Welcome to the Fourth Quarter 2020 Earnings Conference Call. My name is John. I'll be your operator for today's call. [Operator Instructions] And I will now turn the call over to Melinda Ellsworth.

Thank you. Good afternoon, everyone, and welcome to Kaiser Aluminum's Fourth Quarter and Full Year 2020 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 President and Chief Executive Officer, Keith Harvey; Senior Vice President and Chief Financial Officer, Neal West; and Vice President and Chief Accounting Officer, Jennifer Huey. Before we begin, I'd like to refer you to the first 3 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, 2020. 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. Reconciliations of certain forward-looking non-GAAP financial measures to comparable GAAP measures are not provided because certain items required for such reconciliations are outside of our control and/or cannot be reasonably predicted or provided without unreasonable effort. 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 Keith Harvey. Keith?

Thanks, Melinda. And welcome, everyone, to Kaiser Aluminum's Fourth Quarter and Full Year 2020 Earnings Call. Our fourth quarter and second half results were slightly more favorable to the outlook we had previously provided due to strength in the automotive and general industrial business in the quarter. We delivered strong performance under severe business conditions as we navigated the significant decline in commercial aerospace demand during the back half of the year, while managing strong demand for our general engineering, automotive and defense products. For the full year 2020, value-added revenue of $697 million was down approximately 19% compared to our 2019 results, reflecting a strong first quarter, followed by significant COVID-19-related disruptions to our operations and end markets during the remainder of the year. Despite the significant decline in value-added revenue, we reported full year adjusted EBITDA of $154 million and EBITDA margin at a solid 22% in an extremely challenging environment. Our results reflect solid execution of our business cycle strategy and our ability to quickly flex cost and operating levels as we responded to rapidly changing business conditions throughout the year. Aero and high demand experienced the most significant decline year-over-year reflecting the global pandemics impact on commercial airline travel, delays in recertification of the Boeing 737 MAX and destocking within the supply chain. Value-added revenue for our aero and high strength applications for the full year 2020 was down 28% compared to a record 2019, reflecting record performance in the first quarter and strong contractual commitments that carried us through the remainder of the year. While commercial aerospace demand fell sharply in the second half, we continue to see strong demand for our products in the defense industry, specifically from the Joint Strike Fighter program and other legacy military aircraft programs throughout the year. Automotive extrusion…

Thanks, Keith. Turning to Slide 8. Value-added revenue for a full year of 2020 of $697 million declined from $856 million in 2019, reflecting an approximately 20% decrease in shipments, primarily due to the significant COVID-19-related impact on commercial aerospace demand. In addition, during the second quarter, virtually the entire North America automotive supply chain shut down operations, which temporarily affected demand for our automotive applications. Overall, demand for our general engineering applications remained solid throughout the year. Aerospace/high strength value-added revenue of $369 million declined approximately 28% year-over-year on a 37% decline in shipments compared to the strong demand levels experienced in the prior year. The benefit of a record first quarter 2020, strong demand for our defense-related applications and the $15 million of additional revenue recognized in the third quarter related to the modifications to 2020 customer declarations under multiyear contracts, partially offset the COVID-19 impact on our commercial aerospace demand and a significant second half decline in shipments. Automotive value-added revenue of $83 million declined approximately 11% year-on-year on an 11% decrease in shipments, reflecting strong first quarter shipments followed by the impact of the OEM shutdowns in the second quarter due to COVID and a sharp recovery that began late in the second quarter and continued throughout the second half of the year as the auto supply chain returned to full production and new program launches began to ramp up. General engineering value-added revenue of $239 million increased approximately 3% year-on-year on relatively flat shipments and stable pricing throughout the year. Value-added revenue for the fourth quarter 2020 of $152 million reflected continued strength in demand for our general engineering, automotive and defense-related applications. Additional detailed value-added revenue and shipments by end market applications can be found in the appendix of this presentation. Turning to Slide…

