KAISER ALUMINUM CORP 10-K

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 39 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. 40 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 tested management’s controls over revenue recognized over time, including those over cost incurred to date and estimates of reasonable margin. • We tested the mathematical accuracy of management’s calculation of revenue recognized over time. • We selected a sample of contracts with customers and performed the following: o We evaluated whether the contracts were properly included in management’s calculation of revenue recognized over time based on the terms and conditions of each contract. o We tested that control transfer occurred as progress was made toward fulfilling the performance obligation. • We evaluated the estimates of reasonable margin by developing a range of independent estimates and comparing our estimates to those used by management. • We evaluated management’s ability to accurately estimate reasonable margins by comparing actual margins to management’s historical estimates. 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 41 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: • We tested management’s controls over environmental contingencies, including controls over the estimates of costs expected to be incurred. • We evaluated management’s ability to accurately estimate the costs expected to be incurred by comparing actual costs incurred to historical estimates. • With the assistance of our environmental specialists, we evaluated the reasonableness of management’s estimates of costs reasonably expected to be incurred by comparing the estimates to: o Information obtained directly from the Company’s external environmental specialists. o Communications and feasibility studies the Company received from its regulators and other environmental associations, including Washington State Department of Ecology and Ohio Environmental Protection Agency. o Information obtained directly from public domain searches. o Actual costs incurred to date and the progress of management’s remediation activities. /s/ Deloitte & Touche LLP Costa Mesa, California February 25, 2021 We have served as the Company’s auditor since 2002. 42 KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS As of December 31, 2020 2019 (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: Trade receivables, net 112.8 167.1 Other 11.6 18.1 Contract assets 36.1 54.6 Inventories 152.0 177.6 Prepaid expenses and other current assets 28.6 19.4 Total current assets 1,121.4 779.8 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 Goodwill 18.8 18.8 Other assets 44.1 38.4 Total $ 1,864.7 $ 1,526.2 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 86.1 $ 92.0 Accrued salaries, wages and related expenses 30.8 34.4 Other accrued liabilities 41.4 44.0 Total current liabilities 158.3 170.4 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 Long-term debt 838.1 492.6 Total liabilities 1,132.3 792.3 Commitments and contingencies – Note 10 Stockholders' equity: Preferred stock, 5,000,000 shares authorized at both December 31, 2020 and December 31, 2019; no shares were issued and outstanding at December 31, 2020 and December 31, 2019 — — Common stock, par value $ 0.01 , 90,000,000 shares authorized at both December 31, 2020 and December 31, 2019; 22,647,455 shares issued and 15,812,169 shares outstanding at December 31, 2020; 22,550,827 shares issued and 15,868,304 shares outstanding at December 31, 2019 0.2 0.2 Additional paid in capital 1,068.6 1,062.9 Retained earnings 158.2 172.8 Treasury stock, at cost, 6,835,286 shares at December 31, 2020 and 6,682,523 shares at December 31, 2019 ( 475.9 ) ( 463.4 ) Accumulated other comprehensive loss ( 18.7 ) ( 38.6 ) Total stockholders' equity 732.4 733.9 Total $ 1,864.7 $ 1,526.2 The accompanying notes to consolidated financial statements are an integral part of these statements. 43 KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED INCOME Year Ended December 31, 2020 2019 2018 (In millions of dollars, except share and per share amounts) Net sales $ 1,172.7 $ 1,514.1 $ 1,585.9 Costs and expenses: Cost of products sold, excluding depreciation and amortization and other items 941.3 1,215.2 1,300.7 Depreciation and amortization 52.2 49.1 43.9 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 Total costs and expenses 1,091.6 1,388.4 1,442.3 Operating income 81.1 125.7 143.6 Other expense: Interest expense ( 40.9 ) ( 24.6 ) ( 22.7 ) Other expense, net – Note 13 ( 1.4 ) ( 20.7 ) ( 0.9 ) Income before income taxes 38.8 80.4 120.0 Income tax provision ( 10.0 ) ( 18.4 ) ( 28.3 ) Net income $ 28.8 $ 62.0 $ 91.7 Net income per common share: Basic $ 1.82 $ 3.88 $ 5.53 Diluted $ 1.81 $ 3.83 $ 5.43 Weighted-average number of common shares outstanding (in thousands): Basic 15,802 15,997 16,585 Diluted 15,913 16,203 16,874 The accompanying notes to consolidated financial statements are an integral part of these statements. 44 KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME Year Ended December 31, 2020 2019 2018 (In millions of dollars) Net income $ 28.8 $ 62.0 $ 91.7 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 ) Cash flow hedges 6.7 7.8 ( 13.9 ) Foreign currency translation 0.1 — ( 0.1 ) Other comprehensive income (loss), net of tax 19.9 10.2 ( 11.7 ) Comprehensive income $ 48.7 $ 72.2 $ 80.0 The accompanying notes to consolidated financial statements are an integral part of these statements. 45 KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED STOCKHOLDERS’ EQUITY Common Shares Outstanding Common Stock Additional Paid In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total (In millions of dollars, except share and per share amounts) BALANCE, December 31, 2017 16,773,586 $ 0.2 $ 1,055.9 $ 85.5 $ ( 358.6 ) $ ( 36.7 ) $ 746.3 Cumulative-effect adjustment 1 — — — 10.7 — ( 0.4 ) 10.3 BALANCE, January 1, 2018 16,773,586 $ 0.2 $ 1,055.9 $ 96.2 $ ( 358.6 ) $ ( 37.1 ) $ 756.6 Net income — — — 91.7 — — 91.7 Other comprehensive loss, net of tax — — — — — ( 11.7 ) ( 11.7 ) Common shares issued (including impacts from Long-Term Incentive programs) 146,363 — 0.2 — — — 0.2 Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares ( 68,195 ) — ( 6.9 ) — — — ( 6.9 ) Repurchase of common stock 2 ( 617,151 ) — — — ( 61.9 ) — ( 61.9 ) Cash dividends declared 3 — — — ( 37.7 ) — — ( 37.7 ) Amortization of unearned equity compensation — — 10.1 — — — 10.1 BALANCE, December 31, 2018 16,234,603 $ 0.2 $ 1,059.3 $ 150.2 $ ( 420.5 ) $ ( 48.8 ) $ 740.4 Net income — — — 62.0 — — 62.0 Other comprehensive income, net of tax — — — — — 10.2 10.2 Common shares issued (including impacts from Long-Term Incentive programs) 137,905 — 0.3 — — — 0.3 Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares ( 58,783 ) — ( 6.2 ) — — — ( 6.2 ) Repurchase of common stock 2 ( 445,421 ) — — — ( 42.9 ) — ( 42.9 ) Cash dividends declared 3 — — — ( 39.4 ) — — ( 39.4 ) Amortization of unearned equity compensation — — 9.5 — — — 9.5 BALANCE, December 31, 2019 15,868,304 $ 0.2 $ 1,062.9 $ 172.8 $ ( 463.4 ) $ ( 38.6 ) $ 733.9 Net income — — — 28.8 — — 28.8 Other comprehensive income, net of tax — — — — — 19.9 19.9 Common shares issued (including impacts from Long-Term Incentive programs) 142,173 — 0.4 — — — 0.4 Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares ( 45,545 ) — ( 4.3 ) — — — ( 4.3 ) Repurchase of common stock 2 ( 152,763 ) — — — ( 12.5 ) — ( 12.5 ) Cash dividends declared 3 — — — ( 43.4 ) — — ( 43.4 ) Amortization of unearned equity compensation — — 9.6 — — — 9.6 BALANCE, December 31, 2020 15,812,169 $ 0.2 $ 1,068.6 $ 158.2 $ ( 475.9 ) $ ( 18.7 ) $ 732.4 1. Cumulative-effect adjustment relates to our adoption of Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) and ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10) . 2 . Weighted-average repurchase price (dollars per share) for the years ended December 31, 2020, December 31, 2019 and December 31, 2018 was $ 81.94 , $ 96.18 and $ 100.28 , respectively. At December 31, 2020, $ 93.1 million remained available to repurchase our common shares pursuant to the stock repurchase program. 3. Dividends declared per common share were $ 2.68 , $ 2.40 and $ 2.20 during 2020, 2019 and 2018, respectively. The accompanying notes to consolidated financial statements are an integral part of these statements. 46 KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED CASH FLOWS Year Ended December 31, 2020 2019 2018 (In millions of dollars) Cash flows from operating activities: Net income $ 28.8 $ 62.0 $ 91.7 Adjustments to reconcile net income to net cash provided by 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 Deferred income taxes 15.2 21.1 36.7 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: Trade and other receivables 60.8 20.2 ( 22.3 ) Contract assets 18.5 0.3 0.7 Inventories 25.6 37.5 ( 45.0 ) Prepaid expenses and other current assets ( 3.2 ) ( 1.7 ) ( 0.4 ) Accounts payable ( 5.9 ) ( 24.5 ) 29.2 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 ) Net cash provided by operating activities 206.9 232.3 150.2 Cash flows from investing activities 1 : Capital expenditures ( 51.9 ) ( 60.2 ) ( 74.1 ) 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 Cash payment for acquisition of Imperial Machine & Tool Co., net of cash received — — ( 43.2 ) 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 activities 1 : Repayment of principal and redemption premium of 5.875% Senior Notes — ( 391.5 ) — 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 ) Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares ( 4.3 ) ( 6.2 ) ( 6.9 ) 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 ) Net increase in cash, cash equivalents and restricted cash during the period 515.7 139.0 75.3 Cash, cash equivalents and restricted cash at beginning of period 278.6 139.6 64.3 Cash, cash equivalents and restricted cash at end of period $ 794.3 $ 278.6 $ 139.6 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. 47 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 17 Business, Product and Geographical Area Information and Concentration of Risk 80 Note 18 Subsequent Events 81 48 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. 49 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. 50 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 51 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. 52 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES 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. 53 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Supplemental Balance Sheet Information As of December 31, 2020 2019 (In millions of dollars) Cash and Cash Equivalents Cash and money market funds $ 780.3 $ 28.2 Commercial paper — 236.1 Total $ 780.3 $ 264.3 Trade Receivables, net Billed trade receivables $ 113.6 $ 168.5 Allowance for doubtful receivables ( 0.8 ) ( 1.4 ) Trade receivables, net $ 112.8 $ 167.1 Inventories Finished products $ 37.2 $ 42.6 Work-in-process 46.0 63.5 Raw materials 62.3 65.0 Operating supplies 6.5 6.5 Total $ 152.0 $ 177.6 Property, Plant and Equipment, net Land and improvements $ 21.5 $ 21.4 Buildings and leasehold improvements 117.2 104.5 Machinery and equipment 847.4 813.5 Construction in progress 1 37.8 33.2 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 Accrued interest 11.6 2.3 Short-term environmental accrual – Note 10 3.7 5.5 Other – Note 3 and Note 8 17.1 22.9 Total $ 41.4 $ 44.0 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 Total $ 78.6 $ 67.0 1 Based on market conditions during the year ended December 31, 2020, we temporarily idled projects within Construction in progress totaling $ 20.0 million as of December 31, 2020, all of which are expected to resume at a future date. 