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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”). 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. “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. 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. 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. 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. These measures are presented because management uses this information to monitor and evaluate financial results and trends and believes this information to also be useful for investors.

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

Changes in Presentation of Non-GAAP Financial Measures

Change from Value Added Revenue to Conversion Revenue. Beginning with the year ended December 31, 2022, we determined that we will rename our previously used non-GAAP financial measure, “value added revenue” or “VAR,” to “Conversion Revenue.” The change is based on discussions with staff of the SEC pertaining to comment letters received during 2022 and is intended to more clearly characterize the metric as a subcomponent of revenue. Separately, due to high inflationary trends and the historically unprecedented volatility of alloy costs starting in early 2022, we renegotiated certain customer contracts and amendments to existing contracts to replace future price adjustments based on higher commodity and alloy costs with adjustments that pass through commodity and alloy cost. In addition, effective January 1, 2022, we have determined that we will prospectively change our approach from including a portion of alloyed metal cost within Hedged Cost of Alloyed Metal to include all alloyed metal cost. Periods prior to 2022 have not been adjusted as these changes were deemed effective as of January 1, 2022. This approach further aligns the presentation with our business model objective of “metal price neutrality,” as described below in our “Metal Pricing Policies” discussion. We have also expanded our disclosures regarding the nature of the costs included in the Hedged Cost of Alloyed Metal amounts in light of the comments from the SEC. See the table in “Results of Operations – Selected Operational and Financial Information” below for further details.

Change to Adjusted EBITDA. We have determined that we will revise our presentation of Adjusted EBITDA to no longer adjust our operating results for the impact of last-in, first-out (“LIFO”) calculated on an annual basis to LIFO calculated on a monthly basis done at a plant level, previously identified as “Adjustments to plant-level LIFO.” This change is based on discussions with the SEC pertaining to comment letters received during 2022. For comparability, references to prior periods’ Adjusted EBITDA have been updated to show the effect of this change. See the table in “Results of Operations – Selected Operational and Financial Information” below for further details.

Metal Pricing Policies

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

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. In June 2022, US Mag deliveries unexpectedly stopped while performance of the smelter also rapidly deteriorated, negatively impacting Warrick’s operating efficiency and financial performance. As a result of the abrupt and unexpected decline in magnesium supply, on July 7, 2022, we declared force majeure at Warrick due to the limited availability of magnesium utilized in the production of our beverage and food packaging products, reducing our ability to produce those products at the time.

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. In addition, the molten metal supply at Warrick has improved to an acceptable level and we have secured access to alternative sources of molten metal to further diversify our Warrick metal supply and mitigate the risk of further smelter operational disruptions.

Management Review of 2022 and Outlook for the Future

Review

The full year 2022 was a pivotal year in our evolution as we believe we laid the necessary groundwork to position ourselves for long-term, sustainable growth despite the numerous challenges we encountered, including unprecedented supply chain disruptions, inflationary cost pressures and labor turnover, which negatively impacted our financial performance. We continue to work with our customers to negotiate improvements to commodity price adjustments to mitigate the impact of inflationary and volatile commodity costs on our business and improve our margin profile. We are prioritizing investments in our growth through our roll coat capacity expansion project at Warrick, which we expect will become operational by mid-to-late 2024. In addition, we remain well positioned to service the recovery we have been experiencing in aerospace and continued demand for general engineering (plate) following the completion of a long planned, major outage at our Spokane, Washington (“Trentwood”) facility in the third quarter of 2022.

Outlook

Looking ahead, we remain intently focused on continuing to pursue cost reductions in our operations, as well as improving efficiencies and implementing commercial actions to increase our margins. We believe the strategy we have in place should lead to improved performance in the year ahead with our full year 2022 Adjusted EBITDA representing a temporary low point. While our efforts will take time to manifest, we are confident in our ability to execute given our solid market position as a key supplier, diverse end markets with strong secular growth characteristics, deep customer relationships and multi-year contracts with strategic partners.

We remain well positioned to navigate the current demand environment prevailing in our end markets in 2023. We expect demand in commercial aerospace to continue to strengthen throughout 2023 towards levels before the Coronavirus Disease 2019 (“COVID‐19”) pandemic with both business jet and defense remaining strong. In our beverage and food packaging (“Packaging”) end market, we expect our operations will return to more normalized levels in 2023 now that the most significant supply chain issues have been resolved, despite continuing impacts from higher metal costs and a lag in passing through certain costs. General engineering (“GE Products”) end market demand is expected to soften for plate and rod and bar products on stable pricing levels as distributors destock inventories after taking advantage of lower metal prices in the second half of 2022. In the automotive end market (“Automotive Extrusions”), we do not expect a meaningful recovery until mid-to-late 2023.

We are cautiously optimistic our consolidated adjusted EBITDA margin (Adjusted EBITDA as a percentage of Conversion Revenue) will begin to strengthen in 2023 as we return to more normalized costs, improved efficiencies and continued commercial actions.

Results of Operations

Fiscal 2022 Summary

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Strong demand for GE products and Packaging;

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Increasing demand for our aerospace and high strength products (“Aero/HS products”) within commercial aerospace while defense and business jet applications demand remained strong;

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Modest increase in Automotive Extrusions shipments as the market slowly continued to recover;

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Molten metal and magnesium supply chain issues impacted results;

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Diversification of our supply base to no longer be reliant on a single supplier or geographical region;

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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;

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Completion of planned major outage, which included refurbishment of the large stretcher, at our Trentwood facility;

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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”);

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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.

Consolidated Selected Operational and Financial Information

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

Net Sales. We reported Net sales for 2022 of $3,427.9 million, compared to $2,622.0 million for 2021. The increase in Net sales reflected a 132.6 million pound (12%) increase in shipment volume and a $0.39/lb increase in average realized sales price per pound. The shipment volume increase reflected: (i) a 113.6 million pound (21%) increase in Packaging reflecting a full year of shipments during 2022 as a result of our Warrick acquisition, which was completed on March 31, 2021, partially impacted by reduced shipments in the second half of 2022 due to the third quarter force majeure event at Warrick; (ii) a 24.9 million pound (15%) increase in Aero/HS products reflecting continued strength in demand for our business jet and defense related applications, and improved demand for commercial aerospace as we continued to see the recovery in air travel and higher shipments of new aircraft from both major airframe producers, partially offset by constrained plate shipments during the quarter ended September 30, 2022 due to our planned major outage at our Trentwood facility; (iii) a 5.7 million pound (2%) increase in GE products reflecting continued strong underlying demand for semiconductor plate and industrial and machine tools; and (iv) a 2.5 million pound (3%) increase in Automotive Extrusions, which was relatively flat over prior year, driven by the shortage of semiconductors and industry supply chain issues that impacted the North American automotive production levels. The shipment volume increase was partially offset by a 14.1 million pound (54%) decrease in our other industrial end market application (“Other products”).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 Revenueper 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.

Cost of Products Sold, Excluding Depreciation and Amortization and Other Items (“Cost of products sold”). Cost of products sold for 2022 totaled $3,180.2 million, or 93% of Net sales, compared to $2,348.1 million, or 90% of Net sales, in 2021. 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. 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

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. 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.

