Kaiser Aluminum Corporation Stock

Greetings. Welcome to the Kaiser Aluminum Corporation Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Kim Orlando with Investor Relations. Thank you, Kim. You may begin.

Thank you. Hello, everyone, and welcome to Kaiser Aluminum's Third Quarter 2026 Earnings Conference Call. If you have not seen a copy of our earnings release, please visit the Investor Relations page on our website at kaiseraluminum.com. We have also posted a PDF version of the slide presentation for this call. Joining me on the call today are Chairman, President and Chief Executive Officer, Keith Harvey; Executive Vice President and Chief Financial Officer, Neal West; and incoming President and Chief Executive Officer, Fred Stephan.

Before we begin, I'd like to refer you to our first 4 slides of our presentation and remind you that the statements made by management and the information contained in this presentation that constitute forward-looking statements are based on management's current expectations. For a summary of specific risk factors that could cause results to differ materially from the forward-looking statements, please refer to the company's earnings release and reports filed with the Securities and Exchange Commission, including the company's annual report on Form 10-K for the full year ended December 31, 2025. The company undertakes no duty to update any forward-looking statements to conform the statements to actual results or changes in the company's expectations.

In addition, we have included non-GAAP financial information in our discussion. Reconciliations to the most comparable GAAP financial measures are included in the earnings release and in the appendix of the presentation. Reconciliations of certain forward-looking, non-GAAP financial measures to comparable GAAP financial 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.

Any reference to EBITDA in our discussion today means adjusted EBITDA, which excludes non-run rate items for which we have provided reconciliations in the appendix.

Further, Slide 5 contains definitions of terms and measures that will be commonly used throughout today's presentation. At the conclusion of the company's presentation, we will open the call for questions.

I would now like to turn the call over to Keith Harvey. Keith?

Good morning, everyone, and thank you for joining us. I'll begin on Slide 7. Third quarter results were largely in line with our expectations and reflected continued strength across the majority of our portfolio. More importantly, customer activity remained robust throughout the quarter and in many cases, strengthened further from the levels we discussed in July. Demand across aerospace and high-strength packaging and general engineering continues to exceed the expectations we established at the beginning of the year. Lead times remain extended, bookings continue to move further into 2027 and the investments we have made across the portfolio continue to position Kaiser as a preferred supplier across most of our end markets.

As we continue to work through our planning process for 2027 and beyond, we are more optimistic about the opportunities across our markets today than at any point in recent years. Over the last several quarters, we've spoken about the transition from recovery to growth. As we look at the business today, we believe many of our markets have moved beyond that discussion. Demand remains robust, customer investment activity is high and increasingly, our conversations with customers are centered on how we partner together to support their future growth plans, secure long-term supply and meet expanding capacity requirements. In many cases, the discussion is no longer whether demand will materialize, but rather how that demand will be supported in the years ahead. These conversations continue to strengthen our confidence in the long-term outlook for Kaiser.

As customers evaluate growth opportunities and look for partners capable of supporting them, Kaiser is uniquely positioned given the breadth and quality of our product offering, our technical capabilities, our commitment to customer service and our reputation as a trusted supplier across the markets we serve.

Neal will now provide additional details on our third quarter performance, after which I will return and provide a brief update on our markets and what we're seeing as we look ahead. Neal?

Thank you, Keith, and good morning, everyone. I'll now turn to Slide 9 for an overview of our shipments and conversion revenue. Conversion revenue for the third quarter 2026 was $439 million, an increase of approximately $88 million or 25% compared to the prior year period. On a per pound basis, conversion revenue increased 12% year-over-year to $1.46 a pound, driven by broad-based demand strength across our end markets, improved pricing realization and a continued mix shift towards higher value-added packaging and general engineering products.

Now let's look at each of our end markets in detail. Aerospace and high-strength conversion revenue totaled $131 million, up approximately $31 million or 31%, primarily due to a 42% increase in shipments over last year. The year-over-year improvement in our third quarter performance was primarily driven by the recovery in plate production following our planned third quarter 2025 outage at our Trentwood facility for the Phase VII capacity expansion. Based on conversations with our commercial aerospace customers, we now believe plate destocking is over as our commercial aerospace customers move towards their higher production targets. In addition, demand across business jet, defense and space applications remains strong.

Packaging conversion revenue totaled $180 million, up approximately $42 million or 31% year-over-year, driven by the continued mix shift toward higher-value coated products, which generate significantly higher conversion revenue per pound. Strong underlying demand across our customer base drove third quarter shipments up approximately 6% compared to the prior year, reflecting continued success in qualifying additional coatings and our focus on delivering the quality, consistency and service that customers have long associated with Kaiser.

General engineering conversion revenue for the third quarter was $99 million, up approximately $17 million or 21% year-over-year on a 12% increase in shipments. The year-over-year increases primarily reflect the recovery of 6x plate production at our Trentwood facility following the third quarter 2025 Phase VII planned outage to add additional capacity. In addition to strong demand for our purpose-built plate for the semiconductor industry, ongoing restocking of multiyear low inventory levels at our service center partners and favorable market conditions supported by the Kaiser's long-standing reputation for quality, technical expertise and reliable customer service, which continue to underpin our volume growth and improved pricing.

Finally, automotive conversion revenue of $29 million was down slightly year-over-year on a 15% decrease in shipments, reflecting a planned outage at our Bellwood facility as we invest to improve operational efficiencies and expand capacity to support strong demand for aluminum driveshaft. Importantly, these investments are backed by contractual customer commitments and positions the business for continued growth. While the broader automotive market conditions remain mixed with elevated consumer financing costs and ongoing tariff uncertainties, demand for light trucks and SUVs, which represents the core applications served by our products, continues to remain resilient. Additional details on conversion revenue and shipments by end market applications can be found in the appendix of this presentation.

Now moving to Slide 10. Reported operating income for the third quarter was $55 million, an increase of approximately $6 million from $49 million in the prior year quarter. After adjusting for operating non-run rate charges of approximately $1 million, our third quarter 2026 adjusted operating income was $56 million, an increase of approximately $7 million from $49 million in the prior year quarter. Reported net income for the third quarter was approximately $31 million or $1.84 net income per diluted share compared to net income of $40 million or $2.38 net income per diluted share in the prior year quarter. As a reminder, our third quarter 2025 reported net income included a non-run rate gain of approximately $11 million related to legacy nonoperating land sale and insurance settlements.

After adjusting for a net operating and nonoperating non-run rate pretax expense of approximately $1 million, adjusted net income for the third quarter 2026 was $32 million or $1.89 adjusted net income per diluted share. This compares to adjusted net income of $31 million or $1.86 adjusted net income per diluted share in the prior year period. Adjusted net income increased modestly compared to the prior year period as the approximately $2 million in additional interest expense associated with the refinancing of our senior notes completed in the fourth quarter of 2025 was largely offset by our improved operating performance.

Our effective tax rate for the third quarter was 23% compared to 17% in the third quarter of '25. For the full year 2026, we continue to expect our effective tax rate before discrete items to be in the mid-20% range. Additionally, we now anticipate full year 2026 cash tax payments for the federal, state and foreign taxes will be in the $14 million to $16 million range.

Now turning to Slide 11. Adjusted EBITDA for the third quarter was $84 million, up $3 million from the prior year period. As we discussed on our second quarter 2026 earnings call, following several consecutive quarters of unprecedented metal price tailwinds and highly favorable scrap spreads, we expected the metal impact to be neutral to a slight headwind to our third quarter results. More specifically, we recognized an unfavorable $1 million impact to metal price lag in the third quarter of 2026 compared to a favorable $28 million impact in the third quarter of 2025. So while adjusted EBITDA was up approximately $3 million year-over-year, that comparison includes approximately $29 million of an unfavorable swing in metal price lag.

Operationally, the business delivered approximately $32 million of year-over-year improvement, driven by higher conversion revenue from increased shipments and improved pricing and mix. Further offsetting the contributions from the year-over-year increase in the conversion revenues were higher metal consumption costs due to lower scrap utilization and lower operating efficiencies, predominantly driven by the planned partial outage at our Bellwood facility and continuing Roll Coat 4 start-up related costs. These incremental costs, which we have anticipated when we provided our outlook for the remainder of the year, represented approximately 640 basis points of margin impact in the third quarter of 2026.

On a sequential basis, as compared to the second quarter of 2026, our third quarter adjusted EBITDA was down $82 million, or approximately 50%. While conversion revenue was relatively flat, as noted above, the significant metal tailwinds we benefited from in the prior quarter shifted to a slight headwind in the third quarter, as we had anticipated. As we indicated in our second quarter call, in the third quarter of 2026, metal consumption costs were approximately in line with the current month metal passthrough costs. Breaking down the $82 million more granular, approximately $54 million was due to combination of tightening scrap spreads, lower scrap utilization, and the increase in the weighted average cost of purchased metal units, and $28 million was due to metal price lag.

Consistent with our longstanding operating philosophy, Kaiser remains metal-neutral. We do not attempt to speculate on metal prices, and our objective is to create value through conversion, operational performance, and customer service rather than through movements in aluminum markets. It is also important to recognize that when we discuss metal, we're really talking about two different components. The first is metal price lag, the change in market prices, and other accounting-related impacts, which are largely outside of our control, and as we discussed, represented a headwind during the quarter.

The second is our ability to optimize metal procurement practices, improve scrap utilization, and drive operational performance across our facilities. These areas, such as the Bellwood upgrade, Roll Coat trial, furnace rebuilds, et cetera, are largely within our control, and we believe our third quarter performance was not the same levels we experienced in prior periods this year.

With that said, we do not expect the favorable metal-related dynamics experienced during the first half of the year to continue at the same level for the remainder of 2026, as the weighted average cost of our metal inventory has become more closely aligned with the current monthly metal passthrough costs. We are also assuming a more normalized to tighter scrap spread environment and lower scrap utilization for the rest of the year.

Finally, the fourth quarter 2026 results are expected to reflect costs associated with the Bellwood expansion project and seasonally higher major maintenance activity. Even with these challenges, our focus remains on improving operational efficiencies across our portfolio and realizing the benefits of our recent strategic investments while positioning the business for continued margin expansion over the long-term.

Now turning to Slide 12 for a discussion of our balance sheet and cash flow. We continued to generate strong free cash flow, which we define as operating cash flow less capital expenditures, of $72 million during the third quarter, and already surpassed our prior outlook for the full year. With metal costs lower and more stable, we now expect full year 2026 free cash flow to exceed $200 million. Our capital expenditures total $28 million for the third quarter of 2026. And for the full year, we now expect capital expenditures to be approximately $130 million.

Our strong cash position result in total cash of approximately $117 million and approximately $570 million in borrowing availability on our revolving credit facility, strengthening our liquidity to $687 million as of September 30, 2026. As a reminder, our senior notes interest costs are fixed at $54 million annually, and we have no debt maturing until 2030.

Given our strong last 12-month EBITDA performance and cash position at the end of the third quarter of 2026, our net debt leverage ratio improved to 2x from 3.4x at year-end, in line with our targeted range of 2 to 2.5x. In recognition of our improving operational performance and debt leverage, on October 2, 2026, Moody's upgraded our credit rating to Ba3 stable. On October 13, we announced that our Board of Directors declared a quarterly dividend of $0.77 per common share, underscoring our commitment to returning capital to stockholders while continuing to invest in profitable growth opportunities.

Before I turn the call over to Keith to discuss our outlook, I would like to extend my sincere thank you to Keith and his wonderful wife and family for his 46 years of service at Kaiser Aluminum. Keith has been through the worst and best times at Kaiser Aluminum, and through it all, he has always kept his values and focus for the benefit of all the stakeholders of Kaiser. This will be the last time that Keith and I host an earnings call together, and I will truly miss his leadership and mentorship. Congratulations, and all the best as you and your family move into your next chapter of life.

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

Thank you, Neal. I very much appreciate the sentiment and the kind words.

Turning to the end market summary on Slide 14, I'd like to share a few observations that have emerged as we've gotten deeper into our planning process. I believe these observations provide a better perspective on what we see developing across our markets over the next several years, and why our confidence in Kaiser's long-term opportunities continues to grow.

Let me start with aerospace and high-strength. Our outlook for 2026 remains largely unchanged. However, what has changed is our confidence in the opportunities developing beyond 2026. We believe we have now come to an end of large commercial aerospace destocking, and conversations with customers have increasingly shifted toward rate readiness, future requirements, and long-term supply.

Visibility into 2027 continues to improve, and demand signals remain strong, not only within aerospace and high-strength, but across our broader flat-rolled products portfolio. As a leading supplier in this space, we are already engaged in discussions regarding how best to support future growth opportunities. While work remains in our planning process, these discussions continue to reinforce our confidence in the long-term outlook for the aerospace and high-strength portfolio of businesses.

Now moving to packaging. The underlying packaging market remains robust, and longer-term customer demand continues to be strong. As we enter the fourth quarter, we have received requests to manage shipments as customers modify their year-end inventory levels and metal prices move lower from recent historic highs. As a result, we are modestly revising our shipment outlook to growth of 5% to 10% from our prior expectation of 10% to 15%. Despite this revision to shipments, we are maintaining the conversion revenue outlook with expectations to the higher end of the range.

We continue making progress on our coated packaging strategy at our Warrick rolling mill by running more qualification trials, running at higher rates, and resetting long-term contracts. We will be using the balance of 2026 to optimize our operational performance and improve our customer satisfaction metrics to position ourselves for long-term success. We believe these efforts will ensure we are well-positioned for continued success entering into 2027.

Now to general engineering. General engineering market conditions remain very strong. While our plate businesses continue to benefit from many of the same positive trends discussed in aerospace, our extrusion markets remain exceptionally tight, with rising demand after several years of significant destocking at the service centers. As such, much of the material being produced is consumed almost immediately, and lead times continue to extend. These conditions continue to support favorable pricing dynamics, as reflected by a record conversion revenue per pound of $1.47 during the quarter. We've also taken measured steps to free up additional production and better align our output with customer requirements as we move into 2027. We expect demand to remain strong through year-end and continue to see increasingly favorable developments as we move into 2027.