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 54 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES 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, Leases Classification 2020 2019 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: Operating lease liabilities Long-term portion of operating lease liabilities 25.6 25.2 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, 2020 2019 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 $ 10.3 $ 10.5 Total lease cost was $ 8.2 million for the year ended December 31, 2018. 55 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES 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 2021 $ 2.2 $ 5.9 2022 2.0 5.0 2023 1.7 4.6 2024 1.2 4.2 2025 1.0 2.3 Thereafter 0.8 16.9 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 million of 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, 2020 2019 Gross carrying value $ 37.2 $ 62.4 Accumulated impairment loss: Beginning balance ( 18.4 ) ( 18.4 ) Impairment loss — ( 25.2 ) Ending balance ( 18.4 ) ( 43.6 ) Net carrying value $ 18.8 $ 18.8 56 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES 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): Weighted- Average Amortization Period (in years) Gross Amount Accumulated Amortization Intangible Assets, Net As of December 31, 2020 Customer relationships 24 $ 36.1 $ ( 14.2 ) $ 21.9 Trade name 10 2.4 ( 0.6 ) 1.8 Non-compete agreement 5 5.4 ( 2.4 ) 3.0 Total $ 43.9 $ ( 17.2 ) $ 26.7 As of December 31, 2019 Customer relationships 24 $ 36.1 $ ( 12.7 ) $ 23.4 Trade name 10 2.4 ( 0.3 ) 2.1 Non-compete agreement 5 5.4 ( 1.3 ) 4.1 Total $ 43.9 $ ( 14.3 ) $ 29.6 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): 2021 $ 2.8 2022 2.8 2023 2.6 2024 1.8 2025 1.8 Thereafter 14.9 Total $ 26.7 5. Employee Benefits Employee Plans. Employee benefit plans include: • A defined contribution 401(k) savings plan for hourly bargaining unit employees at nine of our production facilities based on the specific collective bargaining agreement at each facility. For active bargaining unit employees at three of these production facilities, we are required to make fixed rate contributions. For active bargaining unit employees at one of these production facilities, we are required to match certain employee contributions. For active bargaining unit employees at three of these production facilities, we are required to make both fixed rate contributions and concurrent matches. For active bargaining unit employees at two remaining production facilities, we are not required to make any contributions. Fixed rate contributions either: (i) range from (in whole dollars) $ 800 to $ 2,400 per employee per year, depending on the employee’s age; (ii) vary between 2 % to 10 % of the employees’ compensation depending on their age and years of service for employees hired prior to January 1, 2004; or (iii) are fixed at a 2 % annual contribution for employees hired on or after January 1, 2004. • A defined contribution 401(k) savings plan for salaried and certain hourly employees providing for a concurrent match of up to 4 % of certain contributions made by employees plus an annual contribution between 2 % and 10 % of their compensation depending on their age and years of service to employees hired prior to January 1, 2004. Certain salaried and hourly new hires on or after January 1, 2004 receive a fixed 2 % contribution annually. • A defined benefit pension plan for salaried employees at our London, Ontario facility, with annual contributions based on each salaried employee’s age and years of service. At December 31, 2020, approximately 58 % of the plan assets were invested in equity securities, 35 % were invested in fixed income securities and 7 % were invested in short-term and other securities. Our investment committee reviews and evaluates the investment portfolio. The asset mix target allocation on the long-term investments is approximately 60 % in equity securities, 35 % in fixed income securities and 5 % in short-term 57 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS securities. The plan assets of our Canadian pension plan are managed by advisors selected by us, with the investment portfolio subject to periodic review and evaluation by our investment committee. The investment of assets in the Canadian pension plan is based upon the objective of maintaining a diversified portfolio of investments in order to minimize concentration of credit and market risks (such as interest rate, currency, equity price and liquidity risks). The degree of risk and risk tolerance take into account the obligation structure of the plan, the anticipated demand for funds and the maturity profiles required from the investment portfolio in light of these demands. • A non-qualified, unfunded, unsecured plan of deferred compensation for certain employees who would otherwise suffer a loss of benefits under our defined contribution plan as a result of the limitations imposed by the Internal Revenue Code of 1986. Despite the plan being an unfunded plan, we make an annual contribution to a rabbi trust to fulfill future funding obligations, as contemplated by the terms of the plan. The assets in the trust are held in various investment funds at certain registered investment companies (see “ Fair Value of Plan Assets” below) and are at all times subject to the claims of our general creditors. No participant has a claim to any assets of the trust; however, participants are eligible to receive distributions from the trust subject to vesting and other eligibility requirements. Offsetting liabilities relating to the deferred compensation plan are included within Other accrued liabilities and Long-term liabilities. Assets in the trust are accounted for as equity investments with changes in fair value recorded within Other expense, net (see Note 13). • Benefits for certain members of senior management, including certain of our named executive officers, related to terminations of employment in specified circumstances, including in connection with a change in control, by us without cause and by the executive officer with good reason. 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, 2020 2019 2020 2019 Discount rate 2.50 % 3.10 % 2.05 % 2.95 % 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: • Based on the information received from the Salaried VEBA at December 31, 2020 and at December 31, 2019, the Salaried VEBA assets were invested in various managed proprietary funds. • Our variable payment, if any, is treated as a funding/contribution policy and not counted as a Salaried VEBA asset at December 31 for actuarial purposes. 58 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS With respect to Salaried VEBA obligations: • The accumulated postretirement benefit obligation (“APBO”) for the Salaried VEBA was computed based on the level of benefits being provided by it at December 31, 2020 and December 31, 2019. • Since the Salaried VEBA was paying a fixed annual amount to its participants at both December 31, 2020 and December 31, 2019, no future cost trend rate increase has been assumed in computing the APBO for the Salaried VEBA. 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, 2020 2019 2018 2020 2019 2018 Discount rate 3.10 % 3.90 % 3.40 % 2.95 % 3.90 % 3.20 % Expected long-term return on plan assets 1 4.45 % 4.45 % 4.45 % 5.50 % 5.50 % 5.50 % Rate of compensation increase 3.00 % 3.00 % 3.00 % — — — 1. The expected long-term rate of return assumption for the Salaried VEBA is based on the targeted investment portfolios provided to us by the trustee of the Salaried VEBA. 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, 2020 2019 2020 2019 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 — — Service cost 0.3 0.3 0.1 0.1 Interest cost 0.3 0.3 2.5 3.2 Prior service (credit) cost 1 — — ( 12.3 ) 2.5 Actuarial loss 2 0.6 1.1 4.7 6.4 Benefits paid by Company ( 0.3 ) ( 0.5 ) — — Benefits paid by Salaried VEBA — — ( 6.9 ) ( 7.6 ) Obligation at end of year 3 10.0 8.8 78.3 90.2 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 — — Actual return on assets 0.7 1.0 8.1 9.1 Company contributions 0.3 0.5 1.7 2.9 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 status 4 $ ( 1.3 ) $ ( 1.0 ) $ ( 17.8 ) $ ( 32.6 ) 1. The prior service (credit) cost relating to the Salaried VEBA in both 2020 and 2019 resulted from (decreases) increases in the annual healthcare reimbursement benefit starting in 2020 and 2019, respectively, for plan participants. 2. The actuarial loss relating to the Salaried VEBA in 2020 was comprised of a $ 5.7 million loss due to a change in the discount rate offset by a $ 1.0 million gain due to changes in census information. The actuarial loss relating to the Salaried VEBA in 2019 was comprised of: (i) a $ 6.8 million loss due to a change in the discount rate and (ii) a $ 0.1 million loss due to changes in census information, partially offset by a $ 0.5 million gain due to a change in the projected utilization rate. 3. For the Canadian pension plan, the benefit obligation is the projected benefit obligation. For the Salaried VEBA, the benefit obligation is the APBO. 4. Net funded status relating to the Canadian pension plan at December 31, 2020 and December 31, 2019 was included within Long term liabilities on our Consolidated Balance Sheets. Net funded status relating to the Salaried VEBA at December 31, 2020 and December 31, 2019 was presented as Net liabilities of Salaried VEBA on our Consolidated Balance Sheets. 59 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The accumulated benefit obligation for the Canadian pension plan was $ 9.2 million and $ 7.6 million at December 31, 2020 and December 31, 2019, respectively. We expect to contribute $ 0.3 million to 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, 2021 2022 2023 2024 2025 2026-2030 Canadian pension plan benefit payments $ 0.4 $ 0.4 $ 0.4 $ 0.4 $ 0.4 $ 2.2 Salaried VEBA benefit payments 1 6.6 6.4 6.1 5.9 5.6 24.2 Total net benefits $ 7.0 $ 6.8 $ 6.5 $ 6.3 $ 6.0 $ 26.4 1. Such amounts are based on benefit amounts and certain key assumptions obtained from the Salaried VEBA. 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, 2020 2019 2020 2019 Accumulated net actuarial loss $ ( 2.1 ) $ ( 1.9 ) $ ( 11.2 ) $ ( 12.1 ) Prior service cost — — ( 24.1 ) ( 41.1 ) Cumulative loss reflected in Accumulated other comprehensive loss $ ( 2.1 ) $ ( 1.9 ) $ ( 35.3 ) $ ( 53.2 ) 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. 60 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES 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 As of December 31, 2020: Plan Assets in the Fair Value Hierarchy: Salaried VEBA – Cash and money market investments $ 1.4 $ — $ — $ 1.4 Deferred compensation program – Diversified investment funds in registered investment companies 1 — 9.6 — 9.6 Total plan assets in the fair value hierarchy $ 1.4 $ 9.6 $ — $ 11.0 Plan Assets Measured at NAV 2 : Salaried VEBA – Fixed income investment funds in registered investment companies 3 $ 22.7 Salaried VEBA – Equity investment funds in registered investment companies 4 34.7 Canadian pension plan – Diversified investment funds in registered investment companies 1 8.7 Total plan assets at fair value $ 77.1 As of December 31, 2019: Plan Assets in the Fair Value Hierarchy: Salaried VEBA – Cash and money market investments $ 0.9 $ — $ — $ 0.9 Diversified investment funds in registered investment companies 1 7.1 — — 7.1 Total Salaried VEBA assets in the fair value hierarchy 8.0 — — 8.0 Deferred compensation program – Diversified investment funds in registered investment companies 1 — 8.1 — 8.1 Total plan assets in the fair value hierarchy $ 8.0 $ 8.1 $ — $ 16.1 Plan Assets Measured at NAV 2 : Salaried VEBA – Fixed income investment funds in registered investment companies 3 $ 21.9 Salaried VEBA – Equity investment funds in registered investment companies 4 24.8 Canadian pension plan – Diversified investment funds in registered investment companies 1 7.8 Total plan assets at fair value $ 70.6 1. The plan assets are invested in investment funds that hold a diversified portfolio of: (i) U.S. and international debt and equity securities; (ii) fixed income securities such as corporate bonds and government bonds; (iii) mortgage-related securities; and (iv) cash and cash equivalents. 