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What changed in KAISER ALUMINUM CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of KAISER ALUMINUM CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+329 added−347 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-24)

Top changes in KAISER ALUMINUM CORP's 2023 10-K

329 paragraphs added · 347 removed · 283 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

93 edited+7 added−16 removed65 unchanged
Biggest changeWe are, as a result, committed to being socially responsible and active members of our industry and the communities in which we operate and our employees and their families live. 10 Consistent with our corporate values, we promote fair business practices and a culture of accountability, responsibility and ethical behavior through: • strong emphasis on the importance of integrity and competence; • conducting annual governance surveys to assess our culture and the effectiveness of our training; • adopting and enforcing our policies, including Corporate Governance Guidelines, Code of Business Conduct and Ethics, Human Rights Policy and Diversity, Equity and Inclusion Policy and compliance with applicable laws and regulations; and • encouraging the reporting of illegal or unethical behavior, including the use of In-Touch, a third party compliance feedback program.
Biggest changeConsistent with our corporate values, we promote fair business practices and a culture of accountability, responsibility, and ethical behavior through: • strong emphasis on the importance of integrity and competence; • conducting annual governance surveys to assess our culture and the effectiveness of our training; • adopting and enforcing our policies, including Corporate Governance Guidelines, Code of Business Conduct and Ethics, Human Rights Policy and Diversity, Equity and Inclusion Policy and compliance with applicable laws and regulations; and • encouraging the reporting of illegal or unethical behavior, including the use of In-Touch, a third-party compliance feedback program. 11 We believe respecting human rights is a fundamental part of our values and corporate responsibility.
The 6000-series alloy is an extremely versatile, medium-strength, heat treatable alloy that can be both extruded and rolled. Our GE products have a wide range of uses and applications, many of which involve further fabrication for numerous transportation and other industrial end market applications where machining of plate, rod and bar is intensive.
The 6000-series alloy is an extremely versatile, medium-strength, heat treatable alloy that can be both extruded and rolled. Our GE products have a wide range of uses and applications, many of which involve further fabrication for numerous transportation and other industrial end market applications where the machining of plate, rod and bar is intensive.
Some of our competitors are substantially larger, have greater financial resources and may have other strategic advantages. Because many of our products are used in safety critical applications, our customers have demanding standards for product quality and consistency that make it difficult to become a qualified supplier.
Some of our competitors are substantially larger, have greater financial resources and may have other strategic advantages. Because many of our products are used in critical safety applications, our customers have demanding standards for product quality and consistency that make it difficult to become a qualified supplier.
Finishing steps may include heat treatment, annealing, stretching, leveling, coating and slitting to achieve the desired metallurgical, dimensional and/or performance characteristics. Aluminum flat-rolled products are manufactured in a variety of alloys, a range of tempers (hardness), gauges (thickness) and widths and various finishes.
Finishing steps may include heat treatment, annealing, stretching, leveling, coating, and slitting to achieve the desired metallurgical, dimensional and/or performance characteristics. Aluminum flat-rolled products are manufactured in a variety of alloys, a range of tempers (hardness), gauges (thickness), widths, and various finishes.
To produce the ingot or log, we purchase primary aluminum, recycled scrap aluminum segregated by alloys and other metals (including, but not limited to, copper, zinc and magnesium) that are necessary to create various aluminum alloys. We also recycle internally generated scrap from our own manufacturing processes.
To produce the ingot or log, we purchase primary aluminum and/or recycled scrap aluminum segregated by alloys and other metals (including, but not limited to, copper, zinc, and magnesium) that are necessary to create various aluminum alloys. We also recycle internally generated scrap from our own manufacturing processes.
Initially in solid form, aluminum is heated in a vessel to a temperature at which it melts. While in molten form, additional metals (aluminum alloyed scrap, alloy metals, primary aluminum or high purity aluminum) are introduced to achieve the proper mixture of chemical elements for a particular alloy.
Initially in solid form, aluminum is heated in a vessel to a temperature at which it melts. While in molten form, additional metals (aluminum alloyed scrap, alloy metals, primary aluminum, or high purity aluminum) are introduced to achieve the proper mixture of chemical elements for a particular aluminum alloy.
IMT is a leader in advanced manufacturing methods and techniques, which include multi-axis CNC machining, 3D Printing, welding and fabrication for aerospace and defense, high tech and general industrial and automotive applications. Many of our facilities employ the same basic manufacturing process and produce the same types of products.
IMT is a leader in advanced manufacturing methods and techniques, which include multi-axis CNC machining, 3D Printing, welding, and fabrication for aerospace and defense, high tech, general industrial, and automotive applications. Many of our facilities employ the same basic manufacturing process and produce the same types of products.
Fluctuation in the underlying aluminum price is a significant factor influencing changes in competitive spot prices. Through spot pricing, we generally can pass aluminum price risk through to customers.
Fluctuation in the underlying aluminum price is a significant factor influencing changes in competitive spot prices. Through spot pricing, we can generally pass aluminum price risk through to customers.
We stress risk awareness and job safe practices and engage our employees in conversations about safety and safety training using a variety of communication channels, including one-on-one communications.
We stress risk awareness and safe job practices and engage our employees in conversations about safety and safety training using a variety of communication channels, including one-on-one communications.
Rewards All of our employees, including hourly and salaried employees at our production facilities, participate in short-term incentive compensation plans, which are based on attainment of performance metrics that drive and support our “Best in Class” commitment.
Rewards All our employees, including hourly and salaried employees at our production facilities, participate in short-term incentive compensation plans, which are based on attainment of performance metrics that drive and support our “Best in Class” commitment.
All of our U.S. employees have access to 401(k) savings plans, depending on the terms of their employment, and salaried employees at our London, Ontario facility have access to a defined benefit pension plan with annual contributions based on each salaried employee’s age and years of service.
All our U.S. employees have access to 401(k) savings plans, depending on the terms of their employment, and salaried employees at our London, Ontario facility have access to a defined benefit pension plan with annual contributions based on each salaried employee’s age and years of service.
In recent years, automotive original equipment manufacturers (“OEMs”) and their suppliers have, at an increasing pace, been converting many automotive components that historically were made of steel to aluminum to decrease weight without sacrificing structural integrity and safety performance and thereby achieve greater fuel efficiency standards mandated by stringent United States’ Corporate Average Fuel Economy (“CAFE”) or equivalent state regulations.
In recent years, automotive original equipment manufacturers (“OEMs”) and their suppliers have, at an increasing pace, been converting many automotive components that historically were made of steel to aluminum to decrease weight without sacrificing structural integrity and safety performance and thereby achieve greater fuel efficiency standards mandated by stringent United States’ Corporate Average Fuel Economy or equivalent state regulations.
Our Automotive Extrusions are sold primarily to tier one automotive suppliers. Almost all sales are made under long-term agreements entered through direct channels using a North American direct sales force that works closely with our technical sales support organization. Demand for Automotive Extrusions is determined based upon automotive build rates in North 6 America and aluminum content.
Our Automotive Extrusions are sold primarily to tier one automotive suppliers. Almost all sales are made under long-term agreements entered through direct channels using a North American direct sales force that works closely with our technical sales support organization. Demand for Automotive Extrusions is determined based upon automotive build rates in North America and aluminum content.
We consider this intellectual property to be important, but no single property is material to the overall conduct of our business. Resources Manufacturing Processes We use two main processes, flat rolling and extrusion/drawing, to produce our fabricated products using a cast of alloyed prime and recycled aluminum in the desired forms and dimensions and with the desired physical properties.
We consider this intellectual property to be important, but no single property is material to the overall conduct of our business. Resources Manufacturing Processes We use two main processes, flat rolling, and extrusion/drawing, to produce our semi-fabricated products using a cast of alloyed prime and recycled aluminum in the desired forms and dimensions and with the desired physical properties.
Demand for our Aero/HS products is heavily impacted by commercial airframe build rates and, to a lesser degree, by defense related airframes and other products. In addition, unanticipated changes in build rates and mix of aircraft models being built can trigger restocking or destocking throughout the long aerospace supply chain, temporarily impacting demand.
Demand for our Aero/HS products is heavily impacted by commercial airframe build rates and, to a lesser degree, by defense related airframes and other products. In addition, unanticipated changes in build rates and mix of aircraft models being built can trigger restocking or destocking throughout the aerospace supply chain, temporarily impacting demand.
Plant safety metrics are integrated into our monthly quality, production and financial reports and are reviewed by the senior leadership team every month. In addition, TCIR and LTIR safety modifiers are included in each of our short-term incentive compensation plans, including the corporate plan applicable to each of our executive officers and members of senior management. 11 Health.
Plant safety metrics are integrated into our monthly quality, production, and financial reports and are reviewed by the senior leadership team every month. In addition, TCIR and LTIR safety modifiers are included in each of our short-term incentive compensation plans, including the corporate plan applicable to each of our executive officers and members of senior management. Health.
Aluminum can stock demand is driven by the packaging industry’s shift towards environmentally sustainable materials due to the fact that aluminum is infinitely recyclable and has the highest consumer recycling rate among beverage containers. Major players have already transitioned some plastic bottled water and carbonated soft drink production to aluminum.
Aluminum can demand is driven by the packaging industry’s shift towards environmentally sustainable materials due to the fact that aluminum is infinitely recyclable and has the highest consumer recycling rate among beverage containers. Major players have already transitioned some plastic bottled water and carbonated soft drink production to aluminum.
The Warrick rolling mill has a unique capability to produce high-margin coated packaging products representing approximately 64% of our total Packaging shipments. GE Products. Our broad portfolio of GE products consists primarily of 6000-series alloy plate, sheet, rod, bar, tube, wire and standard extruded shapes.
The Warrick rolling mill has a unique capability to produce high-margin coated packaging products representing approximately 64% of our total Packaging shipments. GE Products. Our broad portfolio of GE products consists primarily of 6000-series aluminum alloy plate, sheet, rod, bar, tube, wire and standard extruded shapes.
Markets Sales, Marketing and Distribution Industry sales for fabricated products fluctuate in response to competitive and market dynamics. Sales are made directly to customers by our sales personnel located in the United States, Canada, Western Europe and China and by independent sales agents in other regions of Asia, Latin America and the Middle East.
Markets Sales, Marketing, and Distribution Industry sales for fabricated products fluctuate in response to competitive and market dynamics. Sales are made directly to customers by our sales personnel located in the United States, Canada, and Western Europe and by independent sales agents in other regions of Asia, Latin America, and the Middle East.
We strategically choose to serve technically challenging applications for which we can deploy our core metallurgical and process technology capabilities to produce highly engineered mill products with differentiated characteristics that present opportunities for us 3 to receive premium pricing and to create long-term profitable growth.
We strategically choose to serve technically challenging applications for which we can deploy our core metallurgical and process technology capabilities to produce highly engineered mill products with differentiated characteristics that present opportunities for us to receive premium pricing and to create long-term profitable growth.
Additionally, our strategy to be the supplier of choice and a low cost producer is enabled by a culture of continuous improvement that is facilitated by the Kaiser Production System (“KPS”), an integrated application of tools such as Lean Manufacturing, Six Sigma and Total Productive Manufacturing.
Additionally, our strategy to be the supplier of choice and a low cost producer is enabled by a culture of continuous improvement that is facilitated by the 5 Kaiser Production System (“KPS”), an integrated application of tools such as Lean Manufacturing, Six Sigma, and Total Productive Manufacturing.
We strive to be the employer of choice by providing equal employment and a non‑discriminatory workplace, protecting the health and safety of our employees, providing training programs and maintaining a positive and constructive relationship with labor unions of which our employees are members.
We strive to be the employer of choice by providing equal employment and a non‑discriminatory workplace, protecting the health and safety of our employees, providing training programs and maintaining a positive and constructive relationship with labor unions of which a majority of our employees are members.
Producing coated end, tab and body stock for the can market requires the development of alloys and application of coatings that must pass stringent customer qualifications and be compliant with Food and Drug Administration (“FDA”) regulations.
Producing coated end, tab, and body stock for the can market requires the development of alloys and application of coatings that must pass stringent customer qualifications and be compliant with Food and Drug Administration regulations.
Our pricing of fabricated aluminum products is generally intended to lock in a conversion margin (representing the value added from the fabrication process) and to pass aluminum and certain alloy price fluctuations through to our customers.
Our pricing of semi-fabricated aluminum products is generally intended to lock in a conversion margin (representing the value added from the fabrication process) and to pass aluminum and certain alloy price fluctuations through to our customers.
Our Human Rights Policy and Diversity, Equity and Inclusion Policy, which align with our corporate values and Code of Business Conduct and Ethics, are overseen by our Board of Directors and senior leadership team. Labor Practices and Policies Safety.
Our Human Rights Policy and Diversity, Equity, Inclusion and Belonging Policy, which align with our corporate values and Code of Business Conduct and Ethics, are overseen by our Board of Directors and senior leadership team. Labor Practices and Policies Safety.
While trailing indicators, such as total case incident rate (“TCIR”), lost-time case incident rate (“LTIR”) and days away, restricted and transfer (“DART”) rate, help us monitor our safety performance, leading indicators, such as significant injury and fatality (“SIF”) potential and actual incident rate, near‑misses, timely correction action of internal and external audit findings, on-time safety plan execution information and safety culture risk, help us monitor and assess risks and the effectiveness of our safety plans and processes.
While trailing indicators, such as total case incident rate (“TCIR”), lost-time case incident rate (“LTIR”) and days away, restricted and transfer rate, help us monitor our safety performance, leading indicators, such as significant injury and fatality potential and actual incident rate, near‑misses, timely correction action of internal and external audit findings, on-time safety plan execution information and safety culture risk, help us monitor and assess risks and the effectiveness of our safety plans and processes.
Our primary competitors in the global market for Aero/HS products are Arconic, Inc., Constellium N.V. and Novelis Inc. In North America, our primary competitors for Packaging are Arconic, Inc., Constellium N.V., Novelis, Inc. and Tri-Arrows Aluminum, Inc.
Our primary competitors in the global market for Aero/HS Products are Arconic Corporation, Constellium N.V. and Novelis Inc. In North America, our primary competitors for Packaging are Arconic Corporation., Constellium N.V., Novelis Inc. and Tri-Arrows Aluminum, Inc.
We believe that integration of our operations allows us to capture efficiencies while allowing our facilities to remain highly focused on their specific processes and end market applications. 8 Raw Materials To make our fabricated products, we purchase primary aluminum and scrap, or recycled, aluminum from third-party suppliers in varying percentages depending on various market factors, including price and availability.
We believe that integration of our operations allows us to capture efficiencies while allowing our facilities to remain highly focused on their specific processes and end market applications. 9 Raw Materials To make our fabricated products, we purchase primary aluminum and scrap, or recycled aluminum from third-party suppliers in varying percentages depending on various market factors, including price and availability.
We purchase primary, rolling ingot and scrap, or recycled, aluminum, our main raw material, and alloys at prices that fluctuate on a monthly basis, and our pricing policies generally allow us to pass the underlying index cost (see “Raw Materials” section below) of aluminum and certain alloys through to our customers so that we remain neutral to metal pricing.
We purchase primary, rolling ingot and scrap, or recycled, aluminum, our predominant raw material, and alloys at prices that fluctuate on a monthly basis, and our pricing policies generally allow us to pass the underlying index cost (see “Raw Materials” section below) of aluminum and certain alloys through to our customers so that we remain neutral to metal pricing.
As with aluminum, we, from time to time, enter into either hedging transactions with third parties or firm price physical contracts to minimize the impact to us of alloy price fluctuations. 9 All metal procurement and hedging activities are managed centrally to minimize transaction costs, monitor consolidated net exposures and respond promptly to changes in market factors.
As with aluminum, we, from time to time, enter into either hedging transactions with third parties or firm price physical contracts to minimize the impact of alloy price fluctuations. All metal procurement and hedging activities are managed centrally to minimize transaction costs, monitor consolidated net exposures, and respond promptly to changes in market factors.
We use both internal and external resources, including the American National Standards Institute (“ANSI”) and International Organization for Standardization (“ISO”), to assess our compliance with regulatory and internal standards, providing training, performing risk assessments, audits and loss control inspections and developing mitigation strategies with particular emphasis on risks with a greater potential for severe injury.
We use both internal and external resources, including the American National Standards Institute and International Organization for Standardization, to assess our compliance with regulatory and internal standards, providing training, performing risk assessments, audits and loss control inspections, and developing mitigation strategies with particular emphasis on risks with a greater potential for severe injury.
In serving our North American customers for both GE products and Automotive Extrusions, our primary competitors are Arconic, Inc. and Norsk Hydro ASA, and for certain of these products, we also compete with smaller, regional participants. In North America, we also compete with general engineering heat treat plate products imported from South Africa, Europe and China.
In serving our North American customers for both GE Products and Automotive Extrusions, our primary competitors are Arconic Corporation and Norsk Hydro ASA, and for certain of these products, we also compete with smaller, regional participants. In North America, we also compete with general engineering heat treat plate products imported from South Africa, Europe, and China.
