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Kaiser Aluminum Corp (NASDAQ:KALU)
Q2 2020 Earnings Call
Jul 23, 2020, 1:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Kaiser Aluminum Second Quarter 2020 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions]

I would now like to hand the conference over to your host, Melinda Ellsworth. Madam, you may begin.

Melinda C. Ellsworth -- Vice President, Investor Relations & Corporate Communications

Thank you. Good afternoon, everyone, and welcome to Kaiser Aluminum's second quarter and first half 2020 earnings conference call. If you have 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; 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 three 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, 2019, and Form 10-Qs for the quarters ended March 31, 2020, and June 30, 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. 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?

Jack A. Hockema -- Chief Executive Officer and Chairman

Thanks, Melinda. Welcome to everyone joining us on the call today. I want to begin today by acknowledging our recently announced executive succession plan. Following a multi-year planning process, I will step down as CEO on July 31, and Keith Harvey, will assume the role of President and CEO of Kaiser Aluminum, while I'll remain on the Board of Directors as Executive Chairman. Keith and I've worked together for the past 25 years, developing and implementing the culture and the strategy that have positioned Kaiser as the highly respected industry leader it is today. Keith has had full responsibility for the operations of the Company as President and COO since 2015. And during that time, he is focused on building a strong and deep management team as we work through a planned transition for him to assume the additional duties of CEO. Keith is highly respected within the industry and the Company, and the announcement of a strong internal candidate of CEO has been met with enthusiasm by our customers and employees alike. I'm confident in Keith's ability to lead the Company to continued growth, and I congratulate him on his new position.

Turning to Slide 6. As we communicated during the April earnings call and through extensive investor engagement, since then, our business model is predicated on maximizing opportunities during the expanding economy, as well as being well prepared for unexpected economic adversity. To that end, recognizing the cyclicality of our end markets and the inevitable economic downturns, our ongoing financial strategy focuses on management of liquidity and debt leverage. We manage our liquidity to provide funding for sustaining and strategic investments and dividends through the full business cycle. Following the additional capital raise we completed in late April, we have approximately $1 billion of liquidity, which provides a strong safety net, as well as positioning us to capitalize on attractive investment opportunities.

As a key element of our financial strategy, we also seek to maintain leverage at or below a ratio of 2 times net debt to normalized EBITDA. In order to fund attractive strategic initiatives, we would allow greater than 2 times leverage, but only if we have a clear plan to delever to 2 times or less.

Turning to Slide 7, our capital allocation priorities are unchanged. Our top priority continues to be organic investment. With the change in demand for commercial aerospace plate, the $375 million Trentwood expansion project has been placed on hold until market conditions justify the expansion. As noted during our first quarter earnings call, we temporarily curtailed capital spending to fund only critical sustaining projects while we assess the implications of COVID-19. With approximately $1 billion of liquidity, we are positioned to be proactive in funding attractive organic investments to further enhance the efficiency and advance our competitive position.

Our second priority is our inorganic investment, where our strategy remains unchanged. We are constantly on the lookout to acquire businesses that we understand that are complementary to our existing portfolio and that can be acquired at a price that creates long-term shareholder value. During times of economic distress, there may be acquisition opportunities and we are positioned with financial flexibility to consider attractive opportunities.

Our third priority is the regular quarterly dividend. We consistently test our long-term ability to sustain and increase our dividend and we have evaluated a multitude of scenarios for the COVID-19 economy. In all possible scenarios that we envision, we have confirmed that the current dividend is sustainable.

Our fourth and the last priority is share repurchases, which we curtailed in March. Share repurchases deploy excess liquidity beyond what is required for organic and inorganic investments, as well as dividends. In addition, if projected leverage exceeds 2 times normalized EBITDA, we would seek to delever before repurchasing shares.

While the COVID-19 economy is an unwelcome development, we are confident in the long-term prospects for the Company and are well positioned to capitalize on opportunities to further strengthen our prospects for long-term profitable growth. We have successfully navigated challenging market conditions in the past, emerging stronger and better positioned to compete and we believe we will do so again when this market rebounds.

We'll now turn the call to Keith, who will review the current state of the business, second quarter results and our outlook. Keith?

Keith Harvey -- President and Chief Operating Officer

Thank you, Jack. Our second quarter results reflect the impact of COVID-19 on each of our end markets in varying degrees, as we initially noted during our first quarter earnings call. Demand for our commercial aerospace applications declined as Boeing and Airbus temporarily halted production and curtailed deliveries, while demand for defense applications remain [Technical Issues]. While conditions for our service center customers were challenging as many of their customers temporarily shut down during the quarter, our general engineering business remained strong.