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. 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. 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 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. 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. 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 and Note 13 of Notes to Consolidated Financial Statements included in this Report for details.

Income Tax Benefit. The income tax benefitfor 2022 was $8.3 million, resulting in an effective tax rate of 21.9%. 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 income tax benefit for 2021 was $5.5 million, resulting in an effective tax rate of 22.9%. There was no material difference between the effective tax rate and the projected blended statutory tax rate for 2021.

Selected Operational and Financial Information

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

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

Year Ended December 31,

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 instruments1 1.4 1.4

Goodwill impairment2 20.5 —

Non-cash asset impairment charges 3.2 —

Net periodic post retirement service cost relating to Salaried VEBA 0.1 0.1

Environmental expenses3 3.2 0.2

Total non-run-rate items 31.0 28.9

Mark-to-market loss on derivative instruments for 2022 and 2021 represents loss on non-designated commodity hedges. Additionally, in 2021, the loss represents the reversal of mark-to-market loss on hedges entered into prior to the adoption of Accounting Standards Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities and settled in the periods presented above. Adjusted EBITDA reflects the realized loss of such settlements.

See Note 4 of Notes to Consolidated Financial Statements included in this Report for additional information relating to the impairment of goodwill in 2022.

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

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. Adjusted EBITDA for 2022 reflected a full year of Packaging volume during 2022 as a result of our Warrick acquisition on March 31, 2021, offset by approximately $73.0 million of incremental costs associated with magnesium and metal supply chain issues at our packaging operations, see above in “Molten Metal and Magnesium Supply Chain Issues,” coupled with the planned outage at our Trentwood facility. In addition, we had inflation-driven higher energy, manufacturing and employee related cost that were not fully recovered through pricing increases. See above in “Consolidated Selected Operational and Financial Information” for further details.

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,

Aero/HS Products:

$ $ / lb $ $ / lb

Packaging:

$ $ / lb $ $ / lb

GE Products:

$ $ / lb $ $ / lb

Automotive Extrusions:

$ $ / lb $ $ / lb

Other Products:

$ $ / lb $ $ / lb

Less: Hedged Cost of Alloyed Metal (18.6 ) (1.55 ) (24.4 ) (0.93 )

Total:

$ $ / lb $ $ / lb

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. See Note 8 of Notes to Consolidated Financial Statements included in this Report for the total realized loss (gain) on aluminum hedges for which we hedged the metal price exposure externally.

As previously described, effective January 1, 2022, we prospectively changed our approach of quantifying Hedged Cost of Alloyed Metal from including a portion of alloyed metal cost to include all alloyed metal cost. This prospective change resulted in the following decreases of Conversion Revenue by end market: (i) $32.2 million of Aero/HS products; (ii) $49.4 million of Packaging; (iii) $22.4 million of GE products; (iv) $7.1 million of Automotive extrusions; and (v) $0.8 million of Other products, for a total decrease of $111.9 million in 2022 compared to our historical presentation of this metric.

Liquidity and Capital Resources

Summary

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

As of December 31,

Available cash and cash equivalents $ 57.4 $ 303.2

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”). 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.

We place our cash in bank deposits and money market funds with high credit quality financial institutions. Cash equivalents primarily consist of money market funds, which are highly liquid.

See Note 16 of Notes to Consolidated Financial Statements included in this Report for information regarding restricted cash at December 31, 2022.

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.

Cash Flows

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

Year Ended December 31,

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 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.

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.

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. 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.

We do not believe that covenants contained in the Revolving Credit Facility are reasonably likely to limit our ability to raise additional debt or equity should we choose to do so during the next 12 months, nor do we believe it is likely that during the next 12 months we will trigger the availability threshold that would require measuring and maintaining a fixed charge coverage ratio.

At February 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.

We engage in certain customer-based supply chain financing programs to accelerate the receipt of payment for outstanding accounts receivable from certain customers. Costs of these programs are typically reimbursed to us by the customer. Receivables transferred under these customer-based supply chain financing programs generally meet the requirements to be accounted for as sales resulting in the derecognition of such receivables from our consolidated balance sheets. Receivables involved with these customer‐based supply chain finance programs for the year ended December 31, 2022 constituted approximately 47% of our Net sales. See Note 1 of Notes to Consolidated Financial Statements included in this Report for further details with respect to these supply chain financing programs.

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”).

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.

Capital Expenditures and Investments

We strive to strengthen our competitive position across our end markets through strategic capital investment. Significant investments over the past decade have positioned us well with increased capacity and expanded manufacturing capabilities while more recent capital projects have focused on further enhancing manufacturing cost efficiency, improving product quality and promoting operational security, which we believe are critical to maintaining and strengthening our position in an increasingly competitive market environment. A significant portion of our capital spending over the past several years related to the modernization project at our Trentwood rolling mill, which focused on equipment upgrades throughout the process flow to reduce conversion costs, increase efficiency and further improve our competitive cost position on all products produced at our Trentwood facility. 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 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. 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.

Our capital investment plans remain focused on supporting demand growth through capacity expansion, sustaining our operations, enhancing product quality and increasing operating efficiencies. We anticipate total capital spending in 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 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.

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

Dividends

We have consistently paid a quarterly cash dividend since the second quarter of 2007 to holders of our common stock, including holders of restricted stock, and have increased the dividend in each year since 2011. 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. We can give no assurance that dividends will be declared and paid in the future.

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

See our Statements of Consolidated Stockholders’ Equity and Note 18 of Notes to Consolidated Financial Statements included in this Report for information regarding dividends declared during 2022 and 2021 and subsequent to December 31, 2022.

Repurchases of Common Stock

We suspended share repurchases as of March 2020. We will continue to assess share repurchases as a part of our capital allocation priorities and strategic investment opportunities identified to support further growth in our business. At December 31, 2022, $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 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.

Environmental Commitments and Contingencies

See Note 10 of Notes to Consolidated Financial Statements included in this Report for information regarding our environmental commitments and contingencies.

Contractual Obligations, Commercial Commitments and Off-Balance Sheet Arrangements

The discussion below summarizes our significant contractual obligations, commercial commitments and off-balance sheet arrangements as of December 31, 2022.

Principal and Interest on 4.50% Senior Notes and 4.625% Senior Notes. See Note 9 of Notes to Consolidated Financial Statements included in this Report for information, including the timing of principal and interest payments, associated with our debt.

Standby Letters of Credit. Standby Letters of Credit represents letters of credit issued under our Revolving Credit Facility. 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. 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. 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. 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

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. 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 expect finance leases to be funded through available cash generated from our operations, cash and cash equivalents, borrowings under our Revolving Credit Facility and/or other third-party financing arrangements. See Note 3 of Notes to Consolidated Financial Statements included in this Report for the maturity of our lease liabilities associated with our finance lease portfolio.

Pension and OPEB. 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 Report for additional information regarding our variable cash contributions to the voluntary employees’ beneficiary association (“VEBA”) that provides benefits for certain eligible retirees and their surviving spouses and eligible dependents (“Salaried VEBA”).