Our experienced and dedicated research and development team, combined with our Customer Service group, coordinate with coating suppliers, manufacturing operations and our customers to create these alloy and coating systems. Research and Development Our products are differentiated based on the metallurgy and physical properties of the metal and special characteristics that are required for particular end uses.
Our experienced and dedicated research and development team, combined with our Customer Service group, coordinates with coating suppliers, manufacturing operations, and our customers to create these alloy and coating systems. Research and Development Our products are differentiated based on the metallurgy and physical properties of the metal and special characteristics that are required for particular end uses.
Demand for our GE products is closely related to the North America general industrial growth and the recent desire of many companies to lessen their risk of supply chain disruptions by reshoring suppliers and shortening the supply chain. Demand is also impacted by the destocking and restocking of inventory throughout the supply chain. Automotive Extrusions.
Demand for our GE products is closely related to the North America general industrial and semi-conductor growth and the recent desire of many companies to lessen their risk of supply chain disruptions by reshoring suppliers and shortening the supply chain. Demand is also impacted by the destocking and restocking of inventory throughout the supply chain. Automotive Extrusions.
Our casting operations at our facilities in Kalamazoo, Michigan; London, Ontario; Los Angeles, California; Newark, Ohio and Sherman, Texas produce extrusion log and cut billet for their operations and for our other facilities that do not have casting operations. Our Trentwood and Warrick facilities cast rolling ingot for their own consumption.
Our casting operations at our facilities in Kalamazoo, Michigan; London, Ontario; Los Angeles, California; Heath, Ohio; and Sherman, Texas produce extrusion log and cut billet for their operations and for our other facilities that do not have casting operations. Our Trentwood and Warrick facilities cast rolling ingot for their own consumption.
Some of our customers for Aero/HS products and a majority of our customers for GE products pay a product price that incorporates the spot price of primary aluminum (Midwest Price) in effect at the time of shipment to a customer. Spot prices for these products change regularly based on competitive dynamics.
Some of our customers for Aero/HS products and a majority of our customers for GE products pay a product price that incorporates the spot price of primary aluminum (MWTP) in effect at the time of shipment to a customer. Spot prices for these products change regularly based on competitive dynamics.
With respect to the global market for flat-rolled aluminum mill products, our focus is on heat treat plate and sheet for applications that require higher strength and other desired product attributes that cannot be achieved by common alloy rolled products.
With respect to the global market for flat-rolled aluminum mill products, our focus is on heat treated plate and sheet for applications that require higher strength and other desired product attributes that cannot be achieved by common alloy rolled products.
We anticipate further growth will be underpinned by sustainability trends, the secular shift from plastic to aluminum and the fact that North American packaging capacity has been reallocated towards other end markets, including automotive and industrial. GE Products.
We anticipate further growth will be underpinned by sustainability trends, the secular shift from plastic to aluminum and the fact that North American packaging capacity has been reallocated towards other end markets, including automotive and industrial.
For example, our GE products are used to produce armor for military vehicles, ordnances, manufacturing cells for semiconductor production, 5 numerous electronic devices, after-market motor sport parts, tooling plate, parts for machinery and equipment, bolts, screws, nails and rivets. Automotive Extrusions. Automotive Extrusions consist of extruded aluminum products for many North American automotive applications.
For example, our GE products are used to produce armor for military vehicles, ordnances, manufacturing cells for semiconductor production, numerous electronic devices, after-market motor sport parts, tooling plate, parts for machinery and equipment, bolts, screws, and rivets. 6 Automotive Extrusions. Automotive Extrusions consist of extruded aluminum products for many North American automotive applications.
While we are subject to a wide variety of government regulations, generally those most impactful to our results of operations and capital expenditures are the environmental laws and regulations that impose limitations on the discharge of hazardous materials and pollutants and establish standards for the handling, transportation, distribution, treatment, storage and disposal of hazardous materials and solid and hazardous wastes.
While we are subject to a wide variety of government regulations, generally those most impactful to our results of operations and capital expenditures are the environmental laws and regulations that impose limitations on the discharge of hazardous materials and pollutants, including greenhouse gasses, and establish standards for the handling, transportation, distribution, treatment, storage, and disposal of hazardous materials and solid and hazardous wastes.
The pricing structure of our typical aerospace and automotive contracts calls for our customer to pay a product price that incorporates a monthly index-based price for primary aluminum, such as the average Midwest Price for primary aluminum.
The pricing structure of our typical aerospace and automotive contracts calls for our customer to pay a product price that incorporates a monthly index-based price for primary aluminum, such as the average MWTP for primary aluminum.
A majority of our GE products are sold to large metal service centers in North America on an order-by-order basis, with orders primarily consisting of standard catalog type items shipped with a relatively short lead-time. We service this market with a North American sales force focused on GE products and Aero/HS products.
A majority of our GE products are sold to large metal service centers in North America on an order-by-order basis, with orders primarily consisting of standard catalog type items shipped with a relatively short lead-time. We service this market with a North American sales force focused on GE products.
A significant amount of our research and development is devoted to product and process development within our production operations, and is largely focused on controlling the manufacturing process to improve product quality, ensure consistency and enhance one or more specific product attributes. This has resulted in the creation and delivery of our highly differentiated KaiserSelect® products.
A significant amount of our research and development is devoted to product and process development within our production operations and is largely focused on controlling the manufacturing process to improve product quality, ensure consistency, and enhance one or more specific product attributes. This has resulted in the creation and delivery of our highly differentiated Kaiser Select ® products.
Through the collective bargaining process, we contribute to four multi‑employer pension plans under the terms of certain collective bargaining agreements for a majority of our union-represented employees and certain union employees at our Warrick facility participate in a defined benefit pension plan, as well as a postretirement benefit plan relating to retiree medical and life insurance benefits.
Through the collective bargaining process, we contribute to four multiemployer pension plans under the terms of certain collective bargaining agreements for a majority of our union-represented employees. Certain union employees at our Warrick facility participate in a defined benefit pension plan, as well as a postretirement benefit plan relating to retiree medical and life insurance benefits.
We seek to further differentiate ourselves from our competitors through our ongoing investments to continuously improve the quality and machinability of our products, manufacture and deliver unique product attributes (KaiserSelect®) and provide a broad product offering while maintaining a strong customer focus to achieve “Best in Class” status in our markets.
We seek to further differentiate ourselves from our competitors through our ongoing investments to continuously improve the quality and machinability of our products, manufacture and deliver unique product attributes ( Kaiser Select ® ) and provide a broad product offering while maintaining a strong customer focus to achieve “Best in Class” status in our markets.
Our values support and serve as the foundation for our strategic initiatives and are intended to reflect the company’s “tone at the top” which we believe sustains our culture; a culture that continues to drive our behavior. Additionally, the goal of being a valued corporate citizen guides our environmental, social and governance decisions.
Our values support and serve as the foundation for our strategic initiatives and are intended to reflect the company’s “tone at the top” which we believe sustains our culture; a culture that continues to drive our behavior. In addition, the goal of being a valued corporate citizen guides our environmental, social, and governance decisions.
This fluctuation in shipments is usually driven by lower demand during summer vacation and year-end holiday shut downs and year-end inventory rebalancing by our end customers. During these periods of lower demand we generally perform planned major maintenance at our facilities, which can affect cost and operating results.
This fluctuation in shipments is usually driven by lower demand during summer vacation and year-end holiday shutdowns and year-end inventory rebalancing by our end customers. During these periods of lower demand, we generally perform planned major maintenance at our facilities, which can affect cost and operating results.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Report under the caption, “Liquidity and Capital Resources.” Products Overview Our business focuses on producing rolled, extruded and drawn aluminum products used principally for aerospace and defense, aluminum beverage and food packaging, general engineering and automotive products that include consumer durables, electronics and products for electrical and machinery and equipment applications.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K under the caption, “Liquidity and Capital Resources.” Products Overview Our business focuses on producing rolled, extruded, and drawn aluminum products used principally for aerospace and defense, aluminum beverage and food packaging, general engineering that include consumer durables, electronics and products for electrical and machinery and equipment applications and automotive products.
Our Aero/HS products include heat treat plate and sheet, hard alloy extruded shapes, cold finish rod and bar, seamless drawn tube and billet used for a wide variety of end uses in the global aerospace and defense industries.
Our Aero/HS products include heat treated plate and sheet, hard alloy extruded shapes, cold finish rod and bar, seamless drawn tube and billet used for a wide variety of end uses in the global aerospace, space, and defense industries.
Item 1. B usiness Availability of Information We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, any amendments to those reports and statements and other information with the Securities and Exchange Commission (“SEC”). You may obtain the documents that we file electronically from the SEC’s website at http://www.sec.gov .
Item 1. B usiness Availability of Information We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, any amendments to those reports and statements and other information with the SEC. You may obtain the documents that we file electronically from the SEC’s website at http://www.sec.gov .
Material may go through multiple drawing steps to achieve the final dimensional specifications. Extruded and drawn semi-fabricated products are manufactured in a variety of alloys and a range of tempers. Additionally, some of our locations have remelt and casting operations to produce the ingot or log for flat rolling or extrusion.
Material may go through multiple drawing steps to achieve the final dimensional specifications. Extruded and drawn semi-fabricated products are manufactured in a variety of alloys and a range of tempers. In addition, some of our locations have remelt and casting operations to produce the ingot or log for flat rolling or extrusion processing, respectively.
News releases, announcements of upcoming earnings calls and events in which our management participates or hosts with members of the investment community and an archive of webcasts of such earnings calls and investor events and related investor presentations, are also available on our website. Information on our website is not incorporated into this Report unless expressly noted.
News releases, announcements of upcoming earnings calls and events in which our management participates or hosts with members of the investment community and an archive of webcasts of such earnings calls and investor events and related investor presentations, are also available on our website. Information on our website is not incorporated into this Form 10-K unless expressly noted.
While commercial airframe build rates can be subject to certain short-terms events (see Part I, Item 1A. “Risk Factors” included in this Report), we believe the long-term demand for air travel and fuel efficiency will continue to drive long-term growth for our products. Packaging.
While commercial airframe build rates can be subject to certain short-terms events (see Part I, Item 1A. “Risk Factors” included in this Form 10-K), we believe the long-term demand for air travel and fuel efficiency will continue to drive long-term growth for our products. Packaging.
We use high-strength 2000- and 7000-series alloys and apply a variety of thermal practices to manufacture our Aero/HS products to meet the demanding specifications required for such safety-critical applications.
We use high-strength 2000-, 7000-series and certain 6000-series aluminum alloys and apply a variety of thermal practices to manufacture our Aero/HS products to meet the demanding specifications required for such safety-critical applications.
We have continued to introduce programs to educate and assist employees to make healthy lifestyle choices and have offered incentives and discounts to encourage participation across the organization, including: • annual onsite health biometric screenings; • on-site flu shots and the Coronavirus Disease 2019 (“COVID-19”) vaccination; • an employee assistance program, providing confidential assistance with healthcare issues and the healthcare system, including crisis and emergency help; • a smoking/tobacco cessation program; • internal, as well as third-party, online wellness workshops, including workshops on nutrition and fitness; and • wellness coaching.
We have continued to introduce programs to educate and assist employees to make healthy lifestyle choices and have offered incentives and discounts to encourage participation across the organization, including: • annual onsite health biometric screenings; • providing flu shots and the Coronavirus Disease (“COVID”) vaccination; • an employee assistance program, providing confidential assistance with healthcare issues and the healthcare system, including crisis and emergency help; • a smoking/tobacco cessation program; • internal, as well as third-party, online wellness workshops, including workshops on nutrition and fitness; and 12 • wellness coaching.
We primarily serve North American demand for extruded and drawn aluminum mill products. Our rolling mill in Spokane, Washington (“Trentwood”) produces heat treat plate and sheet for aerospace and general engineering end market applications and our Warrick facility produces bare and coated aluminum coil used for can stock applications in the beverage and food packaging industry.
We primarily serve North American demand for extruded and drawn aluminum mill products. Our rolling mill Trentwood facility produces heat treat plate and sheet for aerospace and general engineering end market applications and our Warrick facility produces bare and coated aluminum coil used for can stock applications in the beverage and food packaging industry.
We have long-standing relationships with our customers, which consist primarily of blue-chip companies, including leading aerospace and automotive manufacturers, tier one aerospace and automotive suppliers, beverage and food packaging manufacturers and metal service centers. Approximately 73% of our shipments is sold direct to manufacturers or tier one suppliers and approximately 27% is sold to metal service centers.
We have long-standing relationships with our customers, which consist primarily of blue-chip companies, including leading aerospace and automotive manufacturers, tier one aerospace and automotive suppliers, beverage and food packaging manufacturers and metal service centers. Approximately 75% of our shipments is sold direct to manufacturers or tier one suppliers and approximately 25% is sold to metal service centers.
Approximately 66% of our employees are represented by labor unions under labor contracts with varying durations and expiration dates. The following table shows each manufacturing location, the primary union affiliation, if any, and the expiration date for the current union contracts as of December 31, 2022.
Approximately 65% of our employees are represented by labor unions under labor contracts with varying durations and expiration dates. The following table shows each manufacturing location, the primary union affiliation, if any, and the expiration date for the current union contracts as of December 31, 2023.
Kaiser Aluminum is committed to the development of our employees through a broad mix of internal and external program resources incorporating on-the-job training and development through the Kaiser Leadership Program, the Front Line Leader Development Program, the Kaiser Aluminum Women’s Leadership Program, Kaiser University, the Tuition Assistance Program and the Metallurgy Excellence and Technical Strength Program.
We are committed to the development of our employees through a broad mix of internal and external program resources incorporating on-the-job training and development through the Kaiser Leadership Program, the Front Line Leader Development Program, the Kaiser Aluminum Women’s Leadership Program (“KWLP”), Kaiser University, the Tuition Assistance Program, and the Metallurgy Excellence and Technical Strength Program.
Our environmental accruals represent our undiscounted estimate of costs reasonably expected to be incurred based on presently enacted laws and regulations, existing requirements, currently available facts, existing technology and our assessment of the likely remediation actions to be taken. See Note 10 of Notes to Consolidated Financial Statements included in this Report. The U.S.
Our environmental accruals represent our undiscounted estimate of costs reasonably expected to be incurred based on presently enacted laws and regulations, existing requirements, currently available facts, existing technology, and our assessment of the likely remediation actions to be taken. See Note 10 of Notes to Consolidated Financial Statements included in this Form 10-K.
Contract Location Union Expiration Date Chandler, Arizona (Extrusion) Non-union — Chandler, Arizona (Tube) USW Apr 2024 Columbia, New Jersey Non-union — Florence, Alabama USW Mar 2026 Jackson, Tennessee Non-union — Kalamazoo, Michigan USW Feb 2026 London, Ontario (Canada) USW Canada Feb 2026 Los Angeles, California Teamsters Apr 2026 Newark, Ohio USW Sep 2025 Newburgh, Indiana (Warrick) USW May 2023 Richland, Washington Non-union — Richmond, Virginia (Bellwood) USW/IAM Nov 2026/Nov 2026 Sherman, Texas IAM May 2027 Spokane, Washington (Trentwood) USW Sep 2025 Recruiting, Training, Development and Retention Recruiting.
Contract Location Union Expiration Date Chandler, Arizona (Extrusion) Non-union — Chandler, Arizona (Tube) USW Apr 2024 Columbia, New Jersey Non-union — Florence, Alabama USW Mar 2026 Jackson, Tennessee Non-union — Kalamazoo, Michigan USW Feb 2026 London, Ontario USW Canada Feb 2026 Los Angeles, California Teamsters Apr 2026 Heath, Ohio USW Sep 2025 Newburgh, Indiana USW May 2027 Richland, Washington Non-union — Richmond, Virginia USW/IAM Nov 2026/Nov 2026 Sherman, Texas IAM May 2027 Spokane Valley, Washington USW Sep 2025 Recruiting, Training, Development and Retention Recruiting.
We are able to limit exposure to aluminum price risks created by firm-price customer sales contracts by using third-party hedging instruments. Total fabricated product shipments for which we were subject to price risk were, in millions of pounds, 271.9, 187.2 and 127.6 during 2022, 2021 and 2020, respectively.
We are able to limit exposure to aluminum price risks created by firm-price customer sales contracts by using third-party hedging instruments. Total fabricated product shipments for which we were subject to price risk were, in millions of pounds, 207.5, 271.9 and 187.2 during 2023, 2022 and 2021, respectively.
To help us achieve and maintain a strong safety culture, we have robust compliance and assessment programs such as annual safety planning, monthly safety calls, routine performance reviews against targets and routine audits. Additionally, we partner with the United Steelworkers and various industry groups, including the Aluminum Association, to share and identify best practices.
To help us achieve and maintain a strong safety culture, we have robust compliance and assessment programs such as annual safety planning, monthly safety calls, routine performance reviews against targets, and routine audits. In addition, we partner with the USW and various industry groups, including the Aluminum Association, to share and identify best practices.
