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

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in the following sections:

• Management Review of 2020 and Outlook for the Future;

• Results of Operations;

• Liquidity and Capital Resources;

• Critical Accounting Estimates and Policies; and

• New Accounting Pronouncements.

Our MD&A should be read in conjunction with our consolidated financial statements and related notes included in Item 8. ”Financial Statements and Supplementary Data” of this Report. For a detailed discussion of items impacting the year ended December 31, 2018, as well as a year-to-year comparison of our financial position and results of operations for the years ended December 31, 2019 and December 31, 2018, refer to Part II, Item 7. “Management’s Discussion and Analysis” of our Annual Report on Form 10-K for the years ended December 31, 2018 and 2019, respectively, and filed with the Securities and Exchange Commission (“SEC”) on February 22, 2019 and February 25, 2020, respectively.

This information contains certain non-GAAP financial measures. A non-GAAP financial measure is defined as a numerical measure of a company’s financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles (“GAAP”) in the statements of income, balance sheets or statements of cash flows of the company. We have provided a reconciliation of non-GAAP financial measures to the most directly comparable financial measure in the accompanying tables. We have also provided discussion of the reasons we believe that presentation of the non-GAAP financial measures provide useful information to investors, as well as any additional ways in which we use the non-GAAP financial measures. The non-GAAP financial measures used in the following discussions are value added revenue (“VAR”), earnings before interest, taxes, depreciation and amortization adjusted for non-run-rate items (“Adjusted EBITDA”) and ratios related thereto. These measures are presented because management uses this information to monitor and evaluate financial results and trends and believes this information to also be useful for investors.

In the discussion of operating results below, we refer to certain items as “non-run-rate items.” For purposes of such discussion, non-run-rate items are items that, while they may recur from period-to-period: (i) are particularly material to results; (ii) affect costs primarily as a result of external market factors; and (iii) may not recur in future periods if the same level of underlying performance were to occur. Non-run-rate items are part of our business and operating environment but are worthy of being highlighted for the benefit of readers of our financial statements. Our intent is to allow users of the financial statements to consider our results both in light of and separately from such items. For a reconciliation of Adjusted EBITDA to Net income, see “Results of Operations - Selected Operational and Financial Information” below. Reconciliations of certain forward-looking non-GAAP financial measures to comparable GAAP measures are not provided because certain items required for such reconciliations are outside of our control and/or cannot be reasonably predicted or provided without unreasonable effort.

Our pricing policies and hedging program are intended to significantly reduce or eliminate the impact on our profitability of fluctuations in underlying metal price so that our earnings are predominantly associated with the conversion of aluminum to semi‐fabricated mill products. To allow users of our financial statements to consider the impact of metal cost on our Net sales, we disclose Net sales as well as VAR, which is Net sales less the Hedged Cost of Alloyed Metal. As used in this discussion, “Hedged Cost of Alloyed Metal” is the cost of our metal inputs at the average Midwest Transaction Price (“Midwest Price”) of aluminum plus the cost of alloying elements and any realized gains and/or losses on settled hedges related to the metal sold in the referenced period. The average Midwest Price of aluminum reflects the primary aluminum supply/demand dynamics in North America. For a reconciliation of VAR to Net sales, see “Results of Operations - Selected Operational and Financial Information” below.

Management Review of 2020 and Outlook for the Future

Review

During 2020, we demonstrated solid execution under very challenging business conditions, as we navigated the significant decline in commercial aerospace demand during the second half of the year while managing strong demand for our general engineering (“GE products”) and automotive (“Automotive Extrusions”) end market applications and defense related applications.

For the full year 2020 compared to our 2019 results, Net sales of $1,172.7 milliondecreased approximately 23% and VAR of $697.1million declinedapproximately 19%, reflecting a strong quarter ended March 31, 2020, followed by significant COVID-19 pandemic related disruptions to our operations and end markets during the remainder of the year. Despite the decline in Net sales and VAR, we reported full year Net income of $28.8 million, Adjusted EBITDA of $153.8 million and an EBITDA margin (Adjusted EBITDA as a percentage of VAR) at 22%. Our results reflected our ability to quickly flex costs and operating levels in response to rapidly changing business conditions.

Demand for our aerospace and high strength end market applications (“Aero/HS products”) declined sharply from 2019 levels, reflecting the COVID-19 pandemic impact on commercial airline travel, delays in recertification of the Boeing 737 MAX and destocking within the supply chain. While commercial aerospace demand fell sharply in the second half of 2020, we experienced strong demand throughout the year for our defense related applications, specifically from the F-35 Joint Strike Fighter program and other legacy military aircraft programs. Automotive Extrusions demand regained strength following significant but temporary COVID-19 pandemic related supply chain shutdowns in the quarter ended June 30, 2020. Planned program launches for multiple new platforms ramped up during the second half of 2020 and new programs were awarded during the year reflecting the continued trend for aluminum content growth. Demand for our GE products reflected steady underlying demand driven in part by strength in semi‐conductor and automotive applications, restocking in the supply chain and strong customer preference for KaiserSelect® plate.

Outlook

For the full year 2021, we anticipate total VAR to be up 5% to 10% year-over-year and an EBITDA margin comparable to 2020 driven by strong growth in Automotive Extrusions, defense applications and GE products.

We anticipate VAR for our Aero/HS products to be down 5% to 8% year-over-year on slightly lower shipments compared to 2020, which reflected strong demand for our commercial aerospace applications during the first half of 2020. Commercial aerospace demand continues to reflect weak airline travel impacted by the COVID-19 pandemic and destocking in the supply chain. We continue to anticipate full recovery of commercial aerospace demand in 2023 to 2024.

Lower commercial aerospace demand in 2021 is expected to be mitigated in part by continued strength in demand for defense related applications as build rates for the F-35 Joint Strike Fighter are expected to increase 20% to 30% compared to 2020, while business and regional jet demand continues to improve.

VAR and shipments for our Automotive Extrusions are anticipated to increase 35% to 45% year-over-year as North American build rates are expected to increase more than 25% to approximately 16.0 million units in 2021 from 13.0 million units in 2020, and numerous new product launches in 2020 and 2021 increase our aluminum content on vehicles.

VAR and shipments for our GE products are anticipated to increase 10% to 15% year-over-year, reflecting solid service center and end market demand driven by continued growth in semi-conductor and automotive demand. In addition, reshoring continues as many North American original equipment manufacturers secure domestic supply for their raw material needs to minimize risk of supply chain disruption.

Our planned acquisition of Alcoa Warrick LLC and certain assets comprising the aluminum casting and rolling mill facility located in Warrick County, Indiana (collectively, the “Warrick Rolling Mill”) provides an opportunity for further value creation with strong secular growth in the non-cyclical packaging business. The transaction is anticipated to close on March 31, 2021 and is expected to be immediately accretive to earnings and cash flow. The outlook for the beverage and food packaging markets is strong with favorable demand and industry dynamics driving growth. North American can demand was up 5% year-over-year in 2020 and is projected to increase an additional 3% to 5% in 2021. The Warrick Rolling Mill is one of only four dedicated can sheet mills in North America and we expect to become a significant participant in the supply chain solution in meeting the growing North American demand.

Results of Operations

Fiscal 2020 Summary

Consolidated Selected Operational and Financial Information

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

Net Sales. We reported Net sales for 2020 of $1,172.7 million, compared to $1,514.1 million for 2019. The decrease in Net sales during 2020 compared to 2019 reflected a 122.6 million pound (20%) decrease in shipment volume and a $0.09/lb (4%) decrease in average realized sales price per pound. The shipment volume decrease reflected: (i) a 100.3 million pound (37%) decrease in Aero/HS products reflecting the impact of the pandemic on demand for our aerospace applications; (ii) an 11.4 million pound (55%) decrease in our other industrial end market application (“Other products”) reflecting our planned exit from non‐strategic applications; (iii) a 10.2 million pound (11%) decrease in Automotive Extrusions reflecting the impact of the temporary shutdown of the North American automotive supply chain during the quarter ended June 30, 2020 due to the pandemic; and (iv) a 0.7 million pound (0.3%) decrease in GE products. The decrease in average realized sales price per pound reflected an $0.11/lb (10%) decrease in average Hedged Cost of Alloyed Metal prices per pound, partially offset by a $0.02 (1%) increase in VAR per pound due primarily to approximately $14.8 million of additional net sales associated with provisions under multi-year contracts with our customers. See the table in “Selected Operational and Financial Information” below for further details.

