Good day, ladies and gentlemen, and welcome to the Kaiser Aluminum's Second Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call maybe recorded. I would now like to introduce your host for today’s conference Ms. Melinda Ellsworth, Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you. Good afternoon, everyone and welcome to Kaiser Aluminum's second quarter and first half 2018 earnings conference call. If you've not seen a copy of our earnings release, please visit the Investor Relations' page on our website at kaiseraluminum.com. We have also posted a PDF version of the slide presentation for this call. Joining me on the call today are 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 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, 2017. 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 have 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. Solid second quarter results were driven by strong demand, record shipments and favorable spreads on scrap raw material purchases. In addition, price increases implemented in April and May began to mitigate the margin compression from high freight and contained metal costs. Record shipments reflected continued demand growth for our general engineering applications, continued growth in automotive extrusions, moderating destocking in the commercial aerospace supply chain and benefit from increased capacity enabled by recent investments. Modernization activity continued at Trentwood in the second quarter, including installation of handling equipment at the light gauge plate furnace and development work to refine new heat treatment practices for light gauge plate processing. While we experienced inefficiencies related to this work underlying manufacturing efficiency and capacity benefits are being realized and we expect continuing improvement as we complete equipment installation and fully implement practice changes. Before discussing our outlook I will turn it to Dan for additional color on the second quarter results. Dan?

Thanks Jack. Value added revenue in the second quarter improved to 4% compared to the prior year quarter as strong demand and incremental capacity from our recent investments let to a record second quarter shipments. Aerospace value-added revenue improved 3% from the prior year second quarter on a 2% year-over-year increase in shipments an encouraging sign that the aerospace supply chain overhang is moderating. Automotive value-added revenue increased 4% compared to the second quarter of last year on continued strong shipments for bumper programs and with demand for our general engineering products remaining strong our second quarter, general engineering shipments and value-added revenue each improved 6% year-over-year. For the first six months of 2018, total value-added revenue improved 2% on 4% higher shipments reflecting shipment growth for automotive and general engineering applications. Aerospace value-added revenue however, declined slightly from the first six months of 2017, reflecting value-added revenue compression on noncontract aerospace sales due to higher metal prices. Turning to Slide 7, EBITDA for the second quarter 2018 improved slightly to $55 million compared to $54 million in the prior year quarter as benefits from record quarterly shipments and attractive price spreads on scrap purchases were largely offset by significantly higher metal and freight costs. Notwithstanding these higher costs, our EBITDA margin for the second quarter of 26% was only slightly below our 26.7% EBITDA margin in the prior year of second quarter. EBITDA for the first half of 2018 of $103 million was $5 million lower than the first half of 2017 as the adverse impacts of metal and freight costs were only partially offset by benefits of higher shipments and favorable price spreads on scrap purchases. Margin compression particularly in the first quarter, reduced our first half EBITDA margin to 24.9% from 26.6% in the prior year period.…

Thanks, Dan. Turn to Slide 9, and an update on the market environment, we continue to experience strong demand for our automotive and general engineering applications and demand is strengthening for our commercial aerospace applications as supply chain destocking begins to moderate. While tariffs have created uncertainty we continue to believe that the net long-term impact for Kaiser will be relatively neutral to positive. As we noted on the April call the combination of high freight and contained metal costs resulted in significant margin compression in the first quarter. We successfully implemented price increases during the second quarter to begin to mitigate the impact of these high costs. However, when the price increases are fully realized in the third quarter, we expect still lean sales margins, similar to the historic lows experienced when market conditions were similar in 2014 and 2017. Turning to Slide 10, and discussion of brand markets, our positive outlook for aerospace and high strength applications is unchanged. We expect improving demand in 2018 and 2019 as supply chain destocking moderates, and as airframe manufacturers continue to ramp-up build rates to address increasing demand in the nine-year order backlog. In addition, increased U.S. defense spending and higher demand from U.S. allies strengthens the outlook for F-35 Joint Strike Fighter, the FA-18 Super Hornet and other military applications. With destocking moderating we continue to expect mid single-digit year-over-year growth in our 2018 shipments for these aerospace and high strength applications. Turning to Slide 11, our positive outlook for automotive extrusions is also unchanged. North American build rates are expected to improve approximately 1% year-over-year. We expect continued content growth to drive mid single-digit year-over-year growth in our shipments and value added revenues for these applications while we prepare for a significant number of new price management, break chassis…

[Operator Instructions] And our first question comes from Martin Englert from Jefferies. Your line is now open.

Any estimates regarding the impact from positive trends with the scrap spreads during the quarter?

They were very strong. But we have had a good strong trend of scrap margins here over the past year and a half or so. So there was a little bit of benefit that continued to help mitigate the impact from rising contained metal costs and freight costs and who knows where that goes for the longer term are we going to be able to retain these high spreads or we -- will we begin to see those recede back to more normal levels over the long term.