Demand for our high-performance Kaiser select products, along with the solid support from our long-term customers help create additional pull for our products in the second quarter. In addition, with lower aerospace shipments, we shifted capacity to meet demand for general engineering plate, partially mitigating the impact of lower demand for other general engineering applications.

Demand for our automotive applications significantly eroded during the second quarter as virtually all North American automotive assembly plants temporarily shut down due to the COVID-19 concerns. Although most automotive manufacturers resumed operations in June, restarts were slower and uneven throughout the supply chain as facilities continued to deal with restart issues.

As we began experiencing lower demand during the quarter, we leveraged our business model by aggressively flexing cost and operating capacity at our facilities. Although there is often a lag between these flexing actions and the related savings, our highly variable cost structure allows us to react quickly and appropriately flex costs through all cycles.

Despite the decline in end market demand, pricing has held as the industry response has generally been to reduce operating levels to match demand. As Jack noted, we manage liquidity to ensure we maintain a recession tested safety net in order to sustain capital spending and dividends through all business cycles, including periods of unexpected economic adversity. We have total liquidity of approximately a $1 billion. We will continue to maintain our capital allocation priorities, including our regular quarterly dividend, the most recent that was just announced at $0.67 a share, which will be paid in August.

Before I turn the call over to Neal to provide more color around our second quarter results, I want to acknowledge our employees who have continued to work safely, following the protocols we've established for minimizing the spread of the virus, while continuing to perform at a very high level of customer satisfaction in terms of quality and delivery. I thank them for their dedication and commitment in this very challenging environment.

I will now turn the call over to Neal to discuss second quarter results in more detail. Neal?

Neal West -- Senior Vice President and Chief Financial Officer

Thanks, Keith. Value-added revenue of $175 million in the second quarter 2020 declined approximately $35 million or 17% compared to the prior year quarter on a 24% lower shipment, reflecting lower demand across our end markets due to the impact of COVID-19. Aerospace value-added revenue decreased 15% from the prior year's second quarter on a 25% year-over-year decrease in shipments, which predominantly reflects the production suspension of commercial aerospace at Boeing and Airbus, as noted by Keith, while value-added revenue per pound reflects a slight increase due to customer mix.

Automotive value-added revenue decreased approximately 58% compared to the second quarter of last year on 58% reduction in shipments. As noted earlier, our automotive shipments were significantly impacted during the quarter as virtually every North America automotive manufacturer temporarily shutdown operations.

General engineering value-added revenue was up 1% year-over-year on a 7% reduction in shipments, reflecting solid pricing and mix. The decline in shipments is primarily resulted -- related to disruptions caused by COVID-19, while value-added revenue per pound is up due to the customer and product mix.

For the first six months of 2020, total value-added revenue decreased approximately 9% on 14% lower shipments, reflecting lower demand for our aerospace and automotive applications in the second quarter.

Turning to Slide 12. EBITDA for the second quarter 2020 of $34 million declined from $48 million in the prior year quarter, primarily reflecting approximately $21 million sales impact due to lower demand, partially offset by $5 million lower major maintenance cost in addition to reductions in overheads and other costs. During the second quarter, we incurred approximately $1 million of cleaning and prevention costs associated with COVID-19 and we anticipate ongoing quarterly cost of approximately $250,000 related to virus prevention.

EBITDA margins for the second quarter was approximately 20%, compared to roughly 23% in the prior year quarter, driven by a lower VAR and operating leverage.

EBITDA for the first half 2020 of $94 million declined $10 million, compared to the prior year period, primarily reflecting the reduction of EBITDA in the second quarter 2020 due to the reasons previously discussed.

EBITDA margin of 24% in the first half 2020 is comparable to the prior year period, driven by a record 27.4% first quarter 2020 EBITDA margin and a drag on margins in the first half of 2019 due to the planned and unplanned downtime at Trentwood and lower automotive shipments due to program transition.

Turning to Slide 13. Reported operating income for the second quarter 2020 was approximately $5 million. Adjusting for $17 million of non-run rate charges, operating income for the second quarter of 2020 was approximately $21 million, compared to $35 million in the prior year quarter, reflecting the items previously mentioned and $1 million year-over-year increase in depreciation expense. The $17 million of non-run rate charges in the second quarter, primarily reflects a $12 million restructuring charge for severance and benefit costs as we flex our cost structure and reduce our operating levels to align with lower demand, along with an additional $2 million reserve increase for environmental issues associated with ongoing historical PCB clean up.