Cost of Products Sold, Excluding Depreciation and Amortization and Other Items. Cost of products sold, excluding depreciation and amortization and other items for 2020 totaled $941.3 million, or 80% of Net sales, compared to $1,215.2 million, or 80% of Net sales, in 2019. The decrease during 2020 compared to 2019 of $273.9 million reflected a $183.0 million decrease in Hedged Cost of Alloyed Metal and a $90.9 million decrease in net manufacturing conversion and other costs. Of the $183.0 million decrease in Hedged Cost of Alloyed Metal, $129.1 million was due to lower shipment volume, as discussed above in “Net Sales,” and $53.9 million was due to lower hedged metal prices. The $90.9 million decrease in net manufacturing conversion and other costs reflected: (i) a $90.7 million decrease related to lower sales volume; (ii) $17.4 million of lower benefits and overhead costs; and (iii) a $7.6 million reduction in major maintenance, partially offset by: (i) an increase of $23.0 million in manufacturing costs due to manufacturing inefficiencies and (ii) an increase of $2.3 million in environmental costs associated with on-going historical environmental cleanup.See “Selected Operational and Financial Information” below for a further discussion of the comparative results of operations for 2020 and 2019.

Depreciation and Amortization. Depreciation and amortization for 2020 was $52.2 million compared to $49.1 million for 2019. The increase of $3.1 million was due to various construction-in-progress projects being placed in service during 2020 related primarily to critical sustaining and enhancement projects, as well as for upgrades to equipment supporting Automotive Extrusions.

Selling, General, Administrative, Research and Development (“SG&A and R&D”). SG&A and R&D expense totaled $91.2million in 2020 compared to $98.0 million in 2019. The decrease during 2020 was due primarily to: (i) a $3.9 million reduction in salaries and benefits; (ii) a $3.2 million reduction in travel costs;(iii) a $3.0 million reduction in employee incentive programs; and (iv) a $1.2 million reduction in miscellaneous expenses, partially offset by a $5.5 million increase in legal fees and consulting charges, primarily related to the pending Warrick Rolling Mill acquisition.

Goodwill Impairment. See Note 4 of Notes to Consolidated Financial Statements included in this Report for further details.

Restructuring Costs. See Note 12 of Notes to Consolidated Financial Statements included in this Report for further information regarding the restructuring plan.

Other Operating (Income) Charges, Net. Other operating (income) charges, net, was $0.6 million of income and $0.9 million of charges for the years ended December 31, 2020 and December 31, 2019, respectively. During the year ended December 31, 2020, we recognized $1.3 million of payroll subsidies received by our subsidiary Kaiser Aluminum Canada Limited under the Canada Emergency Wage Subsidy (“CEWS”) Program, which was partially offset by $0.5 million of impairment charges related to property, plant and equipment. The 2019 amount reflected an impairment charge related to property, plant and equipment.

Interest Expense. Interest expense represents cash and non-cash interest expense incurred on our 6.50% Senior Notes, 4.625% unsecured senior notes due March 1, 2028 (“4.625% Senior Notes”) and our Revolving Credit Facility, net of capitalized interest. Interest expense was $40.9 million and $24.6 million for 2020 and 2019, respectively. See Note 9 of Notes to Consolidated Financial Statements included in this Report for a discussion of our debt and credit facilities that were in effect during each of the years 2020 and 2019 and Note 1 of Notes to Consolidated Financial Statements included in this Report for a discussion of our interest expense capitalized as part of construction in progress.

Other Expense, Net. See Note 13 of Notes to Consolidated Financial Statements included in this Report for details.

Income Tax Provision. The income tax provision for 2020 was $10.0 million, resulting in an effective tax rate of 25.9%.There was no material difference between the effective tax rate and the projected blended statutory tax rate for 2020.

The income tax provision for 2019 was $18.4 million, resulting in an effective tax rate of 22.9%. The difference between the effective tax rate and the projected blended statutory tax rate for 2019 was primarily due to a decrease of $7.7 million (10% of taxable income) for cumulative research and development credits recognized for the tax years 2010 through 2019, partially offset by: (i) an increase in unrecognized tax benefits, including interest and penalties, of $2.7 million (3% of taxable income); (ii) an increase of $1.7 million (2% of taxable income) for certain executive compensation; and (iii) an increase of $1.5 million (2% of taxable income) in the valuation allowance for federal and certain state net operating losses.

Selected Operational and Financial Information

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

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

Year Ended December 31,

Other expense, net 1.4 20.7

Depreciation and amortization 52.2 49.1

Non-run-rate items:

Restructuring charges 7.5 —

Adjustments to plant-level LIFO1 2.4 3.4

Mark-to-market (gain) loss on derivative instruments2 (2.6 ) 5.8

Workers' compensation cost due to discounting 1.8 0.8

Goodwill impairment3 — 25.2

Non-cash asset impairment charges 0.5 0.9

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

Environmental expenses4 5.3 1.7

Acquisition costs5 5.5 —

Total non-run-rate items 20.5 37.9

Adjusted EBITDA for 2020 was $153.8 million as compared to $212.7 million for 2019. The decline primarily reflected: (i) a $74.2 million sales impact and (ii) $14.2 million in manufacturing inefficiencies, partially offset by: (i) a $17.1 million reduction in plant and corporate overhead; (ii) a $7.6 million reduction in major maintenance; and (iii) a $4.7 million reduction in incentive compensation expense.

The following table provides our shipment and VAR information (in millions of dollars, except shipments and VAR per pound) by end market applications:

Year Ended December 31,

Aero/HS Products:

$ $ / lb $ $ / lb

Automotive Extrusions:

$ $ / lb $ $ / lb

Less: Hedged Cost of Alloyed Metal (78.4 ) (0.93 ) (97.2 ) (1.03 )

GE Products:

$ $ / lb $ $ / lb

Other Products:

Shipments (mmlbs) 9.4 20.8

$ $ / lb $ $ / lb

Less: Hedged Cost of Alloyed Metal (8.4 ) (0.89 ) (21.3 ) (1.03 )

Total:

$ $ / lb $ $ / lb

Liquidity and Capital Resources

Summary

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

As of December 31,

Available cash and cash equivalents $ 780.3 $ 264.3

Short-term investments — 78.7

We place our cash in bank deposits and money market funds with high credit quality financial institutions. Cash equivalents consist primarily of investment-grade commercial paper, money market accounts and investments which, when purchased, have a maturity of 90 days or less. Short-term investments represent holdings in investment-grade commercial paper with a maturity at the time of purchase of greater than 90 days.

See Note 16 of Notes to Consolidated Financial Statements included in this Report for information regarding restricted cash at December 31, 2020.

We and certain of our subsidiaries have a Revolving Credit Facility with Wells Fargo Bank, National Association, as administrative agent, and the other financial institutions party thereto (see Note 9 of Notes to Consolidated Financial Statements included in this Report). There were no borrowings under our Revolving Credit Facility during the years ending or as of December 31, 2020 or December 31, 2019, respectively.

Cash Flows

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

Year Ended December 31,

Total cash provided by (used in):

Investing activities $ 26.9 $ (101.8 )

Financing activities $ 281.9 $ 8.5

Cash provided by operating activities for the year ended December 31, 2020 included: (i) a decrease in Trade and other receivables of $60.8 million driven primarily by lower Net sales; (ii) a decrease in Inventories of $25.6 million to better align with operations; and (iii) a reduction in Contract assets of $18.5 million driven primarily by timing and volume of shipments related to revenue on products recognized over-time.

