# KAISER ALUMINUM CORP (KALU) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from KAISER ALUMINUM CORP's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/811596/000095017025024313/kalu-20241231.htm
Accession: 0000950170-25-024313
Filing date: 2025-02-20
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/KALU/
All MD&A years: /company/KALU/mda/
Previous year: /company/KALU/mda/fy2023/ (FY 2023)
Next year: /company/KALU/mda/fy2025/ (FY 2025)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in Item 8. “Financial Statements and Supplementary Data” of this Form 10-K. For a detailed discussion of items impacting the year ended December 31, 2022, as well as a year‑to‑year comparison of our financial position and results of operations for the years ended December 31, 2023 and December 31, 2022, refer to Part II, Item 7. “Management’s Discussion and Analysis” of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 22, 2024.

Non-GAAP Financial Measures

This information contains certain non-GAAP financial measures. A non-GAAP financial measure is defined as a numerical measure of a company’s financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with US GAAP in the statements of income (loss), balance sheets, or statements of cash flows of the company. We have provided a reconciliation of non-GAAP financial measures to the most directly comparable financial measure in the accompanying tables. We have also provided a discussion of the reasons we believe that presentation of the non-GAAP financial measures provides useful information to investors, as well as any additional ways in which we use the non-GAAP financial measures. The non-GAAP financial measures used in the following discussions are Conversion Revenue (defined as Net Sales less the Hedged Cost of Alloyed Metal, see below in “Metal Pricing Policies” discussion), Adjusted EBITDA and ratios related thereto. These measures are presented because management uses this information to monitor and evaluate financial results and trends and believes this information to also be useful for investors.

In the discussion of operating results below, we refer to certain items as “non-run-rate items.” For purposes of such discussion, non-run-rate items are items that, while they may recur from period-to-period: (i) are particularly material to results; (ii) affect costs primarily as a result of external market factors; and (iii) may not recur in future periods if the same level of underlying performance were to occur. Non-run-rate items are part of our business and operating environment but are worthy of being highlighted for the benefit of readers of our financial statements. Our intent is to allow users of the financial statements to consider our results both in light of and separately from such items. For a reconciliation of Adjusted EBITDA to Net income, see below in “Results of Operations - Selected Operational and Financial Information.” 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.

Metal Pricing Policies

Our pricing policies and hedging program are intended to significantly reduce or eliminate the impact on our profitability of fluctuations in the underlying price of primary and scrap, or recycled, aluminum, our main raw material, and certain alloys so that our earnings are predominantly associated with the conversion of aluminum to semi‑fabricated mill products. To allow users of our financial statements to consider the impact of aluminum and alloy cost on our Net sales, we disclose Net sales as well as Conversion Revenue, which is Net sales less the Hedged Cost of Alloyed Metal. As used in this discussion, “Hedged Cost of Alloyed Metal” is the cost of aluminum at the average MWTP plus the cost of alloying elements and any realized gains and/or losses on settled hedges related to the metal sold in the referenced period. The average MWTP of aluminum reflects the primary aluminum supply/demand dynamics in North America. For a reconciliation of Conversion Revenue to Net sales, see below in “Results of Operations - Selected Operational and Financial Information.”

Results of Operations

Fiscal 2024 Summary

•
Net income of $46.8 million and Net income per diluted share of $2.87;

•
Net sales of $3.02 billion; Conversion Revenue of $1.46 billion;

•
Adjusted EBITDA of $216.5 million; Adjusted EBITDA Margin 14.9%;

•
Capital investment of $180.8 million, primarily driven by the fourth coating line investment at Warrick;

•
As of December 31, 2024, we had $571.8 million of combined cash and cash equivalents and net borrowing availability under our Revolving Credit Facility; and

•
We paid a total of approximately $50.7 million, or $3.08 per common share, in cash dividends to stockholders, including holders of restricted stock, and dividend equivalents to holders of certain restricted stock units during the year ended December 31, 2024.

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Consolidated Selected Operational and Financial Information

The following data should be read in conjunction with our consolidated financial statements and the notes thereto included in Item 8. “Financial Statements and Supplementary Data” of this Form 10-K.

Net Sales. The following table sets forth the 2024 and 2023 shipments (in millions of pounds) and Net sales (in millions of dollars) by end market applications and the respective fluctuations.