Reported net loss for the second quarter 2020 was $7 million, or $0.41 loss per diluted share. Adjusting for the non-run rate items, adjusted net income for the second quarter was $6 million, compared to $23 million in the prior year quarter, reflecting the lower -- the impact of lower operating income and an increase of $5 million of pre-tax interest related to our recent bond offerings. Adjusted earnings per diluted share in the second quarter declined to $0.36 from $1.40 in the prior year period.

Reported operating income for the first half 2020 was $50 million. Adjusting for the $17 million in non-run rate charges, first half 2020 operating income was $68 million, down from $80 million in the prior year period. The decline primarily reflects the decrease in EBITDA previously discussed.

Reported net income for the first half 2020 was $23 million, or $1.41 per diluted share. Adjusting for the non-run rate items, first half adjusted net income was $36 million, compared to $53 million in the prior year period. Adjusted earnings per diluted share for the first half 2020 was $2.27, compared to $3.24 for the first half of 2019.

The effective tax rate for the quarter was impacted by discrete issues during the period, including an increase in state tax NOL valuation and an adjustment for non-deductibility of executive compensation. The effective tax rate for the 2020 year is projected to be in a low- to mid-30% range due to these same items. We expect our 2020 net cash tax to be a cash refund of approximately $11 million related to AMT modernization.

Capital spending totaled $11 million for the second quarter and $32 million in the first half of 2020 as we limited capital spending in the second quarter to only sustaining projects.

During the first half of 2020, we returned $34 million of cash to shareholders in the form of share repurchases and dividends. As a reminder, we suspended our share repurchase program in early March due to the uncertainties relating to the pandemic. In April, we further strengthened our liquidity and financial flexibility issuing $350 million of 6.5% senior unsecured notes that mature in 2025. At June 30, cash totaled approximately $711 million reflecting the additional capital raise. Borrowing availability on our undrawn revolver -- revolving credit facility was approximately $282 million, providing us with ample liquidity of $1 billion.

And now, I'll turn the call back over to Keith to discuss our outlook. Keith?

Keith Harvey -- President and Chief Operating Officer

Thank you, Neal. Turning to Slide 15, moving on to each of our business segments. As we noted on our first quarter earnings call, we anticipate full-year 2020 value-added revenue for our large commercial aerospace and defense applications will be down approximately 15% to 20% from our record full-year 2019 results. Combined, these two businesses represent approximately 50% of our total value-added revenue. As we previously noted, value-added revenue for our large commercial aerospace business is expected to be down 20% to 25% from the prior year, with sales volume heavily weighted to the first half of 2020. Demand in the commercial aerospace market has been significantly impacted by COVID-19 as air travel has slowed dramatically and by continued delays in recertification of Boeing 737 MAX.

As we look beyond 2020, we expect that passenger traffic will recover and subsequent growth in aircraft builds will continue. However, as both Boeing and Airbus have noted, it could be two to four years before demand returns to the record levels similar to 2019. We will begin discussions with Boeing and Airbus in the third quarter as to their expected needs in 2021. And while we are optimistic that improvements and shipments will occur next year, it is too early to provide specific outlook at this time.

Our defense business remains solid and on track to continue to improve during 2020. We are well positioned on all aircraft models, including, but not limited to, the F35 Joint Strike Fighter, legacy programs such as the F-18, the F-16 and F-15 fighter jets, as well as various rotary aircraft programs such as the V-22 Osprey and the Chinook CH-47 helicopter.

Turning to Slide 16. As I briefly mentioned in my earlier remarks, virtually all our automotive customers resumed operations in June and expect to continue to operate through the typical summer hiatus to meet demand requirements. In response, our automotive-focused facilities have also ramped up production to meet this resurgence in demand. In addition, we recently secured several contracts with key customers for a number of new automotive programs. We anticipate these and other new programs previously awarded will begin to ramp up in the second half of 2020, and will continue to drive growth in 2021 and beyond.

As we look to the second half of 2020, we anticipate demand for our automotive applications will rebound from the weak second quarter 2020 with value-added revenue returning to a pace similar to the first quarter of 2020 as customers return to more normal operations and new program launches resume.