Human Capital At December 31, 2022, we employed approximately 4,000 people, of which approximately 3,920 were employed in our manufacturing, sales and support office locations and approximately 80 were employed in a corporate capacity. Governance and Culture Our talented workforce is a key factor underlying our success.
Human Capital At December 31, 2023, we employed approximately 4,000 people, of which approximately 3,910 were employed in our manufacturing, sales, and support office locations and approximately 90 were employed in a corporate capacity. Governance and Culture Our talented workforce is a key factor underlying our success.
In some cases, the passing through of this alloy cost can lag the actual alloy cost, the timing of which is dependent on market conditions and customer agreements, with a favorable impact to us when alloy price declines and an adverse impact to us when alloy price increases.
In some cases, the passing through of this alloy cost can lag the actual alloy cost, the timing of which is dependent on market conditions and customer agreements, with a favorable impact to us when alloy prices decline and an adverse impact to us when alloy prices increase.
See Note 17 of Notes to Consolidated Financial Statements included in this Report for information about our significant concentrations. Competition The fabricated aluminum industry is highly competitive.
See Note 17 of Notes to Consolidated Financial Statements included in this Form 10-K for information about our significant concentrations. Competition The semi-fabricated aluminum industry is highly competitive.
Our facility located in Columbia, New Jersey focuses on multi-material advanced manufacturing methods and techniques which include multi-axis computer numerical control (“CNC”) machining, additive manufacturing (“3D Printing”), welding and fabrication for demanding aerospace and defense, high tech and general industrial and automotive applications. In 2022, our consolidated Net sales totaled $3,427.9 million on 1,254.2 million pounds shipped from our facilities.
Our facility located in Columbia, New Jersey focuses on multi-material advanced manufacturing methods and techniques which include multi-axis computer numerical control (“CNC”) machining, additive manufacturing (“3D Printing”), welding and fabrication for demanding aerospace and defense, high tech and general industrial and automotive applications. In 2023, our consolidated Net sales totaled $3,087.0 million on 1,196.4 million pounds shipped from our facilities.
We operate four research and development centers. Our Rolling and Heat Treat Center and our Metallurgical Analysis Center are both located at our Trentwood facility. The Rolling and Heat Treat Center has complete hot rolling, cold rolling and heat treat capabilities to simulate, in small lots, processing of flat-rolled products for process and product development on an experimental scale.
We operate the following four research and development centers: • Rolling and Heat Treat Center. The Rolling and Heat Treat Center has complete hot rolling, cold rolling, and heat treat capabilities to simulate, in small lots, processing of flat-rolled products for process and product development on an experimental scale. • Metallurgical Analysis Center.
We believe fuel efficiency standards, along with consumer preference for larger vehicles and the growing conversion to electric vehicles, will continue to drive growth in demand for aluminum extruded components in passenger vehicles as a replacement for the heavier weight of steel components.
We believe fuel efficiency standards, along with consumer preference for larger vehicles and the 7 growing conversion to electric and other alternative vehicles, will continue to drive growth in demand for aluminum extruded components in passenger vehicles as a replacement for the heavier weight of steel components. Customers In 2023, we had approximately 520 customers.
Furthermore, our Centers for Excellence, dedicated research and development centers devoted to product performance enhancement and process development within our production operations, are focused on: (i) controlling the manufacturing process; (ii) maximizing the use of recycled aluminum; (iii) improving product quality; and (iv) ensuring consistency and enhanced product attributes. See “Selected Operational and Financial Information” within Part II, Item 7.
Furthermore, our Centers for Excellence, which are dedicated research and development centers devoted to product performance enhancement and process development within our production operations, are focused on: (i) controlling the manufacturing process; (ii) maximizing the use of recycled aluminum; (iii) improving product quality; and (iv) ensuring consistency and enhanced product attributes.
We serve this market with a North American sales force focused on Aero/HS products and GE products and our sales personnel in Western Europe and China.
We serve this market with a North American and Western Europe sales force focused on Aero/HS products.
Hedging activities are conducted in compliance with a policy approved by our Board of Directors and administered by our hedging committee (members of which include our principal executive officer, principal financial officer and principal accounting officer). Seasonality Under normal operating and economic conditions, we generally have immaterial fluctuations in our overall portfolio quarter‑over‑quarter results.
Hedging activities are conducted in compliance with a policy approved by our Board of Directors and administered by our hedging committee (members of which include our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Treasurer, Executive Vice President of Manufacturing and other officers and employees selected by the Chief Executive Officer). 10 Seasonality Under normal operating and economic conditions, we generally have immaterial fluctuations in our overall portfolio quarter‑over‑quarter results.
Our success is dependent on the knowledge, skills and abilities of our current and future leaders and employees. 12 The Kaiser Leadership Program is a full year program that accelerates the readiness of key talent and combines personalized leadership development and Kaiser-management system focused curriculum with a unique opportunity to build relationships with an internal network of leaders across locations and functions.
The Kaiser Leadership Program is a full year program that accelerates the readiness of key talent and combines personalized leadership development and Kaiser-management system focused curriculum with a unique opportunity to build relationships with an internal network of leaders across locations and functions.
Our fourth center, located in New Kensington, Pennsylvania, is focused on the forming and coating of our packaging products and has the capability on laboratory-scaled equipment to produce beverage end and food cans enabling the evaluation of new coatings and processes for packaging products.
The Packaging Coating Center is focused on the forming and coating of our packaging products and has the capability on laboratory-scaled equipment to produce beverage end and food cans enabling the evaluation of new coatings and processes for packaging products. 8 Our Imperial Machine & Tool Co.
The Metallurgical Analysis Center consists of a full metallographic laboratory and a scanning electron microscope to support research and development programs as well as respond to plant technical service requests.
The Metallurgical Analysis Center consists of a full metallographic laboratory and a scanning electron microscope to support research and development programs as well as respond to plant technical service requests. • Solidification and Casting Center. The Solidification and Casting Center has a developmental casting unit capable of casting billets and ingots for extrusion and rolling experiments.
(“IMT”) subsidiary, located in Columbia, New Jersey, provides us with significant technology and intellectual property that complements our metallurgical and application engineering expertise to further advance our capability to deliver highly engineered solutions for our customers.
(“IMT”) subsidiary, located in Columbia, New Jersey, provides us with significant technology and intellectual property that complements our metallurgical and application engineering expertise to further advance our capability to deliver highly engineered solutions for our customers. We hold numerous patents, trademarks, trade secrets, and copyrights that relate to the design, use, and marketing of products.
The Front Line Leader Development Program is a six-month program that strengthens organizational performance through ethical, effective and sustaining tactical leadership for both new and experienced frontline supervisors. The program uses a cohort model to encourage collaboration and team-building and to ensure accountability, facilitated group discussions and effective best practice sharing.
The Front Line Leader Development Program is a six-month program that strengthens organizational performance through ethical, effective, and sustaining tactical leadership for both new and experienced frontline supervisors.
Business Overview Kaiser Aluminum Corporation, a Delaware corporation, manufactures and sells semi-fabricated specialty aluminum mill products for the following end market applications: (i) aerospace and high strength (“Aero/HS products”); (ii) beverage and food packaging products (“Packaging”); (iii) general engineering (“GE products”); (iv) automotive (“Automotive Extrusions”); and (v) other industrial (“Other products”).
Business Overview Kaiser Aluminum Corporation, a Delaware corporation, manufactures and sells semi-fabricated specialty aluminum mill products for the following end market applications: (i) Aero/HS Products; (ii) Packaging; (iii) GE Products; (iv) Automotive Extrusions; and (v) Other products.
A fundamental part of our business model is to remain neutral to the impact from fluctuations in the market price for aluminum and certain alloys, thereby earning profit predominately from the conversion of aluminum into semi-fabricated mill products. We refer to this as “metal price neutrality.” See “Pricing, Metal Price Risk Management and Hedging” section below for more details.
A fundamental part of our business model is to remain neutral to the impact from fluctuations in the market price for aluminum and certain alloys, thereby earning profit predominantly from the conversion of aluminum into 4 semi-fabricated mill products.
The third center, our Solidification and Casting Center, is located in Newark, Ohio (“Newark”), and has a developmental casting unit capable of casting billets and ingots for extrusion and rolling experiments. The casting unit is also capable of casting full size billets and ingots for processing on the production extrusion presses and rolling mills.
The casting unit is also capable of casting full size billets and ingots for processing on the production extrusion presses and rolling mills. • Packaging Coating Center.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks associated with the Warrick rolling mill acquisition may include: • diversion of management’s time and attention from our existing business; • challenges in managing the increased scope, geographic diversity and complexity of operations; • difficulties integrating the financial, technological and management standards, processes, procedures and controls of the acquired business with those of our existing operations; • liability for known or unknown environmental conditions or other contingent liabilities not covered by indemnification or insurance; • greater than anticipated expenditures required for compliance with environmental or other regulatory standards or for investments to improve operating results; • ability to renegotiate acquired customer contracts to pass through inflationary costs; • difficulties achieving anticipated operational improvements; and 18 • incurrence of indebtedness to finance other acquisitions or capital expenditures relating to acquired assets in the future.
Biggest changeRisks associated with the Warrick rolling mill acquisition may include difficulties integrating the financial, technological and management standards, processes, procedures, and controls of the acquired business with those of our existing operations. In addition, we may experience difficulties achieving anticipated operational improvements at Warrick.
Additionally, while the automotive industry has continued to increase use of aluminum in vehicle production to reduce vehicle weight and increase fuel efficiency, manufacturers may revert to steel or other materials for certain applications and rely on improved drivetrain technology, more efficient engines, aerodynamics or other measures to achieve fuel efficiency goals.
Additionally, while the automotive industry has continued to increase the use of aluminum in vehicle production to reduce vehicle weight and increase fuel efficiency, manufacturers may revert to steel or other materials for certain applications and rely on improved drivetrain technology, more efficient engines, aerodynamics, or other measures to achieve fuel efficiency goals.
Moreover, due to associated high percentage of fixed costs, we may be unable to maintain the gross margin of aluminum packaging products at past levels if we are not able to achieve high capacity utilization rates for our production equipment.
Moreover, due to the associated high percentage of fixed costs, we may be unable to maintain the gross margin of aluminum packaging products at past levels if we are not able to achieve high-capacity utilization rates for our production equipment.
Our business could be adversely affected by the pricing and availability of alloying metals. We use certain alloying metals, such as copper, zinc, magnesium and silicon, in our operations in order to achieve required performance properties in our products.
Our business could be adversely affected by the pricing and availability of alloying metals. We use certain alloying metals, such as copper, zinc, magnesium and silicon, in our operations in order to achieve the required performance properties in our products.
The availability of these alloys in some cases has been and in the future may be restricted due to limited suppliers, government regulations, energy and supply chain disruptions and/or general demand dynamics.
The availability of these alloys in some cases has been and, in the future, may be restricted due to limited suppliers, government regulations, energy, supply chain disruptions, and/or general demand dynamics.
These risks include but are not limited to: • the ability to attract and retain key management and other personnel and develop effective succession plans; • skills shortages in engineering, manufacturing, technology, construction and maintenance contractors and other labor market inadequacies; • regulations that subject us to additional capital or margin requirements or other restrictions that make it more difficult to hedge risks associated with our business or increase the cost of our hedging activities; • compliance with a wide variety of employment, minimum wage, health and safety laws and regulations and changes to such laws and regulations; • new or modified legislation related to health care; • pursuing growth through acquisitions, including the ability to identify acceptable acquisition candidates, finance and consummate acquisitions on favorable terms and successfully integrate acquired assets or businesses; • protection of intellectual property, including patents, trademarks, trade secrets and copyrights, from infringement by others and the potential defense of claims, whether meritorious or not, alleging the unauthorized use of the intellectual property of others; • the exertion of influence over us, individually or collectively, by a few entities with concentrated ownership of our stock; • failure to meet the expectations of investors, including recent environmental, sustainability and governance expectations and other factors that are beyond the control of an individual company; • disputes, legal proceedings or investigations, whether meritorious or not, with respect to a variety of matters, including matters related to personal injury, employees, taxes, contracts and product liability; • taxation by multiple jurisdictions and the impact of such taxation on effective tax rate and the amount of taxes paid; • changes in tax laws and regulations; and • compliance with Section 404 of the Sarbanes-Oxley Act of 2002, including the potential impact of compliance failures.
These risks include but are not limited to: • the ability to attract and retain key management and other personnel and develop effective succession plans; • skills shortages in engineering, manufacturing, technology, construction and maintenance contractors and other labor market inadequacies; • regulations that subject us to additional capital or margin requirements or other restrictions that make it more difficult to hedge risks associated with our business or increase the cost of our hedging activities; • compliance with a wide variety of employment, minimum wage, health and safety laws and regulations and changes to such laws and regulations; • new or modified legislation related to health care; • pursuing growth through acquisitions, including the ability to identify acceptable acquisition candidates, finance and consummate acquisitions on favorable terms and successfully integrate acquired assets or businesses; • protection of intellectual property, including patents, trademarks, trade secrets and copyrights, from infringement by others and the potential defense of claims, whether meritorious or not, alleging the unauthorized use of the intellectual property of others; • the exertion of influence over us, individually or collectively, by a few entities with concentrated ownership of our stock; • failure to meet the expectations of investors, including recent environmental, social and governance expectations and other factors that are beyond the control of an individual company; • disputes, legal proceedings or investigations, whether meritorious or not, with respect to a variety of matters, including matters related to personal injury, employees, taxes, contracts and product liability; • taxation by multiple jurisdictions and the impact of such taxation on effective tax rate and the amount of taxes paid; • changes in tax laws and regulations; and • compliance with Section 404 of the Sarbanes-Oxley Act of 2002, including the potential impact of compliance failures.
Our inability to receive distributions from our subsidiaries, otherwise generate sufficient cash flows to satisfy our debt obligations or refinance our indebtedness on commercially reasonable terms, or at all, would adversely affect our financial position and results of operations. RISKS RELATED TO OUR COLLECTIVE BARGAINING AGREEMENTS. Our failure to maintain satisfactory labor relations could adversely affect our business.
Our inability to receive distributions from our subsidiaries, otherwise generate sufficient cash flows to satisfy our debt obligations or refinance our indebtedness on commercially reasonable terms, or at all, would adversely affect our financial position and results of operations. 22 RISKS RELATED TO OUR COLLECTIVE BARGAINING AGREEMENTS. Our failure to maintain satisfactory labor relations could adversely affect our business.
Despite existing backlogs, adverse developments in any one or more of these influencing factors may lead to reduced demand for new aircraft that utilize our products, which could adversely affect our financial position, results of operations and cash flows. 15 Reductions in defense spending for aerospace and non-aerospace military applications could adversely affect demand for our products.
Despite existing backlogs, adverse developments in any one or more of these influencing factors may lead to reduced demand for new aircraft that utilize our products, which could adversely affect our financial position, results of operations and cash flows. Reductions in defense spending for aerospace and non-aerospace military applications could adversely affect demand for our products.
Furthermore, regulations or other targets for greenhouse gas emissions could impact the availability and price of energy and raw materials, which could ultimately lead to supply demand imbalances, higher costs and supply chain disruptions. Prolonged shortages or slowdowns could negatively impact our cost of goods and result in delays or non-delivery of shipments of our products.
Furthermore, regulations or other targets for greenhouse gas emissions reductions could impact the availability and price of energy and raw materials, which could ultimately lead to supply demand imbalances, higher costs and supply chain disruptions. Prolonged shortages or slowdowns could negatively impact our cost of goods and result in delays or non-delivery of shipments of our products.
We have redundant capacity and capability to produce many of our extruded products within our manufacturing platform to mitigate our 17 business risk from such interruptions, but interruptions at our Trentwood facility where our production of plate and sheet is concentrated or at our Warrick facility where our production of packaging material is concentrated, could significantly compromise our ability to meet our customers’ needs.
We have redundant capacity and capability to produce many of our extruded products within our manufacturing platform to mitigate our business risk from such interruptions, but interruptions at our Trentwood facility where our production of plate and sheet is concentrated or at our Warrick facility where our production of packaging material is concentrated, could significantly compromise our ability to meet our customers’ needs.
The amplified reduction in demand for our products while our customers consume their inventory to meet their business needs (destocking) may adversely affect our financial position, results of operations and cash flows. Our customers may reduce their demand for aluminum products in favor of alternative materials. Our products compete with other materials for use in various customer applications.
The amplified reduction in demand for our products while our customers consume their inventory to meet their business needs (destocking) may adversely affect our financial position, results of operations and cash flows. 15 Our customers may reduce their demand for aluminum products in favor of alternative materials. Our products compete with other materials for use in various customer applications.
Additionally, new parties may become capable of manufacturing similar products and qualifying them with our customers, which could lead to further competitive pressure. Competitors’ facilities located in certain other countries may have a manufacturing cost advantage compared to our facilities, which are located in the United States and Canada.
