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Item 1. Financial Statements

2021-10-26 compared with 2021-07-26 · 297 added, 305 removed, 953 unchanged (39% of the section changed)

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

As of June 30, 2021

As of September 30, 2021

As of December 31, 2020

9 unchanged sentences

Operating lease assets

Deferred tax assets, net

Intangible assets, net

14 unchanged sentences

Stockholders’ equity:

Preferred stock, 5,000,000 shares authorized at both June 30, 2021 and

Preferred stock, 5,000,000 shares authorized at both September 30, 2021 and

December 31, 2020;

no shares were issued and outstanding at

June 30, 2021 and December 31, 2020

September 30, 2021 and December 31, 2020

Common stock, par value $ 0.01 , 90,000,000 shares authorized at both

June 30, 2021 and December 31, 2020;

September 30, 2021 and December 31, 2020;

22,697,958 shares issued and

15,859,820 shares outstanding at June 30, 2021;

15,862,672 shares outstanding at September 30, 2021;

22,647,455 shares

2 unchanged sentences

Retained earnings

Treasury stock, at cost, 6,835,286 shares at both June 30, 2021 and

Treasury stock, at cost, 6,835,286 shares at both September 30, 2021 and

December 31, 2020

4 unchanged sentences

STATEMENTS OF CONSOLIDATED (LOSS) INCOME (UNAUDITED)

Quarter Ended June 30,

Six Months Ended June 30,

Quarter Ended September 30,

Nine Months Ended September 30,

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

3 unchanged sentences

Selling, general, administrative, research and development

Restructuring (benefit) costs

Other operating loss (income), net

Restructuring costs (benefit)

Other operating charges (income), net

Total costs and expenses

Operating income

Other (expense) income:

Other expense:

Interest expense

Other (expense) income, net – Note 11

(Loss) income before income taxes

Income tax benefit (provision)

Other expense, net – Note 11

Income (loss) before income taxes

Income tax (provision) benefit

Net (loss) income

3 unchanged sentences

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

Quarter Ended June 30,

Six Months Ended June 30,

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)

Quarter Ended September 30,

Nine Months Ended September 30,

(In millions of dollars)

5 unchanged sentences

Cash flow hedges

Fair value hedges

Foreign currency translation

Other comprehensive income (loss), net of tax

Comprehensive (loss) income

Other comprehensive income, net of tax

Comprehensive income

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

1 unchanged sentence

STATEMENTS OF CONSOLIDATED STOCKHOLDERS ’ EQUITY (UNAUDITED)

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Outstanding 1,2

1 unchanged sentence

Comprehensive

Income (Loss)

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

16 unchanged sentences

BALANCE, June 30, 2021

At June 30, 2021, 729,450 shares were available for awards under the Kaiser Aluminum Corporation 2021 Equity and Incentive Compensation Plan (“2021 Plan”).

There were no repurchases of common stock during the quarters ended March 31, 2021 and June 30, 2021.

At June 30, 2021, $ 93.1 million remained available to repurchase our common shares pursuant to the stock repurchase program.

Dividends declared per common share was $ 0.72 for each of the quarters ended March 31, 2021 and June 30, 2021.

Other comprehensive income, net of tax

Common shares issued (including impacts from

Long-Term Incentive programs)

Cancellation of shares to cover employees' tax

withholdings upon vesting of non-vested shares

Cash dividends declared 3

Amortization of unearned equity compensation

BALANCE, September 30, 2021

At September 30, 2021, 710,580 shares were available for awards under the Kaiser Aluminum Corporation 2021 Equity and Incentive Compensation Plan (“2021 Plan”).

There were no repurchases of common stock during the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021.

At September 30, 2021, $ 93.1 million remained available to repurchase our common shares pursuant to the stock repurchase program.

Dividends declared per common share was $ 0.72 for the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021.

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

1 unchanged sentence

STATEMENTS OF CONSOLIDATED STOCKHOLDERS ’ EQUITY CONTINUED (UNAUDITED)

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Paid in Capital

Comprehensive

Income (Loss)

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

9 unchanged sentences

BALANCE, March 31, 2020

Other comprehensive loss, net of tax

Other comprehensive income, net of tax

Common shares issued (including impacts from

3 unchanged sentences

BALANCE, June 30, 2020

Other comprehensive income, net of tax

Cash dividends declared 2

Amortization of unearned equity compensation

BALANCE, September 30, 2020

Weighted-average repurchase price (dollars per share) for the quarter ended March 31, 2020 was $ 81.94 .