Cash provided by operating activities for the year ended December 31, 2019 included: (i) a decrease in Inventories of $37.5 million to better align with operations; (ii) a decrease in Accounts payable of $24.5 million driven by reductions in the quantity and price of metal purchases; and (iii) a decrease in Trade and other receivables of $20.2 million driven primarily by improved collection efforts and a lower metal price.

See Statements of Consolidated Cash Flows included in this Report for further details on our cash flows from operating, investing and financing activities for the years ended December 31, 2020 and December 31, 2019.

Sources of Liquidity

We believe our available cash and cash equivalents, borrowing availability under the Revolving Credit Facility and funds generated from operations are our most significant sources of liquidity, and that our Revolving Credit Facility and unsecured notes have covenants that allow us to operate our business with limited restrictions and significant flexibility for the foreseeable future. While we believe these sources will be sufficient to finance our working capital requirements, planned capital expenditures, investments, debt service obligations and other cash requirements (including the pending Warrick Rolling Mill acquisition and acquisition-related costs) for at least the next twelve months, and while we also believe that alternative sources of liquidity will remain available in the event we seek to add liquidity for opportunistic or other reasons in the future, our ability to fund such cash requirements will depend upon our future operating performance (which will be affected by prevailing economic conditions) and financial, business and other factors, some of which are beyond our control.

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

See Note 9 of Notes to Consolidated Financial Statements included in this Report for a description of our Revolving Credit Facility.

Debt

See “Contractual Obligations, Commercial Commitments and Off-Balance Sheet Arrangements - Contractual Obligations and Commercial Commitments” below for mandatory principal and cash interest payments on the outstanding borrowings under the 4.625% Senior Notes and 6.50% Senior Notes. See Note 9 of Notes to Consolidated Financial Statements included in this Report for further details with respect to the 4.625% Senior Notes, 6.50% Senior Notes and the redemption of our 5.875% Senior Notes due 2024 (“5.875% Senior Notes”).

We do not believe that covenants in the indenture governing the 4.625% Senior Notes and 6.50% Senior Notes are reasonably likely to limit our ability to obtain additional debt or equity financing should we choose to do so during the next 12 months.

Capital Expenditures and Investments

We strive to strengthen our competitive position across our end markets through strategic capital investment. Significant investments over the past decade have positioned us well with increased capacity and expanded manufacturing capabilities while more recent capital projects have focused on further enhancing manufacturing cost efficiency, improving product quality and promoting operational security, which we believe are critical to maintaining and strengthening our position in an increasingly competitive market environment. A significant portion of our capital spending over the past several years related to the modernization project at our Spokane, Washington (“Trentwood”) facility, which focused on equipment upgrades throughout the process flow to reduce conversion costs, increase efficiency and further improve our competitive cost position on all products produced at our Trentwood facility. In addition, a significant portion of the investment also focused on modernizing legacy equipment and the process flow for thin gauge plate to achieve KaiserSelect® quality enhancements for these Aero/HS and GE products. These improvements have allowed us to gain incremental manufacturing capacity to enable future sales growth. Total capital expenditures were $51.9 million and $60.2 million for 2020 and 2019, respectively.

On November 30, 2020, we entered into a Purchase Agreement with Alcoa to purchase the Warrick Rolling Mill for a purchase price of approximately $670.0 million, consisting of approximately $587.0 million in cash and approximately $83.0 million of assumed other post-employment benefits liabilities. The transaction is anticipated to close on or about March 31, 2021. The Warrick Rolling Mill acquisition is subject to a number of closing conditions and there can be no assurance that such conditions will be satisfied or that we will be able to complete the Warrick Rolling Mill acquisition within the planned timeframe or at all. See Note 4 of Notes to Consolidated Financial Statements included in this Report for additional information.

As a response to the COVID-19 pandemic and in order to preserve liquidity, in April 2020 we adjusted our capital spending plans to focus on critical sustaining projects and modest investment opportunities to further support our automotive growth and enhance efficiencies throughout our operations. As such, our $375.0 million multi-year expansion and operational security investment project at our Trentwood facility has been deferred pending changes in market conditions and demand for our Aero/HS products. We anticipate that total capital spending in 2021 will be approximately $50.0 million to $60.0 million primarily focused on sustaining capital investment, with some growth projects expected to be implemented as our key markets improve. We will reassess our capital expenditure requirements for organic growth opportunities in our served markets for capacity, quality and efficiency after we have completed the acquisition of the Warrick Rolling Mill.

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

Dividends

We have consistently paid a quarterly cash dividend since the second quarter of 2007 to holders of our common stock, including holders of restricted stock, and have increased the dividend in each year since 2011. Nevertheless, as in the past, the future declaration and payment of dividends, if any, will be at the discretion of our Board of Directors and will depend on a number of factors, including our financial and operating results, financial position and anticipated cash requirements and contractual restrictions under our Revolving Credit Facility, the indentures for our 4.625% Senior Notes and 6.50% Senior Notes or other indebtedness we may incur in the future. We can give no assurance that dividends will be declared and paid in the future.

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

See our Statements of Consolidated Stockholders’ Equity andNote 18 of Notes to Consolidated Financial Statements included in this Report for information regarding dividends declared during 2020 and 2019 and subsequent to December 31, 2020.

Repurchases of Common Stock

In response to prevailing economic conditions, we suspended repurchases of common stock as of March 18, 2020.

See our Statements of Consolidated Stockholders’ Equity included in this Report for information regarding: (i) repurchases of common stock in 2020 and 2019; (ii) the amounts authorized and available for future repurchases of common stock under our stock repurchase program; and (iii) minimum statutory tax withholding obligations arising during 2020 and 2019 in connection with the vesting of non-vested shares, restricted stock units and performance shares.

Environmental Commitments and Contingencies

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

Contractual Obligations, Commercial Commitments and Off-Balance Sheet Arrangements

Contractual Obligations and Commercial Commitments

The following table and discussion summarizes our significant contractual obligations and commercial commitments as of December 31, 2020 (in millions of dollars):

Payments Due by Period

Total Less than 1 year 1-3 years 3-5 years More than 5 years

On-Balance Sheet:

Standby letters of credit 7.8 6.7 1.1 — —

Employer payroll tax deferrals 7.0 3.5 3.5 — —

Uncertain tax liabilities 1.8 — — — —

Deferred compensation plan liability 9.6 — — — —

Salaried VEBA variable contributions 1.7 1.7 — — —

Off-Balance Sheet:

VEBA administrative fees 1.5 0.3 0.6 0.6 —

Commitment fees on Revolving Credit Facility 3.6 0.9 1.9 0.8 —

Principal and Interest on 4.625% Senior Notes and 6.50% Senior Notes. Cash outlays related to our 4.625% Senior Notes and 6.50% Senior Notes consist of our principal obligations and interest obligations based on scheduled interest payments.

Standby Letters of Credit. The $7.8 millionrepresents letters of credit issued under our Revolving Credit Facility. The letters of credit provide financial assurance of our payment of obligations, primarily related to workers’ compensation. The specific timing of payments with respect to such matters is uncertain. The letters of credit generally automatically renew every 12 months and terminate when the underlying obligations no longer require assurance or upon the maturity of our Revolving Credit Facility in October 2024.

Employer Payroll Tax Deferrals. As of December 31, 2020, we recognized $7.0 millionin employer payroll tax deferrals under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), of which, 50% will be paid in 2021 and 50% will be paid in 2022.

Uncertain Tax Liabilities. At December 31, 2020, we had uncertain tax positions which ultimately could result in tax payments. As the amount of ultimate tax payments beyond 2020 is contingent on the tax authorities’ assessment, it is not practical to present annual payment information.

Deferred Compensation Plan Liability. The deferred compensation liability amount relates to our deferred compensation plan for certain key employees. As the distribution amount is contingent upon investment performance, vesting and other eligibility requirements, including retirement dates, it is not practical to present annual payment information unless timing of disbursement is known.

Operating Leases. Operating lease liabilities represent multi-year obligations for certain manufacturing facilities, warehouses, office space and equipment.

Finance Leases. Finance lease liabilities represent non-cancelable capital commitments as of December 31, 2020. We expect finance leases to be funded through available cash generated from our operations, cash and cash equivalents, borrowings under our Revolving Credit Facility and/or other third-party financing arrangements.