New parties may become capable of manufacturing similar products and qualifying them with our customers, which could lead to further competitive pressure. Competitors’ facilities located in certain other countries may have a manufacturing cost advantage compared to our facilities, which are located in the United States and Canada.
As a result of these restrictions, we may be: • limited in how we conduct our business and grow in accordance with our strategy; • unable to raise additional debt or equity financing to operate during general economic or business downturns; or • unable to compete effectively or to take advantage of new business opportunities.
As a result of these restrictions, we may be: • limited in how we conduct our business and grow in accordance with our strategy; • unable to raise additional debt or equity financing to operate during general economic or business downturns; or 21 • unable to compete effectively or to take advantage of new business opportunities.
As a result, our Board of Directors can authorize and issue shares of preferred stock with voting or conversion rights that 25 could adversely affect the voting or other rights of holders of common stock. Our certificate of incorporation also divides our Board of Directors into three classes of directors who serve for staggered terms.
As a result, our Board of Directors can authorize and issue shares of preferred stock with voting or conversion rights that could adversely affect the voting or other rights of holders of common stock. Our certificate of incorporation also divides our Board of Directors into three classes of directors who serve for staggered terms.
A significant effect of a classified Board of Directors may be to deter hostile takeover attempts because an acquirer could experience delays in replacing a majority of directors. Moreover, stockholders are not permitted to call a special meeting. RISKS RELATED TO PUBLICLY TRADED U.S. MANUFACTURING COMPANIES.
A significant effect of a classified Board of Directors may be to deter hostile takeover attempts because an acquirer could experience delays in replacing a majority of directors. Moreover, stockholders are not permitted to call a special meeting. 26 RISKS RELATED TO PUBLICLY TRADED U.S. MANUFACTURING COMPANIES.
To the extent these losses are not covered by insurance, our financial position, results of operations and cash flows could be adversely affected by such events. We may face challenges to our intellectual property rights which could adversely affect our reputation, business and competitive position.
To the extent these losses are not covered by insurance, our financial position, results of operations and cash flows could be adversely affected by such events. 18 We may face challenges to our intellectual property rights which could adversely affect our reputation, business and competitive position.
The lost profits and increased costs related to cyber or other security threats or disruptions may not be fully insured against or indemnified by other means. 24 In addition, from time to time we may implement new technology systems or replace and/or upgrade our current information technology systems.
The lost profits and increased costs related to cyber or other security threats or disruptions may not be fully insured against or indemnified by other means. In addition, from time to time we may implement new technology systems or replace and/or upgrade our current information technology systems.
In the ordinary course of business, we enter into hedging transactions to limit our exposure to risks relating to changes in the market prices of primary aluminum, certain alloying metals, natural gas and electricity, as well as fluctuations in foreign currency exchange rates.
In the ordinary course of business, we enter into hedging transactions to limit our exposure to risks relating to changes in the market prices of primary aluminum, certain alloying metals, natural gas, electricity, as well as fluctuations in foreign currency exchange rates.
Increased competition could cause a reduction in demand for our products and our shipment volumes, our product pricing or both 14 shipment volumes and product pricing, which could have an adverse effect on our financial position, results of operations and cash flows.
Increased competition could cause a reduction in demand for our products and our shipment volumes, our product pricing, or both shipment volumes and product pricing, which could have an adverse effect on our financial position, results of operations and cash flows.
Any failure, or perceived failure, by us to achieve our goals, further our initiatives, adhere to our public statements, comply with federal, state or international ESG laws and regulations or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us that could materially adversely affect our business, reputation, results of operations, financial condition and stock price.
Any failure, or perceived failure, by us to achieve our goals, further our initiatives, adhere to our public statements, comply with federal, state or international sustainability laws and regulations or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us that could materially adversely affect our business, reputation, results of operations, financial condition and stock price.
These valuations reflect assumptions about financial market and other economic conditions, which may change based on changes in key economic indicators. The most significant year-end assumptions we use to estimate pension or other postretirement benefit income or expense for the following year are the discount rate applied to plan liabilities and the expected long-term rate of return on plan assets.
These valuations reflect assumptions about financial markets and other economic conditions, which may change based on changes in key economic indicators. The most significant year-end assumptions we use to estimate pension or other postretirement benefit income or expense for the following year are the discount rate applied to plan liabilities and the expected long-term rate of return on plan assets.
The USW also represents employees at six other facilities, one of which has a contract expiring in 2023. As part of any labor negotiation, the future wages, healthcare benefits and excise taxes that may result therefrom, and other benefits that we agree to, could adversely affect our future financial position, results of operations and cash flows.
The USW also represents employees at six other facilities, one of which has a contract expiring in 2024. As part of any labor negotiation, the future wages, healthcare benefits, and excise taxes that may result therefrom, and other benefits that we agree to, could adversely affect our future financial position, results of operations and cash flows.
If we fail to successfully integrate the Warrick rolling mill, we may not realize the benefits expected from the transaction and/or it may have adverse effects on our financial position, results of operations and cash flows. We are dependent upon Alcoa Corporation (“Alcoa”) for certain resources essential to the day-to-day operation of our business at Warrick.
If we fail to successfully integrate the Warrick rolling mill, we may not realize the benefits expected from the transaction and/or it may have adverse effects on our financial position, results of operations, and cash flows. We are dependent upon Alcoa for certain resources essential to the day-to-day operation of our business at Warrick.
Responding to these ESG considerations and implementation of these goals and initiatives involves risks and uncertainties, including those described under “Forward-Looking Statements,” requires investments and is impacted by factors that may be outside our control. In addition, some stakeholders may disagree with our goals and initiatives and the focus of stakeholders may change and evolve over time.
Responding to these sustainability considerations and implementation of these goals and initiatives involves risks and uncertainties, including those described under “Forward-Looking Statements,” requires investments and is impacted by factors that may be outside our control. In addition, some stakeholders may disagree with our goals and initiatives and the focus of stakeholders may change and evolve over time.
Moreover, because new automotive vehicle demand is tied closely to overall economic strength, economic uncertainty, increasing interest rates and/or increased unemployment could lead to weak demand for, or lower production of, new cars, light trucks, SUVs and heavy duty vehicles and trailers, which, in turn, could adversely affect demand for our products.
Moreover, because new automotive vehicle demand is tied closely to overall economic strength, economic uncertainty, increasing interest rates and/or increased unemployment could lead to weak demand for, or lower production of, new cars, light trucks, SUVs, and heavy-duty vehicles and trailers, which could adversely affect demand for our products.
A failure by Alcoa to provide molten aluminum and support services or transition services within the time frames and upon the terms agreed to, including quality and performance standards, could cause us to incur substantial costs to keep the Warrick rolling mill operational or result in the temporary or permanent shutdown of Warrick’s operations.
A failure by Alcoa to provide support services or transition services within the time frames and upon the terms agreed to, including quality and performance standards, could cause us to incur substantial costs to keep the Warrick rolling mill operational or result in the temporary or permanent shutdown of Warrick’s operations.
Our hedging programs have been and could continue to be adversely impacted by fluctuations as a result of the impacts of supply chain disruptions, geopolitical activity and general economic conditions. We use forward contracts to protect against fluctuations in commodity price and currency exchange rate risks.
Our hedging programs have been and could continue to be adversely impacted by fluctuations as a result of the impacts of supply chain disruptions, geopolitical activity and general economic conditions. We use forward contracts to protect against fluctuations in commodity prices and currency exchange rate risks.
In the event that production of Warrick is negatively impacted by Alcoa’s failure to provide molten aluminum, support or transition services, our operations, business, financial condition and results of operations could be adversely affected. RISKS RELATED TO COMMODITY-RELATED PRICE FLUCTUATIONS. Our business could be adversely affected by pricing and availability of primary aluminum.
In the event that production of Warrick is negatively impacted by Alcoa’s failure to provide support or transition services, our operations, business, financial condition and results of operations could be adversely affected. 19 RISKS RELATED TO COMMODITY-RELATED PRICE FLUCTUATIONS. Our business could be adversely affected by pricing and availability of primary aluminum.
Unplanned events may interrupt our production operations, which may adversely affect our business. The production of fabricated aluminum products is subject to unplanned events such as explosions, fires, inclement weather, natural disasters, accidents, equipment failures, labor disruptions, transportation interruptions, public utilities interruptions and supply interruptions.
Unplanned events may interrupt our production operations, which may adversely affect our business. The production of aluminum products is subject to unplanned events such as explosions, fires, inclement weather, natural disasters, accidents, equipment failures, labor disruptions, transportation interruptions, public utilities interruptions, and supply chain interruptions.
We are dependent upon Alcoa for certain resources required for the day-to-day operation of our business at Warrick, which include molten aluminum and “support services” such as the provision of potable water, compressed air, laboratory services, electricity, steam and hot water.
We are dependent upon Alcoa for certain resources required for the day-to-day operation of our business at Warrick, which include “support services” such as the provision of potable water, compressed air, laboratory services, electricity, steam and hot water.
Theft of personal or other confidential data and sensitive proprietary information could also occur as a result of a breach in cyber security, exposing us to costs and liabilities associated with privacy and data security laws in the jurisdictions in which we operate.
Theft of personal or other confidential data and sensitive proprietary information could also occur as a result of a breach in cybersecurity, exposing us to costs and liabilities associated with privacy and data security laws in the jurisdictions in which we operate.
A payment default or an acceleration following an event of default under our Revolving Credit Facility or our indentures for our 4.625% Senior Notes and 4.50% Senior Notes could trigger an event of default under the other indebtedness obligation, as well as any other debt to which a cross-acceleration or cross-default provision applies, which could result in the principal of and the accrued and unpaid interest on all such debt becoming due and payable.
A payment default or an acceleration following an event of default under our Revolving Credit Facility or our indentures for our Senior Notes could trigger an event of default under the other indebtedness obligation, as well as any other debt to which a cross-acceleration or cross-default provision applies, which could result in the principal of and the accrued and unpaid interest on all such debt becoming due and payable.
When we experience such volatility or are otherwise unable to make accurate predictions with respect to our forward swaps designated as cash flow or fair value hedges, such hedging activities may become ineffective.
When we experience such volatility or are otherwise unable to make accurate predictions with respect to our forward swaps designated as cash flow hedges, such hedging activities may become ineffective.
While our Revolving Credit Facility and the indentures governing the 4.625% Senior Notes and 4.50% Senior Notes place limitations on our ability to pay dividends or make other distributions, repurchase or redeem capital stock, make loans and investments and incur additional indebtedness, investors should be aware that these limitations are subject to significant qualifications and exceptions.
While our Revolving Credit Facility and the indentures governing the Senior Notes place limitations on our ability to pay dividends or make other distributions, repurchase or redeem capital stock, make loans and investments, and incur additional indebtedness, investors should be aware that these limitations are subject to significant qualifications and exceptions.
More detailed descriptions of our Revolving Credit Facility and the indentures governing our 4.625% Senior Notes and 4.50% Senior Notes are included in filings made by us with the SEC, along with the documents themselves, which provide the full text of these covenants. Restrictive covenants in our debt instruments contain significant qualifications and exceptions.
More detailed descriptions of our Revolving Credit Facility and the indentures governing our Senior Notes are included in filings made by us with the SEC, along with the documents themselves, which provide the full text of these covenants. Restrictive covenants in our debt instruments contain significant qualifications and exceptions.
Our Revolving Credit Facility and the indentures governing the 4.625% Senior Notes and 4.50% Senior Notes restrict our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or certain forms of equity capital to be used to repay other indebtedness when it becomes due.
Our Revolving Credit Facility and the indentures governing the Senior Notes restrict our ability to dispose of assets and use the proceeds from those dispositions and may also restrict our ability to raise debt or certain forms of equity capital to be used to repay other indebtedness when it becomes due.
It is possible that the USW may seek to extend the term of the agreement and its right to nominate board members beyond 2025. RISKS RELATED TO ENVIRONMENTAL LAWS AND REGULATIONS AND ESG INITIATIVES. Environmental compliance, cleanup and damage claims may decrease our cash flow and adversely affect our business.
It is possible that the USW may seek to extend the term of the agreement and its right to nominate board members beyond 2025. 23 RISKS RELATED TO ENVIRONMENTAL LAWS AND REGULATIONS AND SUSTAINABILITY INITIATIVES. Environmental compliance, cleanup and damage claims may decrease our cash flow and adversely affect our business.
Despite existing backlogs, additional adverse macroeconomic developments may lead to reduced demand for our products, which could adversely affect our financial position, results of operations and cash flows. We operate in a highly competitive industry. We compete with others in the fabricated products segment of the aluminum industry based upon quality, availability, price, customer service and delivery performance.
Additional adverse macroeconomic developments may lead to reduced demand for our products, which could adversely affect our financial position, results of operations, and cash flows. We operate in a highly competitive industry. We compete with others in the semi-fabricated products segment of the aluminum industry based upon quality, availability, price, customer service, and delivery performance.
Stakeholders also may have very different views on where ESG focus should be placed, including differing views of regulators in various jurisdictions in which we operate.
Stakeholders also may have very different views on where sustainability focus should be placed, including differing views of regulators in various jurisdictions in which we operate.
We are a holding company and depend on our subsidiaries for cash to meet our obligations and pay any dividends. We are a holding company and conduct all of our operations through our subsidiaries, certain of which are not guarantors of our 4.625% Senior Notes, 4.50% Senior Notes or our Revolving Credit Facility.
We are a holding company and depend on our subsidiaries for cash to meet our obligations and pay any dividends. We are a holding company and conduct all of our operations through our subsidiaries, certain of which are not guarantors of our Senior Notes or our Revolving Credit Facility.
Moreover, the existence of labor agreements may not prevent such union-initiated work actions. Our participation in multi-employer union pension plans may have an adverse effect on our financial performance. We participate in several multi-employer pension plans pursuant to our collective bargaining agreements.
Moreover, the existence of labor agreements may not prevent such union-initiated work actions. Our participation in multiemployer union pension plans may have an adverse effect on our financial performance. We participate in several multiemployer pension plans pursuant to our collective bargaining agreements.
In the event that we do not receive distributions from our subsidiaries, we may be unable to make required interest and principal payments on the 4.625% Senior Notes, the 4.50% Senior Notes or our Revolving Credit Facility, or other indebtedness.
In the event that we do not receive distributions from our subsidiaries, we may be unable to make required interest and principal payments on the Senior Notes, or our Revolving Credit Facility, or other indebtedness.
An employer that withdraws or partially withdraws from a multi-employer pension plan may incur a withdrawal liability for the portion of the plan’s underfunding that is allocable to the withdrawing employer under very complex actuarial and allocation rules.
An employer that withdraws or partially withdraws from a multiemployer pension plan may incur a withdrawal liability for the portion of the plan’s underfunding that is allocable to the withdrawing employer under complex actuarial and allocation rules.
Our subsidiaries that are not guarantors of our 4.625% Senior Notes, 4.50% Senior Notes or the Revolving Credit Facility have no obligation to pay amounts due on the 4.625% Senior Notes, 4.50% Senior Notes or the Revolving Credit Facility or to make funds available for that purpose.
Our subsidiaries that are not guarantors of our Senior Notes, or the Revolving Credit Facility have no obligation to pay amounts due on the Senior Notes, or the Revolving Credit Facility or to make funds available for that purpose.
A breach of the covenants or restrictions under our Revolving Credit Facility or under the indentures governing the 4.625% Senior Notes and 4.50% Senior Notes could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt.
A breach of the covenants or restrictions under our Revolving Credit Facility or under the indentures governing the Senior Notes could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt.
Accordingly, repayments of our 4.625% Senior Notes, 4.50% Senior Notes and amounts due under our Revolving Credit Facility are dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us by dividend, loan, debt repayment or otherwise.
Accordingly, repayments of our Senior Notes and any future amounts due under our Revolving Credit Facility are dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us by dividend, loan, debt repayment, or otherwise.
“Management’s Discussion and Analysis of Financial Condition” under caption “Critical Accounting Estimates and Policies – Pension and Other Postretirement Benefits” included in this Report, as well as Note 5 of Notes to Consolidated Financial Statements included in this Report.
“Management’s Discussion and Analysis of Financial Condition” under caption “Critical Accounting Estimates and Policies – Pension and Other Postretirement Benefits” included in this Form 10-K, as well as Note 5 of Notes to Consolidated Financial Statements included in this Form 10-K.
These factors have included the impacts of the COVID-19 pandemic on global travel and supply chains, but also include but are not limited to: (i) declines or reduced growth trends in global travel and airline passenger traffic; (ii) the rate of replacement of older aircraft with more fuel efficient aircraft; (iii) changing airline strategies affecting preferences for single-aisle aircraft models as opposed to twin-aisle or jumbo aircraft models; (iv) airline industry profitability; (v) the state of regional and global economies; (vi) concerns regarding terrorism or the threat of terrorism; (vii) concerns regarding new pandemics of infectious disease; and (viii) safety concerns with newly introduced and existing aircraft.