VEBA administrative fees. 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. Cash outlays for purchase obligations consist primarily of commitments to purchase primary aluminum, recycled scrap aluminum, other alloys, energy and equipment. We have various contracts with suppliers of metals that require us to purchase minimum quantities of these metals in future years based primarily at the associated metal price at the time of payment. 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.

Commitment Fees on Revolving Credit Facility. Future commitment fees on our Revolving Credit Facility are estimated based on the amount of unused credit under the facility at December 31, 2022 and assuming no extension of terms beyond the current maturity date of our Revolving Credit Facility, which is in April 2027. No borrowings were outstanding under our Revolving Credit Facility either throughout the year or as of December 31, 2022. See Note 9 of Notes to Consolidated Financial Statements included in this Report for additional information. See “Sources of Liquidity” above for a discussion of subsequent borrowing activity.

In addition to our off-balance sheet items discussed above:

•

See Note 6 of Notes to Consolidated Financial Statements included in this Report for information regarding our participation in multi-employer pension plans.

•

See Note 7 of Notes to Consolidated Financial Statements included in this Report for information regarding our long-term employee incentive plans. Additional equity awards are expected to be made to employees and non-employee directors in 2023 and future years.

Critical Accounting Estimates and Policies

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

In addition to the accounting estimates we discuss in Note 1 of Notes to Consolidated Financial Statements included in this 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

estimates about the effects of matters that are inherently uncertain. Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.

Revenue Recognition.

Income Tax.

Acquisitions, Goodwill and Intangible Assets.

Pension and Other Postretirement Benefits.

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.

Item 7A.Quantitative and Qualitative 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. Our operating results are sensitive to changes in the prices of primary aluminum, certain alloying metals, natural gas, electricity and foreign currency, and also depend to a significant degree upon the volume and mix of products sold to customers. 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.

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. 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.

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 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. 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.

Alloying Metals

We are exposed to the risk of fluctuating prices of certain alloying metals, especially copper, zinc and magnesium, to the extent that changes in their prices do not highly correlate with price changes for aluminum. Copper, zinc, magnesium and certain other metals are used in our remelt operations to cast rolling ingot and extrusion billet with the proper chemistry for our products. From time to time, we enter into forward contract swaps and/or physical delivery commitments with third parties to mitigate our risk from fluctuations in the prices of these alloys. 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. 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.

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. 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 $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.

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. 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.

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.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

Item 8.Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm (PCAOB ID:34) 47

Consolidated Balance Sheets 51

Statements of Consolidated (Loss) Income 52

Statements of Consolidated Comprehensive (Loss) Income 53

Statements of Consolidated Stockholders’ Equity 54

Statements of Consolidated Cash Flows 55

Notes to Consolidated Financial Statements 56

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of

Kaiser Aluminum Corporation

Franklin, Tennessee

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Kaiser Aluminum Corporation and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of (loss) income, comprehensive (loss) income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

Basis for Opinion

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (CONTINUED)

prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition—Refer to Notes 1 and 17 to the financial statements

Critical Audit Matter Description

The Company recognizes revenue as it fulfills their performance obligations and transfers control of products to its customers. For products that have no alternative use and for which the Company has an enforceable right to payment (including a reasonable profit) throughout the production process, revenue is recognized over time. In general, revenue recognized over time primarily relates to the Company’s Aero/HS products and Automotive Extrusions, with the revenue for the remainder of its products recognized at a point in time. For contracts recognized over time, control transfer occurs incrementally during the Company’s production process as progress is made on fulfilling the performance obligation. The Company uses the input method of determining the progress, capturing direct costs beginning at the point that billet or cast ingot is introduced into production at either the extrusion phase or the rolling phase, respectively. For products in production, the Company recognizes revenue using the cost incurred to date plus an estimate of reasonable margin. As of December 31, 2022, net sales were $3,427.9 million, of which $645.0 million was recognized over time.

Given the volume of contracts that are recognized over time and the complexity of the determination of over time revenue, we identified revenue for over time contracts as a critical audit matter.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to revenue recognized over time, included the following, among others:

•

We tested management’s controls over revenue recognized over time, including those over cost incurred to date and estimates of reasonable margin.

•

We tested the mathematical accuracy of management’s calculation of revenue recognized over time.

•

We selected a sample of contracts with customers and performed the following:

We evaluated whether the contracts were properly included in management’s calculation of revenue recognized over time based on the terms and conditions of each contract.

We tested that control transfer occurred as progress was made toward fulfilling the performance obligation.

•

We evaluated the estimates of reasonable margin by developing a range of independent estimates and comparing our estimates to those used by management.

•

We evaluated management’s ability to accurately estimate reasonable margins by comparing actual margins to management’s historical estimates.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (CONTINUED)

Environmental Contingencies—Refer to Notes 1 and 10 to the financial statements

Critical Audit Matter Description

The Company is subject to a number of environmental laws and regulations, to potential fines or penalties assessed for alleged breaches of such laws and regulations and to potential claims based upon such laws and regulations. The Company records an environmental loss contingency whenever a contingency is probable and reasonably estimable. At December 31, 2022, the Company’s $17.7 million accrual for expected environmental costs is included in other accrued liabilities and long-term liabilities and represents the Company’s undiscounted estimate of costs reasonably expected to be incurred based on presently enacted laws and regulations, existing requirements, currently available facts, existing technology and its assessment of the likely remediation actions to be taken.

We identified environmental contingencies as a critical audit matter because auditing management’s estimate of the costs reasonably expected to be incurred for environmental contingencies involved especially subjective judgment and an increased extent of audit procedures, including the need to involve environmental specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s estimate of the costs reasonably expected to be incurred for environmental contingencies included the following, among others:

•

We tested management’s controls over environmental contingencies, including controls over the estimates of costs expected to be incurred.

•

We evaluated management’s ability to accurately estimate the costs expected to be incurred by comparing actual costs incurred to historical estimates.

•

With the assistance of our environmental specialists, we evaluated the reasonableness of management’s estimates of costs reasonably expected to be incurred by comparing the estimates to:

Information obtained directly from the Company’s external environmental specialists.

Communications and feasibility studies the Company received from its regulators and other environmental associations, including Washington State Department of Ecology and Ohio Environmental Protection Agency.

Information obtained directly from public domain searches.

Actual costs incurred to date and the progress of management’s remediation activities.

Business Combinations, Goodwill and Intangible Assets — Refer to Notes 1 and 4 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. The Company estimates the fair value using a combination of an income approach and a market-based approach. The income approach incorporates the use of cash flow projections and a discount rate that are developed using market participant-based assumptions. The cash-flow projections are based on Company’s best estimates of the long-term forecasts of the business, market prices, projected cash flows and the rate used in the discounting of those cash flows. The carrying value of the Warrick reporting unit exceeded the fair value as of the measurement date and, therefore, management has recognized an impairment of $20.5 million as of December 31, 2022. Determining the fair values of the reporting unit requires management to make significant estimates and assumptions related to future revenue and earnings projections.