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2024","","2023"],["","","Shipments","","Net sales","","Shipments","","Net sales","","Shipment Change","","% Increase (Decrease)","","Net sales Change","","% Increase (Decrease)"],["Aero/HS Products","","245.2","","$","883.0","","254.3","","$","899.3","","","(9.1",")","","(4","%)","$","(16.3",")","","(2","%)"],["Packaging","","592.7","","","1,260.9","","612.4","","","1,315.2","","","(19.7",")","","(3","%)","","(54.3",")","","(4","%)"],["GE Products","","228.7","","","618.1","","215.6","","","596.5","","","13.1","","","6","%","","21.6","","","4","%"],["Automotive Extrusions","","101.4","","","251.9","","104.5","","","254.9","","","(3.1",")","","(3","%)","","(3.0",")","","(1","%)"],["Other Products","","4.3","","","10.1","","9.6","","","21.1","","","(5.3",")","","(55","%)","","(11.0",")","","(52","%)"],["Total","","","1,172.3","","$","3,024.0","","","1,196.4","","$","3,087.0","","","(24.1",")","","(2","%)","$","(63.0",")","","(2","%)"]]
[[/GREPCENT_TABLE]]

The decrease in Net sales reflected a 24.1 million pound (2%) decrease in shipment volume while the average realized sales price per pound remained flat at $2.58 for the years ended 2024 and 2023.

COGS. COGS for 2024 totaled $2,691.1 million, or 89% of Net sales, compared to $2,754.9 million, or 89% of Net sales, in 2023. The decrease reflected the following (in millions of dollars):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2024","","2023","","Change","","% Increase (Decrease)"],["Hedged cost of alloyed metal","","$","1,567.8","","$","1,621.1","","$","(53.3",")","","(3","%)"],["Manufacturing costs","","","805.2","","","809.9","","","(4.7",")","","(1","%)"],["Plant overhead","","","170.5","","","164.6","","","5.9","","","4","%"],["Freight costs","","","91.6","","","103.3","","","(11.7",")","","(11","%)"],["Other cost of products sold","","","56.0","","","56.0","","","\u2014","","","0","%"],["Total","","$","2,691.1","","$","2,754.9","","$","(63.8",")","","(2","%)"]]
[[/GREPCENT_TABLE]]

Of the $53.3 million decrease in Hedged Cost of Alloyed Metal, $20.6 million was due to lower hedged metal cost and $32.7 million was due to lower shipment volume, as discussed above in “Net Sales.” The $11.7 million decrease in freight costs was primarily due to favorable shipping rates. The $4.7 million decrease in manufacturing costs was primarily driven by lower shipment volume and favorable impact of metal sourcing strategies partially offset by higher energy costs and higher hourly personnel costs. The $5.9 million increase in plant overhead was due to higher employee and employee-related costs for salaried operational personnel. Other cost of products sold remained flat as a result of increases in LIFO reserve expense and legacy environmental expenses offset by a decrease in major maintenance costs. See “Selected Operational and Financial Information” below for a further discussion of the comparative results of operations for 2024 and 2023.

Depreciation and Amortization. Depreciation and amortization for 2024 was $116.4 million compared to $108.6 million for 2023. The increase of $7.8 million was primarily attributable to various construction-in-progress projects related to manufacturing cost efficiency and capacity growth initiatives being placed in service.

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Selling, General, Administrative, Research and Development (“SG&A and R&D”). SG&A and R&D expense totaled $120.8 million in 2024 compared to $122.7 million in 2023. The decrease reflected the following (in millions of dollars):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2024","","2023","","Change","","% Increase (Decrease)"],["Research and development costs","","$","2.2","","$","2.9","","$","(0.7",")","","(24","%)"],["Employee costs","","","83.3","","","80.0","","","3.3","","","4","%"],["Other selling, general and administrative costs","","","35.3","","","39.8","","","(4.5",")","","(11","%)"],["Total","","$","120.8","","$","122.7","","$","(1.9",")","","(2","%)"]]
[[/GREPCENT_TABLE]]

The $4.5 million decrease in other SG&A costs was due to: (i) a $2.9 million decrease in legal fees; (ii) a $1.2 million decrease in workers’ compensation expense; and (iii) a $0.7 million decrease in rent expense.