2. The market value of these funds has not been categorized in the fair value hierarchy and is being presented in the table above to permit a reconciliation of the fair value hierarchy to our Consolidated Balance Sheets. Equity investment funds measured at fair value using the NAV practical expedient are managed by an investment adviser registered with the SEC under the Investment Advisers Act of 1940 and can be redeemed with five business days’ notice on the 15th (or last business day prior to the 15th) and on the last business day of each month. A business day is every day that the New York Stock Exchange is open. Diversified investment funds measured at fair value using the NAV practical expedient are unitized mutual funds without externally published net asset values, which can be redeemed daily without restriction. 3. This category represents investments in various fixed income funds with multiple registered investment companies. Such funds invest primarily in bonds (including Eurodollar and Yankee bonds), debentures, notes, securities with equity and fixed-income characteristics (such as bonds with warrants attached, convertible bonds, hybrids and certain preferred securities), cash equivalents, securities backed by mortgages and other assets, loans, pooled or collective investment vehicles made up of fixed‑income securities and other fixed-income obligations of banks, corporations and governmental authorities. 4. This category represents investments in equity funds that invest in portfolios comprised primarily of equity and equity-related securities of U.S. and non-U.S. issuers across all market capitalizations. 61 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the total expense related to all benefit plans (in millions of dollars): Year Ended December 31, 2020 2019 2018 Canadian pension plan 1 $ 0.4 $ 0.4 $ 0.4 Defined contribution plans 1 8.3 8.8 8.8 Deferred compensation plan 2 1.5 1.6 1.0 Multiemployer pension plans 1,3 4.9 5.0 4.7 Net periodic postretirement benefit cost relating to Salaried VEBA 2,3 4.8 6.6 6.1 Total $ 19.9 $ 22.4 $ 21.0 1. Substantially all of these charges related to employee benefits are in Cost of products sold with the remaining balance in SG&A and R&D. 2. The deferred compensation plan and the current service cost component of Net periodic postretirement benefit cost relating to Salaried VEBA is included within our Statements of Consolidated Income in SG&A and R&D for all periods presented. All other components of Net periodic postretirement benefit cost relating to Salaried VEBA are included within Other expense, net, in our Statements of Consolidated Income. 3. See Note 6 for more information on our multiemployer defined benefit pension plans. Components of Net Periodic Postretirement Benefit Cost. Our results of operations included the following impacts associated with our Canadian pension plan and the Salaried VEBA: (i) a charge for service rendered by employees; (ii) a charge for accretion of interest; (iii) a benefit for the return on plan assets; (iv) amortization of prior service costs associated with plan amendments; and (v) amortization of net actuarial differences. The following table presents the components of Net periodic postretirement benefit cost (in millions of dollars): Canadian Pension Plan Salaried VEBA Year Ended December 31, Year Ended December 31, 2020 2019 2018 2020 2019 2018 Service cost $ 0.3 $ 0.3 $ 0.3 $ 0.1 $ 0.1 $ 0.1 Interest cost 0.3 0.3 0.3 2.5 3.2 2.7 Expected return on plan assets ( 0.3 ) ( 0.3 ) ( 0.3 ) ( 2.8 ) ( 2.7 ) ( 2.9 ) Amortization of prior service cost 1 — — — 4.7 5.6 5.4 Amortization of net actuarial loss 0.1 0.1 0.1 0.3 0.4 0.8 Net periodic postretirement benefit cost $ 0.4 $ 0.4 $ 0.4 $ 4.8 $ 6.6 $ 6.1 1. We amortize prior service cost on a straight-line basis over the average remaining years of service to full eligibility for benefits of the active plan participants. 6. Multiemployer Pension Plans Overview. We contribute to multiemployer defined benefit pension plans under the terms of collective bargaining agreements that cover our union-represented employees at certain facilities. At December 31, 2020, approximately 50 % of our total employees were union-represented employees at facilities participating in these multiemployer pension plans. We currently estimate that contributions will range from $ 3.0 million to $ 5.0 million in 2021. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects: • Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers. • If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. • If we choose to stop participating in any of our multiemployer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. 62 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents information about multiemployer pension plans in which we participate: Pension FIP/RP Status Contributions of Employer Protection Act Pending/ the Company Surcharge Expiration Date Identification Zone Status 1 Implemented Year Ended December 31, Imposed of Collective- Pension Fund Number 2020 2019 in 2020 2 2020 2019 2018 in 2020 Bargaining Agreements (in millions of dollars) Steelworkers Pension Trust (USW) 3 23-6648508 Green Green No $ 3.8 $ 3.8 $ 3.6 No Mar 2021 - Sep 2025 Other Funds 4 1.1 1.2 1.1 $ 4.9 $ 5.0 $ 4.7 1. The most recent Pension Protection Act zone status available in 2020 and 2019 for the Steelworkers Pension Trust is for the plan’s year end at December 31, 2019 and December 31, 2018, respectively. The zone status is based on information that we received from the plan and is certified by the plan’s actuary. Among other factors, plans in the green zone are at least 80 % funded. 2. The “FIP/RP Status Pending/Implemented” column indicates if a Financial Improvement Plan (FIP) or a Rehabilitation Plan (RP) is either pending or has been implemented for the plan under the Pension Protection Act. 3. We are party to three collective bargaining agreements with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO, CLC (“USW”) that require contributions to the Steelworkers Pension Trust. As of December 31, 2020, USW collective bargaining agreements covering employees at our Newark, Ohio (“Newark”) and Spokane, Washington (“Trentwood”) facilities covered 85 % of our USW-represented employees and expire in September 2025. Our monthly contributions per hour worked by each bargaining unit employee at our Newark and Trentwood facilities were (in whole dollars) $ 1.75 in 2020. The union contracts covering employees at our Richmond, Virginia facility and Florence, Alabama facility cover 12 % and 3 % of our USW-represented employees, respectively, and expire in November 2021 and March 2021, respectively. 4. Other Funds consists of plans that are not individually significant. We were not listed in any of the plans’ Forms 5500 or the Canada-Wide Industrial Pension Plan financial statements as providing more than 5 % of the total contributions for any of the plan years disclosed. At December 31, 2020, financial statements and Forms 5500 were not available for the plan years ending in 2020. Further, there were no significant changes to the number of employees covered by our multiemployer plans that would affect the period-to-period comparability of the contributions for the years presented. 7. Employee Incentive Plans Short-Term Incentive Plans (“STI Plans”) We have annual short-term incentive compensation plans for senior management and certain other employees payable at our election in cash, shares of common stock or a combination of cash and shares of common stock. Amounts earned under STI Plans are based on our Adjusted EBITDA, modified for certain safety, quality, delivery, cost and individual performance factors. The Adjusted EBITDA targets are determined based on the return on adjusted net assets. Most of our production facilities have similar programs for both hourly and salaried employees. As of December 31, 2020, we had a liability of $ 5.2 million recorded within Accrued salaries, wages and related expenses for estimated probable future payments relating to the 12-month performance period of our 2020 STI Plans. Long-Term Incentive Programs (“LTI Programs”) General . Executive officers and other key employees of the Company, as well as non-employee directors of the Company, are eligible to participate in the Kaiser Aluminum Corporation 2016 Equity and Incentive Compensation Plan (“2016 Plan”). The 2016 Plan was approved by stockholders on May 26, 2016 and replaced and succeeded in its entirety the Kaiser Aluminum Corporation Amended and Restated 2006 Equity and Performance Incentive Plan, except with regard to awards previously granted thereunder that continued to be outstanding. At December 31, 2020, 312,601 shares were available for awards under the 2016 Plan. We issue new shares of our common stock upon vesting under the 2016 Plan. Non-Vested Common Shares and Restricted Stock Units. We grant non-vested common shares (“RSAs”) to our non-employee directors and restricted stock units (“RSUs”) to our executive officers and other key employees. The RSUs have rights similar to the rights of RSAs and each RSU that becomes vested entitles the recipient to receive one common share or a cash amount equaling the value of one common share. The service period is generally one year for RSAs granted to non-employee directors and three years for RSUs granted to executive officers and other key employees. 63 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes activity relating to RSAs and RSUs for the year ended December 31, 2020: Shares Weighted- Average Grant-Date Fair Value per Share Outstanding at December 31, 2019 198,002 $ 95.28 Granted 109,556 71.75 Vested ( 53,297 ) 78.77 Forfeited ( 4,530 ) 95.23 Outstanding at December 31, 2020 249,731 $ 72.22 Performance Shares. We grant performance shares to executive officers and other key employees that vest upon the achievement of specified market or internal performance goals. Performance goals can include: (i) our achieving a total shareholder return (“TSR”) compared to the TSR of a specified group of peer companies over a three-year performance period (“TSR-Based Performance Shares”); (ii) achieving targeted improvements to our total controllable cost performance over a three-year performance period; (iii) achieving targeted improvements to our economic value added performance, determined based on our adjusted pre-tax operating income in excess of a capital charge, over a three-year performance period; and/or (iv) achieving targeted improvements to our Adjusted EBITDA margin performance, measured by our Adjusted EBITDA as a percentage of value added revenue, over a three-year performance period. Each performance share that becomes vested and earned entitles the recipient to receive one common share or a cash amount equaling the value of one common share. The number of performance shares that may be earned and result in the issuance of cash or common shares ranges between 0 % to 200 % of the target number of underlying common shares, which is approximately one-half of the maximum payout. The following table presents the weighted average inputs and assumptions used in the Monte Carlo simulations to calculate the fair value at grant date of our TSR-Based Performance Shares: Year Ended December 31, 2020 2019 2018 Grant date fair value $ 105.88 $ 134.72 $ 127.41 Grant date stock price $ 91.22 $ 108.79 $ 101.66 Expected volatility of Kaiser Aluminum 1 27.40 % 27.35 % 24.86 % Expected volatility of peer companies 1 36.94 % 39.08 % 44.74 % Risk-free interest rate 0.58 % 2.51 % 2.37 % Dividend yield 2.96 % 2.21 % 2.16 % 1. Weighted average expected volatility based on 2.8 years of daily closing share prices from the valuation date to the end of the performance period. The following table summarizes activity relating to performance shares for the year ended December 31, 2020: Shares Weighted- Average Grant-Date Fair Value per Share Outstanding at December 31, 2019 380,013 $ 100.69 Granted 1 138,850 99.87 Vested ( 81,401 ) 92.09 Forfeited 1 ( 7,108 ) 108.78 Canceled 1 ( 65,696 ) 79.69 Outstanding at December 31, 2020 364,658 $ 102.32 1. The number of shares granted and forfeited are presented at their maximum payout; and the number of shares canceled includes the number of shares that did not vest due to performance results falling below those required for maximum payout. 