Salaried VEBA Variable Contributions. See Note 5 of Notes to Consolidated Financial Statements included in this Report for additional information regarding our variable cash contributions to the voluntary employees’ beneficiary association (“VEBA”) that provides benefits for certain eligible retirees and their surviving spouses and eligible dependents (“Salaried VEBA”).

VEBA administrative fees. We are required to pay $0.3 million in annual administrative fees related to the VEBA that provides benefits for eligible retirees represented by certain unions and their surviving spouses and eligible dependents through September 2025.

Purchase Obligations. Cash outlays for purchase obligations consist primarily of commitments to purchase primary aluminum, recycled scrap aluminum, other metals, energy and equipment. We have various contracts with suppliers of metals that require us to purchase minimum quantities of these metals in future years at a price to be determined at the time of purchase based primarily on the underlying metal price at that time. Amounts included in the table are based on minimum required purchase quantities at the metal price at December 31, 2020. We believe the minimum required purchase quantities are lower than our current requirements for these metals. Actual quantities and actual metal prices at the time of purchase could be different. Physical delivery commitments with energy companies are in place to cover our exposure to fluctuations in electricity and natural gas prices and are based on fixed contractual rates and quantities. Equipment purchase obligations are based on scheduled payments to equipment manufacturers.

Commitment Fees on Revolving Credit Facility. Future commitment fees on our Revolving Credit Facility are estimated based on the amount of unused credit under the facility at December 31, 2020 and assuming no extension of terms beyond the current maturity date of our Revolving Credit Facility, which is in October 2024. No borrowings were outstanding under our Revolving Credit Facility either throughout the year or as of December 31, 2020.

Other Off-Balance Sheet Arrangements

In addition to our off-balance sheet items discussed in the “Contractual Obligations and Commercial Commitments” section above:

Critical Accounting Estimates and Policies

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

In addition to the accounting estimates we discuss in Note 1 of Notes to Consolidated Financial Statements included in this Report, management believes that the following accounting estimates are critical to aid in fully understanding and evaluating our reported financial results and require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effects of matters that are inherently uncertain. Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.

Revenue Recognition.

Income Tax.

Acquisitions, Goodwill and Intangible Assets.

New Accounting Pronouncements

For a discussion of all recently adopted and recently issued but not yet adopted accounting pronouncements, see Note 1 of Notes to Consolidated Financial Statements included in this Report.

Item 7A.Quantitative and Qualitative Disclosures About Market Risk

Our operating results are sensitive to changes in the prices of primary aluminum, certain alloying metals, natural gas and electricity, and also depend to a significant degree upon the volume and mix of products sold to customers. As discussed more fully in Note 8 of Notes to Consolidated Financial Statements included in this Report, we have historically utilized hedging transactions to lock in a specified price or range of prices for certain products which we sell or consume in our production process, and to mitigate our exposure to changes in energy prices.

Aluminum

See Note 8 of Notes to Consolidated Financial Statements included in this Report for a discussion of our pricing of fabricated aluminum, firm-price arrangements and third-party hedging instruments.

In 2020 and 2019, settlements of derivative contracts covering 127.6 million pounds and 182.4 million pounds, respectively, hedged shipments sold on pricing terms that created metal price risk for us. At December 31, 2020, we had derivative contracts with respect to approximately 45.1 million pounds and 21.5 million pounds to hedge sales to be made in 2021 and 2022, respectively, on pricing terms that create metal price risk for us.

Based on the aluminum derivative positions held by us to hedge firm-price customer sales agreements, we estimate that a $0.10per pound decrease in the London Metal Exchange (“LME”) market price of aluminum as of December 31, 2020andDecember 31, 2019, with all other variables held constant, would have resulted in an unrealized mark-to-market loss of $6.7 millionand$10.4 million, respectively, with corresponding changes to the net fair value of our aluminum derivative positions. Additionally, we estimate that a $0.01 per pound decrease in the Midwest premium for aluminum as of December 31, 2020 and December 31, 2019, with all other variables held constant, would have resulted in an unrealized mark-to-market loss of $0.7 million and $0.9 million, respectively, with corresponding changes to the net fair value of our aluminum derivative positions.

Alloying Metals

We are exposed to the risk of fluctuating prices of certain alloying metals, especially copper and zinc, to the extent that changes in their prices do not highly correlate with price changes for aluminum. Copper, zinc and certain other metals are used in our remelt operations to cast rolling ingot and extrusion billet with the proper chemistry for our products. From time to time, we enter into forward contract swaps with third parties to mitigate our risk from fluctuations in the prices of copper and zinc (“Alloying Metals”). As of December 31, 2020, we had forward swap contracts with settlement dates designed to align with the timing of scheduled purchases of Alloying Metals by our manufacturing facilities. See Note 8 of Notes to Consolidated Financial Statements included in this Report for additional information relating to these hedges. We estimate that a $0.10 per pound decrease in the LME market price of zinc as of December 31, 2020 and December 31, 2019, with all other variables held constant, would have resulted in an unrealized mark-to-market loss of $0.3 million and $1.0 million, respectively, with corresponding changes to the net fair value of our Alloying Metals hedges. We estimate that a $0.10 per pound decrease in the COMEX market price of copper as of December 31, 2020 and December 31, 2019, with all other variables held constant, would have resulted in an unrealized mark-to-market loss of $0.3 million and $0.6 million, respectively, with corresponding changes to the net fair value of our Alloying Metals hedges.

Energy

We are exposed to risk of fluctuating prices for natural gas and electricity. We, from time to time, in the ordinary course of business, enter into hedging transactions and/or physical delivery commitments with firm prices with third parties to mitigate our risk from fluctuations in natural gas and electricity prices.

See Note 8 of Notes to Consolidated Financial Statements included in this Report for information regarding the volume of our derivative and physical delivery commitments with energy companies in place to cover our exposure to fluctuations in natural gas and electricity prices as of December 31, 2020. We estimate that a $1.00 per mmbtu decrease in natural gas prices as of December 31, 2020 and December 31, 2019 would have resulted in an unrealized mark-to-market loss of $6.6 million and $8.6 million, respectively, with corresponding changes to the net fair value of our natural gas derivative positions. We estimate that a $5.00 per Mwh decrease in electricity prices as of December 31, 2020 and December 31, 2019, would have resulted in an unrealized mark-to-market loss of $2.4 millionas of each period, respectively, with corresponding changes to the net fair value of our electricity derivative positions.

Foreign Currency

Our primary foreign exchange exposure is the operating costs of our London, Ontario facility. We estimate that a 10% change in the Canadian dollar exchange rate as of December 31, 2020 and December 31, 2019 would have resulted in an annual operating cost impact of $1.7 million and $1.8 million, respectively.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

Item 8.Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm 40

Consolidated Balance Sheets 43

Statements of Consolidated Income 44

Statements of Consolidated Comprehensive Income 45

Statements of Consolidated Stockholders’ Equity 46

Statements of Consolidated Cash Flows 47

Notes to Consolidated Financial Statements 48

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of

Kaiser Aluminum Corporation

Foothill Ranch, California

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Kaiser Aluminum Corporation and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

Change in Accounting Principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842).

Basis for Opinion

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

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

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

Definition and Limitations of Internal Control over Financial Reporting

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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (CONTINUED)

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

Critical Audit Matters

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

Revenue Recognition—Refer to Note 1 to the financial statements

Critical Audit Matter Description

The Company recognizes revenue as it fulfills their performance obligations and transfers control of products to its customers. For products that have no alternative use and for which the Company has an enforceable right to payment (including a reasonable profit) throughout the production process, revenue is recognized over time. In general, a majority of the Company’s revenue for Aero/HS products and Automotive Extrusions are recognized over time, with the revenue for the remainder of its products recognized at a point in time. For contracts recognized over time, control transfer occurs incrementally during the Company’s production process as progress is made on fulfilling the performance obligation. The Company uses the input method of determining the progress, capturing direct costs beginning at the point that billet or cast ingot is introduced into production at either the extrusion phase or the rolling phase, respectively. For products in production, the Company recognizes revenue using the cost incurred to date plus an estimate of reasonable margin. As of December 31, 2020, net sales were $1,172.7 million, of which $481.8 million was recognized over time.