Restructuring Costs. Restructuring costs reflect the impacts of our restructuring plans initiated in 2024 and 2022. See Note 12 of Notes to Consolidated Financial Statements included in this Form 10-K for further information regarding the restructuring plans.

Other Operating Charges, Net. Other operating charges, net, of $0.4 million for the year ended December 31, 2024 represented an impairment charge on land classified as held for sale.

Interest Expense. Interest expense represents cash and non-cash interest expense incurred on our Senior Notes and our Revolving Credit Facility, net of capitalized interest. See Note 9 of Notes to Consolidated Financial Statements included in this Form 10-K for further information regarding interest expense, capitalized interest expense, and a discussion of our debt and credit facilities that were in effect during each of the years 2024 and 2023.

Other Income, Net. See Note 13 of Notes to Consolidated Financial Statements included in this Form 10-K for details.

Income Tax (Provision) Benefit. The income tax provision for 2024 was $16.7 million, resulting in an effective tax rate of 26.3%. The difference between the effective tax rate and the projected blended statutory tax rate for 2024 was primarily due to: (i) an increase of 5% related to an increase in the valuation allowance relating to certain state net operating losses and credits; and (ii) an increase of 4% related to non-deductible compensation expense, partially offset by (i) a decrease of 5% due to state net operating loss (“NOL”) carryforward expirations and tax rate true-ups in various states; and (ii) a decrease of 2% related to a Federal Research and Development credit.

The income tax provision for 2023 was $9.1 million, resulting in an effective tax rate of 16.2%. The difference between the effective tax rate and the projected blended statutory tax rate for 2023 was primarily due to: (i) a decrease of 6% related to a Federal Research and Development credit and (ii) a decrease of 3% related to state taxes, partially offset by an increase of 3% related to non-deductible compensation expense.

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Selected Operational and Financial Information

The following data should be read in conjunction with our consolidated financial statements and the notes thereto included in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K.

The following table provides selected operational and financial information (in millions of dollars):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2024","","","2023"],["Net income","","$","46.8","","","$","47.2"],["Interest expense","","","43.7","","","","46.9"],["Other income, net","","","(19.5",")","","","(7.4",")"],["Income tax provision","","","16.7","","","","9.1"],["Depreciation and amortization","","","116.4","","","","108.6"],["Non-run-rate items:"],["Restructuring costs","","","7.6","","","","5.0"],["Non-cash asset impairment charge","","","0.4","","","","\u2014"],["Environmental expenses1","","","4.4","","","","0.2"],["Total non-run-rate items","","","12.4","","","","5.2"],["Adjusted EBITDA","","$","216.5","","","$","209.6"]]
[[/GREPCENT_TABLE]]

1.
Non-run-rate environmental expenses are related to legacy contingencies from activities at operating facilities prior to July 6, 2006. See Note 10 of Notes to Consolidated Financial Statements included in this Form 10-K for additional information relating to environmental expenses.

Adjusted EBITDA for 2024 was $6.9 million higher than Adjusted EBITDA for 2023. Adjusted EBITDA for the year ended December 31, 2024 was impacted by: (i) improved product mix, partially offset by lower shipment volume; (ii) a decrease in freight costs; (iii) favorable impact of metal sourcing strategies; and (iv) lower major maintenance costs driven by timing of annual planned maintenance programs. This was partially offset by: (i) higher personnel costs and (ii) an increase in energy costs. See above in “Consolidated Results of Operations” for further details.

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The following table provides our shipment and Conversion Revenue information (in millions of dollars, except shipments and Conversion Revenue per pound) by end market applications:

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2024","","","2023"],["Aero/HS Products:"],["Shipments (mmlbs)","","245.2","","","254.3"],["","","$","","","$ / lb","","","$","","","$ / lb"],["Net sales","","$","883.0","","","$","3.60","","","$","899.3","","","$","3.54"],["Less: Hedged Cost of Alloyed Metal","","","(353.5",")","","","(1.44",")","","","(366.4",")","","","(1.44",")"],["Conversion Revenue","","$","529.5","","","$","2.16","","","$","532.9","","","$","2.10"],["Packaging:"],["Shipments (mmlbs)","","592.7","","","612.4"],["","","$","","","$ / lb","","","$","","","$ / lb"],["Net sales","","$","1,260.9","","","$","2.13","","","$","1,315.2","","","$","2.15"],["Less: Hedged Cost of Alloyed Metal","","","(770.9",")","","","(1.30",")","","","(812.0",")","","","(1.33",")"],["Conversion Revenue","","$","490.0","","","$","0.83","","","$","503.2","","","$","0.82"],["GE Products:"],["Shipments (mmlbs)","","228.7","","","215.6"],["","","$","","","$ / lb","","","$","","","$ / lb"],["Net sales","","$","618.1","","","$","2.70","","","$","596.5","","","$","2.77"],["Less: Hedged Cost of Alloyed Metal","","","(305.3",")","","","(1.33",")","","","(291.4",")","","","(1.35",")"],["Conversion Revenue","","$","312.8","","","$","1.37","","","$","305.1","","","$","1.42"],["Automotive Extrusions:"],["Shipments (mmlbs)","","101.4","","","104.5"],["","","$","","","$ / lb","","","$","","","$ / lb"],["Net sales","","$","251.9","","","$","2.48","","","$","254.9","","","$","2.44"],["Less: Hedged Cost of Alloyed Metal","","","(132.2",")","","","(1.30",")","","","(138.7",")","","","(1.33",")"],["Conversion Revenue","","$","119.7","","","$","1.18","","","$","116.2","","","$","1.11"],["Other Products:"],["Shipments (mmlbs)","","4.3","","","9.6"],["","","$","","","$ / lb","","","$","","","$ / lb"],["Net sales","","$","10.1","","","$","2.35","","","$","21.1","","","$","2.20"],["Less: Hedged Cost of Alloyed Metal","","","(5.9",")","","","(1.37",")","","","(12.6",")","","","(1.31",")"],["Conversion Revenue","","$","4.2","","","$","0.98","","","$","8.5","","","$","0.89"],["Total:"],["Shipments (mmlbs)","","1,172.3","","","1,196.4"],["","","$","","","$ / lb","","","$","","","$ / lb"],["Net sales","","$","3,024.0","","","$","2.58","","","$","3,087.0","","","$","2.58"],["Less: Hedged Cost of Alloyed Metal1","","","(1,567.8",")","","","(1.34",")","","","(1,621.1",")","","","(1.35",")"],["Conversion Revenue","","$","1,456.2","","","$","1.24","","","$","1,465.9","","","$","1.23"]]
[[/GREPCENT_TABLE]]

1.
Hedged Cost of Alloyed Metal for 2024 and 2023 was comprised of $1,567.6 million and $1,599.7 million, respectively, reflecting the cost of aluminum at the average MWTP and the cost of certain alloys used in the production process, as well as metal price exposure on shipments that we hedged with realized losses upon settlement of $0.2 million and $21.4 million in 2024 and 2023, respectively, all of which were included within both Net sales and COGS in our Statements of Consolidated Income (Loss). See Note 8 of Notes to Consolidated Financial Statements included in this Form 10-K for the total realized (gain) loss on aluminum hedges for which we hedged the metal price exposure externally.

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Liquidity and Capital Resources

Summary

The following table summarizes our liquidity (in millions of dollars):

[[GREPCENT_TABLE]]
[["","","As of December 31,"],["","","2024","","","2023"],["Available cash and cash equivalents","","$","18.4","","","$","82.4"],["Borrowing availability under Revolving Credit Facility, net of letters of credit1","","","553.4","","","","516.7"],["Total liquidity","","$","571.8","","","$","599.1"]]
[[/GREPCENT_TABLE]]

1.
Borrowing availability under the Revolving Credit Facility was determined by a borrowing base calculated as of December 31, 2024 and December 31, 2023. See Note 9 of Notes to Consolidated Financial Statements included in this Form 10-K for further details.

We place our cash in bank deposits with high credit quality financial institutions. See Note 16 of Notes to Consolidated Financial Statements included in this Form 10-K for information regarding restricted cash at December 31, 2024.

We had no borrowings under our Revolving Credit Facility during the year ended December 31, 2024, and we had no outstanding borrowings under our Revolving Credit Facility as of December 31, 2023 after repaying borrowings of $215.1 million incurred during the year ended December 31, 2023. See “Sources of Liquidity” below for a further discussion of subsequent borrowing activity.