Turning to automotive, we are revising our shipment outlook to a decline of 5% to 10%, compared with our prior expectation of a decline of 0% to 5%. There is no change to our conversion revenue outlook. This revision is not driven by worsening customer demand, but rather it is the result of a major outage in this product line during the third quarter as we bring this equipment back online during the fourth quarter. While these investments have created short-term disruption, they position the business to better support customer growth and improve performance in 2027 and beyond.

Turning to Slide 15 for an update on our full year 2026 outlook. While our confidence in the opportunities beyond 2026 continues to strengthen, our outlook for 2026 remains unchanged. That said, we currently expect results to trend towards the lower end of our previously communicated EBITDA outlook of approximately 45% year-over-year growth. This outlook reflects the planned operational outages in the second half, execution performance, customer year-end inventory alignments, and metal-related headwinds. Taken together, these factors impact our near-term outlook, but do not alter our longer-term view of the underlying opportunities developing across our markets.

Before I wrap up, I'd like to take this opportunity to introduce Fred Stephan. Following a thoughtful and very thorough succession planning process, and after 46 years of a rewarding career at Kaiser Aluminum, I have elected to enjoy the next chapter of my life and move one step closer to retirement. I will transition to Executive Chair of the company and act as an advisor to Fred as he assumes the role of CEO on November 1.

With that, please welcome Fred Stephan. Fred, would you care to provide a few comments?

Thank you, Keith, and good morning, everyone. I will keep my comments brief. Today is Keith's call, and he has provided a thorough review of the business. The themes Keith highlighted are among the reasons I am so energized to step into the CEO role next month.

Over the past several months, I've deepened my understanding of the business and gotten to know the leadership team. That experience has strengthened my conviction in the company's strategic vision and the opportunities ahead. Keith has played a pivotal role in strengthening Kaiser's differentiated business model, sharpening its strategic focus, and building a world-class team to execute the strategy. I am grateful for his 46 years of service to Kaiser, including the past 6 years as Chief Executive Officer. Under his leadership, Kaiser has continued to grow its reputation as an organization admired by the investment community and its peers, a great place to work, and a trusted strategic partner to its customers and suppliers.

I also appreciate the time Keith has already invested in getting to know me and my family, and in helping me to fully understand the values on which Kaiser Aluminum is built. I look forward to continuing to partner with him, the Board, and the entire Kaiser Aluminum team as we take the company to the next level of performance.

Between now and year-end, I plan to visit all of our sites to first meet with employees and customers, and key suppliers, to listen to their feedback, their ideas, and concerns, and to further deepen my understanding of the company and the industry.

I am confident that our strategy is sound, our markets are strong, and our execution plans are in place. We have a solid platform to build upon, and I am excited about the future.

I look forward to engaging with many of you in the investment community over the coming months and to speaking with you again on our fourth quarter earnings call.

And with that, I'll turn it back to Keith and Neal for Q&A. Thank you.

Thank you, Fred. In closing, I'd like to take a moment to thank all of the men and women in Kaiser Aluminum that I have had the honor to lead and work beside over the last 46 years. I am so very proud of this organization. The future ahead of us is more exciting than at any time in my history with the company, and my confidence in its success never higher. With Fred and the operating team at the helm, I'm absolutely certain our better days are ahead of us.

I want to thank the Board and the men and women of this great company for providing me so much support in my career, and my undying thanks to my wife and family for always providing the love and support, which has been the bedrock for any success I've had. Thank you all.

With that, I will now open the call to any questions you may have. Operator?

[Operator Instructions] Our first question is from Samuel McKinney with KeyBanc Capital Markets.

You maintained the '26 EBITDA guide, but noted you're shaded toward the lower end, and the release called out execution performance as a potential issue. Not something we're used to hearing from Kaiser, and it'd be helpful if you could drill down more on what exactly that comment was intended to mean.

Certainly. Well, thanks. Let's reflect back on the end of July. We had -- the comments we made is that, we had foregone a number of investments and some outages that we had planned to take in the second half of the year. And that's actually what took place. So Neal did a really good job of explaining those things we didn't control, which were the metal prices and subsequent scrap spread decreases, and so forth. The things that we could control, we tried to be a little more transparent about that, and those were things associated with the Bellwood expansion project that are underway. They're related to the Roll Coat 4 at Warrick. We talked about continuing qualification periods, which are inefficient in themselves. These qualifications sometimes take months with our various customers. So we used some of the time in the third quarter to prepare and continue those. Those went very well. The line is operating with quality and speeds that we had expected. And so, we're very positive about that ongoing.

And then we had some outages with furnaces. And so, when you have outages in furnaces and casting house investments, it means you have to forego utilization of some of that scrap. You have to use some more expensive other type metal units. And we anticipated those for the quarter. We don't think that's an extenuation into ongoing quarterly results, but it's going to be part of taking care of your equipment and preparing for the growth that we're experiencing right now. And as we move forward on that, I'm glad we're addressing this in the second half because the outlook beginning for 2027 is far stronger than we anticipated. And so, finishing up the year with these things in front of us and still delivering record results, in my opinion, is a very successful year for the company.

Okay. And then on the headwind from the scrap utilization, just trying to better understand the 640 basis point year-over-year headwind. With aero and high-strength shipments increasing about 40% year-over-year and GE shipments up about 10%, was this increase also a function of stricter specs or melt requirements for those products? Or was it really just the tighter scrap spreads and/or the more expensive inputs you talked about?

Yes, it's purely just the inputs that I just discussed. Nothing has changed other than the growth. What I'd really like to accentuate here, Neal called out. We had in 2025, third quarter was a pretty significant raise for us. It was somewhere in the 80s from an EBITDA perspective. And with that was about a $20 million to $30 million metal lag. So we actually had a headwind this quarter, and we more than replicated those results. So what I would point to is the continued underlying strengthening of the business as we move forward.

I've stated, Sam, all along that, look, we were recipients of these metal lags, this sharp increase of metal, but we've also called out all along that we felt these would end, and we believe they've ended. But one can never predict the future from that regard. But what I'm confident about is we are replacing those short-term type metal accelerators that we've had with strong conversion numbers, and the businesses are performing very well, and we see demand strengthening in 2027. So we're just figuring out how do we manage the growth over and above our expectations, and you'll be hearing about that in the very near future.

Congrats on the retirement, Keith.

Thank you, Sam. Appreciate it much.

Our next question is from Bill Peterson with JPMorgan.

Keith, it's been a pleasure working with you over the last 4 years or so, and Fred, congrats on the appointment.

Thank you, Bill. Same here.

I guess, on aerospace, it sounds like destocking is clearly in the rearview mirror. I'm trying to get a sense for how we should think about the ramp from here and maybe how that may vary between your large commercial aerospace customer versus business jet, defense, and space. Any way to delineate that sort of growth profile as you move ahead would be helpful.

Sure, Bill. Thanks. Listen, destocking is over from Kaiser's perspective. You may note we were one of the first ones to call this out, the scenario over the last couple of years. I'm glad we're up first declaring an end to it, at least on our side. All of our customers in this space, in this category, are coming to us with probably more growth than what was expected when we've had these discussions along the way over the last 24 months. And what we're busy doing right now is, we're trying to understand how we service all these businesses.

So as you can expect, the large commercial jet is moving forward very strongly, 12-year backlog. And people are getting the supply chain issues in order, and we're seeing ramp rates. Again, we get a year-plus outlook. So we're seeing those rates increase, and we're currently resetting those contracts in large commercial.

As we look to the other areas of our portfolio, however, what we're seeing is continued growth here, and actually growth accelerating probably much faster than what we're seeing on the large commercial jet. I think defense spending, those -- we've talked about how some of our programs have quadrupled. We've extended the JSF F-35 program for multiyears out at better conditions. We have ample opportunities there. Business jet continues to have a multiyear backlog. We're a significant player there, not just with plate, but with our sheet and coil products and our hard alloy extruded products. And then finally, space has got an accelerator to it that is as hard for me to comprehend almost as how fast AI is moving. And we're working very closely with all the participants in how we supply their future needs, and those are ramping exponentially.

So as you might imagine, we're going back and looking at the total portfolio. And even -- this even extends, Bill, over into the GE side of our business because what we're seeing with the data center ramp rates and that forth, semiconductor is rising much quicker than expected or in previous past, and they're talking about 5 and 10 years of demand out there that, well, quite frankly, we're going to have to reset what our outlook is and how we service all these markets. So it reinforces my comment. I really have never seen it this strong. And the biggest challenge for our company is, how well we can ramp and continue to service these customers at the accelerator rate. So it's all moving north.

Yes. And we'll address that sort of capital allocation decision with Fred here in the coming quarters on how to meet that demand. But my second question is on packaging. So you're lowering the shipment growth to 5% to 10%, also maintaining conversion revenue. I guess, how should we think about shipments in 2027 given this, I guess, sort of, I don't know, customers trying to manage their inventories? I guess, why should investors not assume we're on the cusp of another cyclical downturn like we saw in 2023 and 2024? And then just, I guess, squaring the circle here, so maintaining conversion revenue, is that a statement of better mix and better pricing, even with shipments not coming in as high as expected?

Well, I'll answer the last part of your question first. Yes. We're very pleased with the contracts resetting. We're very pleased with the mix and our move to coated products. We continue to be the market leader there, and we continue to invest to maintain that position. And so, what you've also started to see and what you'll see at the first of the year, we're resetting contracts along the way. So we're continuing to see strong demand with -- backed up by multiyear programs that we're putting in place with all of our customers.

And how I would look at the current quarter and the second half of the year about people resetting their inventories. If you take a look at it, and our extrusion customers are very similar, Bill. They'll buy -- we have formulas out there that pass through metal cost. And with continued increasing rising cost, people were buying, trying to get ahead of any increases. Well, during the quarter, metal fell pretty rapidly, which led to the reason it was a $1 million headwind for us. So they're experiencing the same thing, and they would take every pound we could provide them.

So let me not -- let me make that very clear. The reason the move is out, there are two reasons. Metal prices are falling, which gives them incentive to move out shipments unless they don't need them, and this is the slow time of the year. Remember, summertime is second quarter and third quarter, generally the strongest for this market. And then if we can't get the metal to them at this point for the qualifications and things, they're just moving those orders to the right. And so, we're seeing no slowdown in long-term demand. Matter of fact, in some of these meetings we've been having on business planning outlook for the next several years, we see continued growth.

So I'm sure that Fred will be talking to you about continued performance on Roll Coat 4 and perhaps some other investments that we're considering for this business. But nothing has changed on the demand picture for any of our programs, quite frankly, including automotive, which has been our smallest portion.

And again, a pleasure working with you over the last couple of years, and congrats again.

Thank you, Bill. Appreciate it.

Our next question is from Timna Tanners with Wells Fargo.

I just want to say best wishes in the next chapter to Keith. I look forward to working with Fred. I wanted to circle back, if I could, please, on the change in guidance to the lower end of the EBITDA range. I completely understand the change in metal lag, and that's out of your control. But in reference to the reason for the lower guidance, you also talk about outages and scrap, but those were already anticipated. So I'm just trying to understand, is it really the bulk of the change about the metal lag? Or can you help put some more color to that, please?

Sure. So Neal explained the items that we really didn't have control in. That was the metal lag, the change in metal, the impact on the scrap spreads, and then we talked about utilization there. Utilization was impacted. That was under our control. We took some outages in our cast houses that we had foregone from the first half of the year because business was so strong, and we talked about that at the end of the last quarter that we anticipated. But we're also investing heavily in the Bellwood facility for automotive. So we continued -- we had a major outage there that had some impacts with it about coming back online that were a little outside of our control. We didn't handle that extremely well. And then continued Roll Coat 4. And we did anticipate these kinds of costs as we gave the outlook at the end of the second quarter. So we gave a much different outlook.

We probably blew everyone's expectations away in the first half, and nobody believed us for the second half. But from our perspective, we're coming in about what we thought we would be doing, which reflect to the balance of the year. So that outlook also reflects what's happened during the quarter and the outlook for the fourth quarter with some continued outages, some move out by some of the packaging customers into the first part of 2027. And so, what we've tried to incorporate there with a lot more clarity after 3 months more of operating, that gives us to where we felt more confident and transparent about hitting to the lower end of the target.

The good news is, we anticipate the targets, the min and the max, and we expect to come in closer to the min on the targets, but still a record-setting year for the company.

Okay. No, that's helpful. And then I just wanted to ask the second question. On the scrap side, we're seeing more demands from Oswego restarting, Bay Minette, ADI ramping up. Are you seeing any impact either on the scrap procurement side or on the -- in selling into your markets from these new production facilities?

Yes, not at all. We have our supply chain intact. We -- again, these -- the lesser use of scrap wasn't one due to availability, it was more due to the outages that we were taking. So we had to use other forms of metal, higher cost forms of metal to secure the shipments that we had in the quarter. And so, we anticipated those. I think we're pretty comfortable and healthy on where our scrap positions are. And we're going to continue to incur metal profits going forward, even though scrap spreads have tightened over the historic highs they had in the previous 2 or 3 quarters. So I feel pretty good about what our supply position is and our position on scrap.

Okay. And in the markets are you seeing them? Because you've more specialty production, and as you ramp up, I can't imagine they're in the thick of the aerospace side, but are you seeing them in the markets, in some of your other markets?

Yes. One of the probably biggest concerns we had at the outset of the Iranian war, if you will, there is some purity, high purity that comes from EGA over there. We actually got our shipments from that location, and we have multiple other sources around the world. So that was my biggest concern from a scrap perspective. Now we still use some specialized scraps, like in some of our can business for our lids and tabs and things like that. But we've actually been able to secure what we need. We have good, strong secondary positions in place, and those continue to perform very well.

But we're not seeing any of the competition in our markets. SDI, Novelis, they're a startup. They're focused a lot on the automotive side of the business. So Oswego, good for them. I'm glad they were able to recover. They did a very good job from what I can tell. And they're back up online, and they have a strong position with OEMs that we supply other parts to. So we're happy to have them back up and running. But again, that had very little impact on our business to start with, and I don't expect it to be an issue going forward. And I don't have any concern about our ability to secure scrap in any of the markets that we're in, scrap or prime metal that we need to meet these growing sales and shipments to all of our constituents.

Our next question is from Alex Stansbury with UBS.

Congrats, Keith, and best of luck, Fred. I guess, just starting off, looking beyond 4Q, how much of the second half '26 kind of headwinds you guys are experiencing from outages, scrap utilization, startup costs, inventory alignment? How much of that should really reverse out by the first quarter versus remain in the ongoing cost base?