Okay. But not anything terribly different on incremental quarter on quarter basis as far as the benefits?

It was slightly better, but not significant.

And thinking about next year have any of your commercial aero customers come to you and provided any indication of materials requirements yet for 2019 and maybe how that is looking?

We’re just beginning those discussions. So we have some preliminary ideas but it's far from being fully fleshed out. So we'll talk about that more when we get to the October call.

Lastly there, can you just remind us the price increases announced year to date, I believe it was maybe two if I remember right. And do you believe there is a need for any additional increases based on where market prices are today and costs for freight?

We announced increases effective April 1, and May 1, and as we said in the opening remarks here, we expect to realize the full benefit in the third quarter. Too soon to tell whether we need additional price increases, although it's noteworthy and something that I tried to express in those opening remarks is that even with these very significant price increases, when we are done we expect sales margins that are basically at the lows that we experienced in 2014 and 2017. So, with demand being strong we think that there's still a strong price environment here, we will see if that leads to further price increases, but we certainly can't afford any degradation from where we are now.

Sure and just to clarify when you say the lows of 2014, and '17, do you mean on a quarterly basis or an annual basis from their effective line items?

Yeah. Compared to where we were annually in '14 and '17.

Thank you. And our next question comes from Jeremy Kliewer from Deutsche Bank. Your line is now open.

Given the strength of your balance sheet do you anticipate increasing the rate of share repurchases in the near-term or do you just see that kind of steady say that $90 million that's left in the repurchase plan?

I think we have a pretty steady program where we -- as we do buy more at lower prices and less at higher prices. So it's going to be as much as factor for price, as anything on our balance sheet or liquidity profile I believe.

Okay. And then regarding the moderation in aerospace plate stocking can you kind flow-through of how that impacts the lead times or what the actual quantity areas is of that moderation?

Well on the last call, we indicated that our lead times were approximately 20 weeks. We are about that maybe a little bit longer right now but essentially the same place. But that's -- those are strong lead times that are indicative of a good strong demand.

All right, thanks. And the last one from me is you stated in your auto extrusion products that they're becoming more vehicle specific but the product mix is also becoming leaner. I would think that if there are more specialized products or vehicle specific wouldn't that command higher price and/or value-added revenue margin?

Good question, the reason that we see a leaner value-added revenue mix -- value added per pound mix is that the growth is in relatively low value-added products such as bumpers and chassis and structures applications. In contrast we have a mature product line within automotive driveshaft tubing that has value-added revenue per pound six or seven times what a some of the other products are. So the growth is in those lower value added per pound products rather than the high value added driveshaft tubing.

[Operator Instructions] And our next question comes from Josh Sullivan from Seaport Global. Your line is now open.

Just with the retirement of the larger portion of the VEBA payment, is there exchange in the long term capital allocation does it open any doors that maybe weren’t available before?

I’m not sure if that opens any doors when we had a lot of flexibility before with the cash flow generation the company has had and relatively light leverage per profile that we have had. So it does give us more flexibility clearly to not have that kind of an obligation going forward. But and I think we have been investing as we think was appropriate for the company.

And as you look at it over the long-term it's important to remember that while we report taxes in our net income, we haven't been paying any cash taxes to speak of. So once the NOLs roll out there will be increased cash taxes that will offset that to a great extent.

And what is the timeline on the NOLs at this point, when do you think you will exhaust those?

We have 275 million of NOLs available at the end of last year. And so as you expect to see us burn our way through those NOLs its clearly going to be a year or so. At least and probably we’re halfway through this year, we have got a good track record on pretax income, so I can't predict exactly when it takes out, I can give you a ballpark of how long it's going to take to run through those.

And then just switching over to the automotive side, can you guys -- looking at a number of automotive applications launching in 2019, what is the seasonality look like on that? Is it front half, back half loaded and then would you be building inventory maybe in the back half of '18 to prepare for that?

No these will be launches that will be going through during 2019 through the entire year. We expect to see some benefit as we get into 2019, but the benefit will also roll over into 2020. So we’re looking at that pretty strong growth in compared to this year in both 2019 and 2020, and again, we'll give more color on that when we get probably to the February call and have a clear definition. Although, as we know from the past these are always subject to change, we never know exactly how the vehicles are going to launch and how successful they will be or how unsuccessful they will be. So, we will put a lot of uncertainty around whatever outlook we give you on February, other than we expect that 2019 and 2020 to be good solid growth years in automotive.

Thank you. And I’m showing no further questions from our phone lines. I would now like to turn the conference back over to Jack Hockema for any closing remarks.

Okay. Well thanks everyone for joining us on the call and we look forward to updating you on our third quarter call in October. Thank you.

Ladies and gentleman, thank you for participating in today’s conference. This does conclude the program. You may all disconnect. Everyone have a wonderful day.