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

How the Critical Audit Matter Was Addressed in the Audit

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

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

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

Critical Audit Matter Description

The Company is subject to a number of environmental laws and regulations, to potential fines or penalties assessed for alleged breaches of such laws and regulations and to potential claims based upon such laws and regulations. The Company records an environmental loss contingency whenever a contingency is probable and reasonably estimable. At December 31, 2020, the Company’s $18.7 million accrual for expected environmental costs is included in other accrued liabilities and long-term liabilities and represents the Company’s undiscounted estimate of costs reasonably expected to be incurred based on presently enacted laws and

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (CONTINUED)

regulations, existing requirements, currently available facts, existing technology and its assessment of the likely remediation actions to be taken.

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

How the Critical Audit Matter Was Addressed in the Audit

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

o Information obtained directly from public domain searches.

/s/ Deloitte & Touche LLP

Costa Mesa, California

February 25, 2021

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

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

As of December 31,

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

ASSETS

Current assets:

Cash and cash equivalents $ 780.3 $ 264.3

Short-term investments — 78.7

Receivables:

Prepaid expenses and other current assets 28.6 19.4

Property, plant and equipment, net 627.2 622.0

Operating lease assets 26.5 25.8

Deferred tax assets, net — 11.8

Intangible assets, net 26.7 29.6

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accrued salaries, wages and related expenses 30.8 34.4

Other accrued liabilities 41.4 44.0

Long-term portion of operating lease liabilities 25.6 25.2

Net liabilities of Salaried VEBA 17.8 32.6

Deferred tax liabilities 13.9 4.5

Long-term liabilities 78.6 67.0

Commitments and contingencies – Note 10

Stockholders' equity:

Accumulated other comprehensive loss (18.7 ) (38.6 )

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

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED INCOME

Year Ended December 31,

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

Costs and expenses:

Selling, general, administrative, research and development 91.2 98.0 96.3

Goodwill impairment — 25.2 —

Restructuring costs 7.5 — —

Other operating (income) charges, net (0.6 ) 0.9 1.4

Other expense:

Other expense, net – Note 13 (1.4 ) (20.7 ) (0.9 )

Net income per common share:

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

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

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME

Year Ended December 31,

(In millions of dollars)

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

Defined benefit pension plan and Salaried VEBA 13.4 2.4 2.9

Available for sale securities (0.3 ) — (0.6 )

Foreign currency translation 0.1 — (0.1 )

Other comprehensive income (loss), net of tax 19.9 10.2 (11.7 )

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

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED STOCKHOLDERS’ EQUITY

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

Cumulative-effect adjustment1 — — — 10.7 — (0.4 ) 10.3

Other comprehensive loss, net of tax — — — — — (11.7 ) (11.7 )

Cash dividends declared3 — — — (37.7 ) — — (37.7 )

Amortization of unearned equity compensation — — 10.1 — — — 10.1

Other comprehensive income, net of tax — — — — — 10.2 10.2

Cash dividends declared3 — — — (39.4 ) — — (39.4 )

Amortization of unearned equity compensation — — 9.5 — — — 9.5

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

Cash dividends declared3 — — — (43.4 ) — — (43.4 )

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

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

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED CASH FLOWS

Year Ended December 31,

(In millions of dollars)

Cash flows from operating activities:

Depreciation of property, plant and equipment 49.3 46.3 42.1

Amortization of definite-lived intangible assets 2.9 2.8 1.8

Amortization of debt premium and debt issuance costs 2.0 1.2 1.0

Non-cash equity compensation 10.0 9.8 10.3

Non-cash asset impairment charges 0.5 26.1 1.4

Loss on extinguishment of debt — 20.3 —

Loss (gain) on disposition of property, plant and equipment 0.2 — (0.2 )

Gain on disposition of short-term investments (0.7 ) (0.9 ) (2.9 )

Non-cash defined benefit net periodic postretirement benefit cost 5.2 7.0 6.6

Other non-cash changes in assets and liabilities (1.8 ) 8.6 21.9

Changes in operating assets and liabilities:

Prepaid expenses and other current assets (3.2 ) (1.7 ) (0.4 )

Accrued liabilities (3.9 ) (7.5 ) (2.6 )

Annual variable cash contributions to VEBAs (2.9 ) (2.1 ) (15.7 )

Long-term assets and liabilities, net 6.3 5.8 (4.1 )

Cash flows from investing activities1:

Purchase of short-term investments (39.1 ) (132.2 ) (135.2 )

Purchase of equity securities (0.5 ) (0.7 ) (0.9 )

Proceeds from disposition of short-term investments 118.1 91.1 283.9

Proceeds from disposal of property, plant and equipment 0.3 0.2 0.6

Net cash provided by (used in) investing activities 26.9 (101.8 ) 31.1

Cash flows from financing activities1:

Issuance of 4.625% Senior Notes — 500.0 —

Issuance of 6.50% Senior Notes 350.0 — —

Cash paid for debt issuance costs (6.2 ) (8.8 ) —

Repayment of finance lease (1.7 ) (1.4 ) (0.7 )

Repurchase of common stock (12.5 ) (44.2 ) (60.7 )

Cash dividends and dividend equivalents paid (43.4 ) (39.4 ) (37.7 )

Net cash provided by (used in) financing activities 281.9 8.5 (106.0 )

1 See Note 16 for supplemental disclosure of cash flow information.

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

Notes Index

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES INDEX

Note Page

Note 1 Summary of Significant Accounting Policies 49

Note 2 Supplemental Balance Sheet Information 54

Note 3 Leases 54

Note 4 Business Combinations, Goodwill and Intangible Assets 56

Note 5 Employee Benefits 57

Note 6 Multiemployer Pension Plans 62

Note 7 Employee Incentive Plans 63

Note 8 Derivatives, Hedging Programs and Other Financial Instruments 65

Note 9 Debt and Credit Facility 70

Note 10 Commitments and Contingencies 72

Note 11 Accumulated Other Comprehensive (Loss) Income 75

Note 12 Restructuring 76

Note 13 Other Expense, Net 76

Note 14 Income Tax Matters 77

Note 15 Net Income Per Share 79

Note 16 Supplemental Cash Flow Information 80

Note 18 Subsequent Events 81

Notes Index

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

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

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

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

Coronavirus Disease 2019 (“COVID-19”) Pandemic. Beginning in March 2020, the COVID-19 pandemic significantly impacted our industry, causing demand for our products, primarily in our aerospace and automotive end markets, to decline. We instituted operational measures in response to financial impacts caused by the reduced demand. In March 2020, we suspended repurchases of our common stock. During the quarter ended June 30, 2020, we: (i) began limiting capital spending to critical sustaining projects (see Note 2 for discussion of idled projects); (ii) early settled firm commitments with corresponding fair value hedges and reduced forecasts with respect to purchase transactions with corresponding cash flow hedges (see Note 8 ); (iii) settled all outstanding available for sale securities (see Note 8); (iv) issued $350.0 million of new unsecured senior notes (see Note 9); and (v) initiated a plan of restructuring (see Note 12).

Use of Estimates in the Preparation of Financial Statements. The preparation of financial statements in accordance with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of our consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of our consolidated financial position and results of operations. The severity, magnitude and duration, as well as the economic consequences of the COVID-19 pandemic, are uncertain, rapidly changing and difficult to predict. Therefore, our accounting estimates and assumptions may change over time in response to the COVID-19 pandemic and may change materially in future periods.

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

We also review the underlying inputs that are significant to the fair value measurement of financial instruments to determine if a transfer among hierarchy levels is appropriate. We historically have not had significant transfers into or out of each hierarchy level.