We identified the assumptions related to estimating the amount and timing of expected future revenue and earnings used in determining the fair values of the Warrick reporting unit as a critical audit matter because of the significant judgments involved in

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (CONTINUED)

estimating these amounts. Performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the expected amount and timing of future revenue and earnings used to estimate the fair value of the Warrick reporting unit included the following, among others:

•

We tested the effectiveness of controls over their goodwill impairment evaluation, including those over the determination of fair value of the Warrick reporting unit, such as controls related to management’s selection of forecasts of future revenues and earnings.

•

We assessed the reasonableness of management’s forecasts of future revenues and earnings by performing inquiries of appropriate individuals outside of the finance organization, comparing the projections to historical results, contractual agreements, third-party industry forecasts, and internal communications to management and board of directors.

•

With the assistance of our fair value specialists, we compared applicable industry forecasted long-term revenue growth rates to management’s projected revenues used within the valuation models.

•

We evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit.

•

We evaluated management’s ability to estimate future revenues and earnings by comparing actual revenues and earnings to management’s historical forecasts.

/s/ Deloitte & Touche LLP

Costa Mesa, California

February 23, 2023

We have served as the Company’s auditor since 2002.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

As of December 31,

(In millions of dollars, except shareand per share amounts)

ASSETS

Current assets:

Cash and cash equivalents $ 57.4 $ 303.2

Receivables:

Prepaid expenses and other current assets 30.5 48.7

Property, plant and equipment, net 1,013.2 955.2

Operating lease assets 39.1 46.2

Deferred tax assets, net 7.5 3.4

Intangible assets, net 55.3 67.7

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accrued salaries, wages and related expenses 45.2 46.9

Other accrued liabilities 68.4 58.4

Long-term portion of operating lease liabilities 35.4 40.8

Pension and other postretirement benefits 69.3 92.5

Net liabilities of Salaried VEBA 16.5 20.6

Deferred tax liabilities 4.9 10.5

Long-term liabilities 74.7 72.5

Commitments and contingencies – Note 10

Stockholders’ equity:

Accumulated other comprehensive income (loss) 3.2 (3.7 )

The accompanying notes to consolidated financial statements are an integral part of these statements.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED (LOSS) INCOME

Year Ended December 31,

(In millions of dollars, except share and per share amounts)

Costs and expenses:

Selling, general, administrative, research and development 110.9 118.8 91.2

Goodwill impairment 20.5 — —

Restructuring costs (benefit) 2.2 (0.8 ) 7.5

Other operating charges (income), net 3.2 — (0.6 )

Other expense:

Other income (expense), net – Notes 9 and 13 6.4 (38.9 ) (1.4 )

(Loss) income before income taxes (37.9 ) (24.0 ) 38.8

Income tax benefit (provision) 8.3 5.5 (10.0 )

Net (loss) income per common share:

Weighted-average number of common shares outstanding (in thousands):

The accompanying notes to consolidated financial statements are an integral part of these statements.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED COMPREHENSIVE (LOSS) INCOME

Year Ended December 31,

(In millions of dollars)

Other comprehensive income (loss), net of tax – Note 11:

Available for sale securities — — (0.3 )

Foreign currency translation — — 0.1

Other comprehensive income, net of tax 6.9 15.0 19.9

Comprehensive (loss) income $ (22.7 ) $ (3.5 ) $ 48.7

The accompanying notes to consolidated financial statements are an integral part of these statements.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED STOCKHOLDERS’ EQUITY

(In millions of dollars, except share and per share amounts)

Other comprehensive income, net of tax — — — — — 19.9 19.9

Cash dividends declared2 — — — (43.4 ) — — (43.4 )

Amortization of unearned equity compensation — — 9.6 — — — 9.6

Net loss — — — (18.5 ) — — (18.5 )

Other comprehensive income, net of tax — — — — — 15.0 15.0

Cash dividends declared2 — — — (46.7 ) — — (46.7 )

Amortization of unearned equity compensation — — 12.6 — — — 12.6

Net loss — — — (29.6 ) — — (29.6 )

Other comprehensive income, net of tax — — — — — 6.9 6.9

Cash dividends declared2 — — — (50.1 ) — — (50.1 )

Amortization of unearned equity compensation — — 13.7 — — — 13.7

Weighted-average repurchase price (dollars per share) was $81.94 for the year ended December 31, 2020.

Dividends declared per common share were $3.08, $2.88 and $2.68 during 2022, 2021 and 2020, respectively.

The accompanying notes to consolidated financial statements are an integral part of these statements.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED CASH FLOWS

Year Ended December 31,

(In millions of dollars)

Cash flows from operating activities:

Depreciation of property, plant and equipment 97.6 82.5 49.3

Amortization of definite-lived intangible assets 9.3 9.0 2.9

Amortization of debt premium and debt issuance costs 2.3 2.1 2.0

Non-cash asset impairment charges 23.7 — 0.5

Loss on extinguishment of debt — 35.9 —

(Gain) loss on disposition of property, plant and equipment (6.0 ) (0.5 ) 0.2

Gain on reimbursement on certain machinery and equipment – Note 13 (6.0 ) — —

Loss (gain) on disposition of short-term investments — — (0.7 )

Non-cash defined benefit net periodic postretirement benefit cost 13.1 9.4 5.2

Changes in operating assets and liabilities, net of effects of acquisition:

Prepaid expenses and other current assets (1.5 ) (0.9 ) (6.8 )

Annual variable cash contributions to Salaried VEBA — (1.7 ) (2.9 )

Long-term assets and liabilities, net (10.3 ) (8.3 ) 4.8

Net cash (used in) provided by operating activities (63.1 ) 79.4 206.9

Cash flows from investing activities1:

Purchase of short-term investments — — (39.1 )

Purchase of equity securities (0.3 ) (0.4 ) (0.5 )

Proceeds from disposition of short-term investments — — 118.1

Gain on reimbursement on certain machinery and equipment – Note 13 6.0 — —

Proceeds from disposal of property, plant and equipment 11.0 1.8 0.3

Net cash (used in) provided by investing activities (125.8 ) (665.8 ) 26.9

Cash flows from financing activities1:

Repayment of principal and redemption premium of 6.50% Senior Notes — (380.9 ) —

Issuance of 4.50% Senior Notes — 550.0 —

Issuance of 6.50% Senior Notes — — 350.0

Cash paid for debt issuance costs (1.8 ) (8.6 ) (6.2 )

Repayment of finance lease (2.1 ) (2.1 ) (1.7 )

Repurchase of common stock — — (12.5 )

Cash dividends and dividend equivalents paid (50.1 ) (46.7 ) (43.4 )

Net cash (used in) provided by financing activities (56.8 ) 109.1 281.9

See Note 16 for supplemental disclosure of cash flow information.

The accompanying notes to consolidated financial statements are an integral part of these statements.