64 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Non-Cash Compensation Expense. Non-cash compensation expense relating to all awards is included in SG&A and R&D. The following table presents non-cash compensation expense by type of award under LTI Programs (in millions of dollars): Year Ended December 31, 2020 2019 2018 RSAs and RSUs $ 6.1 $ 6.1 $ 5.8 Performance shares 3.5 3.6 4.3 Total non-cash compensation expense $ 9.6 $ 9.7 $ 10.1 Recognized tax benefits relating to non-cash compensation expense were $ 2.3 million, $ 2.4 million and $ 2.5 million for 2020, 2019 and 2018, respectively. The aggregate fair value of awards that vested was $ 12.4 million, $ 16.4 million and $ 19.4 million for 2020, 2019 and 2018, respectively, which represents the market value of our common stock on the date that the awards vested. Unrecognized Gross Compensation Cost Data. The following table presents unrecognized gross compensation costs and the expected period over which the remaining gross compensation costs will be recognized by type of award as of December 31, 2020: Unrecognized Gross Compensation Costs (in millions of dollars) Expected Period (in years) Over Which the Remaining Gross Compensation Costs Will Be Recognized RSAs and RSUs $ 9.7 2.5 Performance shares $ 6.5 1.9 The following table presents the weighted-average grant-date fair value per share for shares granted by type of award: Year Ended December 31, 2020 2019 2018 RSAs and RSUs $ 71.75 $ 97.52 $ 96.40 Performance shares $ 99.87 $ 124.10 $ 109.38 Participants may elect to have us withhold common shares to satisfy minimum statutory tax withholding obligations arising in connection with the vesting of RSAs, RSUs and performance shares. We cancel any such shares withheld on the applicable vesting dates or earlier dates when service requirements are satisfied, which correspond to the times at which income to the employee is recognized. When we withhold these common shares, we are required to remit to the appropriate taxing authorities the fair value of the shares withheld as of the vesting date. The withholding of common shares by us could be deemed a purchase of the common shares. 8. Derivatives, Hedging Programs and Other Financial Instruments Overview . In conducting our business, we enter into derivative transactions, including forward contracts and options, to limit our exposure to: (i) metal price risk related to our sale of fabricated aluminum products and the purchase of metal used as raw material for our fabrication operations; (ii) energy price risk relating to fluctuating prices of natural gas and electricity used in our production processes; and (iii) foreign currency requirements with respect to cash commitments for equipment purchases denominated in foreign currency. 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. Our derivative activities are overseen by a committee (“Hedging Committee”), which is composed of our chief executive officer, chief financial officer, chief accounting officer, vice president of treasury, risk and procurement, vice president of economic analysis and strategic planning and other officers and employees selected by the chief executive officer. The Hedging Committee meets regularly to review commodity price exposure, derivative positions and strategy. Management reviews the scope of the Hedging Committee’s activities with our Board of Directors. We are exposed to counterparty credit risk on all of our derivative instruments, which we manage by monitoring the credit quality of our counterparties and allocating our hedging positions among multiple counterparties to limit exposure to any single entity. 65 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Our counterparties are major investment grade financial institutions or trading companies. Hedging transactions are governed by negotiated reciprocal credit lines, which generally require collateral to be posted above specified credit thresholds. We believe the risk of loss is remote and contained due to counterparty credit quality, our diversification practice and collateral requirements. In a majority of our hedging counterparty agreements, our counterparty offers us a credit line that adjusts up or down, depending on our liquidity. Below specified liquidity thresholds, we may have to post collateral if the fair value of our net liability with such counterparty exceeds our reduced credit line. We manage this risk by allocating hedging transactions among multiple counterparties, using options as part of our hedging activities or both. The aggregate fair value of our derivative instruments that were in a net liability position was $ 2.7 million and $ 7.2 million at December 31, 2020 and December 31, 2019, respectively, and we had no collateral posted as of those dates. Additionally, our firm-price customer sales commitments create incremental customer credit risk related to metal price movements. Under certain circumstances, we mitigate this risk by periodically requiring cash collateral from them, which we classify as deferred revenue and include as a component of Other accrued liabilities. At December 31, 2020, we had no cash collateral posted from our customers. For more information about concentration risks concerning customers and suppliers, see Note 17. Cash Flow Hedges We designate forward swap contracts for aluminum, energy and, from time-to-time, zinc and copper (“Alloying Metals”), used in our fabrication operations as cash flow hedges. Unrealized gains and losses associated with our cash flow hedges are deferred in Other comprehensive income (loss), net of tax, and reclassified to COGS when such hedges settle or when it is probable that the original forecasted transactions will not occur by the end of the originally specified time period. See Note 11 for the total amount of gain or loss on derivative instruments designated and qualifying as cash flow hedging instruments and fair value hedging instruments that was reported in Accumulated other comprehensive loss (“AOCI”), as well as the related reclassifications into earnings and tax effects. Cumulative gains and losses related to cash flow hedges are reclassified out of AOCI and recorded within COGS when the associated hedged commodity purchases impact earnings. Aluminum Hedges . Our pricing of fabricated aluminum products is generally intended to lock in a conversion margin (representing the value added from the fabrication process(es)) and to pass through metal price fluctuations to our customers. For some of our higher value added products sold on a spot basis, the pass through of metal price movements can sometimes lag by as much as several months, with a favorable impact to us when metal prices decline and an adverse impact to us when metal prices increase. Additionally, in certain instances, we enter into firm-price arrangements with our customers for stipulated volumes to be delivered in the future. Because we generally purchase primary and secondary aluminum on a floating price basis, the lag in passing through metal price movements to customers on some of our higher value added products sold on a spot basis and the volume that we have committed to sell to our customers under a firm-price arrangement create metal price risk for us. We use third-party hedging instruments to limit exposure to metal price risk related to the metal pass through lag on some of our products and firm-price customer sales contracts. Alloying Metals Hedges . We are exposed to risk of fluctuating prices for Alloying Metals used as raw materials in our fabrication operations. We, from time to time, in the ordinary course of business, use third-party hedging instruments to mitigate our risk from price fluctuations in Alloying Metals. Energy Hedges . 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 third parties to mitigate our risk from fluctuations in natural gas and electricity prices. As of December 31, 2020, we had derivative and/or physical delivery commitments with energy companies in place to cover exposure to fluctuations in prices for approximately 90 % of our expected natural gas purchases for 2021, 95 % of our expected natural gas purchases for 2022, 92 % of our expected natural gas purchases for 2023, 83 % of our expected natural gas purchases for 2024 and 25 % of our expected natural gas purchases for both 2025 and 2026. As of December 31, 2020, we had derivative and/or physical delivery commitments with energy companies in place to cover exposure to fluctuations in prices for approximately 92 % of our expected electricity purchases for 2021, 76 % of our expected electricity purchases for 2022 and 15 % of our expected electricity purchases for 2023. Fair Value Hedges We are exposed to foreign currency exchange risk related to firm-price commitments for equipment purchases from foreign manufacturers. We, from time to time, in the ordinary course of business, use third-party hedging instruments to mitigate our exposure 66 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS to currency exchange rate fluctuations on these purchases and designate such hedging instruments as fair value hedges. Gain or loss related to components excluded from the assessment of effectiveness from these fair value hedges is first recognized in AOCI and subsequently reclassified to Depreciation and amortization on a straight-line basis over the term of the hedge. Gain or loss on the hedged item (e.g., equipment purchase firm commitments) and the remaining gain or loss on the fair value hedge is recorded within Depreciation and amortization in the period that the gain or loss occurs. Any difference between the change in the fair value of the excluded component and amounts recognized in income on a straight-line basis over the term of the hedge is recognized in AOCI. Non-Designated Hedges of Operational Risks From time-to-time, we enter into commodity and foreign currency exchange contracts that are not designated as hedging instruments to mitigate certain short-term commodity and currency impacts, as identified. For derivative instruments that are not designated as hedging instruments, the gain or loss on these derivatives is recognized within COGS or Other expense, net, depending on whether it relates to commodity risk or foreign currency risk, respectively. During the quarter ended September 30, 2020, we declassified all outstanding Alloying Metals hedges from their initial designation as cash flow hedges. As such, all unrealized gain or loss on these derivatives subsequent to declassification was recognized within COGS. Notional Amount of Derivative Contracts The following table summarizes our derivative positions at December 31, 2020: Aluminum Maturity Period (month/year) Notional Amount of Contracts (mmlbs) Fixed price purchase contracts 1/21 through 12/22 67.4 Fixed price sales contracts 1/21 through 11/21 0.8 Midwest premium swap contracts 1 1/21 through 12/22 66.4 Alloying Metals Maturity Period (month/year) Notional Amount of Contracts (mmlbs) Fixed price purchase contracts 1/21 through 12/21 10.2 Fixed price sales contracts 1/21 through 12/21 4.3 Natural Gas Maturity Period (month/year) Notional Amount of Contracts (mmbtu) Fixed price purchase contracts 1/21 through 12/24 6,630,000 Electricity Maturity Period (month/year) Notional Amount of Contracts (Mwh) Fixed price purchase contracts 1/21 through 12/22 481,800 1. Regional premiums represent the premium over the London Metal Exchange price for primary aluminum which is incurred on our purchases of primary aluminum. 