Kaiser Aluminum Corporation, a Delaware corporation, manufactures and sells
semi-fabricated specialty aluminum mill products for the following end market
applications: aerospace and high strength ("Aero/HS products"); automotive
("Automotive Extrusions"); general engineering ("GE products");
and other industrial ("Other products"). Our fabricated aluminum mill
products include flat-rolled (plate and sheet), extruded (rod, bar, hollows
and shapes), drawn (rod, bar, pipe and tube) and certain cast aluminum products.
The sophistication of our products is due to the metallurgy and physical properties
of the metal and the special characteristics that are required for particular
end uses. We strategically choose to serve technically challenging applications
for which we can deploy our core metallurgical and process technology capabilities
to produce highly engineered mill products with differentiated characteristics
that present opportunities for us to receive premium pricing and to create long-term
profitable growth.
With respect to the global market for flat-rolled aluminum mill products, our
focus is on heat treat plate and sheet for applications that require higher
strength and other desired product attributes that cannot be achieved by common
alloy rolled products. The primary end market applications of flat-rolled heat
treat plate and sheet are Aero/HS products (which we sell globally) and GE products
(which we predominantly sell within North America). We do not supply sheet for
automotive applications, and have chosen not to supply sheet for beverage/food
can applications nor common alloy rolled products for construction or other
applications. Although global demand for these applications is large, the product
requirements are less demanding.
Similarly, in the areas of aluminum extrusions, we focus on demanding Aero/HS
products, Automotive Extrusions and GE products that require high strength,
machinability or other specific properties where we can create and maintain
a defensible competitive position because of our technical expertise, strong
production capability and high product quality. We primarily serve North American
demand for extruded mill products. Building and construction applications, the
largest segment of North American aluminum extrusion market, rarely require
extruded products with specialized properties. Since we have strategically chosen
to deploy our capabilities to make differentiated products, we do not focus
on building and construction applications.
A fundamental part of our business model is to remain neutral to the impact
from fluctuations in the market price for aluminum, thereby earning profit predominately
from the conversion of aluminum into semi-fabricated mill products. We refer
to this as metal price neutrality. We purchase primary and scrap, or recycled,
aluminum, our main raw material, at prices that fluctuate on a monthly basis,
and our pricing policies generally allow us to pass the underlying cost of metal
through to our customers so that we remain neutral to metal pricing. For some
of our higher value added revenue products sold on a spot basis, however, the
pass through of metal price movements can lag by several months, with a favorable
impact to us when metal prices decline and an adverse impact to us when metal
prices increase. Additionally, we sometimes enter into firm-price customer sales
agreements that specify a firm underlying metal price plus a conversion price.
Spot sales with lagged metal price pass through and firm-price sales agreements
create metal price exposure for us, which we mitigate through a hedging program
with an objective to remain metal price neutral.
We have long-standing relationships with our customers, which consist primarily
of blue-chip companies including leading aerospace and automotive manufacturers,
tier one aerospace and automotive suppliers and metal service centers. Approximately
50% of our shipments is sold direct to the manufacturers or tier one suppliers
and approximately 50% is sold to metal service centers. In our served markets,
we seek to be the supplier of choice by pursuing "Best in Class" customer
satisfaction driven by quality, availability, service and delivery performance.
We strive to differentiate our product portfolio through our broad product offering
and our KaiserSelect® products, which are engineered and manufactured to
deliver enhanced product characteristics with improved consistency, so as to
result in better performance, lower waste and, in many cases, lower production
cost for our customers.
Consistent with the manner in which our chief operating decision maker reviews
and evaluates our business, our Fabricated Products business is treated as a
single operating segment. In addition to the Fabricated Products segment, we
have one business unit, All Other, which provides general and administrative
support for our operations. For purposes of segment reporting under United States
generally accepted accounting principles ("GAAP"), we treat the Fabricated
Products segment as its own reportable segment. All Other is not considered
a reportable segment.
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