Turning to Slide 17. Value-added revenue for our general engineering applications in the second half is expected to reflect normal seasonal demand weakness. Challenged by the impact of COVID-19, many North American OEMs are developing strategies to secure and shorten supply lines by accelerating the reshoring of their manufacturing parts suppliers and requesting domestic supply for their raw material needs. Kaiser select rod, bar and plate products and our expansive network of long time service center partners, uniquely position us to capitalize on these opportunities as they develop.

Turning to Slide 18. We continue our planned exit of non-core applications and expect shipments to decline to an annual rate of $4 million in 2020 as we allocate capacity to more strategic extrusion applications.

Turning to Slide 19, and a summary of our outlook for the second half of 2020. As we look at the second half, we expect total value-added revenue will be down approximately 10% to 15% from the second quarter and EBITDA margin to be in the mid-teens. Aerospace and high-strength value-added revenue is expected to be down in the second half of 2020 versus the first half. We expect a strong rebound for automotive in the second half with value-added revenue on par with the pace set in the first quarter of 2020. And in general engineering, we expect normal seasonal demand weakness as compared to the first half of the year.

Our second half 2020 outlook for value-added revenue and EBITDA margin anticipates a weaker third quarter than the fourth quarter due to the timing of aerospace sales and approximately $4 million of higher major maintenance cost related to the timing of planned projects.

As previously noted, in April, we began limiting capital spending to critical sustaining projects only. However, with greater visibility into our end markets and significant liquidity, we will begin to be more proactive in our capital spending. We have decided to resume spending on a number of good return organic investment opportunities to further support our automotive growth and enhance efficiencies throughout our operations. We anticipate that capital spending for the full-year 2020 will now be approximately $50 million to $60 million.

As we've stated in numerous discussions around inorganic growth opportunities, we will continue to adhere to the same disciplined approach as in the past, employing the same filters we apply and evaluating prior potential acquisitions, one, we feel it must be a business that we understand is compatible with our existing businesses. It must have a winning strategy and be capable of achieving a defensible competitive position. We will not overpay. We will only pay a transaction price consistent with creating long-term shareholder value, and we must meet our liquidity safety net and leverage guidelines.

Turning to Slide 20, and a summary of our comments today. Our second quarter results reflected the environment and conditions with which we had to operate as COVID-19 impacted demand in each of our end markets. We properly executed on our strategy and aggressively flexed cost and operating levels to align with changes in business conditions. Despite the decline in demand, pricing held well, as the industry has generally responded to lower demand by reducing operating levels. We expect second half value-added revenue to be down approximately 10% to 15% from second quarter with resulting EBITDA margin in the mid-teens. We intend to begin relaxing our earlier hold on capital spending and will become more proactive with planned investments to support new programs in automotive and other efficiency projects while continuing to fund critical sustaining capital projects at our facilities.

We have a proven, solid business model. As Jack noted, our model is predicated upon being well prepared for unexpected economic adversity and our experienced managers ability to flex operations and execute well in all market conditions. As the balance of 2020 becomes clear, we are all well positioned with approximately $1 billion of liquidity, providing a strong safety net and the financial flexibility to position for the recovery in our key markets, taking advantage of opportunities as they present themselves to further advance our competitive position.

I will now open the call for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Josh Sullivan of The Benchmark Company. Your line is open.

Josh Sullivan -- The Benchmark Company -- Analyst

Hey. Good afternoon, Keith, Jack, Neal and Melinda.

Jack A. Hockema -- Chief Executive Officer and Chairman

Hi, Josh.

Melinda C. Ellsworth -- Vice President, Investor Relations & Corporate Communications

Hi, Josh.

Josh Sullivan -- The Benchmark Company -- Analyst

Just on the transition of the aerospace capacity over the general engineering side, how much more room is there to go? Can the general engineering market bear additional aerospace transition just as we look at the back half of the year with aero volumes potentially a little weaker?

Keith Harvey -- President and Chief Operating Officer

Well, we actually are seeing some pretty good demand there, Josh, a couple of markets in particular. As the automotive business comes back, of course, opportunities for tooling plate and other applications provide us an opportunity, as well as semiconductor, which has held up very well and shows continuing strength in the second half of the year.

You may recall, in '19, we actually were able to ship capacity from GE to more aerospace. That flexibility at Trentwood has really served us well in these two particular markets in the fact that we're able to ship that capacity fairly quickly and meet demand if one market wanes versus another. So, we think that those opportunities will continue in the second half. And, of course, the outlook in 2021, we'll get to that later, but we think we're positioned to take care of any of those. And I mentioned in my covered remarks earlier, we are seeing some reshoring beginning to happen in the North American opportunities. And as those happen and with the products and the service center relationships we have, we're really well positioned to take advantage of those.