These factors include but are not limited to: (i) declines or reduced growth trends in global travel and airline passenger traffic; (ii) the rate of replacement of older aircraft with more fuel efficient aircraft; (iii) changing airline strategies affecting preferences for single-aisle aircraft models as opposed to twin-aisle or jumbo aircraft models; (iv) airline industry profitability; (v) the state of regional and global economies; (vi) concerns regarding terrorism or the threat of terrorism; (vii) concerns regarding new pandemics of infectious disease; and (viii) safety concerns with newly introduced and existing aircraft.
We are exposed to risks related to our receivables supply chain financing arrangements. We are party to several supply chain financing arrangements, in which we may sell certain of our customers’ trade accounts receivable without recourse to such customers’ financial institutions.
We are party to several supply chain financing arrangements, in which we may sell certain of our customers’ trade accounts receivable without recourse to such customers’ financial institutions.
Item 1A. Ri sk Factors In addition to the factors discussed elsewhere in this Report, the risks described below are those that we believe are material to our company.
Item 1A. Ri sk Factors In addition to the factors discussed elsewhere in this Form 10-K, the risks described below are those that we believe are material to our company.
When U.S. and foreign allied governments are faced with competing national priorities, such as addressing financial or spending crises or public health emergencies, there can be significant pressure to reduce defense spending, which could reduce the demand for our products and adversely affect our financial position, results of operations and cash flows.
When U.S. and foreign allied governments are faced with competing national priorities, such as addressing financial or spending crises or public health emergencies, there can be significant pressure to reduce defense spending, which could reduce the demand for our products and adversely affect our financial position, results of operations and cash flows. 16 Downturns in the automotive and ground transportation industries could adversely affect our business.
At December 31, 2022, approximately 66% of our employees were represented by labor unions under labor contracts with varying durations and expiration dates. Employees at our Trentwood and Newark, Ohio (“Newark”) facilities are represented by the USW under a single contract that extends through September 2025.
At December 31, 2023, approximately 65% of our employees were represented by labor unions under labor contracts with varying durations and expiration dates. Employees at our Trentwood and Newark facilities are represented by the USW under a single contract that extends through September 2025.
In 2022, our five largest customers in total accounted for approximately 52% of our 2022 net sales. Most of these customers have one or more sizable sales agreements with us.
Our five largest customers in total accounted for approximately 53% of our 2023 net sales. Most of these customers have one or more sizable sales agreements with us.
RISKS RELATED TO CYBERSECURITY AND PRIVACY. We are subject to risks relating to our information technology systems. We rely on information technology networks and systems to process, transmit and store electronic information, operate our business and communicate among our locations and with our customers, suppliers and other interested parties.
RISKS RELATED TO CYBERSECURITY AND PRIVACY. We are subject to risks relating to our information technology systems and those of our third-party service providers. We rely on information technology networks and systems to process, transmit and store electronic information, operate our business and communicate among our locations and with our customers, suppliers and other interested parties.
Our Revolving Credit Facility and the indentures governing our 4.625% Senior Notes due 2028 (“4.625% Senior Notes”) and 4.50% Senior Notes due 2031 (“4.50% Senior Notes”) contain a number of restrictive covenants that impose operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to: • incur additional indebtedness and guarantee indebtedness; • pay dividends or make other distributions or repurchase or redeem capital stock; • prepay, redeem or repurchase certain debt; • issue certain preferred stock or similar equity securities; • make loans and investments; • sell assets; • incur liens; • enter into transactions with affiliates; • alter the businesses we conduct; • enter into agreements restricting our subsidiaries’ ability to pay dividends; and • consolidate, merge or sell all or substantially all of our assets. 20 In addition, restrictive covenants in our Revolving Credit Facility require us in certain circumstances to maintain specified financial ratios and satisfy other financial condition tests.
Our Revolving Credit Facility and the indentures governing our Senior Notes contain a number of restrictive covenants that impose operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to: • incur additional indebtedness and guarantee indebtedness; • pay dividends or make other distributions or repurchase or redeem capital stock; • prepay, redeem or repurchase certain debt; • issue certain preferred stock or similar equity securities; • make loans and investments; • sell assets; • incur liens; • enter into transactions with affiliates; • alter the businesses we conduct; • enter into agreements restricting our subsidiaries’ ability to pay dividends; and • consolidate, merge or sell all or substantially all of our assets.
If we are unable to generate sufficient productivity improvements and cost savings in the future to offset reductions in our selling prices and increases in our costs that we cannot pass through to our customers, our financial position, results of operations and cash flows could be adversely affected.
If we are unable to generate sufficient productivity improvements and cost savings in the future to offset reductions in our selling prices and increases in our costs that we cannot pass through to our customers, our financial position, results of operations and cash flows could be adversely affected. 17 We are exposed to risks related to our receivables supply chain financing arrangements.
The utility of certain supply chain financing arrangements also depends upon the Term Secured Overnight Financing Rate (“Term SOFR”), as it is a component of the discount rate applicable to certain arrangements.
The utility of certain supply chain financing arrangements also depends upon the Term SOFR rate, as it is a component of the discount rate applicable to certain arrangements.
Our results of operations may be negatively affected by the amount of expense we record for our pension and other postretirement benefit plans, reductions in the fair value of plan assets and other factors. We calculate income or expense for our plans using actuarial valuations in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Our results of operations may be negatively affected by the amount of expense we record for our pension and other postretirement benefit plans, reductions in the fair value of plan assets and other factors. We calculate income or expense for our plans using actuarial valuations in accordance with GAAP.
Laws enacted by governments, including the U.S. Congress, or policies of regulators, including the USEPA, could regulate greenhouse gas emissions through cap-and-trade systems, carbon taxes or other programs under which emitters would be required to buy allowances to offset emissions of greenhouse gas, pay carbon based taxes, make significant capital investments, alter manufacturing practices or curtail production.
Laws enacted by government agencies, or policies of regulators, including the USEPA and the SEC, could regulate greenhouse gas emissions through cap-and-trade systems, carbon taxes, or other programs under which emitters would be required to buy allowances to offset emissions of greenhouse gas, pay carbon based taxes, make certain disclosures about emissions, which may be extensive, make significant capital investments, alter manufacturing practices or curtail production.
Such information technology systems are subject to: (i) interruption or damage from power outages; (ii) cyber security breaches and other types of unauthorized access and/or use; and (iii) cyberattacks in the form of computer viruses, worms, malicious computer programs, denial‑of‑service attacks and other illegal or illicit means.
Such information technology systems are subject to: (i) interruption or damage from power outages; (ii) cybersecurity breaches and other types of unauthorized access and/or use; and (iii) cyberattacks in the form of computer viruses, worms, malicious computer programs, denial‑of‑service attacks and other illegal or illicit means. Cyberattack and security breach strategies and methods continue to evolve and become more sophisticated.
Downturns in the automotive and ground transportation industries could adversely affect our business. The demand for our Automotive Extrusions and many of our general engineering and other industrial products is dependent on the production of cars, light trucks, SUVs and heavy duty vehicles and trailers in North America.
The demand for our Automotive Extrusions and many of our general engineering and other industrial products is dependent on the production of cars, light trucks, SUVs, and heavy-duty vehicles and trailers in North America.
A breach in cyber security could result in manipulation and destruction of sensitive data, cause critical systems to malfunction, be damaged or shut down and lead to disruption of our operations and production downtimes, potentially for lengthy periods of time.
A breach in cybersecurity on our systems or any of our third-party service providers could result in manipulation and destruction of sensitive data, cause critical systems to malfunction, be damaged or shut down and lead to disruption of our operations and production downtimes, potentially for lengthy periods of time.
If one or more of these customers experienced a prolonged period of adverse demand, depressed business activity or financial distress, if any of these customers breached or sought relief from its contractual obligations under its sales agreements with us or if any of these customer relationships otherwise ended or materially deteriorated and such lost business was not successfully replaced, our financial position, results of operations and cash flows could be adversely affected. 16 We experience fluctuation in certain costs that we cannot pass through to our customers and face pressure from our customers on pricing.
If one or more of these customers experienced a prolonged period of adverse demand, depressed business activity or financial distress, if any of these customers breached or sought relief from its contractual obligations under its sales agreements with us or if any of these customer relationships otherwise ended or materially deteriorated and such lost business was not successfully replaced, our financial position, results of operations and cash flows could be adversely affected.
We may not be able to successfully implement our productivity enhancement and cost reduction initiatives that are necessary to offset competitive price pressure. Over time, we have experienced pricing pressure on many of our products and anticipate continued pricing pressure in the future.
We may not be able to successfully implement our productivity enhancement and cost reduction initiatives that are necessary to offset competitive price pressure. Over time, we have experienced pricing pressure on many of our products and anticipate continued pricing pressure in the future. Ongoing and heightened competitive price pressure makes it increasingly important for us to be a low-cost producer.
Because the amount we can borrow under our revolving credit 19 facility with Wells Fargo Bank, National Association, as administrative agent, and the other financial institutions party thereto (“Revolving Credit Facility”) is determined by the value of our receivables and inventory, which serve as collateral for the facility, a reduction in aluminum prices can reduce our borrowing availability and our liquidity, which could have an adverse effect on our financial position, results of operations and cash flows.
Because the amount we can borrow under our Revolving Credit Facility is determined by the value of our receivables and inventory, which serve as collateral for the facility, a reduction in aluminum prices can reduce our borrowing availability and our liquidity, which could have an adverse effect on our financial position, results of operations and cash flows.
Costs related to any new investigation, cleanup or other remediation, fines or penalties, resolution of third-party claims or compliance with new or amended laws and regulations, including enhanced permitting requirements, may be significant and could have an adverse effect on our financial position, results of operations and cash flows. 23 Governmental regulation relating to greenhouse gas emissions may subject us to significant new costs and restrictions on our operations and could impact our supply chain and cost of material .
Costs related to any new investigation, cleanup or other remediation, fines or penalties, resolution of third-party claims or compliance with new or amended laws and regulations, including enhanced permitting requirements, may be significant and could have an adverse effect on our financial position, results of operations and cash flows.
We may not be able to consummate asset dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations then due. 21 If we cannot make scheduled payments on our debt, we will be in default and holders of the 4.625% Senior Notes and 4.50% Senior Notes could declare all outstanding principal and interest to be due and payable, the lenders under our Revolving Credit Facility could terminate their commitments to loan money, the lenders could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.
If we cannot make scheduled payments on our debt, we will be in default and holders of the Senior Notes could declare all outstanding principal and interest to be due and payable, the lenders under our Revolving Credit Facility could terminate their commitments to loan money, the lenders could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.
As indicated above, more detailed descriptions of our Revolving Credit Facility and the indentures governing our 4.625% Senior Notes and 4.50% Senior Notes are included in filings made by us with the SEC, along with the documents themselves, which provide the full text of these covenants.
The aggregate amount of payments made or incremental debt incurred in compliance with these limitations could be substantial. As indicated above, more detailed descriptions of our Revolving Credit Facility and the indentures governing our Senior Notes are included in filings made by us with the SEC, along with the documents themselves, which provide the full text of these covenants.
The early settlement, reclassification of cumulative losses and/or the periodic adjustment to fair value through Net (loss) income associated with ineffective hedging activities could have a material negative impact on our financial position, results of operations and cash flows.
The early settlement, reclassification of cumulative losses and/or the periodic adjustment to fair value through Net income (loss) associated with ineffective hedging activities could have a material negative impact on our financial position, results of operations and cash flows. 20 Our hedging programs may limit the income and cash flows we would otherwise expect to receive if our hedging programs were not in place and may otherwise affect our business.
Cyberattack and security breach strategies and methods continue to evolve and become more sophisticated. Accordingly, preventing intrusions and detecting successful intrusions and defending against them continues to be more difficult and requires ever-increasing vigilance.
Accordingly, preventing intrusions and detecting successful intrusions and defending against them continues to be more difficult and requires ever-increasing vigilance.
Additionally, a change in our ownership, specifically a change in ownership of more than 50% during any period of 36 consecutive months (“ownership change”), as determined under the Internal Revenue Code of 1986 (“Code”), could reduce our ability to fully use our net operating loss carryforwards and other significant tax attributes.
Additionally, a change in our ownership, specifically a change in ownership of more than 50% during any period of 36 consecutive months (“ownership change”), as determined under the Internal Revenue Code of 1986 (“Code”), could reduce our ability to fully use our net operating loss carryforwards and other significant tax attributes. 25 Furthermore, our tax returns for certain past years are still subject to examination by taxing authorities, and the use of net operating loss carryforwards in future periods could trigger a review of attributes and other tax matters in years that are not otherwise subject to examination.
We are unable to pass fluctuations of certain costs through to our customers, including the cost of energy, certain raw materials, operating supplies and freight. Further, cost cutting initiatives that many of our customers have adopted generally result in downward pressure on pricing.
We experience fluctuation in certain costs that we cannot pass through to our customers and face pressure from our customers on pricing. We are unable to pass fluctuations of certain costs through to our customers, including the cost of energy, certain raw materials, operating supplies, and freight.
Recent macroeconomic factors including labor shortages, supply chain disruptions, inflation, recession risks and the COVID-19 pandemic have caused downturns in the commercial aerospace industry and other commercial disruptions, which have adversely affected our business, and could cause additional downturns in the automotive and ground transportation industries, which would further adversely affect our business.
Recent macroeconomic factors including labor shortages, supply chain disruptions, inflation and recession risks have adversely affected our business, and could cause additional downturns in the aerospace, automotive, and ground transportation industries, which would further adversely affect our business. We derive a significant portion of our revenue from products sold to the aerospace and automotive and ground transportation industries.
The future impact of these or other changes could be regulatory or voluntary and could impact our operations directly or indirectly through our customers or our supply chain. These potential impacts could have an adverse effect on our operations, financial position, results of operations and cash flows.
The future impact of these or other changes could be regulatory or voluntary and could impact our operations directly or indirectly through our customers or our supply chain.
The increase or decrease in our contributions to these multi-employer pension plans will depend on our future collective bargaining, actions taken by trustees who manage the plans, actions of other participating employers, government regulations and the actual return on assets held in the plans, among other factors. 22 An adverse decline in the liability discount rate, lower-than-expected investment return on pension assets and other factors could affect our business, financial condition, results of operations or amount of pension funding contributions in future periods.
The increase or decrease in our contributions to these multiemployer pension plans will depend on our future collective bargaining, actions taken by trustees who manage the plans, actions of other participating employers, government regulations and the actual return on assets held in the plans, among other factors.
Our ability to meet those financial ratios and tests can be affected by events beyond our control and we may be unable to meet them.
In addition, restrictive covenants in our Revolving Credit Facility require us in certain circumstances to maintain specified financial ratios and satisfy other financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our control and we may be unable to meet them.
Provisions of Delaware law and our certificate of incorporation and bylaws may discourage a change of control of our company or deter tender offers for our common stock. We are currently subject to anti-takeover provisions under Delaware law. These anti‑takeover provisions impose various impediments to the ability of a third party to acquire control of us.
We are currently subject to anti-takeover provisions under Delaware law. These anti‑takeover provisions impose various impediments to the ability of a third-party to acquire control of us. In addition, provisions of our certificate of incorporation and bylaws impose various procedural and other requirements, which could make it more difficult for stockholders to effect certain corporate actions.
Expectations relating to ESG considerations expose us to potential liabilities, increased costs, reputational harm and other adverse effects on our business . Many governments, regulators, investors, employees, customers and other stakeholders are increasingly focused on ESG considerations relating to businesses, including climate change and greenhouse gas emissions, human capital and diversity, equity and inclusion.
Many governments, regulators, investors, employees, customers, and other stakeholders are increasingly focused on sustainability considerations relating to businesses, including climate change and greenhouse gas emissions, human capital and diversity, equity and inclusion. We make statements about our sustainability goals and initiatives through information provided on our website, press statements, and other communications, including through our Corporate Sustainability Report.
We can give no assurance that dividends will be declared and paid, that dividends will not be reduced or that purchases of our shares pursuant to our repurchase program will occur in the future. Delaware law and our governing documents may impede or discourage a takeover, which could adversely affect the value of our common stock.
Additionally, our Revolving Credit Facility and the indentures for our Senior Notes impose limitations on our ability to pay dividends and repurchase our common shares. We can give no assurance that dividends will be declared and paid, that dividends will not be reduced or that purchases of our shares pursuant to our repurchase program will occur in the future.
Macroeconomic factors including, but not limited to: (i) labor shortages; (ii) disruptions to supply chains, such as the recent disruptions with our molten metal and magnesium supply chains; (iii) other interruptions of international and regional commerce; (iv) inflation; (v) higher interest rates; (vi) recession risks; and (vii) concerns regarding and measures implemented in response to pandemics of infectious disease, such as the COVID‑19 pandemic, have and could further cause changes in global travel and shipping patterns, negatively influencing demand for new commercial aircraft and other vehicles, resulting in cancellations or deferrals of orders and/or decreases in new deliveries.