Notes Index

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES INDEX

Note 1 Summary of Significant Accounting Policies 57

Note 2 Supplemental Balance Sheet Information 64

Note 3 Leases 65

Note 4 Business Combinations, Goodwill and Intangible Assets 65

Note 5 Employee Benefits 67

Note 6 Multiemployer Pension Plans 72

Note 7 Employee Incentive Plans 73

Note 8 Derivatives, Hedging Programs and Other Financial Instruments 76

Note 9 Debt and Credit Facility 80

Note 10 Commitments and Contingencies 82

Note 11 Accumulated Other Comprehensive Income (Loss) 84

Note 12 Restructuring 85

Note 13 Other Income (Expense), Net 86

Note 14 Income Tax Matters 86

Note 15 Net (Loss) Income Per Share 89

Note 16 Supplemental Cash Flow Information 90

Note 18 Subsequent Events 91

Notes Index

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

In this Annual Report on Form 10-K (this “Report”), unless the context otherwise requires, references in these notes to consolidated financial statements to “Kaiser Aluminum Corporation,” “Kaiser,” “we,” “us,” “our,” “the Company” and “our Company” refer collectively to Kaiser Aluminum Corporation and its subsidiaries.

Organization and Nature of Operations. Kaiser Aluminum Corporation specializes in the production of semi-fabricated specialty aluminum mill products, such as aluminum plate and sheet, bare and coated coil and extruded and drawn products, for the following end market applications: (i) aerospace and high strength (“Aero/HS products”); (ii) beverage and food packaging (“Packaging”); (iii) general engineering (“GE products”); (iv) automotive (“Automotive Extrusions”); and (v) other industrial (“Other products”). Our business is organized into one operating segment. See Note 17 for additional information regarding our business, product and geographical area information and concentration of risk.

Principles of Consolidation and Basis of Presentation. Our consolidated financial statements include the accounts of our wholly owned subsidiaries and are prepared in accordance with United States generally accepted accounting principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). Intercompany balances and transactions are eliminated.

Use of Estimates in the Preparation of Financial Statements. The preparation of financial statements in accordance with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of our consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of our consolidated financial position and results of operations.

Supply Chain Financing. Upon our acquisition of Warrick (as defined in Note 4), we became party to several supply chain financing arrangements, in which we may sell certain of our customers’ trade accounts receivable to such customers’ financial institutions without recourse. We sell our undivided interests in certain of these receivables at our discretion when we determine that the cost of these arrangements is less than the cost of servicing our receivables with existing debt. Under the terms of the agreements, we retain no rights or interest, have no obligations with respect to the sold receivables and do not service the receivables after the sale. As such, these transactions are being accounted for as a sale. During the years ended December 31, 2022 and December 31, 2021, we sold trade accounts receivable totaling $1,589.3 million and $1,102.8 million, respectively, related to these supply chain financing arrangements, of which our customers’ financial institutions applied discount fees totaling $23.3 million and $6.2 million, respectively. To the extent discount fees related to the sale of trade accounts receivable under supply chain financing arrangements are not reimbursed by our customers, they are included in Other income (expense), net. As of December 31, 2022, we had been and/or expected to be fully reimbursed by our customers for a majority of these discount fees.

Fair Value Measurements. We apply the fair value hierarchy established by GAAP for the recognition and measurement of certain financial assets and liabilities. An asset or liability’s fair value classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and consider counterparty risk in our assessment of fair value. We also review the underlying inputs that are significant to the fair value measurement of financial instruments to determine if a transfer among hierarchy levels is appropriate.

Financial assets and liabilities that we measure at fair value each period include our derivative instruments and equity investments related to our deferred compensation plan (see Note 5 and Note 8). Additionally, we measure at fair value once each year at December 31 the plan assets of our defined benefit pension and postretirement plans including the Salaried VEBA (defined in Note 5). In determining the fair value of the plan assets at an annual period end, we utilize primarily the results of valuations supplied by the investment advisors responsible for managing the assets of each plan, which we independently review for reasonableness. We record our remaining financial assets and liabilities at carrying value.

Goodwill is tested for impairment during the fourth quarter on an annual basis, as well as on an interim basis, as warranted, at the time of relevant events and changes in circumstances. Our evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. We estimate the fair value of a reporting unit using a combination of an income approach and a market-based approach. Intangible asset fair values and useful lives are determined using the income approach valuation methodology. The income approach incorporates the use of cash flow projections and a discount rate that are developed using market participant-based assumptions. The cash flow projections are based on, among other factors, the expected future period

Notes Index

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of benefit of the asset, the various characteristics of the asset, long‐term forecasts of the business, market prices, projected cash flows and the rate used in discounting those cash flows. Intangible assets with definite lives are initially recognized at fair value and subsequently amortized over the estimated useful lives to reflect the pattern in which the economic benefits of the intangible assets are consumed. In the event the pattern cannot be reliably determined, we use a straight-line amortization method. Whenever events or changes in circumstances indicate that the carrying amount of the intangible assets may not be recoverable, the intangible assets are reviewed for impairment. See Note 4 for a discussion of our business acquisition, goodwill impairment and intangible asset impairment.

For a majority of our remaining non-financial assets and liabilities, which include inventories, debt issuance costs and property, plant and equipment, we are not required to measure their fair value on a recurring basis. However, if certain triggering events occur, an evaluation of the affected non-financial asset or liability will be required, which could result in a reduction to the carrying amount of such asset or liability. See “Property, Plant and Equipment, Net” below for a discussion of impairment charges on idled assets recorded during 2020. See Note 9 for the fair value of our Long-term debt.

Government Grants. From time to time, we receive grants from certain governmental agencies such as states and municipalities. We recognize government grants when we have reasonable assurance that we will comply with any conditions attached to the grant and the grant will be received. Government grants related to property, plant and equipment are presented as a reduction to the related asset’s carrying amount. Grants related to compensation for expenses already incurred or for immediate financial support with no future related costs are recognized as income in the period in which they are receivable. The following table presents the total government assistance recognized during the year ended December 31, 2022 (in millions of dollars):

Grantor Grant Amount Duration Classification

Total $ 3.3

To be eligible to receive and keep the full amount of the TN Fast Track and Performance grants, we must achieve: (i) minimum cumulative expenditures towards developmental and/or capital expenditures; (ii) a minimum number of new full-time employees; and (iii) a minimum average annual wage, all within seven years of our execution of the grant agreement. To be eligible to receive and keep the full amount of the IN EDGE Tax Credit, we must achieve: (i) minimum cumulative expenditures towards capital expenditures and (ii) a minimum number of full-time employees.

Cash and Cash Equivalents. We consider only those short-term, highly liquid investments which, when purchased, have maturities of 90 days or less to be cash equivalents. Our cash equivalents consist primarily of funds in money market funds, which are classified within Level 1 of the fair value hierarchy.

Restricted Cash. We are required to keep on deposit certain amounts that are pledged or held as collateral relating to workers’ compensation and other agreements. We account for such deposits as restricted cash (see Note 16). From time to time, such restricted funds could be returned to us or we could be required to pledge additional cash.

Available for Sale Securities. We have historically accounted for investments in certain marketable debt securities with maturities of greater than 90 days as available for sale securities. Such securities were recorded at fair value with net unrealized gains and losses, net of income taxes, reflected in Accumulated other comprehensive income (loss) as a component of Stockholders’ equity.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Realized gains and losses from the sale of available for sale securities, if any, were determined on a specific identification basis. We settled all outstanding available for sale securities during the year ended December 31, 2020.