67 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Loss (Gain) The following table summarizes the amount of loss (gain) included on our Statements of Consolidated Income associated with all derivative contracts (in millions of dollars): Year Ended December 31, Statements of Consolidated 2020 2019 2018 Income Classification Total of income and expense line items presented in our Statements of Consolidated Income in which the effects of hedges are recorded: Cash flow hedges $ 941.3 $ 1,215.2 $ 1,300.7 Cost of products sold Fair value hedges $ 52.2 n/a n/a Depreciation and amortization Fair value hedges (early termination) $ 1.4 n/a n/a Other expense, net Loss (gain) recognized in our Statements of Consolidated Income related to cash flow hedges: Aluminum $ 13.7 $ 18.4 $ 2.1 Cost of products sold Alloying Metals (effective hedges) 1.4 1.1 1.0 Cost of products sold Alloying Metals (reclassification from AOCI due to forecasted transactions no longer probable of occurring) 0.8 — — Cost of products sold Natural gas 1.3 0.2 ( 0.3 ) Cost of products sold Electricity 0.5 — — Cost of products sold Total loss recognized in our Statements of Consolidated Income related to cash flow hedges $ 17.7 $ 19.7 $ 2.8 (Gain) loss recognized in our Statements of Consolidated Income related to fair value hedges: Foreign exchange contracts $ ( 0.1 ) $ — $ — Depreciation and amortization Hedged item 0.1 — — Depreciation and amortization Excluded component amortized from AOCI 0.4 — — Depreciation and amortization Reclassification from AOCI related to early termination of firm commitment 0.6 — — Other expense, net Net settlement related to early termination of forward contracts ( 0.7 ) — — Other expense, net Total loss recognized in our Statements of Consolidated Income related to fair value hedges $ 0.3 $ — $ — Loss (gain) recognized in our Statements of Consolidated Income related to non-designated hedges: Alloying Metals – Realized loss $ 0.2 $ — $ — Cost of products sold Alloying Metals – Unrealized gain ( 3.5 ) — — Cost of products sold Total gain recognized in our Statements of Consolidated Income related to non-designated hedges: $ ( 3.3 ) $ — $ — 68 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fair Values of Derivative Contracts The fair values of our derivative contracts are based upon trades in liquid markets. Valuation model inputs can 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. All of our derivative contracts with counterparties are subject to enforceable master netting arrangements. We reflect the fair value of our derivative contracts on a gross basis on our Consolidated Balance Sheets. The following table presents the fair value of our derivative financial instruments (in millions of dollars): As of December 31, 2020 As of December 31, 2019 Assets Liabilities Net Amount Assets Liabilities Net Amount Cash Flow Hedges: Aluminum – Fixed price purchase contracts $ 4.6 $ ( 0.1 ) $ 4.5 $ 1.0 $ ( 4.1 ) $ ( 3.1 ) Midwest premium swap contracts 0.2 ( 1.2 ) ( 1.0 ) — ( 1.2 ) ( 1.2 ) Alloying Metals – Fixed price purchase contracts — — — 0.4 ( 1.5 ) ( 1.1 ) Natural gas – Fixed price purchase contracts 0.2 ( 1.5 ) ( 1.3 ) — ( 2.8 ) ( 2.8 ) Electricity – Fixed price purchase contracts 2.0 ( 2.5 ) ( 0.5 ) 2.6 ( 1.6 ) 1.0 Total cash flow hedges 7.0 ( 5.3 ) 1.7 4.0 ( 11.2 ) ( 7.2 ) Non-Designated Hedges: Alloying Metals – Fixed price purchase contracts 3.9 — 3.9 — — — Fixed price sales contracts — ( 1.3 ) ( 1.3 ) — — — Total non-designated hedges 3.9 ( 1.3 ) 2.6 — — — Total $ 10.9 $ ( 6.6 ) $ 4.3 $ 4.0 $ ( 11.2 ) $ ( 7.2 ) The following table presents the total amounts of derivative assets and liabilities on our Consolidated Balance Sheets (in millions of dollars): As of December 31, 2020 2019 Derivative assets: Prepaid expenses and other current assets $ 8.4 $ 2.1 Other assets 2.5 1.9 Total derivative assets $ 10.9 $ 4.0 Derivative liabilities: Other accrued liabilities $ ( 3.8 ) $ ( 7.6 ) Long-term liabilities ( 2.8 ) ( 3.6 ) Total derivative liabilities $ ( 6.6 ) $ ( 11.2 ) Fair Value of Other Financial Instruments Cash and Cash Equivalents. See Note 2 for components of cash and cash equivalents. Available for Sale Securities. Prior to June 30, 2020, we held commercial paper debt securities that were accounted for as available for sale securities and presented as either cash equivalents or short-term investments on our Consolidated Balance Sheets depending on their time-to-maturity upon initial investment. At December 31, 2019, the fair value input of our available for sale securities, which were classified within Level 2 of the fair value hierarchy, was calculated based on broker quotes. The amortized cost of available for sale securities approximated their fair value. When applicable, we review our debt investment portfolio for credit loss at least quarterly or when there are changes in credit risk or other potential valuation concerns. Based on market conditions during the year ended December 31, 2020, we settled all remaining outstanding available for sale securities upon maturity. 69 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table classifies our other financial assets under the appropriate level of the fair value hierarchy as of December 31, 2020 (in millions of dollars): Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 780.3 $ — $ — $ 780.3 Total $ 780.3 $ — $ — $ 780.3 The following table classifies our other financial assets under the appropriate level of the fair value hierarchy as of December 31, 2019 (in millions of dollars): Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 28.2 $ 236.1 $ — $ 264.3 Short-term investments — 78.7 — 78.7 Total $ 28.2 $ 314.8 $ — $ 343.0 All Other Financial Assets and Liabilities. We believe that the fair values of our accounts receivable, contract assets, accounts payable and accrued liabilities approximate their respective carrying values due to their short maturities and nominal credit risk. 9. Debt and Credit Facility Senior Notes 6.50% Senior Notes. In April 2020 and May 2020, we issued $ 300.0 million and $ 50.0 million, respectively, aggregate principal amounts of our 6.50% unsecured senior notes due May 1, 2025 at 100 % and 101 %, respectively, of the principal amounts (“6.50% Senior Notes”). The restrictions and covenants related to our 6.50% Senior Notes are similar to those governing our pre‑existing 4.625% unsecured senior notes due March 1, 2028 (“4.625% Senior Notes”), as discussed below. The unamortized amount of debt issuance costs relating to the 6.50% Senior Notes as of December 31, 2020 was $ 5.4 million. Interest expense, including amortization of debt issuance costs and debt premium, relating to the 6.50% Senior Notes was $ 16.2 million for the year ended December 31, 2020. Interest accrues on the 6.50% Senior Notes beginning April 28, 2020 at a rate of 6.50 % per annum and is payable semiannually on May 1 and November 1 of each year. The first interest payment date was November 1, 2020 . The effective interest rate of the 6.50% Senior Notes is approximately 6.8 % per annum, taking into account the amortization of premium and debt issuance costs. The 6.50% Senior Notes were offered and sold in transactions not required to be registered under the Securities Act of 1933 and are not entitled to any registration rights. The fair value of the outstanding 6.50% Senior Notes, which are Level 1 liabilities calculated based on pricing from trades around the balance sheet date, was approximately $ 376.8 million at December 31, 2020. The 6.50% Senior Notes are unsecured obligations and are guaranteed by each of our existing and future domestic subsidiaries that is a borrower or guarantor under the revolving credit facility (see Revolving Credit Facility below). We may redeem the 6.50% Senior Notes at our option in whole or part at any time on or after May 1, 2022 at redemption prices (expressed as percentages of principal amount) of 103.250 %, declining to 101.625 % and 100.000 % on or after May 1, 2023 and May 1, 2024, respectively, in each case plus any accrued and unpaid interest to the applicable redemption date. At any time prior to May 1, 2022, we may also redeem up to 40.0 % of the 6.50% Senior Notes using the net proceeds from certain equity offerings at a redemption price equal to 106.500 % of the principal amount plus any accrued and unpaid interest. 4.625% Senior Notes. In November 2019, we issued $ 500.0 million principal amount of 4.625 % unsecured senior notes due March 1, 2028 at 100 % of the principal amount. The unamortized amount of debt issuance costs as of December 31, 2020 was $ 6.5 million. Interest expense, including amortization of debt issuance costs, relating to the 4.625% Senior Notes was $ 24.0 million and $ 2.4 million for the year December 31, 2020 and December 31, 2019 respectively. The effective interest rate of the 4.625% Senior Notes was approximately 4.8 % per annum, taking into account the amortization of debt issuance costs. The fair value of the outstanding 4.625% Senior Notes, which are Level 1 liabilities, was approximately $ 521.3 million and $ 513.5 million at December 31, 2020 and December 31, 2019, respectively. The 4.625% Senior Notes are unsecured obligations and are guaranteed by each of our existing and future domestic subsidiaries that is a borrower or guarantor under the revolving credit facility (see Revolving Credit Facility below). 70 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The indenture governing the 4.625% Senior Notes (“indenture”) places limitations on our and our restricted subsidiaries’ ability to, among other things: (i) incur liens; (ii) consolidate, merge or sell all or substantially all of our and our restricted subsidiaries’ assets; (iii) incur or guarantee additional indebtedness; (iv) enter into transactions with affiliates; and (v) make “restricted payments” (as defined in the indenture to include certain loans, investments, dividend payments, share repurchases and prepayments, redemptions and repurchases of certain indebtedness). Certain types and amounts of restricted payments are allowed by various provisions of the indenture. In particular, the indenture provisions permit us to make restricted payments in any amount if, after giving effect to such restricted payments, our “consolidated net debt ratio” (as defined in the indenture) equals or is less than 2.75 :1.00. We may redeem the 4.625% Senior Notes at our option in whole or part at any time on or after March 1, 2023 at redemption prices (expressed as percentages of principal amount) of 102.313 %, declining to 101.156 % and 100 % on or after March 1, 2024 and March 1, 2025, respectively, in each case plus any accrued and unpaid interest to the applicable redemption date. At any time prior to March 1, 2023, we may also redeem some or all of the 4.625% Senior Notes at a redemption price equal to 100 % of the principal amount of the 4.625% Senior Notes redeemed, plus the “applicable premium” (as defined in the indenture) as of the redemption date and any accrued and unpaid interest thereon. In addition, subject to the conditions set forth in the indenture, at any time prior to March 1, 2023, we may also redeem up to 40.0 % of the 4.625% Senior Notes using the net proceeds from certain equity offerings at a redemption price equal to 104.625 % of the principal amount plus any accrued and unpaid interest. Holders of the 4.625 % Senior Notes have the right to require us to repurchase the 4.625 % Senior Notes at a price in cash equal to 101 % of the aggregate principal amount plus any accrued and unpaid interest following the occurrence of both: (i) a change of control and (ii) a “ratings decline” (as defined in the indenture). A change of control includes: (i) the sale, lease or transfer of all or substantially all of our assets; (ii) certain ownership changes; (iii) certain recapitalizations, mergers and dispositions; and (iv) stockholder approval of any plan or proposal for the liquidation or dissolution of us. We may also be required to offer to repurchase the 4.625 % Senior Notes at 100 % of the principal amount, plus any accrued and unpaid interest, with the net proceeds of certain asset sales. 