Cash Flows

The following table summarizes our cash flows from operating, investing, and financing activities (in millions of dollars):

[[GREPCENT_TABLE]]
[["","","Year Ended December 31,"],["","","2024","","","2023"],["Total cash provided by (used in):"],["Operating activities","","$","167.1","","","$","211.9"],["Investing activities","","$","(174.6",")","","$","(128.2",")"],["Financing activities","","$","(55.3",")","","$","(54.3",")"]]
[[/GREPCENT_TABLE]]

Cash provided by operating activities for the year ended December 31, 2024 reflected results of business activity described within “Consolidated Selected Operational and Financial Information” above, as well as the following working capital changes: (i) an increase in inventory of $29.4 million, excluding LIFO impact, primarily driven by higher metal costs; (ii) an increase in contract assets of $14.9 million, primarily driven by timing of customer shipments; (iii) an increase in accounts payable of $14.1 million due to an increase in metal costs in addition to the timing of payments; and (iv) an increase in trade and other receivables of $4.4 million, primarily due to an increase in metal costs in addition to the timing of collections.

Cash provided by operating activities for the year ended December 31, 2023 reflected results of business activity described within “Consolidated Selected Operational and Financial Information” above, as well as the following working capital changes: (i) a decrease in inventory of $47.2 million, excluding LIFO impact, primarily driven by improved inventory management and lower metal costs; (ii) a decrease in trade and other receivables of $33.1 million, primarily due to a decrease in metal costs in addition to the timing of collections; and (iii) a decrease in accounts payable of $43.0 million due to the timing of payments, in addition to a decrease in metal prices.

See Statements of Consolidated Cash Flows included in this Form 10-K for further details on our cash flows from operating, investing, and financing activities for the years ended December 31, 2024 and December 31, 2023.

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Sources of Liquidity

Our most significant sources of liquidity include available cash and cash equivalents, available credit under the Revolving Credit Facility, and funds generated from operations. We believe we have sufficient liquidity to fund our operations and meet our short-term and long-term obligations.

Our Revolving Credit Facility and Senior Notes have covenants that, we believe, allow us to operate our business with limited restrictions and significant flexibility for the foreseeable future. We do not believe that covenants contained in the Revolving Credit Facility are reasonably likely to limit our ability to raise additional debt or equity to satisfy our foreseeable liquidity needs during the next 12 months, should we choose to do so, nor do we believe it is likely that during the next 12 months, we will trigger the availability threshold that would require measuring and maintaining a fixed charge coverage ratio.

At February 17, 2025, we had no outstanding borrowings under the Revolving Credit Facility after repaying borrowings of $37.3 million incurred subsequent to December 31, 2024. See Note 9 of Notes to Consolidated Financial Statements included in this Form 10-K for a description of our Revolving Credit Facility.

We engage in certain customer-based supply chain financing programs to accelerate the receipt of payment for outstanding accounts receivable from certain customers. The costs of these programs are typically reimbursed to us by the customer. Receivables transferred under these customer-based supply chain financing programs generally meet the requirements to be accounted for as sales resulting in the derecognition of such receivables from our consolidated balance sheets. Receivables involved with these customer‑based supply chain finance programs for the year ended December 31, 2024 constituted approximately 36% of our Net sales. See Note 1 and Note 13 of Notes to Consolidated Financial Statements included in this Form 10-K for further details with respect to these supply chain financing programs.

Material Cash Requirements

The discussion below summarizes our material cash requirements from significant contractual obligations, commercial commitments and off-balance sheet arrangements as of December 31, 2024.

Debt. As of December 31, 2024, we have outstanding fixed-rate notes with varying maturities for an aggregate principal amount of $1.05 billion. See Note 9 of Notes to Consolidated Financial Statements included in this Form 10-K for further details with respect to the 4.625% Senior Notes maturing in 2028 (“4.625% Senior Notes”) and the 4.50% Senior Notes maturing in 2031 (“4.50% Senior Notes”). At December 31, 2024, future interest payments associated with our outstanding notes total $241.8 million, with $47.9 million payable within 12 months. We do not believe that covenants in the indenture governing the 4.625% Senior Notes and 4.50% Senior Notes are reasonably likely to limit our ability to obtain additional debt or equity financing should we choose to do so during the next 12 months.