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

Goodwill is tested for impairment during the fourth quarter on an annual basis, as well as on an interim basis, as warranted, at the time of relevant events and changes in circumstances. Intangible assets with definite lives are initially recognized at fair value and subsequently amortized over the estimated useful lives to reflect the pattern in which the economic benefits of the intangible assets are consumed. In the event the pattern cannot be reliably determined, we use a straight-line amortization method. Whenever events or changes in circumstances indicate that the carrying amount of the intangible assets may not be recoverable, the intangible assets are reviewed for impairment. See Note 4 for a discussion of our business acquisition in 2018 and the goodwill impairment charges we recorded during 2019.

Notes Index

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For a majority of our remaining non-financial assets and liabilities, which include inventories, debt issuance costs and property, plant and equipment, we are not required to measure their fair value on a recurring basis. However, if certain triggering events occur, an evaluation of the affected non-financial asset or liability will be required, which could result in a reduction to the carrying amount of such asset or liability. See “Property, Plant and Equipment, Net” below for a discussion of impairment charges on idled assets recorded during 2020, 2019 and 2018.

Cash and Cash Equivalents. We consider only those short-term, highly liquid investments which, when purchased, have maturities of 90 days or less to be cash equivalents. Our cash equivalents consist primarily of funds in commercial paper, money market funds and other highly liquid investments, which are classified within Level 1 of the fair value hierarchy with the exception of commercial paper, which is classified within Level 2 of the fair value hierarchy (see Note 8).

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

Available for Sale Securities. We account for investments in certain marketable debt securities as available for sale securities. Such securities are recorded at fair value (see Note 8), with net unrealized gains and losses, net of income taxes, reflected in Accumulated other comprehensive loss as a component of Stockholders’ equity. Realized gains and losses from the sale of marketable debt securities, if any, are determined on a specific identification basis. Debt investment securities with an original maturity of 90 days or less are classified as Cash and cash equivalents (see Note 2). Debt investment securities with an original maturity of greater than 90 days are presented as Short-term investments on our Consolidated Balance Sheets. In addition to debt investment securities, we also hold assets in various investment funds managed by a third-party trust in connection with our deferred compensation program (see Note 5).

Trade Receivables and Allowance for Credit Losses. Trade receivables primarily consist of amounts billed to customers for products sold. Accounts receivable are generally due within 30 to 90 days. For the majority of our receivables, we establish an allowance for credit losses based upon collection experience and other factors including, but not limited to, customer credit ratings, bankruptcy filings, published or estimated credit default rates, age of receivables, expected loss rates and collateral exposures. On certain other receivables where we are aware of a specific customer’s inability or reluctance to pay, an allowance for credit losses is established against amounts due, to reduce the net receivable balance to the amount we reasonably expect to collect. However, if circumstances change, our estimate of the recoverability of accounts receivable could be different. Circumstances that could affect our estimates include, but are not limited to, customer credit issues and general economic conditions. Accounts are written off once deemed to be uncollectible. Any subsequent cash collections relating to accounts that have been previously written off are typically recorded as a reduction to total bad debt expense in the period of payment. Write-offs for 2020, 2019 and 2018 were immaterial to our consolidated financial statements.

Inventories. Inventories are stated at the lower of cost or market value. Finished products, work-in-process and raw material inventories are stated on the last-in, first-out (“LIFO”) basis. At December 31, 2020 and December 31, 2019, the cost of our inventory on a first-in, first-out (“FIFO”) basis, which approximates the current replacement cost, exceeded its stated LIFO value by $8.4 million and $11.9 million, respectively. During the year ended December 31, 2020, we decremented a prior year, lower cost LIFO layer, which resulted in a benefit of $0.2 million. During the year ended December 31, 2019, we decremented a prior year, higher cost LIFO layer which resulted in a charge of $3.6 million. Other inventories are stated on the FIFO basis and consist of operating supplies, which are materials and supplies to be consumed during the production process. Inventory costs consist of material, labor and manufacturing overhead, including depreciation. Abnormal costs, such as idle facility expenses, freight, handling costs and spoilage, are accounted for as current period charges (see Note 2 for the components of inventories).

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

Property, Plant and Equipment, Net. Property, plant and equipment, net, is recorded at cost and includes construction in progress (see Note 2). Interest related to the construction of qualifying assets is capitalized as part of the construction costs. The amount of interest expense capitalized as construction in progress was $1.0 million, $1.6 million and $1.7 million during 2020, 2019 and 2018, respectively.

Notes Index

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Range (in years)

Land improvements 3-25

Buildings and leasehold improvements 2-45

Machinery and equipment 1-22

Finance lease assets 1-10

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

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

We recorded impairment charges of $0.5 million, $0.9 million and $1.4 million in 2020, 2019 and 2018, respectively, to reflect the scrap value of idled assets we determined not to deploy for future use. Asset impairment charges are included in Other operating (income) charges, net, in our Statements of Consolidated Income.

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

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

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

Self Insurance of Workers’ Compensation and Employee Healthcare Liabilities. We self-insure the majority of the costs of workers’ compensation benefits and employee healthcare benefits and rely on insurance coverage to protect us from large losses on individual claims. Workers’ compensation liabilities are based on a combination of estimates for: (i) incurred-but-not-reported claims and (ii) the ultimate expense of incurred claims. Such estimates are based on judgment, using our historical claims data and information and analysis provided by actuarial and claims advisors, our insurance carriers and other professionals. As of December 31, 2020, we revised our methodology of calculating our estimated workers’ compensation liabilities from a discounted basis to an undiscounted basis, resulting in a charge of $0.6 million and an ending liability of $29.8 million as of December 31, 2020. Our estimate for unpaid claim liabilities, gross of insurance recoverables on an undiscounted basis was $29.2 million at December 31, 2019, of which we recorded $26.6 million using a discount rate of 1.75%. Accrued liabilities for employee healthcare benefits, which are estimates of unpaid incurred medical and prescription drug costs as provided by our healthcare administrators, were $3.1 million and $3.5 million at December 31, 2020 and December 31, 2019, respectively.

Debt Issuance Costs. Costs incurred in connection with debt financing are deferred and amortized over the estimated term of the related borrowing. Such amortization is included in Interest expense and may be capitalized as part of construction in progress (see Note 9).

Conditional Asset Retirement Obligations (“CAROs”). We have CAROs at several of our manufacturing facilities. Our CAROs can be separated into two primary categories: (i) legal obligations related to the removal and disposal of asbestos and (ii) asset retirement obligations related to future lease terminations. The majority of our CAROs relate to the first category and consist of incremental costs that would be associated with the removal and disposal of asbestos (all of which is believed to be fully contained

Notes Index

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and encapsulated within walls, floors, roof, piping or equipment insulation) of certain of our older facilities if such facilities were to undergo major renovation or be demolished. We estimate incremental costs for special handling, removal and disposal costs of materials that may or will give rise to CAROs and then discount the expected costs back to the current year using a credit-adjusted, risk-free rate. When it is unclear when or if CAROs will be triggered, we use probability weighting for possible timing scenarios to determine the probability-weighted liability amounts that should be recognized in our consolidated financial statements (see Note 10).

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

Revenue Recognition. We recognize revenue as we fulfill our performance obligations and transfer control of products to our customers. For products that have an alternative use and/or for which we do not have an enforceable right to payment (including a reasonable profit) during the production process, we recognize revenue at a point in time. For products that have no alternative use and for which we have an enforceable right to payment (including a reasonable profit) throughout the production process, we recognize revenue over time. In general, a majority of our Aero/HS products and our Automotive Extrusions are recognized over time, with the remainder of our products recognized at a point in time.

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

We adjust the amount of revenue recognized on all products, regardless of timing of revenue recognition, for variable price consideration, which could include metal market price adjustments, volume rebates and sales discounts. We estimate rebate and discount values based on forecasted order data and historical payment trends for specific customers, adjusted as necessary at each reporting period. Accounts receivable is recorded when our right to consideration becomes unconditional. Payment terms for a majority of our domestic customers are 30 days after invoice date. To accommodate shipping time to overseas locations, payment terms for foreign customers are typically several weeks longer than domestic terms. As such, we do not adjust the promised amount of consideration for the effects of a significant financing component as we do not expect the period between the transfer of control of products to our customers and receipt of payment will be greater than one year.