I expect the majority of that will be secured in the second half. I don't see any of these really moving forward into 2027 whatsoever.

Now, I will clarify this. The continued investment, the Bellwood investment, is going to continue in 2027, but the big part of the numbers that were impacted us in the second half were around the major outage that was incurred in the third quarter. So we don't have any planned outages in 2027 there. It's just installing a duplicate line to take care of our driveshaft and customers mainly. And so, there shouldn't be any disruption from that line. And we got a lot of the heavy lifting behind us in the second and third quarter of this year. So from that perspective, I think Roll Coat 4 is going to continue to elevate and operate well. We're really pleased with what we've seen there.

So I think our big challenge going into 2027, and Fred and team are already addressing it, is how do we continue to supply the demand that we see coming at us. And we've got some really great ideas, some great plans in place. Fred will articulate that more in February, but that's really the focus. How do we manage the growth that's coming at us? But just to capitalize on your comment, I don't consider any of these cost efficiencies to extend.

Now, we'll always have outages for furnaces, rebuilds in place. Hopefully, we typically distribute those more evenly throughout the year. And that's the plan going forward. It's just that the growth that occurred in the first half was much quicker than what we anticipated. That's why we've moved everything to the second half.

That's good color. I appreciate that. I guess, then on the strong conversion revenue per pound, as Bellwood production normalizes, aero volumes recover, and coated packaging continues to ramp, I guess, can you guys maintain current conversion revenue per pound while adding that volume back? Or should we expect some mixed dilution there?

I think it's got a strong chance it'll be increasing above where it is in 2027 and beyond. I will preface this, Alex, by saying I haven't seen demand this strong in any of my 46 years. So it's on us to how we manage this and continued investments and make sure that our customers are taken care of. But it's somewhat unprecedented to have all of these markets moving in this direction at the same time, and I don't think it's just a -- it's a 1-year pony. I think this is a multiyear going out, driven by a number of factors that probably haven't existed before. So we're looking at how we ramp that up. That obviously creates a really good environment for managing price, managing mix, managing volumes out of our facility, and we just have to make sure we remain efficient in doing so. And that's a big focus of the company.

We have reached the end of the question-and-answer session. I would like to turn the floor back over to Keith Harvey for closing comments.

Well, thanks everyone. I appreciate your time today, and all your time over the years. Fred and team will be back in February of 2027 to provide you an update on our continued progress and really the exciting outlook for Kaiser Aluminum in the upcoming year. Goodbye.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to Kaiser Aluminum Corporation's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Kim Orlando with Investor Relations. Thank you. You may begin.

Thank you. Hello, everyone, and welcome to Kaiser Aluminum's Second Quarter 2026 Earnings Conference Call. If you have not seen a copy of our earnings release, please visit the Investor Relations page on our website at kaiseraluminum.com. We have also posted a PDF version of the slide presentation for this call.

Joining me on the call today are Chairman, President and Chief Executive Officer, Keith Harvey; and Executive Vice President and Chief Financial Officer, Neal West.

Before we begin, I'd like to refer you to the first 4 slides of our presentation and remind you that the statements made by management and the information contained in this presentation that constitute forward-looking statements are based on management's current expectations. For a summary of specific risk factors that could cause results to differ materially from the forward-looking statements, please refer to the company's earnings release and reports filed with the Securities and Exchange Commission, including the company's annual report on Form 10-K for the full year ended December 31, 2025.

The company undertakes no duty to update any forward-looking statements to conform the statement to actual results or changes in the company's expectations. In addition, we have included non-GAAP financial information in our discussion. Reconciliations to the most comparable GAAP financial measures are included in the earnings release and in the appendix of the presentation. Reconciliations of certain forward-looking non-GAAP financial measures to comparable GAAP financial 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.

Any reference to EBITDA in our discussion today means adjusted EBITDA, which excludes non-run rate items for which we have provided reconciliations in the appendix. Further, Slide 5 contains definitions of terms and measures that will be commonly used throughout today's presentation.

At the conclusion of the company's presentation, we will open the call for questions. I would now like to turn the call over to Keith Harvey. Keith?

Thanks, Kim. Good morning, everyone, and thank you for joining us. I'll begin on Slide 7. We're very pleased with our second quarter performance. As we look back on this exceptional quarter, the most notable development was the continued strengthening demand across most of our key end markets. Activity accelerated throughout the period at a pace that exceeded our expectations, driving another record quarter for conversion revenue supported by favorable price and mix.

Higher volumes also translated into improved operating leverage and when combined with favorable metal dynamics from widened scrap spreads contributed to EBITDA results that significantly exceeded our expectations. While we've been highlighting improving market conditions for several quarters, the breadth and pace of the recovery proved stronger than we anticipated. Favorable metal lag provided an additional tailwind in second quarter, but the underlying story is increasingly one of stronger customer demand, improving market conditions and strengthening business fundamentals.

These are exactly the market conditions we have been preparing the business for through the strategic investments we've made across our portfolio over the last several years. As demand strengthened throughout the quarter, we made a number of deliberate operating decisions to support customer requirements, increase throughput and position ourselves to capture the opportunities in front of us. Those actions included targeted investments in labor, production capacity and other operating initiatives designed to support growth, improved customer service and maximize the value of the stronger market conditions.

We believe these were the right decisions for the long-term success of the business. And while some of those investments will continue through the balance of the year, they reflect the strength of the demand environment rather than a change in our underlying cost structure. As we look ahead, our outlook assumes aluminum prices remain relatively stable through the end of the year at current levels, resulting in a more typical contribution from metal-related items versus the significant tailwinds we experienced during the first half of the year.

In addition, the second half will include normal seasonal factors, higher planned spending, facility upgrades and other projects that were less significant during the first half of the year and are intended to support future growth and improved operational performance. While our updated outlook does not assume a continuation of the exceptional pace established during the first half, this is not a change in the trajectory of the business. The demand environment today is stronger than we anticipated entering the year and now moving into 2027 as customer activity continues to build across many of our end market applications.

Subsequently, we are seeing the benefits of the investments we've made over the last several years. While quarterly results will naturally fluctuate as metal, maintenance, seasonality and other timing-related items move through the yearly business cycle, our confidence in the long-term earnings power and margin potential of Kaiser have only increased. With that framework in mind, let me spend a few minutes discussing the key developments we're seeing across our end markets before turning the call over to Neal for a review of the quarter and our updated outlook.

Turning to the end market summary on Slide 8. So beginning with Aerospace and High Strength, I would characterize the quarter as another step forward in the progression we've been discussing over the last several quarters. What began as a recovery story has returned to a growth story. Commercial Aerospace continues to improve as build rates move higher and inventory destocking continues. But just as importantly, we're seeing continued strength across the broader portfolio. Demand in defense, space, biz jet and other high-strength applications remains robust, reinforcing our view that this is not being driven by a single end market or platform.

While those trends support our confidence in the longer-term outlook, it's important to recognize that much of our capacity is already committed, and we continue to expect results to trend toward the high end of our previously communicated range. The demand environment we're seeing today provides increasing confidence that these trends extend well beyond 2026. The investments we've made at our Trentwood operation were designed to support exactly this type of market environment, and we're now seeing growing utilization of that capacity across multiple end markets.

Our focus remains on execution, maximizing the value of the assets we've recently installed and ensuring we're well positioned to support continued growth for our customers in the years ahead. We estimate we will track to the high end of our previous outlook for both shipments and conversion revenue dollars for 2026.

Turning to packaging. The quarter was another important step in the transformation of the Warrick operation. Roll Coat 4 continues to ramp well and perform to our expectations. As a reminder, our objective for 2026 was to ramp the output in a disciplined manner to build a world-class operation focused on quality, reliability and service, the same principles that have long differentiated Kaiser in the marketplace.

As a result, we have been focusing on an 80% utilization rate for the new line, prioritizing product quality and on-time delivery while continuing to increase throughput and qualify additional business. The continued shift toward higher value-added coated products is driving improved conversion revenue and profitability with customer demand remaining well ahead of available industry capacity. What is particularly encouraging is that despite operating at roughly 80% of our targeted quarterly shipment capacity on the new line, Warrick generated the highest conversion revenue performance in its history. That result underscores the strategy we have consistently discussed, maximizing value rather than simply maximizing volume.

While shipments are expected to finish within our previously communicated range of 10% to 15% growth, the continued mix shift toward coated products positions us to finish at the high end of our previously communicated conversion revenue growth outlook of 20% to 25%.

More importantly, we believe there remains significant opportunities ahead. While the progress at Warrick has been substantial, we have not yet fully optimized the assets or realized the complete benefit of the mix transformation underway. The facility is performing well, but we are still in the early stages of capturing the full operating leverage and cost efficiencies we expect from the investment. As we continue to increase capacity and move toward our targeted run rate levels in early 2027, we see additional opportunities to improve both profitability and customer service performance.

As a result, we remain focused on increasing throughput, improving operating performance and continuing to leverage our position as one of North America's leading suppliers of coated packaging products. while steadily progressing toward the margin profile we have discussed over the last several years.

Turning now to General Engineering. I would characterize the quarter as another step forward in what has become one of the more encouraging stories within our portfolio. What initially began as a recovery supported by reshoring activity and improving industrial demand has increasingly transitioned into a broader growth story. Customer inventories remain low by historical standards, booking activity remains healthy, and the lead times continue to extend across many of our product lines, providing additional evidence that demand is strengthening.

We are particularly encouraged by the continued improvement in semiconductor-related demand. where customer discussions have increasingly shifted from inventory management towards securing available capacity. In fact, this has led to the execution of long-term agreements with several large OEMs and service center partners that increasingly recognize they are competing for capacity on our mills with a highly predictable Aerospace and High Strength Supply chain. These customers recognize the value Kaiser brings through Kaiser Select quality, reliability and technical support, positioning portions of our general engineering portfolio on par and in certain cases, exceeding the attractiveness of traditional aerospace plate type products.

As a result, pricing and product mix have continued to improve. And while shipments are trending toward the high end of our previously communicated outlook, stronger conversion revenue per pound now supports increasing our annual general engineering conversion revenue outlook to growth of 10% to 15% over last year. More broadly, the themes we've discussed over the last several quarters, reshoring, domestic manufacturing investment, semiconductor expansion and increasing demand for specialized plate products are no longer just anecdotes. They have become structural changes in our markets.

While we remain disciplined in our outlook, the demand environment today is stronger than we envisioned entering the year, and we believe General Engineering is increasingly benefiting from many of the same strategic advantages driving growth elsewhere in our portfolio.

Lastly, turning to Automotive. The story continues to be one of disciplined participation in attractive applications where Kaiser holds strong competitive position. While broader automotive production remains subject to fluctuations in consumer demand and industry build schedules, demand for the products we supply into light truck and SUV platforms remains healthy. More importantly, the investments and facility upgrades we've discussed over the last several quarters continue to progress as planned and remain supported by long-term customer commitments.

What is increasingly apparent is that the opportunity in front of us is larger than we originally envisioned. The products supporting these investments occupy highly specialized positions within the supply chain where quality and technical expertise matter greatly.

As a result, we continue to view automotive as a meaningful contributor to future growth and an important component of the longer-term earnings potential of the business. Over the next 12 to 15 months, we will be investing to support the continued demand for these unique products. We are maintaining the outlook previously provided.

Neal will now cover these points in more detail as he walks through financial details related to the quarter. Neal?

Thank you, Keith. Good morning, everyone. I'll now turn to Slide 10 for an overview of our shipments and conversion revenue. Conversion revenue for the second quarter was $437 million, an increase of approximately $63 million or 17% compared to the prior year period. Looking at each of our end markets in detail. Aerospace and High Strength conversion revenue totaled $136 million, up approximately $9 million or 7%, primarily due to a 2% increase in shipments over last year.

As noted by Keith, commercial Aerospace production continued to strengthen in the second quarter as OEM build rates increase. We now believe that destocking is largely behind us for the majority of our products, except for certain plate products, which we expect to continue to destock for several more quarters. This has allowed us to take advantage of the strong demand in business jet, defense and space end market applications in addition to strong demand from the semiconductor industry by utilizing our Trentwood capacity to book additional higher value-added plate products.

Packaging conversion revenue totaled $174 million, up approximately $44 million or 34% year-over-year, driven by ongoing mix shift toward higher value-added coated products that generated meaningfully higher conversion revenue per pound. Shipments for the quarter increased 10% over the prior year, reflecting strong underlying demand as we continue to ramp the new coating line to around 80% utilization while we advance quality, qualify additional coatings and continue to move towards the level of service consistency our customers expect from Kaiser.

General engineering conversion revenue for the second quarter was $96 million, up approximately $10 million or 12% year-over-year on a 7% increase in shipments. The year-over-year increases in both conversion revenue and shipments reflect several factors, including the restocking of multiyear low inventory levels, increasing demand for our Semi-K plate, which is specifically developed for the semiconductor industry, tariff-related reshoring and our distinct quality, service and KaiserSelect advantages, which all contribute to a favorable market environment that is supported both volume growth and improved pricing.

Finally, automotive conversion revenue of $32 million was flat year-over-year on an 11% decrease in shipments, primarily due to ongoing conversion to higher value-added products, coupled with a challenging automotive industry backdrop with elevated consumer financing costs and tariff dynamics. However, demand for light trucks and SUVs, the platforms most aligned with our product portfolio continue to hold up well among targeted buyers.

Additional details on conversion revenue and shipments by end market applications can be found in the appendix of this presentation. Now moving to Slide 11. Reported operating income for the second quarter was $134 million, an increase of approximately $96 million from $38 million in the prior year quarter. After adjusting for operating non-run-rate charges of $3 million, our second quarter 2026 adjusted operating income was $137 million, an increase of approximately $99 million from the $38 million in the prior year quarter. Reported net income for the second quarter was approximately $97 million or $5.72 net income per diluted share compared to net income of $23 million or $1.41 net income per diluted share in the prior year quarter. After adjusting for a net operating and nonoperating non-run rate pretax benefit of $4 million, adjusted net income for the second quarter 2026 was $94 million or $5.53 adjusted net income per diluted share. This compares to adjusted net income of $20 million or $1.21 adjusted net income per diluted share in the prior year period. Our effective tax rate for the second quarter was 23% compared to 22% in the second quarter of 2025.