Josh Sullivan -- The Benchmark Company -- Analyst

In what verticals are those reshoring efforts? Is it semiconductors? Are there any other ones to call out?

Keith Harvey -- President and Chief Operating Officer

Well, semiconductor is part of that, but we're seeing that in the automotive supply line. And really through the service center customers and that's really where a big indicator came to us really in the middle of the second quarter. A lot of supply lines had been disrupted just because of what was brought on by COVID-19, some of the issues that have taken place with tariffs and other things. And we believe that's continuing to drive a resurgence of that reshoring. So, as automotive progresses and others, we believe more and more of that is going to focus on domestic supply.

Josh Sullivan -- The Benchmark Company -- Analyst

And then just on -- you've obviously done a good job in flexing costs here. But what inning do you think you're in? How much more do you think you can go on that cost flex?

Keith Harvey -- President and Chief Operating Officer

Well, if you -- look at the second quarter, it was interesting for us. First, we flexed aggressively on the automotive side. And as we know the automotive assembly plants shut down early in the quarter. And so, we flexed a large percentage of our operations early on. And then as we know, a couple of months later all of those came back on. So, we flexed again to respond to that demand. So, we not only brought back majority of the workforce that participate in those markets, we actually have with some of these new opportunities I mentioned, we're bringing back more employees than we had prior to the outages due to COVID-19.

So, we're probably -- unless we have a second wave, we may be in the third quarter there in automotive. If you move over and reflect on the aerospace side, we had some fairly decent demand in the second quarter. And so, while we did flex some of our operations there, we still had a fairly good demand that we had to meet. With our outlook in the second half, we have room to flex operations there and our -- and will do so as demand warrants.

Josh Sullivan -- The Benchmark Company -- Analyst

And then just one...

Keith Harvey -- President and Chief Operating Officer

[Speech Overlap] second quarter there.

Josh Sullivan -- The Benchmark Company -- Analyst

Got it. Okay. And then just to follow-up that, on the automotive side. I mean, can you comment on what it look like in June? I mean, is there any way to frame it in terms of lead times or just how aggressive was the automotive supply chain and picking up in demand?

Keith Harvey -- President and Chief Operating Officer

Well, it was fairly quick. And although it was quick, not only do we have to bring back the employees to begin that, so we had an extensive retraining to get used to that, but we also had retraining to how to work safely in a COVID-19 environment. So that started fairly quickly. And as I mentioned, a lot of the end users, there were fits and starts to their returning. So, June was a chaotic month. But now we're sort of in a groove [Phonetic] through July, we have a better outlook of what the second half looks like. And so, we've ramped up and gone accordingly there. So, June was a transition month for us, but it's happy to be back. We see a good strong demand there. And hopefully, we'll see that continue as we go forward.

The other promising news on that side, there is a resumption of planned launches, that had been temporarily put on hiatus. And so, with those happening in the second half and continuing into 2021, we really see good growth there for us.

Josh Sullivan -- The Benchmark Company -- Analyst

Got it. Thank you.

Keith Harvey -- President and Chief Operating Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Curt Woodworth of Credit Suisse. Your line is open.

Curt Woodworth -- Credit Suisse -- Analyst

Yeah. Hey, Jack, and Keith. Hope you guys are well.

Keith Harvey -- President and Chief Operating Officer

Thank you. Good morning, Curt.

Curt Woodworth -- Credit Suisse -- Analyst

Good morning. First question is on aerospace. The fact that you still saw a decent demand in 2Q is somewhat surprising, just given the OEMs shutting production, as well as the continued delays in 737 MAX. So, I guess, one of the questions I have is, what was the driver of that still somewhat decent demand? In 2Q, you had a competitor that reported yesterday and I think their volumes were off close to 40%.

And then specifically for the MAX, I think we -- in the buy side has a hard time really understanding exactly how meaningful that platform is to Kaiser. We know it's a very material consumer of aluminum plate and sheet. So, the degree to which that eventually recovers, can you provide any insight in terms of thinking about how that could potentially benefit you going forward?