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

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

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

Advertising Costs. Advertising costs, which are included in SG&A and R&D, are expensed as incurred. Advertising costs for 2020, 2019 and 2018 were $0.2 million, $0.4 million and $0.3 million, respectively.

Research and Development Costs. Research and development costs, which are included in SG&A and R&D, are expensed as incurred. Research and development costs for 2020, 2019 and 2018 were $9.1 million, $10.5 million and $9.8 million, respectively.

Notes Index

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

Adoption of New Accounting Pronouncements

ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), was issued in June 2016. Under ASU 2016-13, existing guidance on reporting credit losses for trade and other receivables and available for sale debt securities have been replaced with a new forward-looking “expected loss” model that has resulted in the earlier recognition of allowances for losses. Our adoption of ASU 2016-13 during the quarter ended March 31, 2020 using the modified retrospective transition approach did not result in a material impact on our consolidated financial statements.

ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”), was issued in August 2018. Under ASU 2018-15, requirements for capitalizing implementation costs incurred in a hosting arrangement (cloud computing) that is a service contract are to be aligned with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. We adopted ASU 2018-15 during the quarter ended March 31, 2020 using the prospective transition approach. The implementation costs we capitalized during the twelve months ended December 31, 2020 were included in both Prepaid expenses and other current assets and Other assets in our Consolidated Balance Sheets. The corresponding cash flows related to these arrangements were included in Net cash provided by operating activities in our Statements of Consolidated Cash Flows.

Accounting Pronouncements Issued But Not Yet Adopted

ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), was issued in December 2019. Under ASU 2019-12, the accounting for income taxes is simplified by eliminating certain exceptions and implementing additional requirements which result in a more consistent application of ASC 740 Income Taxes. Most amendments within ASU 2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. We are currently in the process of evaluating the impact of adopting ASU 2019-12 in 2021, but do not expect it to have a material impact on our consolidated financial statements.

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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. Supplemental Balance Sheet Information

As of December 31,

(In millions of dollars)

Cash and Cash Equivalents

Cash and money market funds $ 780.3 $ 28.2

Commercial paper — 236.1

Trade Receivables, net

Allowance for doubtful receivables (0.8 ) (1.4 )

Inventories

Finished products $ 37.2 $ 42.6

Operating supplies 6.5 6.5

Property, Plant and Equipment, net

Land and improvements $ 21.5 $ 21.4

Buildings and leasehold improvements 117.2 104.5

Property, plant and equipment, gross 1,023.9 972.6

Accumulated depreciation and amortization (398.4 ) (352.2 )

Assets held for sale 1.7 1.6

Property, plant and equipment, net $ 627.2 $ 622.0

Other Accrued Liabilities

Uncleared cash disbursements $ 2.1 $ 4.2

Accrued income taxes and other taxes payable 5.2 6.2

Accrued annual contribution to VEBAs – Note 5 1.7 2.9

Short-term environmental accrual – Note 10 3.7 5.5

Long-Term Liabilities

Workers' compensation accruals $ 30.6 $ 27.7

Long-term environmental accrual – Note 10 15.1 11.5

Other long-term liabilities 32.9 27.8

3. Leases

We determine whether an agreement is a lease at inception. We have operating and finance leases for equipment and real estate that primarily have fixed lease payments. Our leases have remaining lease terms of approximately one to 13 years, some of which may include options to extend the lease for up to 20 years, and some of which may include options to terminate the lease within one year. None of our options to extend or terminate are reasonably certain of being exercised, and are therefore not included in our

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

determination of lease assets and liabilities. Short-term leases with an initial term of 12 months or less are not recorded on our Consolidated Balance Sheets.

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

We have lease agreements with lease and non-lease components, which are generally accounted for separately. These non-lease components include items such as common area maintenance, taxes and insurance for our real estate leases, as well as maintenance charges related to our equipment leases. We have, however, applied the practical expedient within ASU 2016-02 to not separate lease and non-lease components to our embedded supply system equipment leases and have therefore accounted for both lease and non‐lease components in determining the lease assets and liabilities.

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

The following table presents lease terms and discount rates as of December 31, 2020:

Finance Leases Operating Leases

Weighted-average lease term (in years) 4.8 9.2

Weighted-average discount rate 3.9 % 5.4 %

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

As of December 31,

Assets

Operating lease assets Operating lease assets $ 26.5 $ 25.8

Finance lease assets Property, plant and equipment, net 8.1 6.6

Total lease assets $ 34.6 $ 32.4

Liabilities

Current:

Operating lease liabilities Other accrued liabilities $ 4.4 $ 3.9

Finance lease liabilities Other accrued liabilities 1.9 1.2

Non-current:

Finance lease liabilities Long-term liabilities 6.2 5.4

Total lease liabilities $ 38.1 $ 35.7

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

Year Ended December 31,

Operating lease cost $ 6.8 $ 7.5

Short-term lease cost 1.6 1.2

Finance lease cost:

Amortization of leased assets 1.6 1.5

Interest on lease liabilities 0.3 0.3

Total lease cost was $8.2 million for the year ended December 31, 2018.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the maturity of our lease liabilities as of December 31, 2020 (in millions of dollars):

Maturity of Lease Liabilities Finance Leases Operating Leases

Total minimum lease payments $ 8.9 $ 38.9

Less: interest (0.8 ) (8.9 )

Present value $ 8.1 $ 30.0

4. Business Combinations, Goodwill and Intangible Assets

Pending Warrick Rolling Mill Acquisition. On November 30, 2020, we entered into a purchase agreement with Alcoa Corporation to purchase Alcoa Warrick LLC and certain assets comprising the aluminum casting and rolling mill facility located in Warrick County, Indiana (collectively, the “Warrick Rolling Mill”) for a purchase price of approximately $670.0 million, consisting of approximately $587.0 million in cash and approximately $83.0 million of assumed other post-employment benefits liabilities. The transaction, anticipated to close on or about March 31, 2021, will provide us with non-cyclical end market diversification and entry into the packaging end market. As of December 31, 2020, we incurred approximately $5.5 millionof acquisition costs, primarily related to legal and advisory fees. The acquisition of the Warrick Rolling Mill is subject to a number of closing conditions and there can be no assurance that such conditions will be satisfied or that we will be able to complete the Warrick Rolling Mill acquisition within the planned timeframe or at all.

Imperial Machine & Tool Co. Acquisition. On September 19, 2018, we acquired Imperial Machine & Tool Co. (“IMT”), located in Columbia, New Jersey, for $43.2 million in cash, net of cash received. IMT specializes in multi-material advanced manufacturing methods and techniques, which include multi-axis computer numerical control machining, additive manufacturing (“3D Printing”), welding and fabrication for demanding aerospace and defense, automotive, high tech and general industrial applications. The acquisition enhances our ability to address customer needs by broadening our capability to provide innovative solutions for demanding applications.

2019 Goodwill Impairment. In conjunction with our acquisition of IMT, we added $25.2 million of goodwill after allocating the consideration paid, net of cash received, to all other identifiable assets. The goodwill recorded reflected the value we expected from IMT’s 3D Printing line of business. However, due to indications that opportunities for this type of disruptive technology were extending over a longer-term horizon than initially valued, during the fourth quarter of 2019, we made the strategic decision to prioritize our focus on IMT’s subtractive (machining) business opportunities while the 3D Printing market continues to mature. Based on our revised strategy, we tested for goodwill impairment using Level 3 inputs and a combination of an income approach using the estimated discounted cash flow and a market-based valuation methodology. Having determined that the carrying value of IMT exceeded its fair value as of November 30, 2019, we recognized an impairment charge of $25.2 million for the year ended December 31, 2019 within Operating income in our Statements of Consolidated Income. As this goodwill is deductible for tax purposes, the deferred tax effects were included in the impairment charge and income tax provision.