Trade Receivables and Allowance for Credit Losses. Trade receivables primarily consist of amounts billed to customers for products sold. Accounts receivable are generally due within 30 to 90 days. For the majority of our receivables, we establish an allowance for credit losses based upon collection experience and other factors including, but not limited to, customer credit ratings, bankruptcy filings, published or estimated credit default rates, age of receivables, expected loss rates and collateral exposures. On certain other receivables where we are aware of a specific customer’s inability or reluctance to pay, an allowance for credit losses is established against amounts due, to reduce the net receivable balance to the amount we reasonably expect to collect. However, if circumstances change, our estimate of the recoverability of accounts receivable could be different. Circumstances that could affect our estimates include, but are not limited to, customer credit issues and general economic conditions. Accounts are written off once deemed to be uncollectible. Any subsequent cash collections relating to accounts that have been previously written off are typically recorded as a reduction to total bad debt expense in the period of payment. Write-offs for 2022, 2021 and 2020 were immaterial to our consolidated financial statements.

Inventories. Inventories are stated at the lower of cost or market value. Finished products, work-in-process and raw material inventories are stated on the last-in, first-out (“LIFO”) basis. At December 31, 2022 and December 31, 2021, the cost of our inventory on a first-in, first-out (“FIFO”) basis, which approximates the current replacement cost, exceeded its stated LIFO value by $84.6 million and $137.1 million, respectively. Other inventories are stated on the FIFO basis and consist of operating supplies, which are materials and supplies to be consumed during the production process. Inventory costs consist of material, labor and manufacturing overhead, including depreciation. Abnormal costs, such as idle facility expenses, freight, handling costs and spoilage, are accounted for as current period charges. See Note 2 for the components of inventories.

Replacement Parts. Replacement parts consist of preventative maintenance and capital spare parts, which are stated on the FIFO basis. Replacement parts are recorded within Prepaid expenses and other current assets or Other assets depending on whether or not the expected utilization of the replacement parts is to occur within the next 12 months.

Property, Plant and Equipment, Net. Property, plant and equipment, net, is recorded at cost and includes construction in progress (see Note 2). Property, plant and equipment acquired in the Warrick (as defined in Note 4) acquisition was recorded at fair value as of the date of acquisition. Interest related to the construction of qualifying assets is capitalized as part of the construction costs (see Note 9).

Depreciation is computed using the straight-line method at rates based on the estimated useful lives of the various classes of assets. Depreciable finance lease assets and leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the lease term. The estimated useful lives are as follows:

Range(in years)

Land improvements 1-25

Buildings and leasehold improvements 2-45

Machinery and equipment 1-22

Depreciable finance lease assets 2-120

Depreciation expense is not included in Cost of products sold, but is included in Depreciation and amortization.

Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset or group of assets may not be recoverable. We regularly assess whether events and circumstances with the potential to trigger impairment have occurred and rely on a number of factors, including operating results, business plans, economic projections and anticipated future cash flow, to make such assessments. We use an estimate of the future undiscounted cash flows of the related asset or asset group over the estimated remaining life of such asset or asset group in measuring whether the asset or asset group is recoverable.

There were no impairment charges in 2022 and 2021. We recorded impairment charges of $0.5 million in 2020 to reflect the scrap value of idled assets we determined not to deploy for future use. Asset impairment charges are included in Other operating charges (income), net, in our Statements of Consolidated (Loss) Income.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We classify assets as held for sale only when an asset is being actively marketed and expected to sell within 12 months. Assets held for sale are initially measured at the lesser of the assets’ carrying amount and the fair value less costs to sell.

Cloud Computing Implementation Costs. We defer implementation costs associated with a software hosting arrangement that meets the definition of a service contract. We recognize these deferred costs within Prepaid expenses and other current assets and within Other assets on our Consolidated Balance Sheets. When the project is placed into service, we amortize the deferred implementation costs over the term of the hosting arrangement inclusive of expected renewal periods to the same line item in the Statements of Consolidated (Loss) Income as the underlying arrangement. The following table summarizes the total deferred implementation costs and accumulated amortization related to the hosted cloud computing software for our enterprise resource planning system refresh project (in millions of dollars):

As of December 31, Average

Deferred implementation costs $ 10.4 $ 7.8 9 years

Accumulated amortization $ (1.1 ) $ (0.1 ) n/a

We recorded amortization expense of $1.0 million, $0.1 million and zero in 2022, 2021 and 2020, respectively.

Leases. We determine whether an agreement is a lease at inception. We have operating and finance leases for equipment and real estate that primarily have fixed lease payments. For purposes of calculating lease liabilities, options to extend or terminate a lease are included within the lease term when it is reasonably certain that we will exercise such options. Short-term leases with an initial term of 12 months or less are not recorded on our Consolidated Balance Sheets.

As most of our leases do not provide an implicit rate, we use information available at the lease commencement date in determining an incremental borrowing rate when calculating our right-of-use lease assets and liabilities. In determining the inputs to the incremental borrowing rate calculation, we make judgments about the value of the leased asset, our credit rating and the lease term, including the probability of our exercising options to extend or terminate the underlying lease. Additionally, we make judgments around contractual asset substitution rights in determining whether a contract contains a lease.

We have lease agreements with lease and non-lease components, which are generally accounted for separately. These non-lease components include items such as common area maintenance, taxes and insurance for our real estate leases, as well as maintenance charges related to our equipment leases. We have, however, applied the practical expedient within Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842): Amendments to the Financial Accounting Standards Board Accounting Standards Codification (“ASU 2016-02”), to not separate lease and non-lease components to our embedded supply system equipment leases and have therefore accounted for both lease and non‐lease components in determining the lease assets and liabilities.

Many of our equipment leases contain clauses that require us to return the equipment with certain functionality intact. We account for these costs as residual value guarantees when the guarantee becomes probable of being owed. Our lease agreements do not contain any material restrictive covenants.

Derivative Financial Instruments. Consistent with guidelines established by management and approved by our Board of Directors, we use derivative financial instruments to mitigate our exposure to changes in the market price of aluminum, certain alloying metals, energy and, to a lesser extent, foreign currency exchange rates. We do not use derivative financial instruments for trading or other speculative purposes. Hedging transactions are executed centrally on behalf of all of our operations to minimize transaction costs, monitor consolidated net exposures and allow for increased responsiveness to changes in market factors.

We reflect the fair value of all of our derivative instruments on our Consolidated Balance Sheets. The fair value of hedges settling within one year is included in Prepaid expenses and other current assets or Other accrued liabilities. The fair value of hedges settling beyond one year is included in Other assets or Long-term liabilities. Cash flows related to all of our derivative instruments are reported in our Statements of Consolidated Cash Flows within the same category as the items being hedged. See Note 8 for additional information on our derivative financial instruments.

Self Insurance of Workers’ Compensation and Employee Healthcare Liabilities. We self-insure the majority of the costs of workers’ compensation benefits and employee healthcare benefits and rely on insurance coverage to protect us from large losses on individual claims. Workers’ compensation liabilities are based on a combination of estimates for: (i) incurred-but-not-reported claims

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and (ii) the ultimate expense of incurred claims. Such estimates are based on judgment, using our historical claims data and information and analysis provided by actuarial and claims advisors, our insurance carriers and other professionals. As of December 31, 2020, we revised our methodology of calculating our estimated workers’ compensation liabilities from a discounted basis to an undiscounted basis, resulting in a charge of $0.6 million. Accrued liabilities for employee healthcare benefits, which are estimates of unpaid incurred medical and prescription drug costs as provided by our healthcare administrators, were $7.7 million and $9.0 million at December 31, 2022 and December 31, 2021, respectively.