Keith Harvey -- President and Chief Operating Officer

Certainly. Well, the demand in second quarter -- again a lot of discussion with the airframers have taken place throughout the year. And we -- of course, we had a record year in the -- record quarter in the first quarter of the year. So, there was continuing demand there. But as the COVID-19 began to impact and, of course, the recertification, some delays there on the MAX, as you pointed out, we saw that continue to slow down.

I put it in the fact that the really strong relationships we have with these end users, I mean, we are in discussions with them almost daily onto their needs, onto the short-term and the longer-term. I can tell you, while a lot of our discussions have taken place on the shortages and the extension maybe be required and looking at shipments currently in 2020, we've also had dialogue about the resurgence and their concern about capacity being available when they do come back. So, we're balancing that between us as partners. And I -- we are working with them, because it's not a short-term play for us, it's a long-term. So that's why we'll seek we're working with them on shipments in 2020 and it's partially the reason for slowing demand in the second half.

I think the airframers are also working to help manage the inventory in this supply chain. I mean, they've slowed production. They've also been working with us as -- on shifting capacities perhaps out later to manage that inventory channel. So, I think the industry is working very well in managing that in some pretty challenging conditions.

With regard to your second point there, Curt, on the MAX, well, the MAX is very important to Boeing, obviously. I think if you look at the backlog that currently exist there, that MAX is at least 70% of their backlog. So -- and I know there has been a lot of discussion about some cancellations with regard to that aircraft. But their backlog still remains robust. And I think the industry is still supporting that particular airframe very well. And quite frankly, with lower production levels and with the backlog that exist at both Airbus and Boeing, we still have over 12,000 planes which are roughly seven or eight years of production rate. So, we think long-term all the conditions are still in place for a good solid sequential growth in this business once we get past these COVID-19 concerns.

Curt Woodworth -- Credit Suisse -- Analyst

Okay. That's super helpful. And then a similar question to what Josh was asking in terms of the -- I guess, displacing back into more GE from aero. And there is a pretty major common alloy trade case ongoing with, I think, 17 countries and I know that you don't do a lot of common alloy product. But clearly, the outcome of that would be meaningful to kind of all type of products. So, can you quantify at all from a volume basis, how much you could pivot into GE? Would you also be willing to try to even go into the more commodity spectrum just to get -- to achieve a certain target utilization rate at Trentwood? Or is that not really feasible? Thank you.

Keith Harvey -- President and Chief Operating Officer

Sure. Curt, that's not really a market that we would look at for the Trentwood facility. We're the largest domestic supplier of heat-treated plate in North America. And as our capacity becomes available, perhaps due to lower aero shipments, we've seen our distributor customers be very pleased to come back and take more volume from us. And actually that reshoring and that concern of supply chain disruptions has really been a catalyst, I believe in keeping things very possible for us on the GE side.

Curt Woodworth -- Credit Suisse -- Analyst

Great. Thank you very much. Best of luck.

Keith Harvey -- President and Chief Operating Officer

Thank you, Curt.

Operator

Thank you. At this time, I'd like to turn the call back over to Keith Harvey for closing remarks. Sir?

Keith Harvey -- President and Chief Operating Officer

Thank you. Before I end the call, I want to formally acknowledge and thank Jack for his leadership and commitment to Kaiser Aluminum, our employees and our stakeholders over the past two decades. Your impact on the Company and each of us has been profound, Jack, and has prepared us well to move Kaiser into our next chapter. In 2021, as Kaiser Aluminum, we will celebrate our 75th anniversary, and as you've said, with the strength of the Company we've built, we're just getting started.

On a more personal note, your mentorship to me over the last 25 years has meant more to me than I can effectively express here. I'm honored and humbled to assume the role as Kaiser Aluminum's next CEO, and I look forward to continuing to work with you in your new role as Executive Chair, as we continue to execute our strategy and ensure Kaiser Aluminum remains best-in-class.

In closing, on behalf of Kaiser Aluminum, our employees and our stakeholders, I would just like to say thank you, Jack, you made a real difference to all of us.

With that, thank you for joining us on the call today. We look forward to updating you on our third quarter 2020 conference call in October. Thank you.

Operator

[Operator Closing Remarks]

Duration: 41 minutes

Call participants:

Melinda C. Ellsworth -- Vice President, Investor Relations & Corporate Communications

Jack A. Hockema -- Chief Executive Officer and Chairman

Keith Harvey -- President and Chief Operating Officer

Neal West -- Senior Vice President and Chief Financial Officer

Josh Sullivan -- The Benchmark Company -- Analyst

Curt Woodworth -- Credit Suisse -- Analyst

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