For the full year 2026, we continue to expect our effective tax rate before discrete items to be in the mid-20% range. Additionally, we now anticipate that 2026 cash tax payments for federal, state and foreign taxes will increase to be in the $14 million to $18 million range due to our improved financial performance.

Now turning to Slide 12. Adjusted EBITDA for the second quarter was approximately $166 million, up $99 million from the prior year period. The year-over-year improvement includes $41 million of higher pricing, increased shipments and improved mix. The remaining net $58 million improvement primarily reflects combined favorable metal tailwinds driven by unprecedented metal price market dynamics. These combined tailwinds reflect lower inventory consumption costs relative to our hedge cost of alloyed metal pass-through to customers. As well as higher-than-normal scrap spreads, improved scrap utilization and a metal lag gain of approximately $13 million as compared to prior year quarter.

The total metal lag gain for the second quarter of 2026 was $27 million. Our performance was partially offset by certain higher manufacturing costs, including increased shipping rates from elevated fuel prices and higher employee-related costs tied to increased incentive compensation. It is important to note that as we exited the second quarter 2026, our weighted average cost of metal inventory was approximately in line with the forward aluminum Midwest transaction price curve of $2.45 per pound. As such, we do not expect the continuation of the metal lag tailwinds and are assuming a more normalized scrap spread and utilization environment in the back half of the year.

As Keith noted, we expect strong demand across key end markets, continued transition to high-value coated products and packaging end markets and favorable pricing to be the key drivers of our operational results going forward. We remain focused on improving operational efficiencies and leveraging our recent capital investments to support continued margin expansion.

Now turning to Slide 13 for a discussion of our balance sheet and cash flow. We continue to generate solid free cash flow, which we calculate as operating cash flow less CapEx of $35 million in the second quarter despite higher working capital requirements on elevated aluminum pricing. For the full year of 2026, we now expect free cash flow to be in the range of $150 million to $175 million, subject to metal price movement and its impact on working capital. Our capital expenditures totaled $24 million in the second quarter of 2026. And for the full year, we continue to expect capital expenditures to be in the range of $120 million to $130 million. Our strong cash position resulted in total cash of approximately $59 million and approximately $570 million in borrowing availability on our revolving credit facility. Strengthening our liquidity position of $628 million as of June 30, 2026.

As a reminder, our senior notes interest costs are fixed at $54 million annually, and we have no debt maturing until 2030. Given our strong last 12-month EBITDA performance and cash position at the end of the second quarter of 2026, our net debt leverage ratio improved ahead of our expectations to 2.1x from 3.4x at year-end and now in line with our targeted range of 2 to 2.5x.

Finally, on July 13, we announced that our Board of Directors declared a quarterly dividend of $0.77 per common share, signaling continued confidence in our long-term strategy to drive profitable growth and advance stockholder value.

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

Thanks, Neal. Now turning to Slide 15. Taking all of this together, we continue to believe Kaiser is exceptionally well positioned. The investments we've made over the last several years were designed to capture exactly the type of market environment we're experiencing today, and we're increasingly seeing the benefits reflected across the portfolio. Demand continues to strengthen across most of our key end markets. Customer activity remains robust and bookings now extend well into 2027 in several areas of our business.

Importantly, this is not being driven by any single market. Aerospace continues to recover and grow. Packaging is delivering the benefits of our transformation at Warrick. General Engineering is increasingly benefiting from solid structural demand drivers along with restocking at service centers and automotive demand and subsequent investments will provide future growth in our targeted applications. While we expect the second half to include a more typical contribution from metal-related items, along with higher spending and seasonal factors, the underlying business is performing better than we anticipated entering the year.

As a result, we now expect conversion revenue growth to finish near the high end of our previously communicated range of 10% to 15% while EBITDA is now expected to increase between 45% and 55% year-over-year.

Our confidence in the long-term earnings power of Kaiser has never been stronger. We remain the premier North American supplier in all of the markets we serve, particularly aerospace and high strength applications. And today, we are seeing multiple growth drivers strengthening simultaneously across the portfolio. The investments are working, demand is building, and we believe the opportunities in front of us extend well beyond 2026.

With that, we're happy to take your questions.

[Operator Instructions] Our first question is from Bill Peterson with JPMorgan.

Keith and Neal, Nice job on the quarterly execution in. Considering the second quarter, I think it's a pretty large beat relative to expectations. Maybe excluding Metal lag, can you provide some additional color on what was significantly better than expected in the quarter? It feels broad-based, but if you can stack rank what happened in the quarter that was better than expectations, that would be helpful.

Sure. Bill, thanks for the questions. Listen, it was very broad-based, as we stated in a lot of our comments, Bill. We saw a lot of throughput through the operations. I called out that we went to no expense to try to meet that demand through the quarter. We plowed a lot of resources to meeting the demand across the board. General Engineering was a little surprise for us, stronger, although we've talked for several quarters in a row how we've seen like 9-year lows in the inventory levels, especially at service centers. Well, they began to kick in, and in spades.

And as we predicted and as we've seen multiple times, they were not only buying for the demand, but they're also trying to refill their coffers, their inventories to meet that rising demand. And when you couple that with the Aerospace coming back in and all this, the only way we can react to that is increase the throughput but move lead times out.

So as I stated in there, the surprise to us was how quick the recovery came to us in that demand and how fast we had to move lead times because we're going to keep paramount focus on customer satisfaction during this period. The packaging numbers speak volumes, if you will. We're seeing really strong demand continue. I'm sure it was driven by World Cup and the typical summer growth that happens in our markets. But while we saw very strong demand.

And again, we're still going through qualifications and so forth on our Rollcoat 4, but we're adding significant volume on the higher value-added side of the business as expected. So we had a really strong quarter out of that.

Now moving into the balance of the year for that, we still have a very strong expectation and continued performance upgrades, but we also have qualifications and some more bugs to work out of the line. That's why we're focused on that 80% for the year.

And then finally, I would say our automotive -- while we thought automotive would be flat and while we have limited our capacities there, we are seeing demand pick up, especially on trucks and SUVs. And we're working with our customers to try to manage through the work that we've got to do and satisfy that growth.

So it's one of those times that we've gone through that we're seeing the strong demand across every market we have, almost every product line we have, and we're just ramping as fast as we can to meet those needs.

Yes. And then considering the second half outlook, and I guess with the context of the unit VAR was better for all segments. If we back into the shipment guidance, would imply unit VAR should trend down for the year. I guess trying to reconcile that relative to seasonality? Is it a mix impact or planned downtime?

And then on the profitability on the EBITDA guidance, it does imply margin pressure as well moving ahead. And so if you do [Cross Line] margins, the margins are strong at over 30%. So trying to just reconcile the second half guidance, both from sort of a unit VAR as well as the EBITDA guidance.

Yes. So the the way we tried to explain that in some of the numbers in that we put forward here was that assumption that, that tailwind we've been having for the last 3 or so quarters, 3 or 4 quarters. We're assuming that we finally become at par with where the market is. And we put that number out there because we really don't know if metal is going to continue to rise or if it will drop further. The big headwind that we've talked about with metal actually occurred in June for us, Bill. Metal moved down roughly $0.30 a pound very quickly and which actually took some of the air out of the sail for second quarter.

So we're not assuming that moving forward. We typically will have probably 55% to 60% of our total sales in the first half of the year normally compared to the second half of the year. So we're bringing that into place. We did pause on some major maintenance in the quarter, which we expect will be heavier in the second half. We have to keep these assets in good condition to meet this rising demand. So we're rolling that into our outlook.

VAR, we're going to have less shipping days in the second half. So we really don't expect a daily demand or actually a demand decrease through the period. It's just the amount of shipping days we have to participate and then rolling in planned outages and expected major maintenance, which we typically do in the second half.

So that's taking that all into account. So we've got the first half of deliverables we've done. We've taken the second half with that expected all those points that I made, and that's what's driving the outlook for the year.

Just anything to call out on the profitability, the EBITDA deceleration?

Well, just the fact of removing some of those metal tailwinds, I really don't see necessarily a per unit decrease taking place. It's going to basically be the metal component and the additional cost associated with some of the maintenance and the outages that we have in place, and it's less shipping days. Otherwise, the demand is strong. As I mentioned, we're into Q1 of 2027 on a number of our items, mainly related to plate products and aerospace and high strength related products at this point.

So that outlook continues to be robust, continues to be higher than we expected. And as you could imagine, what we're doing right now is looking at how we can continue to excel. The expectation is we're resetting contracts for potentially better margin improvement beginning in the first part of the year. We have expected demand continuing to rise on GE, which always gives us an opportunity for margin growth.

And we have the ability to shift between whether we -- whether it's Aero, whether it's GE, whether it's specific in GE Semiconductor, we retain that opportunity to really shift and pivot our business to where those margins are best attained. So other than the metal outlook, which we're putting the red flag in the ground at and with those planned higher spending in the second half, nothing's changed from what we've been seeing in the first part of the year.

[Operator Instructions] Our next question is Samuel McKinney with KeyBanc Capital Markets.

Congrats on the great quarter. Last quarter, you discussed the high-quality standards to which you all hold yourselves at Warrick, and the presentation mentioned the quality coming off our roll coat line #4 is improving. What got better during the second quarter? And where do you still need to get better?

Sure. Thank you. Well, what got better is the throughput is increasing, okay, especially on the new roll coat line, but all of our additional roll coat lines performed very well in the quarter. So we had great output in the second quarter. We continued qualifications and qualifications across the board with new customers, with new coatings that we've needed to qualify. So we've made great strides in that area. I mean we still have some bugs that we're working with on the equipment and some of the design that we'll be working out. And that's what we expected for the year.

I can tell you that our -- it's very slow from my perspective. I want to be at over 90% delivery performance, but we're starting to see some creep up in our delivery performance. We had some weeks that were in excess of 70% and improving. And my goal is 90%. And so we're on our way back to attaining those levels. And so we're meeting those needs of our customers and the new contracts, which we amended for this business. So I'm really pleased. I mean we -- Sam, we talked about this in 2024. People were asking what do we see the changes that we're making in this business and what potentials do they provide us? We gave an outlook of about -- we expected when we started to initiate -- actually, we stated when we were fully implementing our strategy there, we would see a 300 to 400 basis points for the entire entity improvement from this strategy movement that we're making at Warrick.

I can tell you, we have achieved the bottom part of that range in where we currently are today. And we still are working toward the full utilization of that mill. So I believe we're actually going to exceed that outlook just from that strategy alone. So I think what I think is -- I feel much more resolved about is that the strategy is working, that demand is only increasing, and we're really well positioned to take advantage of what we started out when we made the acquisition of Warrick in 2021.

All right. That's helpful. And then within sticking and packaging, first half conversion revenue was up almost 30% year-over-year in packaging. And as you guys continue to increase that richer value coated mix and improve product quality on the roll coat line, should there be any reason not to expect packaging conversion revenue to keep improving in the back half versus the number you posted in the second quarter?

No. No reason to think that it's not going to continue to improve.

There are no further questions at this time. I would like to turn the call back over to Keith Harvey for closing remarks.

Thank you, Sherry. Well, thank you all for your time and interest in Kaiser Aluminum today. The men and women of this storied company worked very hard to successfully execute what's been a long, consistent and a winning strategy for our company. And for that, I'm extremely grateful.

We look forward to discussing our continued progress in October when we review our third quarter results. Have a good day.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

Greetings, and welcome to the Kaiser Aluminum Corporation First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Kim Orlando, Investor Relations.

Thank you. Hello, everyone, and welcome to Kaiser Aluminum's First Quarter 2026 Earnings Conference Call. If you have not seen a copy of our earnings release, please visit the Investor Relations page on our website at kaiseraluminum.com. We have also posted a PDF version of the slide presentation for this call.

Joining me on the call today are Chairman, President and Chief Executive Officer, Keith Harvey; and Executive Vice President and Chief Financial Officer, Neal West.

Before we begin, I'd like to refer you to the first 4 slides of our presentation and remind you that the statements made by management and the information contained in this presentation that constitute forward-looking statements are based on management's current expectations. For a summary of specific risk factors that could cause results to differ materially from the forward-looking statements, please refer to the company's earnings release and reports filed with the Securities and Exchange Commission, including the company's annual report on Form 10-K for the full year ended December 31, 2025.

The company undertakes no duty to update any forward-looking statements to conform the statement to actual results or changes in the company's expectations. In addition, we have included non-GAAP financial information in our discussion. Reconciliations to the most comparable GAAP financial measures are included in the earnings release and in the appendix of the presentation.

Reconciliations of certain forward-looking non-GAAP financial measures to comparable GAAP financial 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. Any reference to EBITDA in our discussion today means adjusted EBITDA, which excludes nonrun rate items for which we have had provided reconciliations in the appendix.

Further, Slide 5 contains definitions of terms and measures that will be commonly used throughout today's presentation.

At the conclusion of the company's presentation, we will open the call for questions.

I would now like to turn the call over to Keith Harvey. Kaiser?

Thanks, Kim. Good morning, everyone, and thank you for joining us. I'll begin on Slide 7.

We're very pleased with our first quarter performance. The momentum we carried out of 2025, not only continued, but in several areas, accelerated. As you saw in our earnings release last night, we are raising our full year outlook, reflecting how quickly the improvement we're seeing is coming together as we execute our strategy and move toward our long-term conversion revenue and EBITDA goals.

We believe 2026 represents the opportunity to deliver a true step change in performance, and our first quarter results reinforce that view. This quarter delivered another record for EBITDA and EBITDA margins. New capacity installed over the last several years is ramping well. Customer demand has been stronger than we anticipated coming into the year. Lead times across the industry are beginning to stretch and pricing continues to firm across many of our products.

While metal remains at elevated levels, these higher costs, which we pass through have not led to any signs of meaningful substitution in our markets, and our supply lines for metal remain secure through the balance of the year, which allows us to stay focused on execution rather than availability.

There were 4 key drivers behind the strength of the results we delivered in the quarter. First, customer activity across all of our end markets exceeded expectations. As lead times extended and pricing firm, the environment has increasingly rewarded reliability and service. These are exactly the conditions where Kaiser differentiates itself and where our operating discipline creates opportunities to win incremental business.