Purchase Obligations. Cash outlays for purchase obligations consist primarily of commitments to purchase primary aluminum, recycled scrap aluminum, alloys, energy, and equipment. We have various contracts with suppliers of metals that require us to purchase minimum quantities of these metals in future years based primarily at the associated metal price at the time of payment. However, we believe the minimum required purchase quantities are lower than our current requirements for these metals. Physical delivery commitments with energy companies are in place to cover our exposure to fluctuations in utility prices and are based on fixed contractual rates and quantities. Equipment purchase obligations are based on scheduled payments to equipment manufacturers.

Leases. We have operating and finance leases for certain manufacturing facilities, warehouses, office space, equipment, and non-cancelable capital commitments. See Note 3 of Notes to Consolidated Financial Statements included in this Form 10-K for the maturity of our lease liabilities.

Deferred Compensation Plan Liability. As of December 31, 2024, we had deferred compensation plan liabilities for certain key employees, which were contingent upon investment performance, vesting and other eligibility requirements, including retirement dates. See Note 5 of Notes to Consolidated Financial Statements included in this Form 10-K for further information, including the total expense related to all benefit plans.

Revolving Credit Facility. We are required to pay a monthly commitment fee equal to 0.25% per annum of the unused commitments under the Revolving Credit Facility. No borrowings were outstanding under our Revolving Credit Facility as of December 31, 2024. Additionally, under our Revolving Credit Facility, we issue standby letters of credit to provide financial assurance of our payment of obligations, primarily related to workers’ compensation claims. The specific timing of payments with respect to such matters is uncertain. The letters of credit generally automatically renew every 12 months and terminate when the underlying obligations no longer require assurance or upon the maturity of our Revolving Credit Facility in April 2027. See Note 9 of Notes to Consolidated Financial Statements included in this Form 10-K for additional information.

Uncertain Tax Liabilities. At December 31, 2024, we had uncertain tax positions which ultimately could result in tax payments. See Note 14 of Notes to Consolidated Financial Statements included in this Form 10-K for further information.

37

Pension, OPEB, and Salaried VEBA. See Note 5 of Notes to Consolidated Financial Statements included in this Form 10-K for information regarding the future net benefits we expect to pay with respect to our pension plans, OPEB, and our variable cash contributions to the Salaried VEBA. Additionally, we are required to pay $0.3 million in annual administrative fees related to the hourly VEBA that provides benefits for eligible retirees represented by certain unions and their surviving spouses and eligible dependents through September 2025.

Multiemployer Pension Plans. See Note 6 of Notes to Consolidated Financial Statements included in this Form 10-K for information regarding the future contributions we expect to make under the terms of collective bargaining agreements that cover our union-represented employees at certain facilities. Additionally, in 2027 we expect to pay a partial withdrawal liability of approximately $4.6 million resulting from the exit of our soft alloy aluminum extrusion facility located in Sherman, Texas and the corresponding cessation of ongoing contributions to the multiemployer pension plan for those covered employees.

While we believe our available cash on hand, anticipated available borrowing capacity under the Revolving Credit Facility, and funds generated from operations will be sufficient to finance our working capital requirements, planned capital expenditures, investments, debt service obligations and other cash requirements for at least the next 12 months, and while we also believe that alternative sources of liquidity will remain available in the event we seek to add liquidity for opportunistic or other reasons in the future, our ability to fund such cash requirements will depend upon our future operating performance (which will be affected by prevailing economic conditions) and financial, business and other factors, some of which are beyond our control.

Capital Expenditures and Investments

We strive to strengthen our competitive position across our end markets through strategic capital investment. Significant investments over the past decade have positioned us well with increased capacity and expanded manufacturing capabilities while more recent capital projects have focused on further enhancing manufacturing cost efficiency, improving product quality, and promoting operational security, which we believe are critical to maintaining and strengthening our position in an increasingly competitive market environment. A significant portion of our capital spending over the past several years are related to: (i) our investment in a fourth coating line at Warrick to increase our capacity for higher margin coated aluminum material for packaging applications and (ii) modernization projects at our Trentwood rolling mill, which focused on equipment upgrades throughout the process flow to reduce conversion costs, increase efficiency and further improve our competitive cost position on all products produced at Trentwood. A significant portion of the Trentwood investment also focused on modernizing legacy equipment and the process flow for thin gauge plate to achieve KaiserSelect® quality enhancements for these Aero/HS Products and GE Products. These improvements have and will allow us to gain incremental manufacturing capacity to enable future sales growth. Total capital expenditures were $180.8 million in 2024 and $143.2 million in 2023.