Thanks, Neal. I'll now review our '21 outlook beginning on Slide 13. Although we expect continued improvement from the second half 2020 run rate, we anticipate full year 2021 value-added revenue to be down 5% to 8% year-over-year, following a record first quarter and strong first half 2020 as demand in commercial aerospace continues to slowly recover and destocking continues in the supply chain. We are encouraged by positive signs supporting long-term recovery in this market, including the recertification of the 737 MAX late last year and an expected 20% to 30% increase in build rates for the Joint Strike Fighter in 2021. We expect shipments to continue to improve throughout the year. Ongoing dialogue with our commercial aerospace customers continues as we work to manage short-term needs and plan for longer-term opportunities as we anticipate a full recovery in the 2023-2024 time frame. We continue to believe that aerospace demand will return to a long-term 3% to 5% compound annual growth rate and remain committed to meeting the long-term needs of our customers. Although we have placed our previously announced Trentwood capacity expansion planned on hold, we will continue to evaluate market conditions, and we'll be prepared to move forward with our investments as we gain more visibility and clarity around the expected recovery for large commercial aerospace demand. Moving to Slide 14. We anticipate exceptionally strong shipments and value-added revenue for our automotive extrusion applications in 2021. North American build rates are expected to increase from 13 million vehicles in 2020 to over 16 million vehicles in 2021 and for several years beyond that. While we experienced lower demand in 2020 due to COVID disruptions in the supply chain, we successfully initiated multiple program launches in the second half of the year. With more program launches planned throughout…

[Operator Instructions] And our question is from Josh Sullivan from The Benchmark Company.

Just on the Warrick acquisition and the operations, can you tell us about any customer contracting that might be up for renegotiations this year? Or just what we should be thinking about as far as the contracting cycle at Warrick?

Sure. Cyclic contracts for that packaging business appears, what we've seen, to be in the 2- to 3-year type framework. We know that through the diligence, there were already begin negotiation with some contracts in 2020, and that is continuing through 2021. So the short term, most of the contracts are billed. The facility is basically booked for the balance of this year. And they're currently looking out through the 2023-2024 time frame.

Got it. And then as you think about those expansion efforts that were previously just focused on Trentwood, and now you have the Warrick operations, can you talk about how you're going to think about the expansion between -- or how you're going to allocate those capital improvement dollars as we go down the road?

Sure. We -- the pandemic created a pause for us, which may turn out to be quite beneficial. As I mentioned in my remarks, during the diligence process, while they've done a great job at the Warrick facility, we see opportunities for some immediate investment to further that growth and momentum that's going on there. We're able to do that in the pause where aerospace is. But in all of our planning processes and to our capital prioritization, we're looking at being able to fund both growth legs in that area. So when the aerospace comes back, we fully intend to re-instigate that program and put that capacity in place to meet the long-term needs of our customers.

Got it. And then just 1 on automotive, given the growth you're looking at with the new product launches here, can you talk a little bit about the penetration of aluminum content on those new models? I think in the past, you've talked about aluminum penetration growing at about 8% above SAAR. Just curious what the new models suggest as far as that kind of penetration starting.

Well, it's a great question. We have -- look at SAAR's growth year-over-year, it's roughly a 23% increase year-over-year expect. And so we're announcing a 30% to 40%, 35% -- 30% to 40% type of increase. You could see that our penetration is in that 8% to 10% and above range that we've talked about long term. So that's still in line, and we're actually seeing that accelerate slight over the next few years.

Okay. And then just 1 last one on the general engineering side, just the semiconductor exposure. Can you talk about visibility there? Do you think -- how much of a cycle should we see and kind of demand for that as they build out a little capacity here?

Yes. Everything we see and here, Josh, is that this thing, which has had legs in 2020, we see this continuing throughout 2021. It's been well publicized, the shortages of semiconductor chips and all of that. And what we're seeing is continued growing demand. We expect to probably place even more growth in the GE business as we go forward this year because of that demand. And so we see that well through 2021, maybe into 2022.

Thank you.

And we have no further questions at this time. I'll now turn it back to Keith Harvey for final remarks.

Well, thank you very much for your time and interest in Kaiser Aluminum. I look forward to updating you on our first quarter results and our outlook and plans for the balance of '21 during our first quarter earnings call in April. Have a good day.

Thank you, ladies and gentlemen, that concludes today's call. Thank you for participating, and you may now disconnect.