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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2024
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | 10. Commitments a nd Contingencies Commitments. We have a variety of financial commitments, including purchase agreements, forward foreign exchange and forward sales contracts, indebtedness, and letters of credit (see Note 3, Note 8, and Note 9). CAROs. The inputs in estimating the fair value of CAROs include: (i) the timing of when any such CARO cash flows may be incurred; (ii) incremental costs associated with special handling or treatment of CARO materials; and (iii) the credit-adjusted risk-free rate applicable at the time additional CARO cash flows are estimated. The majority of these inputs are considered Level 3 inputs as they involve significant judgment from us. The following table summarizes activity relating to CARO liabilities (in millions of dollars):
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
Beginning balance |  | $ | 10.9 |  |  | $ | 10.1 |  |  | $ | 7.2 |
Liabilities added during the period |  |  | — |  |  |  | — |  |  |  | 2.3 |
Liabilities settled during the period |  |  | (0.1 | ) |  |  | — |  |  |  | (0.1 | )
Accretion expense |  |  | 0.9 |  |  |  | 0.8 |  |  |  | 0.7 |
Ending balance |  | $ | 11.7 |  |  | $ | 10.9 |  |  | $ | 10.1 |
The estimated fair values of CARO liabilities were based upon the application of a weighted-average credit-adjusted risk-free rate of 8.30% and 8.26% at December 31, 2024 and December 31, 2023, respectively. CAROs are included in Other accrued liabilities or Long-term liabilities, as appropriate. Environmental Contingencies. We are subject to a number of environmental laws and regulations, potential fines or penalties assessed for alleged breaches of such laws and regulations, and potential claims based upon such laws and regulations. We are also subject to legacy environmental contingencies related to activities that occurred at operating facilities prior to July 6, 2006, which represent the majority of our environmental accruals. The status of these environmental contingencies are discussed below. We have established procedures for regularly evaluating environmental loss contingencies. Our environmental accruals represent our undiscounted estimate of costs reasonably expected to be incurred based on presently enacted laws and regulations, currently available facts, existing requirements, existing technology and our assessment of the likely remediation actions to be taken. We continue to pursue remediation activities, primarily to address the historical use of oils containing polychlorinated biphenyls (“PCBs”) at Trentwood. Our remediation efforts are in collaboration with the Washington State Department of Ecology (“Ecology”), to which we submitted a feasibility study in 2012 of remediation alternatives and from which we received permission to begin certain remediation activities pursuant to a signed work order. We have completed a number of sections of the work plan and have received satisfactory completion approval from Ecology on those sections. In cooperation with Ecology, we constructed an experimental treatment facility to determine the treatability and evaluate the feasibility of removing PCBs from ground water under Trentwood. In 2015, we began treatment operations involving a walnut shell filtration system, which we optimized for maximum PCB capture during 2020. Furthermore, based on advancements in technology, we signed an Amended Agreed Order with Ecology to evaluate and implement a new Ultraviolet Light Advanced Oxidation Process (“UV/AOP”) for PCB removal from groundwater on a pilot basis. During 2024, based on the positive results of the UV/AOP, we implemented a full-scale UV/AOP treatment system that is operational as of December 31, 2024. We are currently working with Ecology, as required by the Amended Agreed Order, to finalize details of the UV/AOP and also determine future remediation steps to be taken at which time there may be revisions to our estimated liabilities for this matter. Pursuant to a consent agreement with the Ohio Environmental Protection Agency (“OEPA”), we initiated an investigational study of Newark related to historical on-site waste disposal. During the quarter ended December 31, 2018, we submitted our remedial investigation study to the OEPA for review and approval. The final remedial investigation report was approved by the OEPA during the quarter ended December 31, 2020. During the quarter ended December 31, 2023, we submitted an Alternate Arrays Document (“AAD”) to the OEPA for review. During the quarter ended September 30, 2024, based on input from the OEPA and the proposed remediation options included in the AAD, we increased our accrual by $2.9 million. This increase reflects updated preliminary estimates for the most likely remediation activities, as laid out in the AAD. Once the AAD is reviewed and accepted by the OEPA, we plan to submit our feasibility study to the OEPA, which we expect to occur in 2025. The following table presents the changes in our environmental accrual. We classify the short-term and long-term liabilities within Other accrued liabilities and Long-term liabilities, respectively, on our Consolidated Balance Sheets (in millions of dollars):
|  | Year Ended December 31, |
|  | 2024 |  |  | 2023 |  |  | 2022 |
Beginning balance |  | $ | 17.0 |  |  | $ | 17.7 |  |  | $ | 16.8 |
Additional accruals |  |  | 4.2 |  |  |  | 1.2 |  |  |  | 3.2 |
Less: expenditures |  |  | (2.8 | ) |  |  | (1.9 | ) |  |  | (2.3 | )
Ending balance |  | $ | 18.4 |  |  | $ | 17.0 |  |  | $ | 17.7 |
At December 31, 2024, our environmental accrual of $18.4 million represented our estimate of the incremental remediation cost based on: (i) proposed alternatives in the final feasibility study related to Trentwood; (ii) currently available facts with respect to Newark; and (iii) facts related to certain other locations owned or formerly owned by us. In accordance with approved and proposed remediation action plans, we expect that the implementation and ongoing monitoring could occur over a period of 30 or more years. As additional facts are developed, feasibility studies are completed, remediation plans are modified, necessary regulatory approvals for the implementation of remediation are obtained, alternative technologies are developed, and/or other factors change, there may be revisions to management’s estimates and actual costs may exceed the current environmental accruals. We believe at this time that it is reasonably possible that undiscounted costs associated with these environmental matters may exceed current accruals by amounts that could be, in the aggregate, up to an estimated $13.4 million over the remediation period. It is reasonably possible that our recorded estimate will change in the next 12 months. Other Contingencies. We are party to various lawsuits, claims, investigations and administrative proceedings that arise in connection with past and current operations. We evaluate such matters on a case-by-case basis and our policy is to vigorously contest any such claims we believe are without merit. We accrue for a legal liability when it is both probable that a liability has been incurred and the amount of the loss is reasonably estimable. Quarterly, in addition to when changes in facts and circumstances require it, we review and adjust these accruals to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. While uncertainties are inherent in the final outcome of such matters and it is presently impossible to determine the actual cost that may ultimately be incurred, we believe that we have sufficiently accrued for such matters and that the ultimate resolution of pending matters will not have a material impact on our consolidated financial position, operating results or liquidity.

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