Debt Issuance Costs. Costs incurred in connection with debt financing are deferred and amortized over the estimated term of the related borrowing. Such amortization is included in Interest expense in our Statements of Consolidated (Loss) Income. Unamortized issuance costs are presented within Long-term debt on our Consolidated Balance Sheets (see Note 9).

Conditional Asset Retirement Obligations (“CAROs”). We have CAROs at several of our manufacturing facilities. Our CAROs can be separated into two primary categories: (i) legal obligations related to the removal and disposal of asbestos and (ii) asset retirement obligations related to future lease terminations. The majority of our CAROs relate to the first category and consist of incremental costs that would be associated with the removal and disposal of asbestos (all of which is believed to be fully contained and encapsulated within walls, floors, roof, piping or equipment insulation) of certain of our older facilities if such facilities were to undergo major renovation or be demolished. We estimate incremental costs for special handling, removal and disposal costs of materials that may or will give rise to CAROs and then discount the expected costs back to the current year using a credit-adjusted, risk-free rate. When it is unclear when or if CAROs will be triggered, we use probability weighting for possible timing scenarios to determine the probability-weighted liability amounts that should be recognized in our consolidated financial statements (see Note 10).

Environmental Contingencies. With respect to environmental loss contingencies, we record a loss contingency whenever a contingency is probable and reasonably estimable (see Note 10). Accruals for estimated losses from environmental remediation obligations are generally recognized no later than the completion of the remedial feasibility study. Such accruals are adjusted as information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Accruals for expected environmental costs are included in Other accrued liabilities or Long-term liabilities, as appropriate (see Note 2). Environmental expense relating to continuing operations is included in Cost of products sold excluding depreciation and amortization and other items (“Cost of products sold” or “COGS”) in our Statements of Consolidated (Loss) Income. Environmental expense relating to non-operating locations is included in Selling, general, administrative, research and development (“SG&A and R&D”) in our Statements of Consolidated (Loss) Income.

Revenue Recognition. We recognize revenue as we fulfill our performance obligations and transfer control of products to our customers. For products that have an alternative use and/or for which we do not have an enforceable right to payment (including a reasonable profit) during the production process, we recognize revenue at a point in time. For products that have no alternative use and for which we have an enforceable right to payment (including a reasonable profit) throughout the production process, we recognize revenue over time. In general, revenue recognized over time primarily relates to our Aero/HS products and our Automotive Extrusions with the remainder of our products recognized at a point in time. In limited circumstances, we have concluded that we are an agent in certain Packaging end market arrangements. For these transactions, revenue has been recognized on a net basis.

For the majority of our business, contracts with customers begin when we acknowledge a purchase order for a specific customer order of product to be delivered in the near term. These purchase orders are short term in nature, although they may reference a longer term “blanket purchase order” or a “terms and conditions” agreement, both of which may span multiple years. For revenue recognized at a point in time, transfer of control usually occurs upon shipment or upon customer receipt of the product, depending on shipping terms. For contracts recognized over time, control transfer occurs incrementally during our production process as progress is made on fulfilling the performance obligation. We use the input method of determining our progress, capturing direct costs beginning at the point that billet or cast ingot is introduced into production at either the extrusion phase or the rolling phase, respectively. We believe the input method more accurately reflects the transfer of control as it represents the best information available of work completed to date for which we have an enforceable right to payment. For products in production, we recognize revenue using estimates of the cost incurred to date plus a reasonable margin. As the duration of our contracts for accounting purposes is typically less than one year, we do not present quantitative information about the aggregate transaction price allocated to unsatisfied performance obligations at the end of the reporting period.

We adjust the amount of revenue recognized on all products, regardless of timing of revenue recognition, for variable price consideration, which could include metal market price adjustments, volume rebates and sales discounts. We estimate rebate and discount values based on forecasted order data and historical payment trends for specific customers, adjusted as necessary at each reporting period. Accounts receivable is recorded when our right to consideration becomes unconditional. Payment terms for a majority of our domestic customers are 30 days after invoice date. To accommodate shipping time to overseas locations, payment

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

terms for foreign customers are typically several weeks longer than domestic terms. As such, we do not adjust the promised amount of consideration for the effects of a significant financing component as we do not expect the period between the transfer of control of products to our customers and receipt of payment will be greater than one year.

Contract assets primarily relate to our enforceable right to consideration for work completed but not billed at the reporting date on contracts for products recognized over time. Contract assets also include amounts related to our contractual right to consideration for finished goods recognized over time that were in transit as of period end.

Incremental Costs of Obtaining a Contract. We expense the costs of obtaining a contract as incurred as the amortization period of the asset that we otherwise would have recognized is one year or less.

Shipping and Handling Activities. We account for shipping and handling activities that occur after the customer has obtained control of a product as fulfillment activities (i.e., an expense) rather than as a promised service (i.e., a revenue element).

Advertising Costs. Advertising costs, which are included in SG&A and R&D, are expensed as incurred. We had no advertising costs for 2022, and $0.1 million and $0.2 million in 2021 and 2020, respectively.

Research and Development Costs. Research and development costs, which are included in SG&A and R&D, are expensed as incurred. Research and development costs for 2022, 2021 and 2020 were $9.3 million, $9.3 million and $9.1 million, respectively.

Major Maintenance Activities. All major maintenance costs are accounted for using the direct expensing method.

Stock-Based Compensation. Stock-based compensation in the form of service-based awards is provided to executive officers, certain employees and non-employee directors and is accounted for at fair value. We measure the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of the award and the number of awards expected to ultimately vest. The grant-date fair value is determined based on the stock price on the date of grant, adjusted for expected dividends or dividend equivalents to be paid during the vesting period.

We also grant performance-based awards to executive officers and other key employees. The methodology used to value these performance-based awards is based on the nature of the performance conditions within those awards. Awards that are subject to performance conditions pertaining to total shareholder return (market-based awards) are valued on the date of grant using a Monte Carlo valuation model. The key assumptions in applying this model are an expected volatility and a risk-free interest rate. Awards with certain other performance conditions (non-market-based awards) are valued based on our stock price at the date of grant. Our non‐market-based awards have performance conditions pertaining to our cost performance and adjusted EBITDA margin performance, which is measured by our adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) as a percentage of Conversion Revenue, which is Net sales less the Hedged Cost of Alloyed Metal. As used in this discussion, “Hedged Cost of Alloyed Metal” is the cost of aluminum at the average 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. Holders of performance-based awards receive a one-time payment at the time of issuance of vested shares based on the total dividends they would have received if the vested shares had been held of record from the date of grant through the date of issuance. See Note 7 for more information on our stock-based compensation.

