major furnace rebuild at Trentwood, but still had very strong cost performance. So they managed the disruption very, very well up there in the first quarter, the minor disruption.

And I guess I do have just one final question here as I thought about this. So, you are still seeing obviously a very competitive marketplace on the general engineering front. Has that level of aggressiveness, has it accelerated from when last you spoke with us? Or are you seeing it more stable?

No. It’s basically what we’ve been saying for – I think you go clear back to the third quarter call. We were already saying that we anticipated pressure. And in fact we’ve got a little – if you go back where we were six or nine months ago, we have a little less pressure in the first half, frankly, than we were anticipating six to nine months ago. But we’ve been anticipating this. It’s been in our vision here for several months. So it’s pretty much what we expected, but we expect to see degradation as we move into the second half.

Fair enough. I appreciate it. Thanks, Jack.

And from KeyBanc Capital Markets, we turn next to Tyler Kenyon.

Hey, good afternoon.

Hey, Tyler. Is this Tyler or Phil?

This is Tyler.

Hi, Tyler.

How is everybody?

Good.

A lot of my questions were actually answered but, Dan, a question for you just on the SG&A. It looked like it was a little bit higher than normal. Were there any accruals in the quarter? Or is there any way to be thinking about what a run rate might be there moving forward?

Well, typically we do have some higher costs that we incur and have to accrue in the first quarter. So if you are talking sequentially, we’ll have a few items like accruals, some vacations that have to be earned and 401(k) kind of benefits. So generally we do have higher – and we talked about this, I think, before in prior first quarter calls. So that is probably part of what you’re looking at if you’re looking sequentially. And overall, though, we did have kind of a trend, if you will, of some ever gradually increasing overhead costs that are related to some of the – serving some of these markets that we’re growing in, and in particular automotive.

Okay. So, should we be expecting the absolute dollar amount to begin trending down here as we progress throughout the year? Or would there be some puts and takes to that?

Well, I always hate to talk about quarter-by-quarter because it can have surprises. That said, first quarter should be higher because of what I just said, the first quarter accruals that we normally would see. And then we’ll be focusing on some of these costs as well as we move throughout the year.

Okay, great. Thank you. And then any way to maybe quantify what the mix impact was, just on the catch up of a richer mix of long products in the first quarter, following a softer fourth quarter? Any way to quantify what that impact was to the price per pound there?

I would say the entire change that you see in price per pound, fourth quarter to first quarter, almost all of it would have been mix related to the long products change.

Okay, great. Thanks for the color. Appreciate it.

[Operator Instructions] And we’ll go next to Jorge Beristain of Deutsche Bank.

Hey, guys. A few questions. Is there any particular model that you can point to coming up on the auto side where you’re getting increased aluminum content? I’m not sure if you are able to publicly comment about names.

No. I wouldn’t go there, but most of the new product launches that we have this year are bumper programs. So, as the car companies replace one platform with a new platform, we’ll typically be involved there. In some of those the old platforms they are replacing may have been steel bumpers and now they are moving over to aluminum bumpers. But it’s just the general migration that we’ve seen over the past several years of growth in bumpers. Although the really rapid growth here is for bumpers were probably five years ago, and that growth has tapered off some, but continues and we expect it to continue, at a reasonable growth rate. But not double-digit growth rate like we were seeing a few years ago.

Okay. And then in terms of your value added revenue, it tends to peak in the second quarter. I was just wondering if there is any particular reason behind that seasonality, and if you would expect a similar pattern to continue? Or would that be overcome by just your continued growth and mix shift?

I'm sorry, which was that?

Value-added revenue quarterly. And seasonality...

Oh, quarterly value added revenue? Again, that’s a question I’m glad you asked. The first quarter in any year is almost like the fourth quarter; it’s hard to tell what’s going to happen in the first quarter. Our typical pattern is the first quarter is strong, the second quarter is stronger, then we taper off in the third quarter and the fourth quarter is the worst quarter. However, what happens in the fourth quarter – and coincidentally, what happens in the first quarter is often a function of what customers are doing with their inventories at the end of the year. So, we got hit pretty hard in the aerospace long products in the fourth quarter, as we said. It’s rebounded here in the first quarter. What we can measure, however, is when we look at our total first quarter, how much of the strong value added revenue that we had was a function of other customer activities at year end that might've been under our radar screen because we were so preoccupied with what was going on in long products. So, this year we don't expect to see a significant increase like we normally do in the second quarter compared to the first quarter, but we still expect the typical longer-term seasonal pattern, which is a strong first half and the weaker second half.

Thanks. And then just maybe for Dan, a housekeeping issue. Were there any stock repurchases in the quarter? And what's your availability under your repo plan?

Sure. During the quarter I believe the number is about 83,000 shares that we purchased. It was about $6.4 million that we spent during the quarter. And we have a lot of room still on the existing plan. I think it’s $117 million as of the end of the quarter, I believe that’s authorized, yet to be purchased – for purchase by the Board.

Thank you.

And it appears there are no further questions in the queue at this time, so I’d like to turn the conference back over to Mr. Jack Hockema for any additional or closing remarks.

Okay. Well, thanks, everyone, for joining us on the call. We’ve got a nice start to the year and we look forward to updating you again in the second quarter call in July. Thank you.

And this concludes today’s presentation. Thank you all for your participation.