Second, we continue to see meaningful mix improvement at our rolling mill, Warrick. The mix shift towards higher value-added coated volume is fundamental towards long-term success and underpins our confidence in the margin and EBITDA trajectory of the business.

Performance has been encouraging and demand for coated products remain strong. Based on what we're seeing today, we expect this mix improvement to continue through the balance of the year.

Third, operational performance significantly improved across our operations. With significant start-up costs and related disruptions to the operations now behind us as we completed our new investments strong operational financial performance is returning to more historical levels. Excluding metal lag gains in the year-over-year quarterly results, we saw an approximate 850 basis points margin improvement due to operational performance gains alone.

And finally, aluminum prices moved up meaningfully during the quarter, creating a metal tailwind. While beneficial to our financial results, it's modest relative to the structural improvements underway across the business. As always, we operate on a metal-neutral basis, passing through what we can't control, while focusing on conversion, productivity and disciplined capital deployment.

I also would like to point out Kaiser's strong competitive position with the growing use of recycled material across our portfolio, which not only supports our sustainability initiatives, but also creates the environment for strong tailwinds under current conditions. I will continue to remind everyone that these conditions can also reverse and become headwinds should metal prices decline in a volatile market.

Neal will cover these points in more detail as he walks through financial details related to the quarter. Neal?

Thank you, Keith, and good morning, everyone. I'll now turn to Slide 9 for an overview of our shipments and conversion revenue. Conversion revenue for the first quarter was $404 million, an increase of approximately $41 million or 11% and compared to prior year period. Looking at each of our end markets in detail. Aerospace and high-strength conversion revenue totaled $131 million, up $10 million or approximately 8%, primarily reflecting a 9% increase in shipments over last year.

Commercial aircraft production continued to recover, supported by higher build rates at our OEM partners. We are seeing signs of destocking now ending on several of our products, albeit certain plate products continue to destock within our commercial aerospace customers. Demand across our other aerospace high-strength applications, including business jet, defense and space remained strong with improving booking rates.

Packaging conversion revenue totaled $157 million, up $30 million or approximately 24% year-over-year, reflecting a 13% increase in shipments over last year. The shift to coated products is generating higher conversion revenue per pound, and this is supported by strong underlying market demand. In addition, the improvement in shipments also reflects the ramp-up of the fourth coating line.

As Keith mentioned on our last call, although profitability is expected to strengthen meaningfully in 2026, we plan to operate the line at around 80% utilization, while we further optimize quality and consistency.

General engineering conversion revenue for the first quarter was $87 million, up $4 million or approximately 5% year-over-year, primarily driven by favorable pricing partially offset by a 2% decline in shipments. Inventory levels across the channel remain at multiyear lows, positioning us well as these markets improve. Tariff-related reshoring and the differentiation of our customer-focused quality and services, along with our KaiserSelect offerings are reinforcing a favorable market setup for increasing volumes with improved pricing.

And finally, automotive conversion revenue of $29 million decreased by 8% year-over-year on an 8% decrease in shipments. Sustained high consumer borrowing costs and tariff-related uncertainties are dampening conditions across the automotive industry as a whole. However, demand for larger vehicles such as light trucks and SUVs, where our products are primarily targeted in this end market, remains strong among certain buyers. Additional details on conversion revenue and shipments by end market applications can be found in the appendix of this presentation.

Now moving to Slide 10. Reported and adjusted operating income for the first quarter was approximately $98 million, up approximately $55 million year-over-year. Reported net income for the first quarter was $63 million or income of $3.71 per diluted share compared to net income of $22 million or income of $1.31 per diluted share in the prior year period. After adjusting for pretax non-run-rate charges of approximately $600,000, adjusted net income for the first quarter 2026 was $63 million or adjusted income of $3.74 per diluted share, compared to adjusted net income of $24 million or adjusted income of $1.44 per diluted share in the prior year period.

Our effective tax rate for the first quarter was 24%, and compared to 25% in the first quarter of 2025. For the full year 2026, we continue to expect our effective tax rate before discrete items to be in the mid-20% range. Additionally, we anticipate the 2026 cash tax payments for federal state and form taxes will be in the $10 million to $13 million range.

Now turning to Slide 11. Adjusted EBITDA for the first quarter was $129 million, up $55 million from the prior year period. Adjusted EBITDA as a percentage of conversion revenue improved by approximately 1,200 basis points from the first quarter of 2025 to 31.8%. The year-over-year improvement was primarily driven by $25 million from higher shipment volumes from pricing and a net $34 million improvement in operating costs. This reflects improved scrap utilization and spreads, which was partially offset by higher operating costs.

Of the $34 million operating cost improvement, $15 million was attributed to metal lag gain. In addition to our strong underlying operational performance, the first quarter metal lag gain was approximately $36 million. The increase in year-over-year scrap spreads and the metal lag gain reflect higher aluminum prices, influenced by the upward pressure in global markets from the conflict in the Middle East as well as elevated Midwest premium driven by U.S. tariff policy and tight domestic supply. As the year progresses, we remain focused on operational improvements by optimizing efficiencies and further leveraging our recent capital investments to support continued margin expansion.

Now turning to Slide 12 for a discussion of our balance sheet and cash flow. We generated solid free cash flow, which we calculate as operating cash flow less CapEx. Of $69 million in the first quarter despite higher working capital demands on elevated aluminum pricing, resulting in total cash of approximately $30 million and approximately $566 million of borrowing availability on our revolving credit facility. Our resultant liquidity position of approximately $596 million remained strong as of March 31, 2026.

As a reminder, our senior note interest costs fixed at $54 million annually, and we have no debt maturing until 2030. Given our strong last 12-month EBITDA performance and cash position at the end of the first quarter of 2026, our net debt leverage ratio improved to 2.8x from 3.4x at year-end, moving us closer to our targeted range of 2 to 2.5x. We now expect full year free cash flow to be in the range of $140 million to $150 million subject to metal price movements and its impact on working capital.

Turning to capital allocation. Our framework remains focused on driving long-term growth. Our priorities are clear: disciplined organic investment, selective inorganic opportunities and consistent return to stockholders. Our capital expenditures totaled $19 million for the first quarter, 2026, and for the full year 2026, we continue to expect our capital expenditures to be in the range of $120 million to $130 million.

Finally, on April 13, we announced that our Board of Directors declared a quarterly dividend of $0.77 per common share, reaffirming their support for our strategy and focus on delivering sustainable value to our stockholders. 2025 capped our 19th consecutive year of dividend payments, a unique distinction that sets Kaiser [indiscernible] industry.

In summary, as we celebrate Kaiser's 80th anniversary, we entered 2026 with strong momentum, solid visibility across our end markets and the benefit of having completed major growth investments. With this foundation in place, we are focused on harvesting returns, expanding margins through disciplined execution and generating meaningful free cash flow.

I'll now turn the call back over to Keith to discuss our 2026 outlook. Keith?

Thanks, Neal. Let me walk through our end markets and how we're thinking about the remainder of the year as part of that discussion.

Turning to Slide 14. Starting with aerospace and high strength, demand continues to improve. We saw solid bookings and shipments across the portfolio in the first quarter, and that strength is expected to continue. Destocking headwinds that affected parts of the market last year continue to ease and improving demand is now the primary driver. A lack of imports is supporting market share gains and increasing defense and space spending is adding incremental demand across several programs. In fact, demand for our defense and space applications appear to be taking an additional step higher, building on already high levels in 2025.

Utilization across the facilities remains high, including the recently completed Phase 7 capacity expansion at our Trentwood rolling facility, driving longer lead times and upward pressure on pricing for noncontractual bookings. Based on this backdrop, we now expect aerospace and high-strength shipments to grow in the range of 15% to 20% this year with conversion revenue growth of 10% to 15%.

In packaging, performance during the quarter was strong with robust shipments and continued healthy demand in a supply-constrained environment. The fourth coating line advanced further toward full production with 8 monthly output records attained since the second half of 2025. This improvement was achieved despite persistent challenges with certain converters we use, particularly related to on-time delivery shortfalls and overall broader performance concerns.

Our own execution improved during the quarter and momentum remains positive. With solid multiyear demand visibility, our focus on increasing the coated mix at Warrick will continue to position conversion revenue ahead of shipment growth as coated products become a larger portion of our mix. This is reflected largely in higher conversion revenue per pound. As you can see in the appendix of this presentation, conversion prices through first quarter have risen by nearly 50% since we acquired the business in 2021 and continue to improve.

Given current market conditions, we now expect packaging shipments to grow between 10% and 15% for the year, with conversion revenue growth in the range of 20% to 25%.

General engineering is off to a strong start in 2026 as well. Shipments and booking activity were solid across the portfolio. Pricing and lead times are moving out across most products, signaling a healthier demand environment. Generally speaking, low customer inventories and extending lead times create a favorable market backdrop.

Specifically on semiconductor plate products, order activity has been encouraging, whereas the destocking overhang that [indiscernible] on demand last year, has largely transitioned into ensuring capacity is available to keep up with requirements.

Based on trends we're seeing today, we expect general engineering shipments and conversion revenue, both to increase between 5% and 10% for the year.

In Automotive, results were in line with expectations. Demand for light truck and SUV where aluminum pairs well and light weighting remains healthy. Our shipments were lower as we prepare for two major outages later this year, focused on equipment repairs, upgrades and reviewing plans to significantly expand capacity to support aluminum drive shaft demand. As always, these investments are contractually supported by customer commitments and position the business well for future growth.

Based on these factors, we now expect shipments and conversion revenue to be flat to down 5% for the year.

Now turning to Slide 15 and taking all of this together, we now expect conversion revenue to rise 10% to 15% and EBITDA to increase between 20% and 30% year-over-year. This improvement reflects stronger demand, firmer pricing, improved mix, particularly at Warrick, and continued strong execution across the portfolio.

Overall, we're off to an excellent start in 2026. The fundamentals across our markets are aligning well with the expectations we set heading into the year, and in several cases, are exceeding them. The strategy is working, execution remains strong, and the opportunities ahead even more encouraging.

With that, we're happy to take your questions.

[Operator Instructions] Our first question comes from Bill Peterson with JPMorgan.

Nice job on the quarterly execution and the revised guidance. I have a few questions. And I guess maybe starting out trying to unpack the first quarter print, better-than-expected metal price lag benefits. Can you unpack that versus improving demand story? I think you might have said some of those too, but versus also the VAR pricing power. And maybe more importantly, looking ahead on the revised guidance. Can you help us understand how much scrap spreads play a role versus mix and the volume impacts, that you had called out?

Sure. So Bill, I appreciate your comments. Let me speak to some of that if I missed something, just hit me with a specific question again. The way I look at where we currently are, Bill, I've been trying to pull out the metal lag gains just to understand operationally how we're going. And if I do that in the comparative between the first quarter of last year, first quarter of this year, last year, if I pulled out the gain and looked at what the EBITDA margin was without the gain, we were around the mid-teens. We're around 14% or 15% type margin on just the operational side.

If I do the same thing with the first quarter of this year and pull out the $36 million gain that we called out, that margin improvement has moved up to about 24%. So we're driving the business operationally, which includes not only the type of mix in volume and pricing we expected in the business, but we also have underlying better performance at the facilities.

Now we also -- that also captures in the traditional business. We're still counting -- we're looking at metal profits as a component of that, of which we are taking advantage of spreads, but we had spread opportunity. And these are beyond the metal lag that we call out.

So all in all, we've got all the pieces performing much better and as expected. Now again, I think what was key there -- and I think sometimes gets lost. Last year, we had -- we called out for the full year, we had about $47 million of onetime cost start-up costs and things that we had identified. We have those pretty much behind us now. So we're getting some of that cost back into the system. The markets are improving, and we're executing better with all the chaos behind us. So that's my general thoughts on how I look at it.

Going forward, how do we look at these metal lag, Bill, what we have stated, like in February, we said, look, we're taking what the current quarter outlook does for us. And then we're looking at the forward metal curves. And the forward metal curves, especially as we looked at in our last call, seemed to drop off proportionally, okay, for the market coming back into alignment. What I will say is that those forward curves are remaining fairly elevated. So I'm sure that's representative of all the volatility in the market and so forth.

So we could have some continued metal lag gains that are going to aid us. But again, we're differentiating between that and operational performance. And so when I look at the margin growth based on how well we're doing versus just these tailwinds that have taken place, we've got almost a 75% improvement quarter-over-quarter -- year-over-year. I mean in Q1. So that's what I'm most pleased about and focused on, and I believe is going to long term drive our business.

And I don't believe you spoke to it, but there has been some changes to the [ second 232 ] tariffs, have been kind of refined somewhat. Are you able to comment on what impacts this change may have on your business, including supporting pricing or other kind of customer feedback that you're hearing thus far?

Bill, I've looked at it and tried to understand where that can come to play. And I think where I come down is this: I actually think it enhances the domestic supply position. A lot of those semi finished-type products coming in where a 25% would apply are really going to impact the imports, I would say, for the most part. And the 232 are hanging in quite well. I think we're on the verge of continuing to see reshoring, continue to elevate here. We're seeing more factory demand. We're seeing growth in semiconductors start to come off perhaps if we call the floor last year, I think it's going to double year-over-year this year, has the potential to double year-over-year next year.

So I think that strong demand and that more of a -- I would say, of a hindrance for the imports only leads us to perhaps a better market condition with regards to demand and a pricing environment.

Okay. Maybe if I can ask one more, and I can get back in the queue. But on the new assumptions that are baked into the updated aero and high-strength guidance, it sounds like you're increasingly more confident in the commercial aero demand, I think you're saying either the destocking is done or nearly finished.

I guess can you comment on that and then what -- maybe how that compares with Entrust or how the impact to your guidance would be in terms of the import environment being less pronounced? Or on the other side, with defense being -- it sounds like you're feeling incrementally better about defense as well.

Yes. And I think that's really it, Bill. We're seeing defense in some programs -- we expected perhaps a doubling. We're actually seeing quadrupling of expected demand coming our way. I can say that aero -- I happen to be watching CNBC yesterday morning and [ Kelly Ortner ] was on from Boeing. And he's the one that publicly called out the rise in build rates on the [indiscernible] from [ 42 to 47 ], as expected, continued progress on other variants that are being up for approval.