The cost of service-based awards, including time-vested restricted stock and performance shares, is recognized as an expense over the requisite service period of the award on a straight-line basis. Adjustments to expense related to forfeitures are recorded in the period in which they occur. For performance shares with performance conditions pertaining to our cost performance and Adjusted EBITDA margin performance, the related expense is updated quarterly by adjusting the estimated number of shares expected to vest based on the most probable outcome of the performance condition (see Note 7).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Adoption of New Accounting Pronouncements

ASU No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance (“ASU 2021-10”) was issued in November 2021. Under ASU 2021-10, the accounting entities with transactions with a government that are accounted for by analogy to a grant or contribution accounting model are required to annually disclose certain information regarding the transaction including: (i) nature and related accounting policy used; (ii) line items on the balance sheet and income statement affected by the transactions; (iii) amounts applicable to each line item; and (iv) significant terms and conditions. We adopted ASU 2021-10 during the year ended December 31, 2022 using a prospective approach. See “Government Grants” above for additional information.

In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”) and also issued subsequent amendments to the initial guidance (collectively, “Topic 848”). Topic 848 is effective for all entities as of March 12, 2020 through December 31, 2024 and provides optional guidance for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. During the quarter ended June 30, 2022, we completed the transition of our customers’ supply chain financing contracts from the London Interbank Offered Rate (“LIBOR”) to Term Secured Overnight Financing Rate (“Term SOFR”). Our adoption of Topic 848 did not have a material impact on our consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Supplemental Balance Sheet Information

As of December 31,

(In millions of dollars)

Trade Receivables, net

Allowance for doubtful receivables (0.5 ) (0.8 )

Inventories

Finished products $ 98.0 $ 90.3

Operating supplies 10.9 9.1

Property, Plant and Equipment, net

Land and improvements $ 28.4 $ 26.0

Buildings and leasehold improvements 185.5 179.0

Property, plant and equipment, gross 1,587.9 1,431.8

Accumulated depreciation and amortization (574.9 ) (480.4 )

Assets held for sale 0.2 3.8

Property, plant and equipment, net $ 1,013.2 $ 955.2

Other Accrued Liabilities

Uncleared cash disbursements $ 13.6 $ 10.9

Accrued income taxes and other taxes payable 8.9 9.5

Accrued interest 9.9 9.9

Short-term environmental accrual – Note 10 1.1 2.6

Long-Term Liabilities

Workers' compensation accruals $ 30.9 $ 31.9

Long-term environmental accrual – Note 10 16.6 14.2

Other long-term liabilities 27.2 26.4

Based on market conditions, we temporarily idled projects within Construction in progress totaling $21.9 million and $24.9 million as of December 31, 2022 and December 31, 2021, respectively, all of which are expected to resume at a future date.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. Leases

Our leases have remaining lease terms of approximately one to 59 years, some of which may include options to extend the lease for up to 60 years, and some of which may include options to terminate the lease within one year.

The following table presents lease terms and discount rates as of December 31, 2022:

Finance Leases Operating Leases

Weighted-average lease term (in years) 29.0 7.0

Weighted-average discount rate 3.51 % 3.95 %

The following table summarizes the classification of lease assets and lease liabilities on our Consolidated Balance Sheets (in millions of dollars):

As of December 31,

Operating lease assets Operating lease assets $ 39.1 $ 46.2

Finance lease assets Property, plant and equipment, net $ 6.7 $ 8.2

Current operating lease liabilities Other accrued liabilities $ 9.1 $ 9.0

Current finance lease liabilities Other accrued liabilities $ 2.1 $ 2.1

Non-current finance lease liabilities Long-term liabilities $ 5.0 $ 6.1

The following table summarizes the components of lease cost in our Statements of Consolidated (Loss) Income (in millions of dollars):

Year Ended December 31,

Short-term lease cost 4.3 3.2 1.6

Finance lease cost:

Amortization of leased assets 2.5 2.1 1.6

Interest on lease liabilities 0.3 0.3 0.3

The following table presents the maturity of our lease liabilities as of December 31, 2022 (in millions of dollars):

Finance Leases Operating Leases

Total minimum lease payments $ 11.8 $ 52.2

Less: interest (4.7 ) (7.7 )

Present value $ 7.1 $ 44.5

4. Business Combinations, Goodwill and Intangible Assets

Business Combinations. On March 31, 2021, we acquired Alcoa Warrick LLC and certain assets comprising the aluminum casting and rolling mill facility located in Warrick County, Indiana (collectively, “Warrick”) for a final purchase consideration of $609.2 million. Warrick is a leading producer of bare and coated aluminum coil used for can stock applications in the beverage and

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food packaging industry in North America. The transaction provided us with non-cyclical end market diversification and re-entry into the packaging end market.

Goodwill. In conjunction with our acquisition of Warrick, we added $20.5 million of goodwill after allocating the consideration paid, net of cash received to all other identifiable assets. The goodwill reflected the value we expected from our re-entry into the Packaging end market and our assembled workforce. In conjunction with our annual testing and due to downward revisions in forecasted operating margins as a result of supply chain challenges, inflationary cost pressures and manufacturing inefficiencies, we determined that the carrying value of Warrick exceeded its fair value, and we recognized an impairment charge of $20.5 million for the year ended December 31, 2022 within Operating income in the Statements of Consolidated (Loss) Income. We estimated the fair value of Warrick using a combination of an income approach and a market-based approach. The income approach incorporated the use of cash flow projections and a discount rate that is developed using market participant-based assumptions. The cash flow projections are based on our best estimates of the long-term forecasts of the business, market prices, projected cash flows and the rate used in the discounting of those cash flows. As goodwill is deductible for tax purposes, the deferred tax effects were included in the impairment charge and income tax provision. The following table presents the changes in the carrying value of our goodwill (in millions of dollars):

As of December 31,

Gross carrying value:

Beginning balance $ 57.7 $ 37.2

Warrick acquisition — 20.5

Warrick impairment (20.5 ) —

Accumulated impairment loss (18.4 ) (18.4 )

Net carrying value $ 18.8 $ 39.3

Intangible Assets. The following table presents the gross carrying amount and accumulated amortization by major intangible asset class (in millions of dollars, except amortization periods):

Non-compete agreement 5 5.4 (4.6 ) 0.8

Non-compete agreement 5 5.4 (3.5 ) 1.9

Favorable commodity contracts 2 11.0 (4.1 ) 6.9

Favorable lease contracts 120 7.0 — 7.0

During the year ended December 31, 2022, we impaired the remaining book value of our favorable commodity contracts intangible asset as the supplier associated with the intangible asset ceased all deliveries of magnesium to us and provided no indication of when or if deliveries would resume over the remainder of the contract. The impairment charge of $3.1 million was included within Other operating charges (income), net, in our Statements of Consolidated (Loss) Income. We identified no indicators of impairment associated with our intangible assets during the years ended December 31, 2021 or December 31, 2020.

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KALU US Equity

KALU · 10-K · period ended 2022-12-31

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

Item 7A.Quantitative and Qualitative Disclosures About Market Risk

Item 8.Financial Statements and Supplementary Data

KALU US Equity☆

KALU · 10-K · period ended 2022-12-31

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

Item 7A.Quantitative and Qualitative Disclosures About Market Risk

Item 8.Financial Statements and Supplementary Data

KALU US Equity