Our capital investment plans remain focused on supporting demand growth through capacity expansion, sustaining our operations, enhancing product quality, and increasing operating efficiencies. We anticipate total capital spending in 2025 of approximately $125.0 million. We expect to continue to deploy capital thoughtfully so that investment decisions align with demand expectations in order to maximize the earnings potential of the business and maintain financial strength and flexibility.

Capital investments will be funded using cash generated from operations, available cash and cash equivalents, borrowings under the Revolving Credit Facility, and/or other third-party financing arrangements. The level of anticipated capital expenditures may be adjusted from time to time depending on our business plans, our price outlook for fabricated aluminum products, our ability to maintain adequate liquidity, and other factors. No assurance can be provided as to the timing of any such expenditures or the operational benefits expected therefrom.

Dividends

We have consistently paid a quarterly cash dividend since the second quarter of 2007 to holders of our common stock, including holders of restricted stock. Nevertheless, as in the past, the future declaration and payment of dividends, if any, will be at the discretion of our Board of Directors and will depend on a number of factors, including our financial and operating results, the availability of surplus and/or net profits, liquidity position, anticipated cash requirements, contractual restrictions under our Revolving Credit Facility, and the indentures for our Senior Notes or other indebtedness we may incur in the future. We can give no assurance that dividends will be declared and paid in the future.

We also pay quarterly dividend equivalents to the holders of certain restricted stock units. Holders of performance shares are not paid a quarterly dividend equivalent, but instead are entitled to receive, in connection with the issuance of underlying shares of common stock for performance shares that ultimately vest, a one-time payment equal to the dividends such holder would have received if the number of such shares of common stock so issued had been held of record by such holder from the date of grant of such performance shares through the date of such issuance.

38

See our Statements of Consolidated Stockholders’ Equity and Note 18 of Notes to Consolidated Financial Statements included in this Form 10-K for information regarding dividends declared during 2024 and 2023 and subsequent to December 31, 2024.

Repurchases of Common Stock

We are not obligated to repurchase any specific number of shares under our stock repurchase program. We suspended share repurchases as of March 2020. We will continue to assess share repurchases as a part of our capital allocation priorities and strategic investment opportunities identified to support further growth in our business. At December 31, 2024, $93.1 million remained authorized and available for future repurchases of common stock under our stock repurchase program. See our Statements of Consolidated Stockholders’ Equity included in this Form 10-K for information regarding minimum statutory tax withholding obligations arising during 2024 and 2023 in connection with the vesting of non-vested shares, restricted stock units, and performance shares.

Critical Accounting Estimates and Policies

Our consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

In addition to the accounting estimates we discuss in Note 1 of Notes to Consolidated Financial Statements included in this Form 10-K, management believes that the following accounting estimates are critical to aid in fully understanding and evaluating our reported financial results and require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effects of matters that are inherently uncertain. Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.

Revenue Recognition

We decide at the outset of entering into contracts with customers whether our performance obligations as specified in these contracts are satisfied over time or at a point in time. To recognize revenue over time means that we will need to synchronize revenue recognition with progress toward completion of the performance obligation. If we have determined that revenue will be recognized over time for a specific customer order, the earliest point in our production process that we will recognize revenue will be the point that the product cannot be directed to another customer. In most cases, this happens at the time we begin to mold the ingot or billet, either by flat rolling the ingot or by extruding the billet through a die. For custom alloys, we would begin recognizing revenue over time at the point the custom alloy billet is cast. Approximately 77% of our business is recognized at a point in time with the remaining 23% recognized over time.

We follow the input method of recognizing revenue over time. Under this approach, revenue is recognized for products in production based on the cost incurred to date plus a reasonable margin. Cost incurred to date is based on resources consumed, labor hours expended, and other costs incurred relative to the total inputs expected in order to satisfy a performance obligation. Reasonable margins are estimated using an average margin of the respective production facility producing the product. For purposes of recognizing revenue over time on products that are in work‑in-process as of the period end, we make the assumption that the average margins at the respective production facilities are reasonably close to the individual product margins that are in work‑in-process.

Although we believe that the judgments and estimates around recognizing revenue over time discussed herein are reasonable, actual results could differ and we may be exposed to losses or gains that could be material. A change in our estimated average margins by 5% would have had an impact of approximately $0.1 million to Net income for the year ended December 31, 2024.