So we're seeing the commercial definitely get a little stronger, but we're also seeing space. It's a cliche, but we're seeing space take off. And so all these things are hitting around the same time. And we got into that same environment in 2019 when we saw not only the aerospace start to take off, but also on the GE begin to rise. And that created a pretty pleasant environment for us, and I can foresee the same thing beginning to occur here.

Good execution, and the market environment is turning positive for us. So I appreciate the chance to ask some questions.

Thank you, Bill. Appreciate it.

Our next question comes from Samuel McKinney with KeyBanc Capital Markets.

Congrats on the strong quarter. I'm going to follow up on the last question on the aero and high strength market. You had enough confidence in the end market trends to raise the shipment outlook there for the year. You touched on the production ramp at the major OEMs, but if you could just talk to us a little bit about where you think we are in that destocking, restocking cycle within that end market right now?

Yes. If I had to go from 1 to 10 -- or let's do with this. I think the baseball analogy goes really well. if I had to say what inning we're in, I'd say we're coming up in the seventh inning or so on -- with regard to demand for plate type products. And I believe we're in the ninth and heading into other extended innings here on the other products and other markets that we participate, and that includes defense, [indiscernible], jet, space and the other products. So I would say, especially on the aero side, aero and high strength, that's where we're currently at.

And so when I take a look at first quarter results and I look back, we had -- we claimed a new record in 2024 for aero and high strength and then we got into some of that destocking last year. If I compare our first quarter results to the first quarter of 2024, they're very similar. And so that's a really good strong start, stronger than what we had last year.

And what I would say is our outlook with the activity that we're seeing currently and expectations, we're going to be growing that pretty much quarter-over-quarter through the remainder of the year. So I'm expecting the quarterly results to continue to improve, and the outlook that we're seeing right now are supporting that.

Lead times are moving out. They've more than doubled in the last few months. And we're seeing that with fairly record low inventories outside of the commercial players. So that bodes pretty well for long-term demand. So we're going to see the similar strength on the GE products and so forth.

Okay. That's helpful. And then on a per pound basis, you saw some nice sequential expansion in packaging conversion revenue this quarter. Just talk to us about the progress you've made and expect to make over the balance of this year, on shifting to more code capacity at Warrick as well as the reception from your customers on the product coming off that new [ Royco ] line.

Sure. What we stated, Sam, is that we were -- we have a target of 80% utilization of that line this year. So naturally, your first question is, "With such strong demand, why don't you ramp it to 100%?" Well, I can tell you, part of the mantra for Kaiser is on-time delivery and so forth. And over the last couple of years, we've not been meeting our expectations, much less our customers' expectations in that regard. So we're going to ramp up and make sure that our service levels improve in a very similar basis of a ramp-up there. And we can get those earlier in the year. I'm confident that demand will be there to supply additional shipments through there.

Now with regard to the customer reception, we've had excellent reception to the quality of the product that's come off of that line. And we've been qualifications well through a number of those. And you can see, as we begin to ramp that up, we still have a ways to go and store more upside for us from that potential. And again, 80% is the target. There remains obviously another 20% beyond that, which we intend to continue to focus on that when move to coated.

And so that fits us well. Our customers are receptive to this. They appreciate it. Demand is as strong as we've ever seen it. And so I would say at this point, we're ramping along nicely and should continue to see growth throughout the quarter through the balance of the year in that category.

We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Keith Harvey for closing comments.

Thanks, Maria. We thank you for your continued interest in the company. I'd like to also thank all the Kaiser team members for their contributions and and helping develop and execute what has long been a very successful strategy.

I look forward to updating you all on our progress in July. Have a great day.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, everyone, and welcome to the Kaiser Aluminum Corporation Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kim Orlando, Investor Relations. Thank you. You may begin.

Thank you. Hello, everyone, and welcome to Kaiser Aluminum's Fourth Quarter and Full Year 2025 Earnings Conference Call. If you have not seen a copy of our earnings release, please visit the Investor Relations page of our website at kaiseraluminum.com. We have also posted a PDF version of the slide presentation for this call. Joining me on the call today are Chairman, President and Chief Executive Officer, Keith Harvey; and Executive Vice President and Chief Financial Officer, Neal West.

Before we begin, I'd like to refer you to the first 4 slides of our presentation and remind you that the statements made by management and the information contained in this presentation that constitute forward-looking statements are based on management's current expectations. For a summary of specific risk factors that could cause results to differ materially from the forward-looking statements, please refer to the company's earnings release and reports filed with the Securities and Exchange Commission, including the company's annual report on Form 10-K for the full year ended December 31, 2024. The company undertakes no duty to update any forward-looking statements to conform the statements to actual results or changes in the company's expectations. In addition, we have included non-GAAP financial information in our discussion.

Reconciliations to the most comparable GAAP financial measures are included in the earnings release and in the appendix of the presentation. Reconciliations of certain forward-looking non-GAAP financial measures to comparable GAAP financial 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 efforts.

Any reference to EBITDA and our discussion today means adjusted EBITDA, which excludes nonrun rate items for which we have provided reconciliations in the appendix. Further, Slide 5 contains definitions of terms and measures that will be commonly used throughout today's presentation. At the conclusion of the company's presentation, we will open the call for questions. I would now like to turn the call over to Keith Harvey. Keith?

Thanks, Kim, and good morning, everyone. Thank you for joining us. I'll begin on Slide 7. I'm pleased to report that our fourth quarter results continue to build on the momentum we've established throughout the year. This marks our fifth consecutive quarter of performance ahead of our internal expectations and we exceeded the full year outlook we provided in October.

Start-up costs moderated versus the prior 2 quarters, while metal pricing remained a tailwind. For the full year, we delivered more than 25% EBITDA growth with margins above 21% and second half margins improving to nearly 24%, driven by our packaging investment that enhanced our mix along with modest operational progress in multiple areas of the business. Overall, we achieved record EBITDA in 2025 and established a solid foundation for continued growth as we move into 2026.

We are positioned to harvest the returns from our recent investments, continue strengthening margins and generate free cash flow as we execute efficiently across the portfolio. With that, I'll turn the call over to Neal to review the quarter and full year financial results. I'll then return to discuss our end market trends, our 2026 outlook and the strategic priorities that will guide us in the years ahead.

Thank you, Keith, and good morning, everyone. I'll now turn to Slide 9 for an overview of our shipments and conversion revenue. Our full year total net sales were $3.4 billion after adjusting for the hedge cost of alloy metal of $1.9 billion, our conversion revenue for the year was $1.5 billion, relatively consistent with 2024.

Our total shipments were GBP 1.1 billion, down GBP 64 million or 5% from 2024. Looking at each of our end markets in detail. Aerospace and high-strength conversion revenue totaled $457 million, down $73 million or approximately 14% and primarily due to a 16% decrease in shipments attributed to the commercial aerospace OEM destocking of plate products and the impact of the planned Phase 7 investment, which occurred in the second half of the year. Commercial aerospace OEM destocking began to ease exiting the fourth quarter of 2025.

Across our other aerospace high-strength applications that includes the business threat defense and space end markets demand has remained strong. Packaging conversion revenue for the year totaled $544 million, up $54 million or approximately 11%, driven by our planned transition to coated products as we finalize commissioning of the new coating line. While shipments declined by 32 million pounds during this transition, reflecting a slower ramp-up of the coating line than originally anticipated, the shift is generating higher conversion revenue per pound, supported by the strong underlying market demand.

General engineering conversion revenue for the year totaled $331 million up $14 million or approximately 4% year-over-year on a 6% increase in shipments. Tariff-driven reshoring activity and KaiserSelect quality attributes continue to create a favorable demand backdrop, supporting both volumes and pricing. And finally, automotive conversion revenue for the year totaled $122 million, up 2% year-over-year and a 6% decrease in shipments primarily due to persistently high interest rates and tariff-related customer uncertainty affecting the automotive industry on a whole.

However, improved pricing and product mix helped offset the lower shipments. Additional details on conversion of revenue and shipments by end market application can be found in the appendix of this presentation. Now moving to Slide 10. Reported operating income for 2025 was $189 million after adjusting for non-run rate income of approximately $1 million, our 2025 adjusted operating income was $188 million, up $63 million from 2024. In addition, 2025 operating income included a $6 million increase in depreciation expense associated with the Trentwood rolling mill Phase VII expansion project and the commissioning of the new coating line at Work. An effective tax rate for the full year was 25% comparable to 2024.

For the full year 2026, we expect our effective tax rate before discrete items to be in the mid-20% range including the impacts related to the new tax bill recently signed into law. Additionally, we anticipate that the 2026 cash tax payments for federal and state foreign taxes will be in the $5 million to $7 million range. Reported net income from 2025 was $113 million or $6.77 per net income per diluted share compared to net income of $66 million or $4.02 net income per diluted share in the prior year. After adjusting for net pretax nonrun rate income of approximately $15 million primarily related to legacy land sales and insurance settlements associated with prior year claims.

Adjusted net income for the year was $100 million or $6.03 adjusted net income per diluted share. This compares to adjusted net income of $60 million or $3.67 adjusted net income per diluted share in 2024. Now turning to Slide 11. Adjusted EBITDA for the year was $310 million, up approximately $69 million from 2024. Adjusted EBITDA as a percentage of conversion revenue improved to 21.3% approximately 470 basis points above our 2024 margin of 16.6%. In 2025, we also incurred approximately $47 million of nonrecurring operating and other related costs, primarily associated with our new coating line start-up at Work and planned Trentwood outage which were more than offset by the impact of metal lag gain from rising metal prices.

The improvement in adjusted EBITDA, even with the 5% year-over-year decline in shipments reflects resilient underlying fundamentals across our business and our end markets, along with a richer mix of value-added products. Now turning to a discussion of our balance sheet and cash flow. At the end of December 31, 2025, total cash of approximately $7 million and approximately $540 million of net borrowing availability in our revolving credit facility resulted in a strong liquidity position of $547 million. As a reminder, the October extension of our $575 million revolving credit facility further demonstrates the strength of our balance sheet and the continued confidence our lenders have in our long-term strategy. The extended facility is set to mature in October 2030.

Additionally, in November, we completed a $500 million offering of senior notes due in 2034 with favorable terms. We used the proceeds along with revolver borrowings and available cash to redeem our 2028 notes effectively completing a planned refinancing that extends our long-term debt maturity profile and supports our long-term financial flexibility. Our senior notes interest costs are fixed at $54 million annually, and as of the year-end, our net debt leverage ratio was 3.4x, an improvement from the 4.3x at December 31, 2024. Our full year 2025 capital expenditures came in at $137 million, following the completion of our major growth projects at Warrick and Trentwood.

It is important to note that, that $168 million usage of working capital during 2025 was a direct impact to rising metal prices through the year. For 2026, we expect capital expenditures to be in the range of $120 million to $130 million, with free cash flow anticipated to be in a range of $120 million to $140 million subject to metal price movement and resulting impact in working capital. As a reminder, we define free cash flow as cash flow from operations less capital expenditures. Additionally, in 2025, we returned approximately $51 million to our shareholders through dividend payments, marking our 19th consecutive year of dividend payments to our shareholders.

On January 13, we announced that our Board of Directors declared a quarterly dividend of $0.77 per common share, reflecting our ongoing commitment to disciplined capital allocation and delivering long-term value to our stockholders. With that, I'll turn the call back over to Keith to discuss our outlook. Keith?

Thanks, Neal. Let me now turn to our outlook and priorities as we move into 2026 on Slide 13. In 2026, Kaiser will celebrate its 80th anniversary, a milestone that speaks to the resilience of our operations and the durability of our long-standing customer relationships. Fittingly, our outlook reflects what we expect will be record years for both conversion revenue and EBITDA. I'll begin with aerospace and high-strength products. We expect shipments to increase in the range of 10% to 15% in 2026 with conversion revenue expected up approximately 5% to 10%.

This implies conversion revenue per pound, consistent with our first half 2025 run rate as last year's second half benefited from a richer aerospace extrusion mix as we upgraded plate line at Trentwood. The Phase VII install was executed seamlessly and timed well to support the demand growth we expect in 2026 and beyond. Commercial aircraft production continues to recover with increasing build rates at our OEM partners. We are well positioned to support that growth with the additional plate capacity from Trentwood. As we've discussed previously, destocking at commercial OEMs has continued to temper near-term sell-through of plate products.

However, we expect this to largely dissipate as we exit the year, if not earlier. We will continue to update you throughout 2026 on supply chain conditions. Importantly, I'm very encouraged by the momentum building in one of our premier markets, momentum that should benefit results in 2026 and continue to build through the end of the decade. Defense and business jet demand remains consistent, and we continue to benefit from new opportunities across space and specialty platforms. Now moving to packaging. Packaging demand and fundamentals continue to improve, supported by our long-term contracts that provide excellent visibility.

Importantly, we completed our final contract commitment at this facility during the fourth quarter of 2025. For 2026, we are targeting shipment growth of 5% to 10% and conversion revenue growth of 15% to 20%. Our fourth coating line at Work is fully commissioned, qualified and progressing towards full production. This investment shifts our mix toward higher coated volumes now at approximately 75% and growing and supports the margin uplift we've targeted. The progress at Warrick reflects a multiyear journey that began with a strategic decision to acquire the facility in 2021. In 2026, we expect to see a step change in financial and customer satisfaction performance in this business.

As we previously stated, while profitability will improve meaningfully in 2026, the line will not yet be operating at its optimal rate. We plan to operate at approximately 80% utilization as we continue to fine-tune quality and reliability. Customer service remains a core tenet of Kaiser's values and a key differentiator in all our markets. Now turning to general engineering. We expect another year of growth, supported by improving GDP and strengthening demand in the semiconductor market. Shipments and conversion revenue are expected to grow approximately 3% to 5% year-over-year, with the potential for even stronger growth depending on the strength of the North American economy as inventory levels at most customers remain at multiyear lows.

Our businesses are well positioned to respond quickly as these markets continue to improve. Now turning to automotive. Automotive opportunities continue to expand. Even as we remain highly selective in the products and services we provide to this market. The shift towards more internal combustion engine vehicles in the light truck and SUV category are driving demand for several of our products at a faster pace than previously anticipated. To support this expected multiyear demand outlook we will be retooling select facilities and adding incremental capacity. While shipments and conversion revenue in 2026 are expected to decline approximately 5% to 10% year-over-year.