5.875% Senior Notes. In May 2016, we issued $ 375.0 million principal amount of 5.875 % unsecured senior notes due May 15, 2024 (“5.875% Senior Notes”) at 100 % of the principal amount. On December 18, 2019, we redeemed in full all outstanding 5.875% Senior Notes at a redemption price of 104.406 % of the principal amount. The effective interest rate of the 5.875% Senior Notes was approximately 6.1 % per annum, taking into account the amortization of debt issuance costs. Interest expense, including amortization of debt issuance costs, relating to the 5.875% Senior Notes was $ 22.0 million and $ 22.9 million for the years ended December 31, 2019 and December 31, 2018, respectively. Revolving Credit Facility In October 2019, we entered into a revolving credit facility with Wells Fargo Bank, National Association, as administrative agent, and the other financial institutions party thereto (“Revolving Credit Facility”). The Revolving Credit Facility provides us with a $ 375.0 million funding commitment through October 30, 2024. Joining us as borrowers (“Co-Borrowers”) under the Revolving Credit Facility are three of our wholly owned domestic operating subsidiaries: (i) Kaiser Aluminum Investments Company; (ii) Kaiser Aluminum Fabricated Products, LLC; and (iii) Kaiser Aluminum Washington, LLC. The Revolving Credit Facility replaces the previously existing facility that was due to mature in December 2020. The Revolving Credit Facility is secured by a first priority lien on substantially all of the Co-borrowers’ accounts receivable, inventory, cash or cash equivalents and certain other related assets and proceeds, as well as certain machinery and equipment. Under the Revolving Credit Facility, we are able to borrow from time to time an aggregate amount equal to the lesser of $ 375.0 million and a borrowing base comprised of: (i) 90 % of eligible accounts receivable in which the account debtor is an investment-grade domestic account debtor; (ii) 85 % of eligible accounts receivable in which the account debtor is a domestic account debtor, but not an investment-grade domestic account debtor; (iii) the lesser of (a) 85 % of eligible accounts receivable in which the account debtor is not a domestic account debtor and (b) an amount equal to 25 % of the lesser of (a) the maximum revolver amount or (b) the borrowing base; (iv) the lesser of (a) the product of 75 % multiplied by the value of eligible inventory and (b) the product of 85 % multiplied by the net recovery percentage identified in the most recent acceptable appraisal of inventory, multiplied by the value of eligible inventory; (v) certain eligible machinery and equipment supporting up to $ 71.5 million of borrowing availability; and (vi) at our option, 100 % of eligible cash, reduced by certain reserves, all as specified in the Revolving Credit Facility. Up to a maximum of $ 20.0 million of availability under the Revolving Credit Facility may be utilized for letters of credit. At maturity, all principal amounts outstanding under the Revolving Credit Facility will be due and payable. Borrowings under the Revolving Credit Facility bear interest at a rate equal to either a base prime rate or LIBOR, plus, in each case, a specified variable percentage determined by reference to the then-remaining borrowing availability under the Revolving Credit Facility. The initial LIBOR applicable margin is 125 basis points. We will also pay a monthly commitment fee equal to 0.25 % per annum multiplied by the result of the aggregate amount of revolver commitments, less the average revolver usage during the immediately preceding month. The Revolving Credit Facility may, subject to certain conditions and the agreement of lenders thereunder, be increased up to $ 575.0 million, subject to certain conditions and the agreement of lenders thereunder. 71 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Amounts owed under the Revolving Credit Facility may be accelerated upon the occurrence of various events of default, including, without limitation, the failure to make principal or interest payments when due and breaches of covenants, representations and warranties set forth therein. The Revolving Credit Facility places limitations on our ability and the ability of certain of our subsidiaries to, among other things, grant liens, engage in mergers, sell assets, incur debt, enter into sale and leaseback transactions, make investments, undertake transactions with affiliates, prepay certain debt, pay dividends and repurchase shares. We are allowed to prepay debt, pay dividends and repurchase shares in any amount if, in accordance with terms as defined in the Revolving Credit Facility, no “default” or “event of default” has occurred and is continuing or would result after giving effect to such action and, after giving effect to such proposed action, “excess availability” calculated on a pro forma basis is greater than a defined minimum level. A lower minimum level applies if the “fixed charge coverage ratio,” calculated on a pro forma basis after giving effect to such proposed action for the period of four consecutive fiscal quarters ending on the last day of the most recently ended fiscal quarter for which financial statements have been delivered, is greater than 1.10 :1.0. In addition, we are required to maintain a fixed charge coverage ratio on a consolidated basis at or above 1.0 :1.0 if borrowing availability under the Revolving Credit Facility is less than a defined minimum level. At December 31, 2020, we were in compliance with all covenants contained in the Revolving Credit Facility. The following table summarizes availability and usage of our Revolving Credit Facility as determined by a borrowing base calculated as of December 31, 2020 (in millions of dollars except for borrowing rate): Revolving Credit Facility borrowing commitment $ 375.0 Borrowing base availability $ 259.3 Less: Outstanding borrowings under Revolving Credit Facility — Less: Outstanding letters of credit under Revolving Credit Facility ( 7.8 ) Remaining borrowing availability $ 251.5 Borrowing rate (if applicable) 1 3.50 % 1 Such borrowing rate, if applicable, represents the interest rate for any overnight borrowings under the Revolving Credit Facility. 10. Commitments and Contingencies Commitments. We have a variety of financial commitments, including purchase agreements, forward foreign exchange and forward sales contracts, indebtedness and letters of credit (see Note 3, Note 8 and Note 9). CAROs. The inputs in estimating the fair value of CAROs include: (i) the timing of when any such CARO cash flows may be incurred; (ii) incremental costs associated with special handling or treatment of CARO materials; and (iii) the credit-adjusted risk-free rate applicable at the time additional CARO cash flows are estimated; all of these are considered Level 3 inputs as they involve significant judgment from us. The following table summarizes activity relating to CARO liabilities (in millions of dollars): Year Ended December 31, 2020 2019 2018 Beginning balance $ 6.5 $ 6.3 $ 5.9 Liabilities settled during the period ( 0.1 ) ( 0.2 ) — Accretion expense 0.5 0.5 0.4 Adjustment to accretion expense due to revisions to estimated cash flow and timing of expenditure 1 ( 0.2 ) ( 0.1 ) — Ending balance $ 6.7 $ 6.5 $ 6.3 1. The adjustments to accretion expense had a $ 0.01 impact on the basic and diluted net income per share for both 2020 and 2019. The estimated fair value of CARO liabilities were based upon the application of a weighted-average credit-adjusted risk-free rate of 8.7 % at both December 31, 2020 and December 31, 2019. CAROs are included in Other accrued liabilities or Long-term liabilities, as appropriate. Environmental Contingencies. We are subject to a number of environmental laws and regulations, to potential fines or penalties assessed for alleged breaches of such laws and regulations and to potential claims based upon such laws and regulations. We are also subject to legacy environmental contingencies related to activities that occurred at operating facilities prior to July 6, 2006, which 72 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS represent the majority of our environmental accruals. The status of these environmental contingencies are discussed below. We have established procedures for regularly evaluating environmental loss contingencies. Our environmental accruals represent our undiscounted estimate of costs reasonably expected to be incurred based on presently enacted laws and regulations, currently available facts, existing requirements, existing technology and our assessment of the likely remediation actions to be taken. We continue to pursue remediation activities, primarily to address the historical use of oils containing polychlorinated biphenyls (“PCBs”) at our Trentwood facility. Our remediation efforts are in collaboration with the Washington State Department of Ecology (“Ecology”), to which we submitted a feasibility study in 2012 of remediation alternatives and from which we received permission to begin certain remediation activities pursuant to a signed work order. We have completed a number of sections of the work plan and have received satisfactory completion approval from Ecology on those sections. Additionally, in cooperation with Ecology, to determine the treatability and evaluate the feasibility of removing PCBs from ground water under the Trentwood facility, we constructed an experimental treatment facility and began treatment operations in 2015. During the year ended December 31, 2020, we increased our environmental accrual by $ 3.8 million based on a minimum cost estimate to implement a full‑scale experimental treatment facility for ground water PCB contaminants. As the long-term success of the new methodology cannot be reasonably determined at this time, it is possible we may need to make upward adjustments to our related accruals and cost estimates as the long term results become available. Pursuant to a consent agreement with the Ohio Environmental Protection Agency (“OEPA”), we initiated an investigational study of our Newark facility related to historical on-site waste disposal. During the quarter ended December 31, 2018, we submitted our remedial investigation study to the OEPA for review and approval. The final remedial investigation report was approved by the OEPA during the quarter ended December 31, 2020. We are currently preparing the required feasibility study, which we expect to submit to the OEPA for review during the quarter ending June 30, 2021. The actual and final remediation cost estimates will not be fully determinable until the feasibility study has been accepted by the OEPA and the selected remediation design work plans are complete, which we expect to occur in the next 10 to 16 months . During 2020, following the issuance of information requests under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), to which we responded, the United States Environmental Protection Agency (“USEPA”) issued a general notice letter to us alleging that we are a potentially responsible party under CERCLA for response and other potential remedial actions concerning property owned by us near our former smelter site in Mead, Spokane County, Washington. In February 2020, we responded to the general notice letter and in August 2020, we entered into an administrative settlement agreement and an order on consent for removal actions (“EPA Order”). We performed the required remediation actions in October 2020 and, following its field evaluation, the USEPA notified us that the remediation actions taken were deemed to have completed the requirements of the EPA Order. As such, we have no remaining obligations or environmental accrual related to the EPA Order. The following table presents the changes in our environmental accrual, which was primarily included in Long-term liabilities (in millions of dollars): Year Ended December 31, 2020 2019 2018 Beginning balance $ 17.0 $ 16.9 $ 16.6 Additional accruals 5.2 1.8 1.7 Less: expenditures ( 3.5 ) ( 1.7 ) ( 1.4 ) Ending balance $ 18.7 $ 17.0 $ 16.9 At December 31, 2020, our environmental accrual of $ 18.7 million represented our estimate of the incremental remediation cost based on: (i) proposed alternatives in the final feasibility study related to the Trentwood facility; (ii) currently available facts with respect to our Newark facility; and (iii) facts related to certain other locations owned or formerly owned by us. In accordance with approved and proposed remediation action plans, we expect that the implementation and ongoing monitoring could occur over a period of 30 or more years. As additional facts are developed, feasibility studies are completed, remediation plans are modified, necessary regulatory approvals for the implementation of remediation are obtained, alternative technologies are developed and/or other factors change, there may be revisions to management’s estimates and actual costs may exceed the current environmental accruals. We believe at this time that it is reasonably possible that undiscounted costs associated with these environmental matters may exceed current accruals by amounts that could be, in the aggregate, up to an estimated $ 11.6 million over the remediation period. It is reasonably possible that our recorded estimate will change in the next 12 months. 