27422 Portola Parkway, Suite 200 Foothill Ranch, CA 92610-2830 January 9, 2013 |
Re: | Kaiser Aluminum Corporation |
1. | We note the table showing “value added revenue” on page 3, along with your references thereto within MD&A, particularly as it relates to the increase in prices and sales for your Fabricated Products segment, for example, on page 28 and 30. Since it appears that value added revenue is a non-GAAP measure, tell us and revise future filings to discuss how you have complied with the requirements of Item 10(e) of Regulation S-K, including why you believe that such presentation provides useful information to investors. Disclose how the changes in value added revenue impacts net sales and operating results. |
• | We provided disclosure of the most comparable GAAP measure (net sales) with equal or greater prominence in the table of trend data on page 3. |
• | We reconciled the difference between net sales and value added revenue in a footnote on page 3 as well as a footnote on page 34, where we said that value added revenue represents net sales less the hedged cost of alloyed metal. In addition, in the table on the top of page 34 we presented, on a per pound basis, the two components of average realized sales price: (a) the hedged cost of alloyed metal and (b) the average realized value added revenue. Also presented in that table are shipment pounds which, when multiplied by the average realized price per pound, equals the GAAP measurement of net sales (which is also presented in the table). |
• | We included throughout MD&A statements disclosing the reasons why our management believes that value added revenue information is useful to investors in connection with their review of our financial condition and results of operations: |
◦ | We state on page 26 (continuing to page 27) that a fundamental part of our business model is to either pass metal price volatility to customers through our pricing policies or to hedge metal price exposure that cannot be passed on to customers. |
◦ | In several places, we include statements explaining changes in our average realized sales price per pound by discussing the two components: (a) changes in value added revenue per pound and (b) changes in the underlying cost of alloyed metal which we pass on to customers. |
▪ | On the top of page 28, we state that net sales prices (per pound) are higher due to both higher value added revenue and higher underlying hedged, alloyed metal prices, noting that the latter is passed through to customers. |
▪ | On page 30, we discuss changes in average realized price per pound by highlighting the contributing impact of changes in value added revenue per pound and changes in underlying metal prices. Further, we note that underlying metal price fluctuations do not directly impact profitability due to our ability to pass metal price fluctuation to customers or our ability to hedge metal price exposures that cannot be passed on to customers. |
◦ | Additionally, on page 34, we provide a table showing shipments, value added revenue, and value added revenue per pound for our major end market categories. The table illustrates the relative stability of value added revenue per pound (as compared to the average sales price per pound included in the immediately preceding table), which is important in light of the fact that metal cost - the other component of average realized sales price - is largely passed through to customers or hedged. |
2. | On page 87 and elsewhere you disclose you effectuated a complete withdrawal from the Teamster Local Union 786 Building Material pension fund effective October 28, 2011 as a result of terminating the Plainfield, Illinois operation. Please explain to us and revise future filings to disclose the nature of the Plainfield operations, why it was terminated and, to the extent material, the financial statement impact of this termination. |
3. | We note your disclosure that to reduce the risk of an ownership change under Section 382 of the Code, if the Union VEBA wished to sell common shares without the approval of your Board of Directors, such sale would be limited by a stock transfer restriction agreement. In January 2012, your Board of Directors granted its written approval permitting the Union VEBA to sell any and all of the 1,321,485 shares that the Union VEBA would be entitled to sell during a 12-month period beginning March 24, 2012 at any time during such 12-month period. We further note that in the second quarter, your Board of Directors removed these transfer restrictions. Please tell us the business, economic, and/or operational factors the Board considered in removing such restrictions. |
4. | Please tell us if your chief operating decision maker regularly reviews operating results and the financial information grouped by the type of products you produce or end market segments (e.g. Aero/HS Products, GE Products, Automotive Extrusions and Other Products) |
5. | We note your conclusion that disclosure controls and procedures were not effective as of December 31, 2011. In Management's Annual Report on Internal Control Over Financial Reporting (ICFR), you disclose that based on the evaluation using the criteria |
6. | We also noted from the Forms 10-Q filed subsequent to December 31, 2011 your disclosure within each Item 4 that management has identified and is implementing corrective actions to improve annual controls and procedures around the review of the completeness and accuracy of the information used to value the Union VEBA postretirement benefit obligations, which corrective actions “include controls and procedures to ensure information and assumptions we use for the valuation of the Union VEBA's postretirement benefit obligations accurately reflect the Union VEBA benefit structure, plan participants and participant coverage elections.” Please revise future filings to disclose the specific nature of each such control and procedure. |
7. | Please tell us the specific nature of the $15.3 million in net cash provided by operating activities at the Parent level during the nine months ended September 30, 2011, as well as the $22 million provided by operating activities in 2011. |
8. | Please explain the underlying reasons for the intermediate factors mentioned in your discussion of cash flows. For example, on page 46 of your Form 10-Q for the period ending September 30, 2012, you cite an increase in accounts receivable of $34.9 million in Fabricated Products, but do not address the underlying causes or the reasons for the overall higher account receivable and greater days in receivables as of September 30, 2012, on a consolidated basis. |
• | Regarding the increase in receivables over the nine months ending September 30, 2012, on page 56 we stated that an increase in accounts receivable of $51.3 million for our Fabricated Products segment was partly due to the elimination of customer cash discounts. The elimination of the discount option accounted for virtually all of the increase of days in receivables for the Fabricated Products segment. |
• | On a consolidated basis for the nine months ending September 30, 2012, our accounts receivables increased by $58.0 million which was primarily due to the $51.3 million noted above and a $6.6 million increase in Anglesey-related receivables which was partially described in “All-Other” section on page 56 and driven by increased sales volume at Anglesey. As Anglesey-related activity has little or no impact to net sales (see “Secondary Aluminum” in the Outlook sections, page 54), this increase in receivables also impacted consolidated days in receivables. |
• | Regarding the increase in accounts receivables for the first nine months of 2011, we noted on page 56 the increase of $34.7 million of accounts receivable in Fabricated Products. The reason for the increase was the increase in net sales. |
• | On a consolidated basis for the nine months ending September 30, 2011, our accounts receivables increased by $39.2 million which was primarily due to the $34.7 million noted above and a $4.7 million increase in Anglesey-related receivables which was partially described in “All-Other” section on page 56 and driven by increased sales volume at Anglesey. |
• | The Company is responsible for the adequacy and accuracy of the disclosures in the filing; |
• | Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and |
• | The Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States |
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