Macroeconomic factors include, but not limited to: (i) labor shortages; (ii) disruptions to supply chains; (iii) other interruptions of international and regional commerce; (iv) inflation; (v) higher interest rates; and (vi) recession risks.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Trentwood facility consists of 2,765,000 square feet, which is owned by us, and 121,000 square feet, which is subject to a lease with a 2025 expiration date and a renewal option subject to certain terms and conditions. Production facilities and equipment are generally in good condition and suitable for their intended uses.
Biggest changeThe Richland, Washington facility is subject to a lease with a 2025 expiration date, subject to certain extension rights held by us. 5. The Spokane Valley, Washington facility consists of 2,765,000 square feet, which is owned by us, and 121,000 square feet, which is subject to a lease with a 2025 expiration date.
The Chandler, Arizona (Extrusion) facility is subject to a lease with a 2023 expiration date, subject to certain extension rights held by us. 2. The Chandler, Arizona (Tube) and Kalamazoo, Michigan facilities are each subject to leases with terms that expire in 2033, subject to certain extension rights held by us. 3.
The Chandler, Arizona extrusion facility is subject to a lease with a term that expires in 2038, subject to certain extension rights held by us. 2. The Chandler, Arizona tube, and Kalamazoo, Michigan facilities are each subject to leases with terms that expire in 2033, subject to certain extension rights held by us. 3.
Pr operties The following table provides information regarding the location, size and ownership of our principal production facilities as of December 31, 2022: Location Square footage Owned or Leased Chandler, Arizona (Extrusion) 110,000 Leased 1 Chandler, Arizona (Tube) 103,000 Leased 2 Columbia, New Jersey 33,000 Owned Florence, Alabama 249,000 Owned Jackson, Tennessee 306,000 Owned Kalamazoo, Michigan 465,000 Leased 2 London, Ontario (Canada) 306,000 Owned Los Angeles, California 174,000 Owned Newark, Ohio 1,284,000 Owned Newburgh, Indiana (Warrick) 3,922,000 Owned/Leased 3 Richland, Washington 63,000 Leased 4 Richmond, Virginia (Bellwood) 474,000 Owned Sherman, Texas 311,000 Owned Spokane, Washington (Trentwood) 2,886,000 Owned/Leased 5 Total 10,686,000 1.
Pr operties The following table provides information regarding the location, size, and ownership of our principal production facilities as of December 31, 2023: Location Square footage Owned or Leased Chandler, Arizona 98,000 Leased 1 Chandler, Arizona 103,000 Leased 2 Columbia, New Jersey 33,000 Owned Florence, Alabama 249,000 Owned Jackson, Tennessee 306,000 Owned Kalamazoo, Michigan 465,000 Leased 2 London, Ontario 306,000 Owned Los Angeles, California 174,000 Owned Heath, Ohio 1,284,000 Owned Newburgh, Indiana 3,922,000 Owned/Leased 3 Richland, Washington 63,000 Leased 4 Richmond, Virginia 474,000 Owned Sherman, Texas 311,000 Owned Spokane Valley, Washington 2,886,000 Owned/Leased 5 Total 10,674,000 1.
The Warrick facility is owned by us, while the land where the rolling mill is located is subject to a lease with a 2081 expiration date and a renewal option subject to certain terms and conditions. 4. The Richland, Washington facility is subject to a lease with a 2025 expiration date, subject to certain extension rights held by us. 5.
The Newburg, Indiana facility is owned by us, while the land where the rolling mill is located is subject to a lease with a 2081 expiration date and a renewal option subject to certain terms and conditions. 4.
For additional information regarding our production facilities, see the table under Item 1. Business “Resources - Manufacturing Processes” of this Report. Item 3. Legal Proceedings None. Item 4. Mine Saf ety Disclosures Not applicable. 27 PART II
Production facilities and equipment are generally in good condition and suitable for their intended uses. For additional information regarding our production facilities, see the table under Item 1. Business “Resources - Manufacturing Processes” of this Form 10-K. Item 3. Legal Proceedings None. Item 4. Mine Saf ety Disclosures Not applicable. 29 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeCOMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among Kaiser Aluminum Corporation, the Russell 2000 Index and the S&P SmallCap 600 Materials Index 28 Issuer Repurchases of Equity Securities The following table provides information regarding our repurchases of our common shares during the quarter ended December 31, 2022: Equity Incentive Plans Stock Repurchase Plan Total Number of Shares Purchased 1 Average Price per Share Total Number of Shares Purchased 2 Average Price per Share Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program (millions) 2 October 1, 2022 - October 31, 2022 25 $ 65.42 — $ — $ 93.1 November 1, 2022 - November 30, 2022 75 88.92 — — 93.1 December 1, 2022 - December 31, 2022 — — — — 93.1 Total 100 $ 83.04 — $ — n/a 1 Under our equity incentive plan, participants may elect to have us withhold common shares to satisfy minimum statutory tax withholding obligations arising from the recognition of income and the vesting of restricted stock, restricted stock units and performance shares.
Biggest changeCOMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among Kaiser Aluminum Corporation, the Russell 2000 Index and the S&P SmallCap 600 Materials Index 30 Issuer Repurchases of Equity Securities The following table provides information regarding our repurchases of our common shares during the quarter ended December 31, 2023: Equity Incentive Plans Stock Repurchase Plan Total Number of Shares Purchased 1 Average Price per Share Total Number of Shares Purchased 2 Average Price per Share Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program (millions) 2 October 1, 2023 - October 31, 2023 344 $ 67.08 — $ — $ 93.1 November 1, 2023 - November 30, 2023 — — — — 93.1 December 1, 2023 - December 31, 2023 683 64.95 — — 93.1 Total 1,027 $ 65.67 — $ — n/a 1.
Stock Performance Graph The following graph compares the cumulative total shareholder return on our common stock with: (i) the Russell 2000 Index and (ii) the S&P SmallCap 600 Materials Index. We are a component of each of these indices. The graph assumes: (i) an initial investment of $100 as of December 31, 2017 and (ii) reinvestment of all dividends.
Stock Performance Graph The following graph compares the cumulative total shareholder return on our common stock with: (i) the Russell 2000 Index and (ii) the S&P SmallCap 600 Materials Index. We are a component of each of these indices. The graph assumes: (i) an initial investment of $100 as of December 31, 2018 and (ii) reinvestment of all dividends.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information Our outstanding common stock is traded under the ticker symbol “KALU” on the Nasdaq Global Select Market. Holders As of February 20, 2023, there were approximately 490 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities Market Information Our outstanding common stock is traded under the ticker symbol “KALU” on the Nasdaq Global Select Market. Holders As of February 19, 2024, there were approximately 495 holders of record of our common stock.
When we withhold these shares, we are required to remit to the appropriate taxing authorities the market price of the shares withheld by us on the date of withholding.
When we withhold these shares, we are required to remit to the appropriate taxing authorities the market price of the shares withheld by us on the date of withholding. The withholding of common shares by us could be deemed a purchase of such common shares. 2.
At December 31, 2022, $93.1 million remained available to repurchase our common shares pursuant to the stock repurchase program. The September 2018 authorization does not have an expiration date. Item 6. [Re served] 29
In September 2018, our Board of Directors authorized us to repurchase an indeterminate number of shares of our common stock at an aggregate market value of up to $100.0 million. At December 31, 2023, $93.1 million remained available to repurchase our common shares pursuant to the stock repurchase program. The September 2018 authorization does not have an expiration date.
Removed
The withholding of common shares by us could be deemed a purchase of such common shares. 2 In September 2018, our Board of Directors authorized us to repurchase an indeterminate number of shares of our common stock at an aggregate market value of up to $100.0 million.
Added
Under our equity incentive plan, participants may elect to have us withhold common shares to satisfy minimum statutory tax withholding obligations arising from the recognition of income and the vesting of restricted stock, restricted stock units, and performance shares.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCash provided by operating activities for the year ended December 31, 2021 reflected results of business activity for the year ended December 31, 2021, as well as the following working capital changes: (i) an increase in accounts payable of $112.5 million, primarily driven by Warrick payables added during the year ended December 31, 2021 and higher metal cost; (ii) an increase in trade and other receivables of $90.3 million, primarily driven by Warrick receivables added during the year ended December 31, 2021 and the remainder due to the timing and mix of sales and an increase in metal prices; and (iii) an increase in inventory of $43.5 million due primarily to higher inventory pounds to satisfy increased demand, as well as a higher per pound inventory cost.
Biggest changeCash Flows The following table summarizes our cash flows from operating, investing, and financing activities (in millions of dollars): Year Ended December 31, 2023 2022 Total cash provided by (used in): Operating activities $ 211.9 $ (63.1 ) Investing activities $ (128.2 ) $ (125.8 ) Financing activities $ (54.3 ) $ (56.8 ) 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 $48.2 million, 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.
Liabilities and expenses for pension and other postretirement 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).
Pension and Other Postretirement Benefits Liabilities and expenses for pension and other postretirement 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).
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 plan.
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.
For a reconciliation of Adjusted EBITDA to Net loss, 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.
For a reconciliation of Adjusted EBITDA to Net income (loss), 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.
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 obligations to increase, yielding a reduced net expense of these obligations.
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 obligations to increase, yielding a reduced net expense of these obligations in future years.
We account for acquisitions using the acquisition method of accounting, which requires the assets acquired and liabilities assumed to be recorded at the date of acquisition at their respective estimated fair values. We recognize goodwill as of the acquisition date as the excess over the fair values of the identifiable net assets acquired.
Goodwill and Intangible Assets We account for acquisitions using the acquisition method of accounting, which requires the assets acquired and liabilities assumed to be recorded at the date of acquisition at their respective estimated fair values. We recognize goodwill as of the acquisition date as the excess over the fair values of the identifiable net assets acquired.
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 electricity and natural gas prices and are based on fixed contractual rates and quantities. Equipment purchase obligations are based on scheduled payments to equipment manufacturers.
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 electricity and natural gas prices and are based on fixed contractual rates and quantities. Equipment purchase obligations are based on scheduled payments to equipment manufacturers. Leases.
We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to estimate the fair value of goodwill and intangible assets. Additionally, as of December 31, 2022, we do not believe any of our reporting units are at risk of failing the goodwill impairment test.
We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to estimate the fair value of goodwill and intangible assets. Additionally, as of December 31, 2023, we do not believe any of our reporting units are at risk of failing the goodwill impairment test.
We do not believe that covenants in the indenture governing the 4.50% Senior Notes and 4.625% 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.
We do not believe that covenants in the indenture governing the 4.50% Senior Notes and 4.625% 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.
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, including the availability of surplus and/or net profits, and operating results, financial position and anticipated cash requirements and contractual restrictions under our Revolving Credit Facility, the indentures for our 4.50% Senior Notes and 4.625% Senior Notes or other indebtedness we may incur in the future.
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, including the availability of surplus and/or net profits, and operating results, financial position and anticipated cash requirements and contractual restrictions under our Revolving Credit Facility, the indentures for our Senior Notes or other indebtedness we may incur in the future.
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 discussion of the reasons we believe that presentation of the non-GAAP financial measures provide useful information to investors, as well as any additional ways in which we use the non-GAAP financial measures.
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.
However, if, among other things: (i) actual results vary from our forecasts due to one or more of the factors cited above or elsewhere in this Report; (ii) income is distributed differently than expected among tax jurisdictions; (iii) one or more material events or transactions occur which were not contemplated; or (iv) certain expected deductions, credits or carryforwards are not available, it is possible that the effective tax rate for a year could vary materially from the assessments used to prepare the interim consolidated financial statements.
However, if, among other things: (i) actual results vary from our forecasts due to one or more of the factors cited above or elsewhere in this Form 10-K; (ii) income is distributed differently than expected among tax jurisdictions; (iii) one or more material events or transactions occur which were not contemplated; or (iv) certain expected deductions, credits, or carryforwards are not available, it is possible that the effective tax rate for a year could vary materially from the assessments used to prepare the interim consolidated financial statements.
For a detailed discussion of items impacting the year ended December 31, 2020, as well as a year‑to‑year comparison of our financial position and results of operations for the years ended December 31, 2021 and December 31, 2020, refer to Part II, Item 7.
For a detailed discussion of items impacting the year ended December 31, 2021, as well as a year‑to‑year comparison of our financial position and results of operations for the years ended December 31, 2022 and December 31, 2021, refer to Part II, Item 7.
In addition, a significant portion of the 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 allowed us to gain incremental manufacturing capacity to enable future sales growth.
In addition, a significant portion of the investment also focused on modernizing legacy equipment and the process flow for thin gauge plate to achieve Kaiser Select ® quality enhancements for these Aero/HS Products and GE Products. These improvements have allowed us to gain incremental manufacturing capacity to enable future sales growth.
A reduction in the LTRR would reduce the amount of projected net assets available to satisfy postretirement obligations and, thus, cause the net expense of these obligations to increase. A change in plan provisions could cause the estimated obligations to change.
A reduction in the LTRR would reduce the amount of projected net assets available to satisfy postretirement 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.
We will continue to deploy capital thoughtfully to ensure that investment decisions align with demand expectations in order to maximize the earnings potential of the business and maintain financial strength and flexibility. 37 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.
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.
See Note 14 of Notes to Consolidated Financial Statements included in this Report for additional discussion of these matters. 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 material.
See Note 14 of Notes to Consolidated Financial Statements included in this Form 10-K for additional discussion of these matters. 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 material.
In addition to the accounting estimates we discuss in Note 1 of Notes to Consolidated Financial Statements included in this Report, 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 39 estimates about the effects of matters that are inherently uncertain.
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.
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 Annual Report on Form 10-K (“Report”).
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.
The impact on the combined pension and other postretirement liabilities of a change in the weighted average discount rate of ¼ of 1% would be approximately $3.5 million as of December 31, 2022, and would impact pretax earnings in 2023 by approximately $0.3 million.
The impact on the combined pension and other postretirement liabilities of a change in the weighted average discount rate of 0.25% would be approximately $3.5 million as of December 31, 2023, and would impact pretax earnings in 2024 by approximately $0.3 million.
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 Report for further information. Uncertain Tax Liabilities .
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 .
Approximately 81% of our business is recognized at a point in time with the remaining 19% recognized over time. We follow the input method of recognizing revenue over time. Under this approach, revenue is recognized on products in production based on the cost incurred to date plus a reasonable margin.
Approximately 78% of our business is recognized at a point in time with the remaining 22% 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.
In 2022, we continued spending on our previously announced capital project to add a fourth roll coat line at our Warrick facility to increase our capacity for higher margin coated packaging product.
In 2023, we continued spending on our previously announced capital project to add a fourth roll coat line at our Warrick facility to increase our capacity for higher margin coated packaging products.
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 Report.
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.
See Note 9 of Notes to Consolidated Financial Statements included in this Report 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 2022 and 2021. Other Income (Expense), Net.
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 2023 and 2022. Other Income (Expense), Net.
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 generally accepted accounting principles (“GAAP”) in the statements of income, balance sheets or statements of cash flows of the company.
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.
For a reconciliation of Conversion Revenue to Net sales, see below in “Results of Operations - Selected Operational and Financial Information.” Molten Metal and Magnesium Supply Chain Issues As we have previously discussed, our rolling mill facility located in Warrick County, Indiana (“Warrick”) faced specific challenges with the September 2021 force majeure declaration of its primary magnesium supplier, US Magnesium, LLC (“US Mag”), which resulted in a significant reduction in deliveries while we were also being impacted by the operational challenges Alcoa Corporation was experiencing at its adjacent smelter, which supplies molten metal to Warrick.
For a reconciliation of Conversion Revenue to Net sales, see below in “Results of Operations - Selected Operational and Financial Information.” Molten Metal and Magnesium Supply Chain Issues In September 2021, Warrick faced specific challenges with the force majeure declaration of its primary magnesium supplier, US Magnesium, LLC (“US Mag”), which resulted in a significant reduction in deliveries while we were also being impacted by the operational challenges Alcoa was experiencing at its adjacent smelter, which supplies molten metal to Warrick.
Cash Flows The following table summarizes our cash flows from operating, investing and financing activities (in millions of dollars): Year Ended December 31, 2022 2021 Total cash (used in) provided by: Operating activities $ (63.1 ) $ 79.4 Investing activities $ (125.8 ) $ (665.8 ) Financing activities $ (56.8 ) $ 109.1 Cash used in operating activities for the year ended December 31, 2022 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 $120.8 million, primarily driven by higher inventory pounds built at our Warrick facility to mitigate the impact of supply chain disruptions related to magnesium and hot metal supply and at our Trentwood facility to prepare for the planned outages associated with our large stretcher refurbishment, as well as higher per pound inventory cost due to higher metal prices in ending inventory; (ii) a decrease in accounts payable of $61.2 million, primarily due to timing of purchases and a decrease in period ending metal prices; and (iii) a decrease in accounts receivable of $15.0 million due to the timing and mix of sales, as well as a decrease in period ending metal prices.