Environmental Commitments and Contingencies

We are subject to a number of environmental laws and regulations, to potential fines or penalties assessed for alleged breaches of such laws and regulations and to potential claims and litigation based upon such laws and regulations. Based on our evaluation of environmental matters, we have established environmental accruals, primarily related to solid waste disposal and soil and groundwater remediation matters. These environmental accruals represent our estimate of costs reasonably expected to be incurred in the ordinary course of business based on presently enacted laws and regulations, currently available facts, existing technology and our assessment of the likely remediation action to be taken.

Making estimates of possible incremental environmental remediation costs is subject to inherent uncertainties. In estimating the amount of any loss, in many instances a single estimation of the loss may not be possible. Rather, we may only be able to estimate a

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range for possible losses. In such an event, ASC 450, Contingencies requires that a liability be established for at least the minimum end of the range assuming that there is no other amount which is more likely to occur. As additional facts are developed and definitive remediation plans and necessary regulatory approvals for implementation of remediation are established or alternative technologies are developed, changes in these and other factors may result in actual costs exceeding the current environmental accruals.

Although we believe that the judgments and estimates discussed herein are reasonable, actual results could differ and we may be exposed to losses or gains that could be materially different than those reflected in our accruals. To the extent we prevail in matters for which accruals have been established or are required to pay amounts in excess of our accruals, our future results from operations could be materially affected. We believe at this time that it is reasonably possible that undiscounted costs associated with these environmental matters may exceed current accruals by amounts that could be, in the aggregate, up to an estimated $13.4 million over the remediation period. See Note 10 of Notes to Consolidated Financial Statements included in this Form 10-K for additional discussion of these matters.

Pension and Other Postretirement and Postemployment Benefits

Liabilities and expenses for pension and other postretirement and postemployment benefits are determined using actuarial methodologies and incorporate significant assumptions, including the interest rate used to discount the future estimated liability, the expected long-term rate of return (“LTRR”) on plan assets and several assumptions relating to the employee workforce (salary increases, health care cost trend rates, retirement age and mortality). The most significant assumptions used in determining the estimated year-end obligations include the assumed discount rate and the LTRR.

In addition to the above assumptions used in the actuarial valuations, changes in plan provisions could also have a material impact on the net funded status of our pensions and other postretirement and postemployment benefits. Additionally, our obligation to the Salaried VEBA is to pay an annual variable contribution amount based on the level of our cash flow. The funding status of the Salaried VEBA has no impact on our annual variable contribution amount. We have no control over any aspect of the Salaried VEBA plan. We rely on information provided to us by the Salaried VEBA administrator with respect to specific plan provisions such as annual benefits expected to be paid. See Note 5 of Notes to Consolidated Financial Statements included in this Report for additional information on our benefit plans.

Since the recorded obligation represents the present value of expected postretirement and postemployment benefit payments over the life of the plans, decreases in the discount rate (used to compute the present value of the payments) would cause the estimated obligation to increase. Conversely, an increase in the discount rate would cause the estimated present value of the obligation to decline.

The LTRR on plan assets reflects an assumption regarding what the amount of earnings would be on existing plan assets (before considering any future contributions to the plan). Increases in the assumed LTRR would cause the projected value of plan assets available to satisfy postretirement and OPEB obligations to increase, yielding a reduced net expense of these obligations in future years. A reduction in the LTRR would reduce the amount of projected net assets available to satisfy postretirement and OPEB obligations and, thus, cause the net expense of these obligations to increase in future years. A change in plan provisions could cause the estimated obligations to change. An increase in annual benefits expected to be paid would increase the estimated present value of the obligations and conversely, a decrease in annual benefits expected to be paid would decrease the estimated present value of the obligations.

The impact on the combined pension and other postretirement and OPEB liabilities of a change in the weighted average discount rate of 0.25% would be approximately $3.3 million as of December 31, 2024 and would impact pretax earnings in 2025 by approximately $0.4 million. A change in the assumption for the weighted average expected long-term rate of return on plan assets of 0.25% would impact pretax earnings by approximately $0.2 million for 2025.

New Accounting Pronouncements

For a discussion of all recently adopted and recently issued but not yet adopted accounting pronouncements, see Note 1 of Notes to Consolidated Financial Statements included in this Form 10-K.