73 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Other Contingencies. We are party to various lawsuits, claims, investigations and administrative proceedings that arise in connection with past and current operations. We evaluate such matters on a case-by-case basis and our policy is to vigorously contest any such claims we believe are without merit. We accrue for a legal liability when it is both probable that a liability has been incurred and the amount of the loss is reasonably estimable. Quarterly, in addition to when changes in facts and circumstances require it, we review and adjust these accruals to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. While uncertainties are inherent in the final outcome of such matters and it is presently impossible to determine the actual cost that may ultimately be incurred, we believe that we have sufficiently accrued for such matters and that the ultimate resolution of pending matters will not have a material impact on our consolidated financial position, operating results or liquidity. 74 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. Accumulated Other Comprehensive (Loss) Income The following table presents the changes in the accumulated balances for each component of AOCI (in millions of dollars): Year Ended December 31, 2020 2019 2018 Defined Benefit Pension Plan and Salaried VEBA: Beginning balance $ ( 33.2 ) $ ( 35.6 ) $ ( 38.5 ) Actuarial gain (loss) arising during the period 0.4 ( 0.4 ) 4.4 Less: income tax (expense) benefit ( 0.1 ) 0.1 ( 1.1 ) Net actuarial gain (loss) arising during the period 0.3 ( 0.3 ) 3.3 Prior service credit (cost) arising during the period 12.3 ( 2.5 ) ( 6.9 ) Less: income tax (expense) benefit ( 3.0 ) 0.6 1.7 Net prior service credit (cost) arising during the period 9.3 ( 1.9 ) ( 5.2 ) Amortization of net actuarial loss 1 0.4 0.5 0.9 Amortization of prior service cost 1 4.7 5.6 5.4 Less: income tax expense 2 ( 1.2 ) ( 1.4 ) ( 1.5 ) Net amortization and reclassification from AOCI to Net income 3.9 4.7 4.8 Translation impact on Canadian pension plan AOCI balance ( 0.1 ) ( 0.1 ) — Other comprehensive income, net of tax 13.4 2.4 2.9 Ending balance $ ( 19.8 ) $ ( 33.2 ) $ ( 35.6 ) Available for Sale Securities: Beginning balance 3 $ 0.3 $ 0.3 $ 0.9 Unrealized gain on available for sale securities 1.3 4.4 4.7 Less: income tax expense ( 0.7 ) ( 1.1 ) ( 1.1 ) Net unrealized gain on available for sale securities 0.6 3.3 3.6 Reclassification of unrealized gain upon sale of available for sale securities 4 ( 2.0 ) ( 4.4 ) ( 5.4 ) Less: income tax benefit 2 1.1 1.1 1.2 Net gain reclassified from AOCI to Net income ( 0.9 ) ( 3.3 ) ( 4.2 ) Other comprehensive loss, net of tax ( 0.3 ) — ( 0.6 ) Ending balance $ — $ 0.3 $ 0.3 Cash Flow Hedges: Beginning balance $ ( 5.6 ) $ ( 13.4 ) $ 0.5 Unrealized loss on cash flow hedges ( 9.4 ) ( 9.5 ) ( 21.2 ) Less: income tax benefit 2.3 2.3 5.3 Net unrealized loss on cash flow hedges ( 7.1 ) ( 7.2 ) ( 15.9 ) Reclassification of unrealized loss upon settlement of cash flow hedges 5 17.4 19.7 2.7 Reclassification due to forecasted transactions no longer probable of occurring 5 0.8 — — Less: income tax expense 2 ( 4.4 ) ( 4.7 ) ( 0.7 ) Net loss reclassified from AOCI to Net income 13.8 15.0 2.0 Other comprehensive income (loss), net of tax 6.7 7.8 ( 13.9 ) Ending balance $ 1.1 $ ( 5.6 ) $ ( 13.4 ) Fair Value Hedges: Beginning balance $ — $ — $ — Unrealized loss on fair value hedges ( 1.0 ) — — Less: income tax benefit 0.2 — — Net unrealized loss on fair value hedges ( 0.8 ) — — Excluded component amortized from OCI to Net income 0.4 — — Reclassification due to cancellation of firm commitment 0.6 — — Less: income tax expense 2 ( 0.2 ) — — Net loss reclassified from AOCI to Net income 0.8 — — Other comprehensive income, net of tax — — — Ending balance $ — $ — $ — Foreign Currency Translation: Beginning balance $ ( 0.1 ) $ ( 0.1 ) $ — Other comprehensive income (loss), net of tax 0.1 — ( 0.1 ) Ending balance $ — $ ( 0.1 ) $ ( 0.1 ) Total AOCI ending balance $ ( 18.7 ) $ ( 38.6 ) $ ( 48.8 ) 75 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Amounts amortized out of AOCI relating to Salaried VEBA adjustments were included within Other expense, net, as a component of Net periodic postretirement benefit cost relating to Salaried VEBA. 2. Income tax amounts reclassified out of AOCI were included as a component of Income tax provision. 3. The beginning unrealized gain within Available for sale securities as of January 1, 2018 includes a $ 0.4 million cumulative‑effect adjustment from our adoption of ASU 2016-01, which required us to remove cumulative gains on equity investments related to our deferred compensation plan as they are no longer accounted for as available for sale securities (see Note 1 and Note 8 for additional details). 4. Amounts reclassified out of AOCI relating to sales of available for sale securities were included as a component of Other expense, net. We use the specific identification method to determine the amount reclassified out of AOCI. 5. Amounts reclassified out of AOCI relating to cash flow hedges were included as a component of Cost of products sold. As of December 31, 2020, we estimate a net mark-to-market loss before tax of $ 4.7 million in AOCI will be reclassified into Net income within the next 12 months. 12. Restructuring During the year ended December 31, 2020, global restrictions on air travel and other changes in global travel patterns as a result of the COVID-19 pandemic negatively impacted short and mid-term commercial aerospace demand within our Aero/HS products end market applications. We therefore initiated a restructuring plan during the quarter ended June 30, 2020 that consisted primarily of a reduction in force measures. As the economic impact of the COVID-19 pandemic is ever evolving, we made adjustments to our estimated headcount reductions during the quarters ended September 30, 2020 and December 31, 2020 that impacted our total expected cash requirements, including recalling employees that were previously on indefinite layoff. Employee costs related to the restructuring plan were included within Restructuring costs in our Statements of Consolidated Income and consisted of severance, voluntary buyout packages, outplacement services, estimated medical costs and associated payroll costs . Substantially all of the costs associated with the restructuring efforts initiated during the year ended December 31, 2020 were incurred and expensed as of December 31, 2020. Cash payments associated with the restructuring plan are estimated to extend through 2022. The following table summarizes activity relating to restructuring plan liabilities (in millions of dollars): Year Ended December 31, 2020 Beginning balance $ — Restructuring costs 12.4 Cash payments ( 6.1 ) Other adjustments 1 ( 4.9 ) Ending balance $ 1.4 1. In December 2020, we revised our production forecast for 2021, thereby reducing the estimated number of headcount reductions necessary as compared with our initial restructuring plan. As such, included in Other adjustments is a reduction to our estimated restructuring liability of $ 4.9 million with an offset to Restructuring costs to accommodate the revised headcount requirements. 13. Other Expense, Net Other expense, net, consisted of the following (in millions of dollars): Year Ended December 31, 2020 2019 2018 Interest income $ 0.6 $ 0.6 $ 0.3 Net periodic postretirement benefit cost relating to Salaried VEBA ( 4.7 ) ( 6.5 ) ( 6.0 ) Realized gain on available for sale securities 2.0 4.4 5.4 Unrealized gain (loss) on equity securities 0.7 0.7 ( 1.0 ) Loss on extinguishment of debt — ( 20.3 ) — All other, net — 0.4 0.4 Other expense, net $ ( 1.4 ) $ ( 20.7 ) $ ( 0.9 ) 76 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. Income Tax Matters The following table presents Income before income taxes by geographic area (in millions of dollars): Year Ended December 31, 2020 2019 2018 Domestic $ 35.2 $ 76.3 $ 114.6 Foreign 3.6 4.1 5.4 Income before income taxes $ 38.8 $ 80.4 $ 120.0 Tax Provision . Income taxes are classified as either domestic or foreign based on whether payment is made or due to the United States or a foreign country. Certain income classified as foreign is also subject to domestic income taxes. Income tax provision consisted of the following (in millions of dollars): Federal Foreign State Total Year Ended December 31, 2020 Current $ 6.1 $ ( 0.4 ) $ ( 0.6 ) $ 5.1 Deferred ( 18.8 ) ( 0.1 ) ( 2.3 ) ( 21.2 ) Benefit (expense) applied to decrease (increase) Retained earnings/Other comprehensive income 5.1 ( 0.1 ) 1.1 6.1 Income tax provision $ ( 7.6 ) $ ( 0.6 ) $ ( 1.8 ) $ ( 10.0 ) Year Ended December 31, 2019 Current $ 5.7 $ ( 1.1 ) $ ( 1.8 ) $ 2.8 Deferred ( 19.6 ) ( 0.3 ) ( 4.5 ) ( 24.4 ) Benefit (expense) applied to decrease (increase) Retained earnings/Other comprehensive income 2.7 ( 0.1 ) 0.6 3.2 Income tax provision $ ( 11.2 ) $ ( 1.5 ) $ ( 5.7 ) $ ( 18.4 ) Year Ended December 31, 2018 Current $ 11.9 $ ( 1.9 ) $ ( 1.5 ) $ 8.5 Deferred ( 34.7 ) 0.1 ( 1.4 ) ( 36.0 ) Expense applied to increase Retained earnings/ Other comprehensive loss ( 0.7 ) — ( 0.1 ) ( 0.8 ) Income tax provision $ ( 23.5 ) $ ( 1.8 ) $ ( 3.0 ) $ ( 28.3 ) The following table presents a reconciliation between the provision for income taxes and the amount computed by applying the federal statutory income tax rate to Income before income taxes (in millions of dollars): Year Ended December 31, 2020 2019 2018 Amount of federal income tax provision based on the statutory rate $ ( 8.1 ) $ ( 16.9 ) $ ( 25.2 ) (Increase) decrease in federal valuation allowances — ( 0.1 ) 1.7 Non-deductible compensation expense ( 1.1 ) ( 1.7 ) ( 0.6 ) Non-deductible benefit (expense) 0.4 0.1 ( 1.5 ) State income tax provision, net of federal benefit 1 ( 1.5 ) ( 4.5 ) ( 2.5 ) Research and development credit 0.4 7.7 — Gross increases for tax positions from current year — ( 0.3 ) — Gross decreases (increases) for tax positions from prior years 0.4 ( 2.4 ) — Foreign income tax expense ( 0.4 ) ( 0.1 ) ( 0.5 ) Foreign undistributed (earnings) loss ( 0.1 ) ( 0.2 ) 0.4 Tax rate change — — ( 0.1 ) Income tax provision $ ( 10.0 ) $ ( 18.4 ) $ ( 28.3 ) 1. State income taxes were $ 1.3 million in 2020, reflecting an increase of $ 3.7 million due to state net operating loss (“NOL”) carryforward