Cash used in operating activities for the year ended December 31, 2022 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 $120.8 million, primarily driven by higher inventory pounds built at our Warrick facility to mitigate the impact of supply chain disruptions related to magnesium and hot metal supply and at our Trentwood facility to prepare for the planned outages associated with our large stretcher refurbishment, as well as higher per pound inventory cost due to higher metal prices in ending inventory; (ii) a decrease in accounts payable of $61.2 million, primarily due to timing of purchases and a decrease in period ending metal prices; and (iii) a decrease in accounts receivable of $15.0 million due to the timing and mix of sales, as well as a decrease in period ending metal prices.
While we believe these sources 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.
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.
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.
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.
A change in the assumption for the weighted average expected long-term rate of return on plan assets of ¼ of 1% would impact pretax earnings by approximately $0.4 million for 2023.
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 2024.
Total capital expenditures were $142.5 million in 2022, of which $74.7 million related to the new roll coat line and $67.8 million primarily related to critical sustaining capital projects, and $58.0 million in 2021, primarily related to critical sustaining capital projects.
Total capital expenditures were $143.2 million in 2023, of which $66.0 million related to the new roll coat line and $77.2 million primarily related to critical sustaining capital projects, and $142.5 million in 2022, of which $74.7 million related to the new roll coat line and $67.8 million primarily related to critical sustaining capital projects.
As of December 31, 2022, we had deferred compensation plan liabilities for certain key employees, which were contingent upon investment performance, vesting and other eligibility requirements, including retirement 38 dates. See Note 5 of Notes to Consolidated Financial Statements included in this Report for further information, including the total expense related to all benefit plans. Operating Leases .
As of December 31, 2023, 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.
Hedged Cost of Alloyed Metal for 2022 and 2021 was comprised of $2,028.2 million and $1,552.4 million, respectively, reflecting the cost of aluminum at the average Midwest Price 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 $17.0 million in 2022 and realized gains upon settlement of $41.6 million in 2021, all of which were included within both Net sales and Cost of products sold in our Statements of Consolidated (Loss) Income.
Hedged Cost of Alloyed Metal for 2023 and 2022 was comprised of $1,599.7 million and $2,028.2 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 $21.4 million and $17.0 million in 2023 and 2022, respectively, all of which were included within both Net sales and COGS in our Statements of Consolidated Income (Loss).
The difference between the effective tax rate and the projected blended statutory tax rate for 2022 was primarily due to: (i) an increase of 3% due to various permanent items not deductible for tax purposes; (ii) an increase of 2% related to non-deductible compensation expense; and (iii) an increase of 1% related to state taxes, partially offset by a decrease of 6% related to a Federal Research and Development Credit.
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.
“Management’s Discussion and Analysis” of our Annual Report on Form 10-K for the years ended December 31, 2020 and 2021, respectively, filed with the Securities and Exchange Commission (“SEC”) on February 26, 2021 and March 1, 2022, respectively. Non-GAAP Financial Measures This information contains certain non-GAAP financial measures.
“Management’s Discussion and Analysis” of our Annual Report on Form 10-K for the years ended December 31, 2021 and 2022, respectively, filed with the SEC on March 1, 2022 and February 23, 2023, respectively. Non-GAAP Financial Measures This information contains certain non-GAAP financial measures.
The following table provides selected operational and financial information (in millions of dollars): Year Ended December 31, 2022 2021 Net loss $ (29.6 ) $ (18.5 ) Interest expense 48.3 49.5 Other (income) expense, net (6.4 ) 38.9 Income tax benefit (8.3 ) (5.5 ) Depreciation and amortization 106.9 91.5 Non-run-rate items: Restructuring costs (benefit) 2.2 (0.8 ) Mark-to-market loss on derivative instruments 1 1.4 1.4 Goodwill impairment 2 20.5 — Non-cash asset impairment charges 3.2 — Net periodic post retirement service cost relating to Salaried VEBA 0.1 0.1 Environmental expenses 3 3.2 0.2 Acquisition costs 4 0.4 28.0 Total non-run-rate items 31.0 28.9 Adjusted EBITDA $ 141.9 $ 184.8 1.
The following table provides selected operational and financial information (in millions of dollars): Year Ended December 31, 2023 2022 Net income (loss) $ 47.2 $ (29.6 ) Interest expense 46.9 48.3 Other income, net (7.4 ) (6.4 ) Income tax provision (benefit) 9.1 (8.3 ) Depreciation and amortization 108.6 106.9 Non-run-rate items: Restructuring cost 5.0 2.2 Mark-to-market loss on derivative instruments 1 — 1.4 Goodwill impairment 2 — 20.5 Non-cash asset impairment charge — 3.2 Net periodic postretirement service cost relating to Salaried VEBA — 0.1 Environmental expenses 3 0.2 3.2 Acquisition costs 4 — 0.4 Total non-run-rate items 5.2 31.0 Adjusted EBITDA $ 209.6 $ 141.9 1.
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, and have increased the dividend in each year since 2011.
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.
Selling, General, Administrative, Research and Development (“SG&A and R&D”). SG&A and R&D expense totaled $110.9 million in 2022 compared to $118.8 million in 2021.
Selling, General, Administrative, Research and Development (“SG&A and R&D”). SG&A and R&D expense totaled $122.7 million in 2023 compared to $110.9 million in 2022.
See the table in “Results of Operations – Selected Operational and Financial Information” below for further details. 30 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.
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.
In April 2022, we executed Amendment No. 3 to our Revolving Credit Facility to, among other things: (i) increase the commitment to $575.0 million; (ii) extend the maturity date; (iii) update our borrowing base; and (iv) update relevant benchmark provisions from London Interbank Offered Rate (“LIBOR”) to Term Secured Overnight Financing Rate (“Term SOFR”).
In April 2022, we executed Amendment No. 3 to our Revolving Credit Facility to, among other things: (i) increase the commitment to $575.0 million; (ii) extend the maturity date; (iii) update our borrowing base; and (iv) update relevant benchmark provisions from LIBOR to Term SOFR.
The letters of credit provide financial assurance of our payment of obligations, primarily related to workers’ compensation. The specific timing of payments with respect to such matters is uncertain.
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.
See Note 12 of Notes to Consolidated Financial Statements included in this Report for further information regarding the restructuring plans. Other Operating Charges (Income), Net . Other operating charges (income), net, of $3.2 million for the year ended December 31, 2022 was primarily due to the impairment of our favorable commodity contract intangible asset.
Other operating charges, net, of $3.2 million for the year ended December 31, 2022 was primarily due to the impairment of our favorable commodity contract intangible asset. See Note 4 of Notes to Consolidated Financial Statements included in this Form 10-K for further details. Interest Expense.
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), earnings before interest, taxes, depreciation and amortization adjusted for non-run-rate items (“Adjusted EBITDA”) and ratios related thereto.
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.
As used in this discussion, “Hedged Cost of Alloyed Metal” is the cost of aluminum at the average Midwest Transaction Price (“Midwest Price”) 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.
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.
See Note 5 of Notes to Consolidated Financial Statements included in this Report for additional information regarding the future net benefits we expect to pay with respect to our pension plans and our healthcare and life insurance postretirement benefit plan (“OPEB”). Salaried VEBA Variable Contributions .
See Note 5 of Notes to Consolidated Financial Statements included in this Form 10-K for additional 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.
There were no borrowings under our Revolving Credit Facility during the years ending December 31, 2022 or December 31, 2021. See “Sources of Liquidity” below for a further discussion of subsequent borrowing activity.
We had no borrowings under our Revolving Credit Facility during the year ended December 31, 2022. See “Sources of Liquidity” below for a further discussion of subsequent borrowing activity.
Debt See Note 9 of Notes to Consolidated Financial Statements included in this Report for further details with respect to the 4.50% Senior Notes due 2031 (“4.50% Senior Notes”) and 4.625% Senior Notes due 2028 (“4.625% Senior Notes”) and the redemption of our 6.50% Senior Notes due 2025 (“6.50% Senior Notes”).
See Note 9 of Notes to Consolidated Financial Statements included in this Form 10-K for further details with respect to the 4.50% Senior Notes maturing in 2031 (“4.50% Senior Notes”) and 4.625% Senior Notes maturing in 2028 (“4.625% Senior Notes”).
We have a process for determining the need for a valuation allowance with respect to these attributes. The process includes an extensive review of both positive and negative evidence including our earnings history, future earnings, adverse recent occurrences, carryforward periods, an assessment of the industry and the impact of the timing differences.
The process includes an extensive review of both positive and negative evidence including our earnings history, future earnings, adverse recent occurrences, carryforward periods, an assessment of the industry, and the impact of the timing differences.
We anticipate total capital spending in 2023 of approximately $170.0 million to $190.0 million, of which approximately 60% of total spending will be focused on growth initiatives, primarily reflecting continued investment in the new roll coat line at Warrick.
We anticipate total capital spending in 2024 of $170.0 million to $190.0 million, of which approximately 65% will be focused on growth initiatives, primarily reflecting continued investment in the new roll coat line at Warrick, which we anticipate will be approximately $100 million. In addition, approximately $10 million is attributable to our Phase VII growth project at our Trentwood facility.
The income tax benefit for 2021 was $5.5 million, resulting in an effective tax rate of 22.9%.
The income tax benefit for 2022 was $8.3 million, resulting in an effective tax rate of 21.9%.
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.
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. 39 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 2023 and 2022 and subsequent to December 31, 2023.
We are required to pay $0.3 million in annual administrative fees related to the VEBA that provides benefits for eligible retirees represented by certain unions and their surviving spouses and eligible dependents through September 2025. See Note 5 of Notes to Consolidated Financial Statements included in this Report for additional information. Purchase Obligations.
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.
The increase in average realized sales price per pound reflected a $0.28/lb (21%) increase in average Hedged Cost of Alloyed Metal prices per pound and an $0.11/lb (11%) increase in Conversion Revenue per pound reflecting higher pricing and surcharges to offset higher inflationary and commodity related costs. See the table in “Selected Operational and Financial Information” below for further details.
The decrease in average realized sales price per pound reflected a $0.28/lb (17%) decrease in average Hedged Cost of Alloyed Metal prices per pound offset by a $0.13/lb (12%) increase in Conversion Revenue per pound reflecting higher pricing and surcharges to offset higher inflationary and commodity related costs.
See Note 9 and Note 13 of Notes to Consolidated Financial Statements included in this Report for details. Income Tax Benefit. The income tax benefit for 2022 was $8.3 million, resulting in an effective tax rate of 21.9%.
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 2023 was $9.1 million, resulting in an effective tax rate of 16.2%.
The increase during 2022 compared to 2021 of $832.1 million reflected: (i) a $534.4 million increase in Hedged Cost of Alloyed Metal and (ii) a $297.7 million increase in net manufacturing conversion and other costs.
The decrease during 2023 compared to 2022 of $425.3 million reflected: (i) a $424.1 million decrease in Hedged Cost of Alloyed Metal and (ii) a $1.2 million decrease in net manufacturing conversion and other costs.
At December 31, 2022, we had uncertain tax positions which ultimately could result in tax payments. See Note 14 of Notes to Consolidated Financial Statements included in this Report for further information. Deferred Compensation Plan Liability.
At December 31, 2023, 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. 38 Pension, OPEB, and Salaried VEBA.
Adjusted EBITDA reflects the realized loss of such settlements. 2. See Note 4 of Notes to Consolidated Financial Statements included in this Report for additional information relating to the impairment of goodwill in 2022. 3. Non-run-rate environmental expenses are related to legacy activities at operating facilities prior to July 6, 2006.
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. 4.
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, 2022 constituted approximately 47% of our Net sales.
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.
See our Statements of Consolidated Stockholders’ Equity included in this Report for information regarding minimum statutory tax withholding obligations arising during 2022 and 2021 in connection with the vesting of non-vested shares, restricted stock units and performance shares.
At December 31, 2023, $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 2023 and 2022 in connection with the vesting of non-vested shares, restricted stock units, and performance shares.
Operating lease liabilities represent multi-year obligations for certain manufacturing facilities, warehouses, office space and equipment as of December 31, 2022. See Note 3 of Notes to Consolidated Financial Statements included in this Report for the maturity of our lease liabilities associated with our operating lease portfolio. Finance Leases. Finance lease liabilities represent non-cancelable capital commitments as of December 31, 2022.
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.
In order to determine the effective tax rate to apply to interim periods, estimates and judgments are made (by taxable jurisdiction) as to the amount of taxable income that may be generated, the availability of deductions and credits expected and the availability of net operating loss carryforwards or other tax attributes to offset taxable income.
Inherent within the completion of our assessment of the need for a valuation allowance, we make significant judgments and estimates with respect to future operating results, timing of the reversal of deferred tax assets and current market and industry factors. 40 In order to determine the effective tax rate to apply to interim periods, estimates and judgments are made (by taxable jurisdiction) as to the amount of taxable income that may be generated, the availability of deductions and credits expected and the availability of net operating loss carryforwards or other tax attributes to offset taxable income.
See above in “Consolidated Selected Operational and Financial Information” for further details. 34 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: Year Ended December 31, 2022 2021 Aero/HS Products: Shipments (mmlbs) 186.5 161.6 $ $ / lb $ $ / lb Net sales $ 676.1 $ 3.63 $ 533.7 $ 3.30 Less: Hedged Cost of Alloyed Metal (319.8 ) (1.72 ) (219.0 ) (1.35 ) Conversion Revenue $ 356.3 $ 1.91 $ 314.7 $ 1.95 Packaging: Shipments (mmlbs) 655.3 541.7 $ $ / lb $ $ / lb Net sales $ 1,585.3 $ 2.42 $ 1,119.3 $ 2.07 Less: Hedged Cost of Alloyed Metal (1,030.6 ) (1.57 ) (730.0 ) (1.35 ) Conversion Revenue $ 554.7 $ 0.85 $ 389.3 $ 0.72 GE Products: Shipments (mmlbs) 303.9 298.2 $ $ / lb $ $ / lb Net sales $ 883.8 $ 2.91 $ 706.1 $ 2.37 Less: Hedged Cost of Alloyed Metal (517.2 ) (1.70 ) (409.0 ) (1.37 ) Conversion Revenue $ 366.6 $ 1.21 $ 297.1 $ 1.00 Automotive Extrusions: Shipments (mmlbs) 96.5 94.0 $ $ / lb $ $ / lb Net sales $ 254.8 $ 2.64 $ 225.0 $ 2.39 Less: Hedged Cost of Alloyed Metal (159.0 ) (1.65 ) (128.4 ) (1.36 ) Conversion Revenue $ 95.8 $ 0.99 $ 96.6 $ 1.03 Other Products: Shipments (mmlbs) 12.0 26.1 $ $ / lb $ $ / lb Net sales $ 27.9 $ 2.33 $ 37.9 $ 1.45 Less: Hedged Cost of Alloyed Metal (18.6 ) (1.55 ) (24.4 ) (0.93 ) Conversion Revenue $ 9.3 $ 0.78 $ 13.5 $ 0.52 Total: Shipments (mmlbs) 1,254.2 1,121.6 $ $ / lb $ $ / lb Net sales $ 3,427.9 $ 2.73 $ 2,622.0 $ 2.34 Less: Hedged Cost of Alloyed Metal 1,2 (2,045.2 ) (1.63 ) (1,510.8 ) (1.35 ) Conversion Revenue $ 1,382.7 $ 1.10 $ 1,111.2 $ 0.99 1.
See above in “Consolidated Results of Operations” for further details. 35 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: Year Ended December 31, 2023 2022 Aero/HS Products: Shipments (mmlbs) 254.3 186.5 $ $ / lb $ $ / lb Net sales $ 899.3 $ 3.54 $ 676.1 $ 3.63 Less: Hedged Cost of Alloyed Metal (366.4 ) (1.44 ) (319.8 ) (1.72 ) Conversion Revenue $ 532.9 $ 2.10 $ 356.3 $ 1.91 Packaging: Shipments (mmlbs) 612.4 655.3 $ $ / lb $ $ / lb Net sales $ 1,315.2 $ 2.15 $ 1,585.3 $ 2.42 Less: Hedged Cost of Alloyed Metal (812.0 ) (1.33 ) (1,030.6 ) (1.57 ) Conversion Revenue $ 503.2 $ 0.82 $ 554.7 $ 0.85 GE Products: Shipments (mmlbs) 215.6 303.9 $ $ / lb $ $ / lb Net sales $ 596.5 $ 2.77 $ 883.8 $ 2.91 Less: Hedged Cost of Alloyed Metal (291.4 ) (1.35 ) (517.2 ) (1.70 ) Conversion Revenue $ 305.1 $ 1.42 $ 366.6 $ 1.21 Automotive Extrusions: Shipments (mmlbs) 104.5 96.5 $ $ / lb $ $ / lb Net sales $ 254.9 $ 2.44 $ 254.8 $ 2.64 Less: Hedged Cost of Alloyed Metal (138.7 ) (1.33 ) (159.0 ) (1.65 ) Conversion Revenue $ 116.2 $ 1.11 $ 95.8 $ 0.99 Other Products: Shipments (mmlbs) 9.6 12.0 $ $ / lb $ $ / lb Net sales $ 21.1 $ 2.20 $ 27.9 $ 2.33 Less: Hedged Cost of Alloyed Metal (12.6 ) (1.31 ) (18.6 ) (1.55 ) Conversion Revenue $ 8.5 $ 0.89 $ 9.3 $ 0.78 Total: Shipments (mmlbs) 1,196.4 1,254.2 $ $ / lb $ $ / lb Net sales $ 3,087.0 $ 2.58 $ 3,427.9 $ 2.73 Less: Hedged Cost of Alloyed Metal 1 (1,621.1 ) (1.35 ) (2,045.2 ) (1.63 ) Conversion Revenue $ 1,465.9 $ 1.23 $ 1,382.7 $ 1.10 1.