The following table presents the changes in the carrying value of our goodwill (in millions of dollars):

As of December 31,

Gross carrying value $ 37.2 $ 62.4

Accumulated impairment loss:

Beginning balance (18.4 ) (18.4 )

Impairment loss — (25.2 )

Net carrying value $ 18.8 $ 18.8

Notes Index

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Non-compete agreement 5 5.4 (2.4 ) 3.0

Non-compete agreement 5 5.4 (1.3 ) 4.1

We identified no indicators of impairment associated with our intangible assets during the years ended December 31, 2020, December 31, 2019 or December 31, 2018.

Amortization expense relating to definite-lived intangible assets was $2.9 million for 2020, $2.8 million for 2019 and $1.8 million for 2018. The following table presents the expected amortization of intangible assets for each of the next five calendar years and thereafter as of December 31, 2020 (in millions of dollars):

5. Employee Benefits

Employee Plans. Employee benefit plans include:

Notes Index

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Salaried VEBA Postretirement Obligation. Certain retirees who retired prior to 2004 and certain employees who were hired prior to February 2002 and have subsequently retired or will retire with the requisite age and service, along with their surviving spouses and eligible dependents, are eligible to participate in a voluntary employees’ beneficiary association (“VEBA”) that provides healthcare cost, medical cost and long-term care insurance cost reimbursement benefits (“Salaried VEBA”). We have an ongoing obligation with no express termination date to make variable cash contributions up to a maximum of $2.9 million to the Salaried VEBA. We determined that in the first quarter of 2021, we will pay approximately $1.7 million with respect to 2020. Such amount was recorded within Other accrued liabilities as of December 31, 2020 (see Note 2). We paid $2.9 million with respect to 2019 during the first quarter of 2020. We account for the Salaried VEBA as a defined benefit plan in our financial statements.

Union VEBA Postretirement Obligation. Certain other eligible retirees represented by certain unions, along with their surviving spouses and eligible dependents, participate in a separate VEBA (“Union VEBA”). During the first quarter of 2018, we made a $12.8 million cash contribution to the Union VEBA with respect to the nine months ended September 30, 2017. This was our final contribution. We have no ongoing obligation to make further variable cash contributions to the Union VEBA.

Key Assumptions. The following data presents the key assumptions used and the amounts reflected in our consolidated financial statements with respect to our Canadian pension plan and the Salaried VEBA. We use a December 31 measurement date for both of the plans.

The following table presents the assumptions used to determine benefit obligations:

Canadian Pension Plan Salaried VEBA

As of December 31, As of December 31,

Expected long-term return on plan assets 4.45 % 4.45 % 5.50 % 5.50 %

Rate of compensation increase 3.00 % 3.00 % — —

Key assumptions made in computing the net obligation of the Salaried VEBA and in total include:

With respect to Salaried VEBA assets:

Notes Index

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

With respect to Salaried VEBA obligations:

The following table presents the assumptions used to determine net periodic postretirement benefit cost:

Canadian Pension Plan Salaried VEBA

Year Ended December 31, Year Ended December 31,

Rate of compensation increase 3.00 % 3.00 % 3.00 % — — —

Benefit Obligations and Funded Status. The following table presents the benefit obligations and funded status of our Canadian pension plan and the Salaried VEBA and the corresponding amounts that are included in our Consolidated Balance Sheets (in millions of dollars):

Canadian Pension Plan Salaried VEBA

As of December 31, As of December 31,

Change in benefit obligation:

Obligation at beginning of year $ 8.8 $ 7.3 $ 90.2 $ 85.6

Foreign currency translation adjustment 0.3 0.3 — —

Prior service (credit) cost1 — — (12.3 ) 2.5

Benefits paid by Company (0.3 ) (0.5 ) — —

Benefits paid by Salaried VEBA — — (6.9 ) (7.6 )

Change in plan assets:

Fair market value of plan assets at beginning of year 7.8 6.5 57.6 53.2

Foreign currency translation adjustment 0.2 0.3 — —

Benefits paid by Company (0.3 ) (0.5 ) — —

Benefits paid by Salaried VEBA — — (6.9 ) (7.6 )

Fair market value of plan assets at end of year 8.7 7.8 60.5 57.6

Net funded status4 $ (1.3 ) $ (1.0 ) $ (17.8 ) $ (32.6 )

Notes Index

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The accumulated benefit obligation for the Canadian pension plan was $9.2 millionand $7.6 million at December 31, 2020 and December 31, 2019, respectively. We expect to contribute $0.3 millionto the Canadian pension plan in 2021.

The following table presents the net benefits expected to be paid (in millions of dollars):

Year Ended December 31,

Canadian pension plan benefit payments $ 0.4 $ 0.4 $ 0.4 $ 0.4 $ 0.4 $ 2.2

The following table presents the amount of loss included in our Consolidated Balance Sheets (within Accumulated other comprehensive loss) associated with our Canadian pension plan and the Salaried VEBA (before tax) that had not yet been reflected in net periodic postretirement benefit cost (in millions of dollars):

Canadian Pension Plan Salaried VEBA

As of December 31, As of December 31,

Accumulated net actuarial loss $ (2.1 ) $ (1.9 ) $ (11.2 ) $ (12.1 )

Prior service cost — — (24.1 ) (41.1 )

Fair Value of Plan Assets. The plan assets of our Canadian pension plan and the Salaried VEBA are measured annually on December 31 and reflected in our Consolidated Balance Sheets at fair value. In determining the fair value of the plan assets at an annual period end, we utilize primarily the results of valuations supplied by the investment advisors responsible for managing the assets of each plan, which we independently review for reasonableness. Valuation of certain Canadian pension plan and Salaried VEBA assets are based on the net asset value (“NAV”) of shares held by the plans at year end using the NAV practical expedient.

With respect to the Salaried VEBA, the investment advisors providing the valuations are engaged by the Salaried VEBA trustees. Certain Salaried VEBA plan assets are valued based upon unadjusted quoted market prices in active markets that are accessible at the measurement date for identical, unrestricted assets (e.g., liquid securities listed on an exchange). Such assets are classified within Level 1 of the fair value hierarchy. Valuation of other Salaried VEBA invested plan assets is based on significant observable inputs (e.g., valuations derived from actual market transactions, broker-dealer supplied valuations or correlations between a given U.S. market and a non-U.S. security). Valuation model inputs can generally be verified and valuation techniques do not involve significant judgment. The fair values of such financial instruments are classified within Level 2 of the fair value hierarchy.

In addition to the Canadian pension plan and Salaried VEBA, we also hold assets in various investment funds at certain registered investment companies in connection with our deferred compensation program. Such assets are presented within Level 2 of the fair value hierarchy and are measured and recorded at fair value based on their quoted market prices.

Notes Index

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the fair value of plan assets, classified under the appropriate level of the fair value hierarchy (in millions of dollars):

Level 1 Level 2 Level 3 Total

Plan Assets in the Fair Value Hierarchy:

Salaried VEBA –

Cash and money market investments $ 1.4 $ — $ — $ 1.4

Total plan assets in the fair value hierarchy $ 1.4 $ 9.6 $ — $ 11.0

Plan Assets Measured at NAV 2:

Salaried VEBA – Equity investment funds in registered investment companies4 34.7

Total plan assets at fair value $ 77.1

Plan Assets in the Fair Value Hierarchy:

Salaried VEBA –

Cash and money market investments $ 0.9 $ — $ — $ 0.9

Diversified investment funds in registered investment companies1 7.1 — — 7.1

Total Salaried VEBA assets in the fair value hierarchy 8.0 — — 8.0

Total plan assets in the fair value hierarchy $ 8.0 $ 8.1 $ — $ 16.1

Plan Assets Measured at NAV 2:

Salaried VEBA – Equity investment funds in registered investment companies4 24.8

Total plan assets at fair value $ 70.6

Notes Index

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

KALU US Equity

KALU · 10-K · period ended 2020-12-31

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

Item 7A.Quantitative and Qualitative Disclosures About Market Risk

Item 8.Financial Statements and Supplementary Data

KALU US Equity☆

KALU · 10-K · period ended 2020-12-31

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

Item 7A.Quantitative and Qualitative Disclosures About Market Risk

Item 8.Financial Statements and Supplementary Data

KALU US Equity