This primarily reflects planned outages, most notably at our Bellwood facility associated with retooling rather than underlying demand. These actions position us to support higher demand and higher returns as market conditions evolve. Now turning to Slide 14 and our summary outlook. With our two major growth investments now behind us, 2026 will mark a shift toward harvesting returns through margin expansion. With the execution risk of large-scale projects largely behind us, we are proactively intensifying our focus on reducing both manufacturing and operating costs to drive additional operating leverage and maximize the return on these investments.

These actions are expected to also strengthen cash flow, continue reducing our debt leverage ratios and improve our customer service standards. As we look ahead, we are establishing an initial outlook for 2026 of 5% to 10% conversion revenue improvement year-over-year, with resulting EBITDA growth of 5% to 15%, setting the stage for another record EBITDA performance year for the company. While metal pricing was a meaningful contributor to our performance in 2025. Our expectations for 2026 are driven primarily by operational execution with metal assumptions aligned with current future curves. In closing, we entered 2026 with a strong foundation, clear visibility into our end markets, and the assets firmly in place to deliver meaningful improvement in profitability and cash generation. We look forward to updating you on our progress throughout the year. With that, I will now open the call to any questions you may have. Operator?

[Operator Instructions]. The first question comes from Bill Peterson with JPMorgan.

Really nice results for the year. My first question is on the 2026 outlook at a higher level. So I think it looks like the aerospace conversion revenues below shipments, while packaging conversion revenues above shipments. Is there anything to call out on mix. If you think about Aero, for example, commercial business jet or defense, or is this more just more high strength in non-aero. And then on packaging, similar to, is this a pricing statement or a mix towards more coated products? Just any sort of color for the difference between the shipments and conversion revenue outlooks.

Sure. Bill. Let me hit Aero first. We called out some specifics because, as you recall, we had an outage at Trentwood mainly through the third quarter. So if you looked at the 2 halves of the year, our shipments in the second half were actually down 25% from the first half of the year. That was mainly plate-related. And you saw a pretty higher number there because extrusions generally carry a higher price than the plate. We expect to come back rapidly on the plate in this year. So that -- the numbers we're reflecting there says we're back to having that full plate capacity. And so you'll see that in the numbers. The prices have remained very strong and consistent.

Of course, the majority of that is backed up by long-term agreements in place. And so as we've noted, as the industry continues to improve, continue to get improved shipments output by our customers, we should see those numbers pop up. From a mix perspective, what you will also see out of our flat roll shipments, Bill, we're starting to see activity again on the semiconductor side. So as you know, we put that capacity in that can service both aero and general engineering. I'm really encouraged by the activity at the beginning of the year on semiconductor.

So I think after maybe a 2-year hiatus there, we're going to start to see some good activity through the balance of the year that should really support that increased capacity at Trentwood. As I move over to the packaging side and look at our business, I really think we're positioned for a very strong year. The -- we're in our seventh month of increasing output from our Roll Coat 4, the new investment that we made. So we're beginning to see the better through throughput that was expected. We're beginning to get all the qualifications behind us. We're ramping up speeds. And so the opportunities there continue to exist, quite frankly, beyond what we have.

We are working with some of our converters to try to get their performance up improved as I think the opportunities there exceed even all of our capacities there together. So as we also mentioned in our notes, we're really pleased to complete the final contract, multiyear contractual opportunity for the new capacity. So what you're going to begin seeing and what you have seen is that the mix shift has begun in earnest, you'll start seeing some improved pricing on that side as a result of those investments and the contractual commitments that were made.

And so we're really positioned there. We talked about bringing that an additional 300 to 400 basis points impact on the total company. We're beginning to already see that, and they were a major influence into what happened for us even at the end of the year. So a lot of expectations for that for 2026. Food market, the food packaging side is very strong. It's even stronger than beverage. And as you know, we're a major player there. So we see full output. The surprise to me, and I'll just continue if I can. The surprise to me is the automotive opportunity that we highlighted in our comments with the move back toward the internal combustion engines, man, we're seeing demand on trucks and SUVs. So we made a decision to make an investment that we really hadn't contemplated in the last 12 months, but we'll be making that decision to increase our capacity through some of our highly specialty products and that all services trucks and SUVs. So that's going to be a unexpected focus for continued growth for us in that category.

Can I pick up on that last point. This auto opportunity it sounds like it's capacity expansion, but if not, I'm just trying to get a sense, would this take away from other markets, how much capacity growth does this imply when will this -- I guess, when would we be ready to sort of support this effort? And maybe taking a step back some more to my question on the guidance. You're looking for this year to be down following a pretty rich, I guess, mix last year. Anything to call out from the market environment or platforms that you're on or things like that within the 2026 guidance?

Yes. No. The only difference, we don't expect any price deterioration there in any of the markets, Bill. The only change that was going to be highlighted probably on the aero side was a slight adjustment as you bring back more plate as opposed to extrusion on the era. On the automotive piece that I was just referring to, we're actually -- these are actually fairly high-margin products for us. They're all specialty products. They are actually products that Kaiser has 10 or close to 100% supply position.

And as the markets turn back to stronger growth on planned on trucks, especially around ICE vehicles. We're the only play. So there's going to be an outage at a couple of outages that we'll take through the year to prepare for that. So you may be -- actually, that may impact some of the shipments this year. but certainly preparing us for 2027 strength, continued strength, and we see these as multiyear. We don't think that the change, the shift that's gone to is just a single year temporary slope. We see this focus on ICE vehicles for trucks to be multiyear. That's what our customers are telling us. So we're going to ramp up the investment. And I would expect to see -- we'll highlight it more in April. But our automotive component here on very specialized products has the opportunity to increase substantially within the next 12 to 18 months.

Okay. Maybe pick it up again on this. So CapEx guidance looks to be a little higher than expected. Is a lot of this driven by this auto opportunity? Or maybe you could parse out the CapEx guide maybe in the context, I guess, Phase 7, I think, came a bit under budget. Just any sort of context on the CapEx guidance?

Yes. Actually, we were expecting to be probably somewhere between $10 million, $12 million this year. And that change in range for us is purely that automotive opportunity. Our customers would take it today. They're actually utilizing some steel products because they don't have the availability of the aluminum products in the quantities that they need. So we've updated that opportunity, and that's the reason that's probably a slightly higher CapEx than you may have expected.

Great. Maybe just my last one. Obviously, you mentioned earlier that you're not expecting any changes, I guess, to sort of Midwest premiums and things like that. I assume that also may be similar around where scrap spreads are. But given the high prices that were -- or cost, I guess, for your customers given where aluminum pricing is today, are you hearing any evidence of demand destruction or what areas would you be concerned with? And then maybe secondarily, we're hearing more about derivative tariffs any potential impact to your business? I realize it's early days on that second point.

Yes. No, it's fascinating what's going on. I can tell you this, Bill, this is a way to look at '25 and '26 for Kaiser. No question, we had some significant tailwinds. We had some significant higher operating costs as we put in these capacities. We don't expect those to extend into 2026. So you're going to see a recovery on those costs that were out in '26 versus -- excuse me, '25 versus '26.

Our outlook also has the expectation that you won't necessarily -- you won't see that tailwind reoccur in 2026. Now it may we're still seeing favorable higher prices than expected in Q1. But our outlook did not assume that to continue throughout the year. And so that gain that we're talking about here is purely operational gain based on the investments we've made, the cost and the efficiency gains we expect to make in our operations. So any continued higher price tailwinds are going to be a tailwind above what we're talking about on this call. So it could conceivably go higher than what we -- that's why we gave the initial outlook the way we did. I have to tell you, as you ask the question and I look at it constantly, Bill.

We've seen absolutely no demand destruction in any of our product lines. We're seeing the general market, the general business start out very strong. We see continued bookings shipments going through the months. I'm more encouraged than I had been on the general engineering with GDP. So I'm feeling better about that side of our business. Our packaging business, as I talked about, we can sell every pound we can make Food business is up to the high single digits year-over-year growth. And then when I look at what's going on, I know the market corrected felt like while this 232 tariffs were going to fall off.

All indications that we're getting are that what they're considering is more downstream type products and not removing the tariffs, but perhaps loosening tariffs but addressing the full end product versus just the raw material. And at this point, we really don't see those tariffs coming off. And even if we did, we've commented, we're neutral to positive, slightly positive there. And we've said all along, while we appreciate and enjoy the tariffs -- excuse me, some of the tailwinds we get from metal pricing we should stay at any point if we saw a rapid decline, those could turn into headwinds. And so we'll call those out, and that's why we remain super -- uber focused on operational gains in our business, which we've highlighted here in our comments this morning.

There are no questions in queue at this time. I would like to turn the call back to Mr. Keith Harvey for closing comments.

All right. Well, thank you for joining us today. We're off to a strong start to the year, and we're excited for our 2026 prospects, and I look forward to sharing details on our continued progress in April. Have a good day.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.

Greetings, and welcome to the Kaiser Aluminum Corporation Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Kim Orlando with ADDO Investor Relations. Thank you. You may begin.

Thank you. Hello, everyone, and welcome to Kaiser Aluminum's Third Quarter 2025 Earnings Conference Call. If you have not seen a copy of our earnings release, please visit the Investor Relations page on our website at kaiseraluminum.com. We have also posted a PDF version of the slide presentation for this call.

Joining me on the call today are Chairman, President and Chief Executive Officer, Keith Harvey; and Executive Vice President and Chief Financial Officer, Neal West.

Before we begin, I'd like to refer you to the first 4 slides of our presentation and remind you that the statements made by management and the information contained in this presentation that constitute forward-looking statements are based on management's current expectations. For a summary of specific risk factors that could cause results to differ materially from the forward-looking statements, please refer to the company's earnings release and reports filed with the Securities and Exchange Commission, including the company's annual report on Form 10-K for the full year ended December 31, 2024. The company undertakes no duty to update any forward-looking statements to conform the statement to actual results or changes in the company's expectations. In addition, we have included non-GAAP financial information in our discussion. Reconciliations to the most comparable GAAP financial measures are included in the earnings release and in the appendix of the presentation. Reconciliations of certain forward-looking non-GAAP financial measures to comparable GAAP financial 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. Any reference to EBITDA in our discussion today means adjusted EBITDA, which excludes non-run rate items for which we have provided reconciliations in the appendix. Further, Slide 5 contains definitions of terms and measures that will be commonly used throughout today's presentation. At the conclusion of the company's presentation, we will open the call for questions.

I would now like to turn the call over to Keith Harvey. Keith?

Thanks, Kim, and good morning, everyone. I'll begin on Slide 7 for our third quarter update. We're pleased to report another strong quarter, marking our fourth consecutive period of performance ahead of our expectations. As a result, we're once again raising our full year EBITDA outlook.

During the quarter, we incurred approximately $20 million in start-up costs tied to our two key strategic investments for aerospace and packaging, offset by the impact of metal pricing on inventory, which continued to provide a favorable tailwind. In total, we delivered 23% EBITDA margins in the third quarter and over 20% year-to-date.

Now let's turn to the status of our key investments. At our Trentwood rolling mill, the installation of our Phase 7 plate capacity expansion project for aerospace and general engineering applications is nearly complete. It remains on time and on budget. As expected, the 12-week outage impacted our third quarter sales, reducing conversion revenue for aero and general engineering plate collectively by approximately $15 million to $20 million. The investment timing, however, aligns well with the short- and long-term growth expectations from our aerospace and general engineering customers.

At our Warrick packaging rolling mill, the fourth coating line is steadily progressing through its qualification phase. September marked our strongest output to date on the new line with momentum continuing into October. We anticipate reaching full run rate in time to support 2026 shipments. Customer feedback has been overwhelmingly positive regarding product quality and performance, fully aligning with the expectations we set when initiating this investment nearly 3 years ago. This project remains central to our strategy of shifting the majority of the mill's output to coated products, a segment where Warrick already holds a market-leading position. As we approach full run rate, increased throughput will begin to satisfy our customers' demand needs and start-up costs will begin to taper off.

Turning to our key end markets. Demand remains solid. Aerospace is trending positively, though not yet fully reflected in our results. Packaging supply remains tight with strong demand expected to continue for the foreseeable future. General engineering continues to outperform the traditional 2% CAGR, reflecting solid demand from our customers. However, month-to-month demand has shown an uneven cadence, which has made it challenging to operate with normal efficiencies.

Despite this variability, the overall trajectory remains strong. Automotive rebounded meaningfully late summer after a volatile start to the year. I'll touch more on our markets in a moment when we discuss the outlook. With that market backdrop in mind, as we near the end of our major investment cycle, we have a renewed focus on managing our cost, restoring operating efficiencies and regaining our best-in-class operating metrics that have historically defined Kaiser.

With that, I'll turn the call over to Neal to walk through the financials. Neal?

Thank you, Keith, and good morning, everyone. I'll now turn to Slide 9 for an overview of our shipments and conversion revenue. Conversion revenue for the third quarter was $351 million, a decline of approximately $11 million or 3% compared to the prior year period.

Looking at each of our end markets in detail. Aerospace and high-strength conversion revenue totaled $100 million, down $28 million or approximately 22%. This was primarily due to a 30% decline in shipments driven by the planned 12-week partial outage we took at the Trentwood facility to finalize our Phase 7 expansion projects as well as ongoing destocking in commercial aircraft OEM production. We anticipate improved demand conditions ahead as destocking appears to be easing, along with improved shipments as we return to full production following the outage.

Demand has remained strong across our other aerospace and high-strength applications, including business jet, defense and space markets. Packaging conversion revenue totaled $138 million, up $9 million or approximately 7% year-over-year on stronger pricing and mix.

Shipments for the quarter, while up 2% sequentially, declined 5% over the prior year period, reflecting the mix shift in product deliveries away from bare products as we continue to ramp the new roll coat line and qualify products with customers. As discussed, the underlying demand environment is strong, and we're working closely with our customers as we ramp the new coating line to full run rate levels by year-end 2025.

General engineering conversion revenue for the third quarter was $81 million, up $5 million or 6% year-over-year on a 7% increase in shipments. Reshoring activity continues to create a favorable demand backdrop, supporting both volumes and pricing. And finally, automotive conversion revenue of $32 million increased 10% year-over-year on a 5% decrease in shipments, primarily due to tariff-related customer uncertainty affecting the automotive industry. Improved pricing and product mix more than offset the lower shipments. Additional details on conversion revenue and shipments by end market applications can be found in the appendix of this presentation.