A change in our estimated average margins by 5% would have had an impact of approximately $0.2 million to Net (loss) income for the year ended December 31, 2022. 41 Description Judgments and Uncertainties Potential Effect If Actual Results Differ From Assumptions Income Tax. We have tax attributes available to offset the impact of future income taxes.
A change in our estimated average margins by 5% would have had an impact of approximately $0.2 million to Net income for the year ended December 31, 2023. Income Tax We have tax attributes available to offset the impact of future income taxes. We have a process for determining the need for a valuation allowance with respect to these attributes.
See Note 9 of Notes to Consolidated Financial Statements included in this Report for further details. Borrowing availability under the Revolving Credit Facility was determined by a borrowing base calculated as of December 31, 2022 and December 31, 2021 using the terms of the Revolving Credit Facility in effect as of those dates.
See Note 9 of Notes to Consolidated Financial Statements included in this Form 10-K for further details. Borrowing availability under the Revolving Credit Facility was determined by a borrowing base calculated as of December 31, 2023 and December 31, 2022. We place our cash in bank deposits and money market funds with high credit quality financial institutions.
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, 2022, $93.1 million remained authorized and available for future repurchases of common stock under our stock repurchase program.
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.
The decrease in 2022 compared with 2021 was primarily due to a $16.8 million decrease in legal, consulting and outsourced service expenses primarily related to the completion of Warrick integration activities, partially offset by: (i) a $6.7 million increase due to the addition of Warrick operations and (ii) a $2.4 million increase in salaries and benefits. Goodwill Impairment.
The $11.8 million increase in 2023 compared to 2022 was primarily due to: (i) an $11.2 million increase in salaries, benefits, and incentive compensation and (ii) a $2.7 million increase in legal fees, partially offset by a $3.6 million decrease in consulting and outsourced services. Goodwill Impairment .
See Statements of Consolidated Cash Flows included in this Report for further details on our cash flows from operating, investing and financing activities for the years ended December 31, 2022 and December 31, 2021. 36 Sources of Liquidity We believe our available cash and cash equivalents, borrowing availability under the Revolving Credit Facility and funds generated from operations are our most significant sources of liquidity, and that our Revolving Credit Facility and unsecured notes have covenants that allow us to operate our business with limited restrictions and significant flexibility for the foreseeable future.
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, 2023 and December 31, 2022. 37 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.
A change in our effective tax rate by 1% would have had an impact of approximately $0.4 million to Net (loss) income for the year ended December 31, 2022. 42 Description Judgments and Uncertainties Potential Effect If Actual Results Differ From Assumptions Acquisitions, Goodwill and Intangible Assets.
A change in our effective tax rate by 1% would have had an impact of approximately $0.6 million to Net income for the year ended December 31, 2023.
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.
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.
See Note 4 of Notes to Consolidated Financial Statements included in this Report for further details. Interest Expense. Interest expense represents cash and non-cash interest expense incurred on our unsecured senior notes and our Revolving Credit Facility, net of capitalized interest.
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 10 of Notes to Consolidated Financial Statements included in this Report for additional information relating to the environmental expenses. 4. Acquisition costs are non-run-rate acquisition-related transaction costs, which include professional fees, as well as non‑cash hedging charges recorded in connection with our Warrick acquisition. Adjusted EBITDA for 2022 was $42.9 million lower than Adjusted EBITDA for 2021.
Acquisition costs are non-run-rate acquisition-related transaction costs, which include professional fees, as well as non‑cash hedging charges recorded in connection with our Warrick acquisition. Adjusted EBITDA for 2023 was $67.7 million higher than Adjusted EBITDA for 2022.
See “Selected Operational and Financial Information” below for a further discussion of the comparative results of operations for 2022 and 2021. Depreciation and Amortization. Depreciation and amortization for 2022 was $106.9 million compared to $91.5 million for 2021. The increase of $15.4 million was primarily attributable to a full year of Warrick operations.
See “Selected Operational and Financial Information” below for a further discussion of the comparative results of operations for 2023 and 2022. Depreciation and Amortization. Depreciation and amortization for 2023 was $108.6 million compared to $106.9 million for 2022. The increase of $1.7 million was primarily attributable to various construction-in-progress projects being placed in service related to manufacturing cost efficiency initiatives.
At February 20, 2023, we had $10.2 million in outstanding borrowings under the Revolving Credit Facility after repaying $19.3 million on total borrowings of $29.5 million incurred subsequent to December 31, 2022. See Note 9 of Notes to Consolidated Financial Statements included in this Report for a description of our Revolving Credit Facility.
See Note 16 of Notes to Consolidated Financial Statements included in this Form 10-K for information regarding restricted cash at December 31, 2023. We had no outstanding borrowings as of December 31, 2023 under our Revolving Credit Facility, after repaying borrowings of $215.1 million incurred during the year ended December 31, 2023.
Results of Operations Fiscal 2022 Summary • Strong demand for GE products and Packaging; • Increasing demand for our aerospace and high strength products (“Aero/HS products”) within commercial aerospace while defense and business jet applications demand remained strong; • Modest increase in Automotive Extrusions shipments as the market slowly continued to recover; • Molten metal and magnesium supply chain issues impacted results; • Diversification of our supply base to no longer be reliant on a single supplier or geographical region; • Negotiated more efficient contained metal and alloy cost pass throughs and commodity price adjustments in our customer contracts to help mitigate the impact of higher material and other inflationary costs on our business; • Completion of planned major outage, which included refurbishment of the large stretcher, at our Trentwood facility; • As of December 31, 2022, we had $615.2 million of combined cash and cash equivalents and net borrowing availability under our revolving credit facility with Wells Fargo Bank, National Association, as administrative agent, and the other financial institutions party thereto (“Revolving Credit Facility”); • We paid a total of approximately $50.1 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, 2022, reflecting a 7% increase in the quarterly dividend compared with the prior year ended December 31, 2021.
Results of Operations Fiscal 2023 Summary • Increasing demand for our Aero/HS Products within commercial aerospace and space applications, while defense and business jet applications demand remained strong; • Continued destocking in our Packaging and GE Products end markets; • Negotiated more efficient contained metal pass throughs and commodity price adjustments in our customer contracts to help mitigate the impact of higher material and other inflationary costs on our business; • Capital investment was $143.2 million for the year, driven by the fourth roll coat line investment at our Warrick facility; • As of December 31, 2023, we had $599.1 million of combined cash and cash equivalents and net borrowing availability under our Revolving Credit Facility; • We paid a total of approximately $50.4 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, 2023. 33 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.
For further details on goodwill and intangible assets, see Note 4 of Notes to Consolidated Financial Statements included in this Report. 43 Description Judgments and Uncertainties Potential Effect If Actual Results Differ From Assumptions Pension and Other Postretirement Benefits.
For further details on goodwill and intangible assets, see Note 4 of Notes to Consolidated Financial Statements included in this Form 10-K.
See Note 1 of Notes to Consolidated Financial Statements included in this Report for further details with respect to these supply chain financing programs.
Receivables involved with these customer‑based supply chain finance programs for the year ended December 31, 2023 constituted approximately 41% 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.
After successfully securing and qualifying magnesium from additional sources, on September 6, 2022 we announced that we had lifted our force majeure declaration and have now sourced Warrick's magnesium requirements through 2023 and beyond. We believe our supply base is now well diversified, as it is not reliant on any one single supplier or geographical region.
After successfully securing and qualifying magnesium from additional sources, on September 6, 2022, we announced that we had lifted our force majeure declaration.
Of the $534.4 million increase in Hedged Cost of Alloyed Metal, $355.6 million was due to higher hedged metal cost and $178.8 million was due to higher shipment volume, as discussed above in “Net Sales.” The $297.7 million increase in net manufacturing conversion and other costs was primarily due to: (i) a $120.9 million increase related to higher sales, primarily due to a full year of shipments during 2022 as a result of our Warrick acquisition, which was 32 completed on March 31, 2021; (ii) an $85.9 million increase in manufacturing costs due to lower efficiencies and higher employee related costs; (iii) $49.8 million of higher benefits and overhead costs; (iv) $28.4 million of higher energy, freight and metal costs driven by inflation, transportation bottlenecks and supply chain inefficiencies; and (v) $8.3 million of higher planned major maintenance costs.
Of the $424.1 million decrease in Hedged Cost of Alloyed Metal, $329.7 million was due to lower hedged metal cost and $94.4 million was due to lower shipment volume, as discussed above in “Net Sales.” The $1.2 million decrease in net manufacturing conversion and other costs was primarily due to: (i) a $19.8 million decrease related to lower shipments; (ii) a $10.9 million decrease in other costs, primarily due to lower freight costs; and (iii) a $3.2 million decrease in environmental costs, partially offset by: (i) a net $25.3 million increase in manufacturing costs primarily due to higher labor and material costs and (ii) a $7.4 million increase in major maintenance.
Goodwill impairment of $20.5 million for the year ended December 31, 2022 reflected our write-off of the goodwill we obtained from our acquisition of Warrick. See Note 4 of Notes to Consolidated Financial Statements included in this Report for further details. Restructuring Costs (Benefit). Restructuring costs (benefit) reflects the impacts of our restructuring plans initiated in 2022 and 2020.
See Note 4 of Notes to Consolidated Financial Statements included in this Form 10-K for further details. Restructuring Costs. Restructuring costs reflect the impacts of our restructuring plans initiated in 2022 and 2020. 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 .

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeBased on the aluminum derivative positions held by us to hedge firm-price customer sales agreements, we estimate that a $0.10/lb decrease in the London Metal Exchange (“LME”) market price of aluminum as of December 31, 2022 and December 31, 2021, with all other variables held constant, would have resulted in an unrealized mark-to-market loss of $6.3 million and $8.0 million, respectively, with corresponding changes to the net fair value of our aluminum derivative positions.
Biggest changeAt December 31, 2023, we had derivative contracts with respect to approximately 56.4 million pounds and 7.1 million pounds to hedge sales to be made in 2024 and 2025, respectively, on pricing terms that create aluminum price risk for us. 42 Based on the aluminum derivative positions held by us to hedge firm-price customer sales agreements, we estimate that a $0.10/lb decrease in the LME market price of aluminum as of December 31, 2023 and December 31, 2022, with all other variables held constant, would have resulted in an unrealized mark-to-market loss of $6.3 million in both periods, with corresponding changes to the net fair value of our aluminum derivative positions.
Energy We are exposed to risk of fluctuating prices for natural gas and electricity. We, from time to time, in the ordinary course of business, enter into hedging transactions and/or physical delivery commitments with firm prices with third parties to mitigate our risk from fluctuations in natural gas and electricity prices.
Energy We are exposed to the risk of fluctuating prices for natural gas and electricity. We, from time to time, in the ordinary course of business, enter into hedging transactions and/or physical delivery commitments with firm prices with third parties to mitigate our risk from fluctuations in natural gas and electricity prices.
We estimate that a 10% decrease in the exchange rate of our hedged foreign currencies to U.S. dollars would have resulted in $0.1 million and an immaterial unrealized mark-to-market loss as of December 31, 2022 and December 31, 2021, respectively, with corresponding changes to the net fair value of our foreign currency derivative positions.
We estimate that a 10% decrease in the exchange rate of our hedged foreign currencies to U.S. dollars would have resulted in an unrealized mark-to-market loss of $1.9 million and $0.1 million as of December 31, 2023 and December 31, 2022, respectively, with corresponding changes to the net fair value of our foreign currency derivative positions.
We estimate that a $1.00 per mmbtu decrease in natural gas prices would have resulted in an unrealized mark-to-market loss of $3.5 million and $5.2 million as of December 31, 2022 and December 31, 2021, respectively, with corresponding changes to the net fair value of our natural gas derivative positions.
We estimate that a $1.00 per mmbtu decrease in natural gas prices would have resulted in an unrealized mark-to-market loss of $3.4 million and $3.5 million as of December 31, 2023 and December 31, 2022, respectively, with corresponding changes to the net fair value of our natural gas derivative positions.
Additionally, we estimate that a $0.05/lb decrease in the Midwest premium for aluminum as of December 31, 2022 and December 31, 2021, with all other variables held constant, would have resulted in an unrealized mark-to-market loss of $3.2 million and $4.0 million, respectively, with corresponding changes to the net fair value of our aluminum derivative positions.
In addition, we estimate that a $0.05/lb decrease in the Midwest premium for aluminum as of December 31, 2023 and December 31, 2022, with all other variables held constant, would have resulted in an unrealized mark-to-market loss of $1.4 million and $3.2 million, respectively, with corresponding changes to the net fair value of our aluminum derivative positions.
Our primary foreign exchange exposure is the operating costs of our London, Ontario facility. We estimate that a 10% change in the Canadian dollar exchange rate as of December 31, 2022 and December 31, 2021 would have resulted in an annual operating cost impact of $2.6 million and $2.2 million, respectively. 45 KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
Our primary foreign exchange exposure is the operating costs of our London, Ontario facility. We estimate that a 10% change in the Canadian dollar exchange rate as of December 31, 2023 and December 31, 2022 would have resulted in an annual operating cost impact of $2.7 million and $2.6 million, respectively. 43 KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
We estimate that a $5.00 per Mwh decrease in electricity prices as of December 31, 2021, would have resulted in an unrealized mark‑to‑market loss of $1.1 million with corresponding changes to the net fair value of our electricity derivative positions. As of December 31, 2022, we had no outstanding electricity derivative positions.
We estimate that a $5.00 per Mwh decrease in electricity prices would have resulted in an unrealized mark‑to‑market loss of $0.3 million as of December 31, 2023, with corresponding changes to the net fair value of our electricity derivative positions. As of December 31, 2022, we had no outstanding electricity derivative positions.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk The following quantitative and qualitative disclosures about market risk should be read in conjunction with Note 8 and Note 11 of Notes to Consolidated Financial Statements included in this Report.
Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk The following quantitative and qualitative disclosures about market risk should be read in conjunction with Note 8 and Note 11 of Notes to Consolidated Financial Statements included in this Form 10-K.
As of December 31, 2022, we had forward swap contracts with settlement dates designed to align with the timing of scheduled purchases of zinc and copper (“Alloying Metals”) by our manufacturing facilities.
As of December 31, 2023, we had forward swap contracts with settlement dates designed to align with the timing of scheduled purchases of zinc and copper by our manufacturing facilities.
We estimate that a $0.10/lb decrease in the market price of Alloying Metals as of December 31, 2022 and December 31, 2021, with all other variables held constant, would have resulted in an unrealized mark-to-market loss of $0.1 million and $0.6 million, respectively, with corresponding changes to the net fair value of our Alloying Metals derivative positions.
We estimate that a $0.10/lb decrease in the market price of zinc and copper as of December 31, 2023 and December 31, 2022, with all other variables held constant, would have resulted in an unrealized mark-to-market loss of $0.8 million and $0.1 million, respectively, with corresponding changes to the net fair value of our zinc and copper derivative positions.
Foreign Currency As of December 31, 2022, we hedged certain lease transactions and equipment purchases denominated in euros and British pounds using forward swap contracts with settlement dates through February 2024.
Foreign Currency As of December 31, 2023, we hedged certain lease transactions and equipment purchases denominated in Euros and British Pounds using forward swap contracts with settlement dates through January 2026.
We have historically utilized hedging transactions to lock in a specified price or range of prices for certain products which we sell or consume in our production process, and to mitigate our exposure to changes in energy prices. 44 Aluminum In 2022 and 2021, settlements of derivative contracts covering 271.9 million pounds and 187.2 million pounds, respectively, hedged shipments sold on pricing terms that created aluminum price risk for us.
We have historically utilized hedging transactions to lock in a specified price or range of prices for certain products which we sell or consume in our production process, and to mitigate our exposure to changes in energy prices.
At December 31, 2022, we had derivative contracts with respect to approximately 60.5 million pounds and 2.5 million pounds to hedge sales to be made in 2023 and 2024, respectively, on pricing terms that create aluminum price risk for us.
Aluminum In 2023 and 2022, settlements of derivative contracts were for 207.5 million pounds and 271.9 million pounds, respectively, of hedged shipments sold on pricing terms that created aluminum price risk for us.

Other KALU 10-K year-over-year comparisons