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Kaiser Aluminum Cites SEC Scrutiny For New Adjusted Profit Calculation
Specialty aluminum products maker has been inflating adjusted profit metric tied to executive bonuses.
March 2, 2023
After multiple writs slaps from the SEC Kaiser Aluminum Corporation (KALU), a manufacturer of semi-fabricated specialty aluminum mill products, is changing how it reports non-GAAP financial measures. When calculating Adjusted EBITDA, Kaiser will no longer adjust results for the impact of last-in, first-out (LIFO) calculated on an annual basis to LIFO calculated on a monthly basis.
In its latest annual report, Kaiser said it made the change:
“...based on discussions with the SEC pertaining to comment letters received during 2022.”
The change reveals Kaiser overstated 2021 Adjusted EBITDA by $7.8 million, or 4.2%.
Importantly, Kaiser’s short term executive bonuses are based on Adjusted EBITDA.
Separately, the company is also renaming its key metric “value-added-revenue” (VAR) to “conversion revenue”, explaining the change:
“...is based on discussions with staff of the SEC pertaining to comment letters received during 2022 and is intended to more clearly characterize the metric as a subcomponent of revenue.”
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