Now moving to Slide 10. Reported operating income for the third quarter was $49 million, an increase of approximately $36 million from $13 million in the prior year quarter. As a reminder, the third quarter of 2024 included operating non-run rate charges of approximately $4 million, primarily related to an increase in legacy environmental reserves. After adjusting for these charges, our third quarter 2025 adjusted operating income was up $32 million from the prior year quarter, reflecting a $35 million year-over-year improvement in EBITDA, partially offset by a $3 million of higher depreciation expense, primarily associated with the commissioning of our new coating line at Warrick.

Our effective tax rate for the third quarter was 17% compared to 21% in the third quarter of 2024. For the full year 2025, we expect our effective tax rate before discrete items to be in the low to mid-20% range, including the impacts related to the new tax bill recently signed into law. Additionally, we anticipate that the 2025 cash tax payments for federal, state and foreign taxes will be in the $5 million to $7 million range.

Reported net income for the third quarter was $40 million or $2.38 net income per diluted share compared to net income of $9 million or $0.54 net income per diluted share in the prior year quarter. After adjusting for net pre-tax non-run rate income of approximately $11 million, primarily related to legacy land sales and insurance settlements associated with prior year claims, adjusted net income for the third quarter of 2025 was $31 million or $1.86 adjusted net income per diluted share, and this compares to adjusted net income of $5 million or $0.31 adjusted net income per diluted share in the prior year period, which excludes a net pre-tax non-run rate income of $4 million.

Now turning to Slide 11. Adjusted EBITDA for the third quarter was $81 million, up approximately $35 million from the prior year period. Importantly, this result was achieved despite the 8% year-over-year reduction in our shipments. The true momentum in the business earnings power is becoming increasingly clear, driven by the stronger mix of higher value-added products and strong underlying fundamentals across our business and end markets. Additionally, during the quarter, we incurred approximately $20 million of higher operating costs and inefficiencies associated with the Trentwood Phase 7 outage and the ongoing Warrick Roll Coat ramp-up, which we don't expect to continue. These discrete costs were offset by a year-over-year increase in metal lag gains, primarily attributed to the continuing increase in metal price during the quarter.

Now turning to a discussion of our balance sheet and cash flow. As of September 30, 2025, we had $577 million in total liquidity, including $17 million in cash and $560 million in availability on the revolver. Importantly, as of the end of the third quarter, our net debt leverage ratio improved to 3.6x from 4.3x at the end of 2024.

Earlier this month, we announced the extension of our $575 million revolving credit facility, underscoring the continued strength of our financial position and the confidence our lending partners place in our long-term strategy. The extended facility is set to mature in October 2030, subject to certain conditions.

We generated cash flow from operations of $59 million during the third quarter with our capital expenditures totaling $25 million. We expect capital expenditures for the full year 2025 to be approximately $130 million with free cash flow anticipated to be in the range of $30 million to $50 million, reflecting temporary working capital impacts tied to higher metal costs.

Importantly, we remain on track to complete our major growth capital projects this year and continue funding our quarterly dividend of $0.77 per share, reinforcing our commitment to returning value to our shareholders.

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

Thanks, Neal. We continue to be encouraged by the momentum and visibility we're seeing across our markets. Let me now walk you through our full year outlook by end market on Slide 13. Starting with aero and high strength. Commercial aircraft recovery remained on pace throughout the third quarter with build rates strengthening and the supply chain normalization progressing, providing us with greater confidence of growing demand heading into 2026.

As build rates ramp, we expect elevated aluminum inventory levels in the channel to be rapidly absorbed. Demand in defense, space and business jet remains steady at strong levels. Looking ahead, we're confident in our position as a leading global supplier of aluminum products in these end markets. Our capital investments continue to strengthen that leadership and position us well for the long term.

As a result of our planned 12-week partial outage for our Phase 7 investment at Trentwood and the resulting lower sales in Q3, we now expect full year aerospace shipments and conversion revenue to be down approximately 10% year-over-year as destocking works through the system and shipments recover in the fourth quarter.

Let's move on to packaging. We remain confident in the long-term outlook and the strength of our customer pipeline with the full ramp-up of our coating line on pace for late fourth quarter of 2025. North American demand continues to far outpace available supply, and we expect that dynamic to persist well beyond 2025.

Our team is fully focused on accelerating capacity and throughput across our value stream to meet the growing needs of our customers. Due mainly to the previously discussed delay in the start-up of our new roll coat line, we now expect conversion revenue for the year to be up 12% to 15% as the mix shift to higher-margin coated products continues to build. Shipments are still expected to decline approximately 3% to 5% year-over-year as we finalize the ramp of our new roll coating line, ahead of fully benefiting from the mix shift in volumes. We expect a higher output from the new roll coat line in the fourth quarter as we improve line speeds and realize the full capabilities of the line.

Turning to general engineering. Our strong momentum from the first half carried into the third quarter with shipments up mid-single digits and solid pricing supporting growth in conversion revenue. Looking ahead, we expect shipments to remain strong for the remainder of the year, driven by a favorable mix shift towards plate products, which will further support conversion revenue growth. We continue to expect full year shipments and conversion revenue to be up approximately 5% to 10% year-over-year.

Finally, turning to automotive. Our outlook for the remainder of the year remains stable. Auto production forecast have varied throughout the year, hitting a low point post tariffs in mid-summer before expectations improved into the fall. The resilience of our portfolio and favorable mix toward SUVs and light truck ICE vehicles has kept us steady. As a result, we continue to expect our full year conversion revenue to increase approximately 3% to 5% year-over-year on approximately 5% to 7% lower shipments.

Now turning to our summary outlook on Slide 14. Our end market fundamentals remain strong, and our operational execution continues to improve. Based on our year-to-date performance in 2025 and our updated expectations for aero and high strength and packaging, we're updating our full year conversion revenue guidance to be flat to up 5% year-over-year. And raising our full year EBITDA outlook by 10%, now expecting 20% to 25% year-over-year growth over our recasted 2024 EBITDA of $241 million. We remain firmly focused on our long-term objective of achieving mid- to high 20% EBITDA margins. And we see clear tangible progress toward that goal as our investments come fully online and end market demand continues to improve.

With that, I will now open the call to any questions you may have. Operator?

[Operator Instructions] The first question is from Bill Peterson from JPMorgan.

On the aero and high strength, shipments down 30% quarter-on-quarter. It sounds like a lot of that was based off the Trentwood and planned maintenance. But how much -- can you help delineate between the planned maintenance versus weakness, continued weakness you've seen? Based off your revised guidance, it looks like you see more or less a recovery back to first, second quarter levels in 4Q. But I guess with your comments on destocking abating, how should we think about your aero high strength trajectory in 2026? I guess how fast can we see a recovery?

Yes. Bill, first, your assessment of what we are looking at in Q4 is right on. You look at the run rate we had in the first half of the year, we expect that to come back very close to those levels. Now we're still finalizing the Phase 7 at Trentwood. So that's going to cut into the fourth quarter a little bit, but I wouldn't expect that to impact shipments any more than 5% or 10% off of the first half.

With respect to destocking and where we see in 2026, we're going to be able to give you a much clearer view of that in February of next year. But I will say that as we had anticipated, we're beginning to see these ramp rates continue to increase. And when those build rates up, that expedites the condition and the inventory levels.

So I think Boeing and others are on a really good pace moving forward. As you saw, we had another rate increase. And most of these rate increases generally around 5 shipsets ramp increments. And I would expect to see a couple -- 2 or 3 more of those as we go into 2026. So again, it's just expediting the situation we've had. And I think it will be continued improvement. We'll have more detailed information on that in February.

Okay. Yes, fair enough. On packaging, it sounds like you're prioritizing more higher value add. But I guess in terms of your contract negotiations, where do the last, I guess, renegotiations stand. And when these new packaging contracts kick in, how should we think about the magnitude of the pricing uplift as we look into next year?

Yes. Well, we're staying pretty firm with our 300 to 400 basis points increase on the EBITDA side of -- the EBITDA margin side of the business here, Bill. We've had great progress throughout the year with regard to putting those contracts in place. I've been very pleased with the progress there. We're down to, quite frankly, one last major customer, long-term customer with Kaiser, and that's really progressed well. I believe that will be finalized before the end of the year and you'll start to see those ramp-ups and the change in the volume. If you go look at our conversion per pound rate that's happened, you'll see some pretty significant growth over the last 4 to 5 quarters. And that's even before we put in the new capacities. So I'm expecting some pretty accelerated rates there.

I'll give you some insight where people -- the other question that has been asked of us quite a good bit is will that be fully committed then? Will Warrick be at full total run rate? And I can tell you, no, we're going to actually take the measured approach next year. We're only going to put out about 75% or 80% of that capacity just to make sure that we don't get ourselves in a situation where we're not giving exemplary delivery performance back to our customer base. They've struggled a little bit with the delays we've had this year, but I believe the outcome is going to be really solid. So we're really looking forward to cranking this thing up beginning first of the year.

Maybe just a housekeeping. You talked about the commissioning charge. How much of that was between the roll coat line versus Phase 7? And is there any more that we should expect in the fourth quarter?

Well, I would say it's fair to bet. The majority of that was related to the Warrick roll coat 4 start-up, okay? As we've talked in the past, Trentwood's -- even though these start-ups are always difficult, and there's some uncertainty associated with them. For Trentwood, who's done 7 -- 6 of these prior, they managed through this very well. And so very little impact of that cost was part of that $20 million. Now I will say we do expect less cost through the balance of the year. We expect that number to be lower, as I mentioned in my comments, and then to have this well positioned to fully execute in January of next year.

The next question is from Timna Tanners from Wells Fargo.

Keith, nice to catch up. I wanted to hear a little bit more about the impact of tariffs. I feel like that we're getting kind of into that a couple of quarters since they've been announced. And how you -- any pushback on prices with your customers? Any ability to take more share from import or anything else you can elaborate on would be great.

Yes. Nice to hear you again. Yes, the tariffs, we remain neutral to slightly positive from our perspective. As you know, all of our facilities are North America based. We do have one extrusion facility in Canada. But the impact to us is, as I said, neutral to slightly positive. And I'll explain the positives, and you mentioned those quite well, quite frankly, in your opening comments there.

First of all, what we've seen is a large move on the premiums associated with the LME. And so as we know, the majority, if not all of our business has pretty straight pass-through on those costs. So we enable that, move that through to our customers. We're mindful that, that's gone up significantly and that, that could come down, but we'll see how negotiations progress with USMCA and other things. But on the positive side, what we've done in the marketplace is that it is a little more difficult for imports, and they've come into more about the same type of inability to rapidly lower their prices below us as a result of that premium. And so far, we're seeing better demand for domestic products. And because of the large portfolio of products that we provide to our service centers and other customers in the marketplace, we're seeing good pull on that demand as you can reflect in our general engineering business that throughout the year, which has held up amazingly well, not just from a demand perspective, but also on the pricing front.

So we see opportunities. Again, we've got a lot of this capacity. The Trentwood capacity can -- we expect to also help us strengthen on the GE side of the business. And if we get a little bit of tailwind beginning in 2026, I expect really strong demand for GE products, and I expect opportunities for additional price enhancement of our business. So I think we're at the front of the bow wave of this, and we're riding it very well. And I'm very, very pleased with how the operations are performing and meeting this current demand.

Okay. I wanted to touch base, particularly on the packaging side. I know you said that was strong, but we're hearing from our colleague who covers the space that there's some concern about cost inflation impacting demand. I wonder if maybe you're shielded from that a bit, given that you're doing more of the ends and tabs or any thoughts on the impact on packaging?

Yes. Timna, this -- we're seeing still overall good demand on our products. And I think there some industry incidents can exasperate some of the supply scenario at different times. I know we had our challenges at the beginning of the year. I think others have had some challenges. But overall, I feel the demand for aluminum substrate products and packaging are very strong. I'll remind you that a good portion of our business is food related, and that's held up very strong. And we still continue to see that, quite frankly, outpace the demand for beverage. And so we may be insulated from that somewhat based on the markets that we serve. But overall, we're not seeing anyone reduce or wanting to reduce the capacities that we're contracted for. As a matter of fact, we continue to have customers asking for more. So that's really the basis behind our comments and where we see our business.

Okay. That makes sense. Along those same lines, actually, one of your competitors had an outage recently that's caused some attention to the space and where there might be spare capacity. So I don't think you're a player in the auto sheet market, but do you have spare capacity if needed to fill in for can sheet?

We're actually fairly full right now, Timna. I mean the -- it's really difficult for me to see when others have challenges because I've lived those before. A lot of times, we're in positions to help our customers. I think our customers have expectations that Kaiser, we want you to hit your commitments to us. And we're beginning to do those very well as our equipment ramps up. Really not in a strong pace to do anything other than that. As you know, a lot of that is probably bare product that's coming into the market. And we've been busy shifting our capacity more to the coated side. So we're really not one of the areas to help on the bare in a very big way.

Okay. And I guess I'll just ask one last one, but kind of a big picture. I know you talked about 2025 guidance, and it's appreciated, but we're almost done with the year and looking ahead to 2026, how do we think about the cadence of the ramp-up of some of these -- the new facilities? Is it full run rate Q1 and straight line? Or do we kind of have some gradual improvements even as the year progresses?

Yes. It's a great question. We -- look, for purposes of making sure we don't disappoint customers, there's somewhat of a ramp rate that we're going to be putting into our outlooks in the first half of the year. But those are going to be marginal with strong demand, expectations are that all the businesses, all these major growth investments will be behind us. And we're, quite frankly, ready to hit the run at rate buttons as quick as we can.

Again, we'll give you more insight as to what we think the cadence of that by probably first half to second half. I think it's fair to say the second half with demand coming with, I think, ramp moving up on aero as packaging continues to show full ramp rate and especially if GE becomes on a little stronger next year, I think you'll see some -- we'll begin to see some of these rates that we had expectations for this business. And I'm going to be very thankful that we've got these growth assets in place to be able to take full advantage of those next year. So I'm pretty excited about next year.

There are no further questions at this time. I would like to turn the floor back over to Keith Harvey, CEO, for closing comments.

Thank you, operator. Thank you for your time and interest in Kaiser. We're excited about our future, and we look forward to sharing our full year 2025 results in February of next year. Have a good rest of your day, and thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.