expirations and tax rate true-ups in various states, partially offset by a $ 3.5 million decrease in the valuation allowance relating to certain state net operating losses. State income taxes were $ 3.8 million in 2019, reflecting a decrease of 77 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS $ 0.7 million due to lower tax rate true-ups in various states , partially offset by an increase of $ 1.4 million due to a change in the valuation allowance relating to certain state net operating losses. The state income taxes were $ 4.5 million in 2018, reflecting an increase of $ 0.9 million due to higher tax rate true-ups in various states, partially offset by a $ 2.9 million decrease in the valuation allowance relating to certain state net operating losses. Deferred Income Taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. The following table presents the components of our net deferred income tax assets (in millions of dollars): As of December 31, 2020 2019 Deferred income tax assets: Loss and credit carryforwards $ 33.4 $ 48.7 Salaried VEBA (see Note 5) 4.8 8.7 Other assets 29.4 30.1 Leased assets 7.3 7.1 Inventories 6.9 9.4 Valuation allowances ( 6.4 ) ( 9.9 ) Total deferred income tax assets 75.4 94.1 Deferred income tax liabilities: Property, plant and equipment ( 80.8 ) ( 78.5 ) Leased liability ( 6.4 ) ( 6.3 ) Undistributed foreign earnings ( 2.1 ) ( 2.0 ) Total deferred income tax liabilities ( 89.3 ) ( 86.8 ) Net deferred income tax (liabilities) assets 1 $ ( 13.9 ) $ 7.3 1. Of the total net deferred income tax assets of $ 7.3 million at December 31, 2019, $ 11.8 million was presented as Deferred tax assets, net, and $ 4.5 million was presented as Deferred tax liabilities. Tax Attributes. At December 31, 2020, we had $ 94.6 million of NOL carryforwards available to reduce future cash payments for federal income taxes in the United States. H.R.1, commonly referred to as the Tax Cut and Jobs Act, allows net operating losses generated prior to December 31, 2017 (including our NOL carryforwards) to be fully deducted against 100% of taxable income until fully utilized or expired. Our NOL carryforwards expire periodically through 2030. In addition, we had $ 8.1 million of federal research and development (“R&D”) credit carryforwards to offset regular federal income tax requirements. Our R&D credit carryforwards expire periodically through 2040. In assessing the realizability of deferred tax assets, management considers whether it is “more likely than not” that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers taxable income in carryback years, the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. Due to uncertainties surrounding the realization of some of our deferred tax assets, primarily including state NOL carryforwards sustained during the prior years and expiring tax benefits, we have a valuation allowance against our deferred tax assets. When recognized, the tax benefits relating to any reversal of this valuation allowance will be recorded as a reduction of income tax expense. There was a decrease in the valuation allowance of $ 3.5 million in 2020, an increase in the valuation allowance of $ 1.5 million in 2019 and a decrease in the valuation allowance of $ 4.6 million in 2018. The decrease in the valuation allowance for 2020 was primarily due to the expiration of state NOL carryforwards and the related reversal of their valuation allowances. The increase in the valuation allowance for 2019 was primarily due to unutilized state NOL carryforwards and Federal Separate Return Limitation Year losses that were expected to expire. The decrease in the valuation allowance for 2018 was primarily due to the expiration of state NOL carryforwards and the related reversal of their valuation allowances and the expiration of a capital loss carryforward. Other . We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. 78 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Our tax returns for certain past years are still subject to examination by taxing authorities and the use of NOL carryforwards in future periods could trigger a review of attributes and other tax matters in years that are not otherwise subject to examination. In 2018, we made an accounting policy election to treat global intangible low-taxed income (“GILTI”) as a period cost. We have gross unrecognized benefits relating to uncertain tax positions. The following table presents a reconciliation of changes in the gross unrecognized tax benefits (in millions of dollars): Year Ended December 31, 2020 2019 2018 Gross unrecognized tax benefits at beginning of period $ 4.1 $ 1.5 $ 1.5 Gross increases for tax positions of current year 0.1 0.3 — Gross increases for tax positions of prior years — 2.3 — Gross decreases for tax positions of prior years ( 0.4 ) — — Gross unrecognized tax benefits at end of period $ 3.8 $ 4.1 $ 1.5 If and when the $ 3.8 million of gross unrecognized tax benefits at December 31, 2020 are recognized, $ 1.5 million will be reflected in our income tax provision and thus affect the effective tax rate in future periods. In addition, we recognize interest and penalties related to unrecognized tax benefits in the income tax provision. We had $ 0.3 million accrued for interest and penalties at both December 31, 2020 and December 31, 2019. Of these amounts, no ne were considered current and, as such, were included in Long-term liabilities on our Consolidated Balance Sheets as of December 31, 2020 and December 31, 2019. We recognized an increase in interest and penalty of $ 0.1 million in our tax provision in both 2019 and 2018. We do not expect our gross unrecognized tax benefits to significantly change within the next 12 months. 15. Net Income Per Share Basic net income per share is computed by dividing distributed and undistributed net income allocable to common shares by the weighted-average number of common shares outstanding during the applicable period. The basic weighted-average number of common shares outstanding during the period excludes non-vested share-based payment awards. Diluted net income per share was calculated under the treasury stock method for 2020, 2019 and 2018, which in all years was more dilutive than the two-class method. The following table sets forth the computation of basic and diluted net income per share (in millions of dollars, except share and per share amounts): Year Ended December 31, 2020 2019 2018 Numerator: Net income $ 28.8 $ 62.0 $ 91.7 Denominator – Weighted-average common shares outstanding (in thousands): Basic 15,802 15,997 16,585 Add: dilutive effect of non-vested common shares, restricted stock units and performance shares 1 111 206 289 Diluted 15,913 16,203 16,874 Net income per common share, Basic: $ 1.82 $ 3.88 $ 5.53 Net income per common share, Diluted: $ 1.81 $ 3.83 $ 5.43 1. A total of 44,000 non-vested RSAs, RSUs and performance shares for the year ended December 31, 2020 were excluded from the weighted-average diluted shares computation as their inclusion would have been anti-dilutive. No ne were excluded for the years ended December 31, 2019 and December 31, 2018. 79 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 16. Supplemental Cash Flow Information Year Ended December 31, 2020 2019 2018 (in millions of dollars) Interest paid $ 29.4 $ 23.6 $ 21.6 Non-cash investing and financing activities (included in Accounts payable): Unpaid purchases of property and equipment $ 4.5 $ 4.5 $ 7.0 Stock repurchases not yet settled $ — $ — $ 1.3 Supplemental lease disclosures: Operating lease liabilities arising from obtaining operating lease assets $ 5.4 $ 1.8 n/a Cash paid for amounts included in the measurement of operating lease liabilities $ 4.5 $ 3.8 n/a Finance lease liabilities arising from obtaining finance lease assets $ 3.2 $ 1.0 $ 6.5 As of December 31, 2020 2019 2018 Components of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 780.3 $ 264.3 $ 125.6 Restricted cash included in Prepaid expenses and other current assets — 0.3 0.3 Restricted cash included in Other assets 14.0 14.0 13.7 Total cash, cash equivalents and restricted cash shown in our Statements of Consolidated Cash Flows $ 794.3 $ 278.6 $ 139.6 17. Business, Product and Geographical Area Information and Concentration of Risk Our primary line of business is 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) Aero/HS products; (ii) Automotive Extrusions; (iii) GE products; and (iv) Other products. We operate 12 focused production facilities in the United States and one in Canada. Our chief operating decision maker reviews and evaluates our business as a single operating segment. At December 31, 2020, approximately 63 % of our employees were covered by collective bargaining agreements and 24 % of those employees were covered by collective bargaining agreements with expiration dates occurring within one year from December 31, 2020. The following table presents Net sales by end market applications and by timing of control transfer (in millions of dollars): Year Ended December 31, 2020 2019 2018 Net sales: Aero/HS products $ 537.9 $ 803.2 $ 739.4 Automotive Extrusions 161.4 190.5 239.3 GE products 458.8 480.1 546.0 Other products 14.6 40.3 61.2 Total net sales $ 1,172.7 $ 1,514.1 $ 1,585.9 Timing of revenue recognition: Products transferred at a point in time $ 690.9 $ 866.9 $ 912.7 1 Products transferred over time 481.8 647.2 673.2 1 Total net sales $ 1,172.7 $ 1,514.1 $ 1,585.9 1. As corrected from $ 543.0 million of products transferred at a point in time and $ 1,042.9 million of products transferred over time. 80 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents geographic information for net sales based on country of origin, income taxes paid and long-lived assets (in millions of dollars): Year Ended December 31, 2020 2019 2018 Net sales to unaffiliated customers: Domestic $ 1,126.8 $ 1,461.4 $ 1,509.6 Foreign 1 45.9 52.7 76.3 Total net sales $ 1,172.7 $ 1,514.1 $ 1,585.9 Income taxes paid: Domestic $ 0.7 $ 3.5 $ 1.6 Foreign 0.3 2.0 2.0 Total income taxes paid $ 1.0 $ 5.5 $ 3.6 As of December 31, 2020 2019 2018 Long-lived assets: 2 Domestic $ 597.5 $ 592.9 $ 581.7 Foreign 1 29.7 29.1 30.1 Total long-lived assets $ 627.2 $ 622.0 $ 611.8 1. Foreign reflects our London, Ontario production facility. 2. Long-lived assets represent Property, plant and equipment, net. The aggregate foreign currency transaction gain (loss) included in determining net income were immaterial for 2020, 2019 and 2018. Concentrations. For the years ended December 31, 2020, December 31, 2019 and December 31, 2018, one customer represented 26 %, 25 % and 25 %, respectively, of Net sales and a second customer represented 11 %, 17 % and 15 %, respectively, of Net sales. One individual customer accounted for 20 % and another individual customer accounted for 13 % of the accounts receivable balance at December 31, 2020. One individual customer accounted for 41 % and another individual customer accounted for 10 % of the accounts receivable balance at December 31, 2019. The following table presents information about export sales and primary aluminum supply from our major suppliers: Year Ended December 31, 2020 2019 2018 Percentage of Net sales: Export sales 10 % 14 % 15 % Percentage of total annual primary aluminum supply (lbs): Supply from our top five major suppliers 72 % 74 % 81 % Supply from our largest supplier 21 % 22 % 22 % Supply from our second and third largest suppliers combined 32 % 32 % 38 % 18. Subsequent Events Dividend Declaration . On January 14, 2021 , we announced that our Board of Directors declared a quarterly cash dividend of $ 0.72 per common share, or approximately $ 11.6 million (including dividend equivalents), representing a 7.5 % increase over the prior dividend declared during the quarter ended December 31, 2020. The dividend was paid on February 12, 2021 to stockholders of record at the close of business on January 25, 2021 . 81 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.