There was no repurchase of common stock for the quarter ended June 30, 2020.

Dividends declared per common share was $ 0.67 for each of the quarters ended March 31, 2020 and June 30, 2020.

There was no repurchase of common stock for the quarters ended June 30, 2020 and September 30, 2020.

Dividends declared per common share was $ 0.67 for each of the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020.

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

1 unchanged sentence

STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions of dollars)

8 unchanged sentences

Loss (gain) on disposition of short-term investments

Non-cash asset impairment charge

Loss on extinguishment of debt

Loss on disposition of property, plant and equipment

Bad debt expense

Changes in operating assets and liabilities, net of effects of acquisition:

9 unchanged sentences

Capital expenditures

Cash payment for acquisition of Warrick

Cash payment for acquisition of Warrick, net of cash received – Note 4

Purchase of short-term investments

1 unchanged sentence

Proceeds from disposition of short-term investments

Proceeds from disposition of property, plant and equipment

Net cash (used in) provided by investing activities

26 unchanged sentences

Restructuring

Other (Expense) Income, Net

Other Expense, Net

Income Tax Matters

28 unchanged sentences

As such, these transactions are being accounted for as a sale.

During both the quarter and six months ended June 30, 2021, we sold trade accounts receivable totaling $ 316.0 million related to these supply chain financing arrangements, of which our customers’ financial institutions applied discount fees totaling $ 1.9 million.

To the extent discount fees related to the sale of trade accounts receivable under supply chain financing arrangements are not reimbursed by our customers, they are included in Other (expense) income, net.

As of June 30, 2021, we had been and/or expected to be fully reimbursed by our customers for these discount fees.

During the quarter and nine months ended September 30, 2021, we sold trade accounts receivable totaling $ 390.2 million and $ 706.2 million, respectively, related to these supply chain financing arrangements, of which our customers’ financial institutions applied discount fees totaling $ 2.1 million and $ 4.0 million, respectively.

To the extent discount fees related to the sale of trade accounts receivable under supply chain financing arrangements are not reimbursed by our customers, they are included in Other expense, net.

As of September 30, 2021, we had been and/or expected to be fully reimbursed by our customers for these discount fees.

Fair Value of Goodwill and Intangible Assets.

1 unchanged sentence

As the determination of an asset’s fair value and useful life involves management making certain estimates and because these estimates form the basis for the determination of whether or not an impairment charge should be recorded, these estimates are considered to be critical accounting estimates.

Government Grants.

From time-to-time, we receive grants from certain governmental agencies such as states and municipalities.

We recognize government grants when we have reasonable assurance that we will comply with any conditions attached to the grant and the grant will be received.

Government grants related to property, plant and equipment are presented as a reduction to the related asset’s carrying amount.

Grants related to compensation for costs already incurred or for immediate financial support, with no future related costs, are recognized as income in the period in which it is receivable.

During the quarter and nine months ended September 30, 2020, our subsidiary Kaiser Aluminum Canada Limited received $ 0.1 million and $ 1.3 million, respectively, of payroll subsidies under the Canada Emergency Wage Subsidy Program.

These subsidies were recorded within Other operating charges (income), net.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

Adoption of New Accounting Pronouncements

3 unchanged sentences

Our adoption of ASU 2019-12 during the quarter ended March 31, 2021 did not result in a material impact on our consolidated financial statements.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

Accounting Pronouncements Issued But Not Yet Adopted

4 unchanged sentences

We do not expect our adoption of Topic 848 to have a material impact on our consolidated financial statements.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

Supplemental Balance Sheet Information

As of June 30, 2021

As of September 30, 2021

As of December 31, 2020

29 unchanged sentences

Other long-term liabilities

At June 30, 2021 and December 31, 2020 the current cost of our inventory exceeded its stated last-in, first-out (“LIFO”) value by $ 73.4 million and $ 8.4 million , respectively.

At September 30, 2021 and December 31, 2020 the current cost of our inventory exceeded its stated last-in, first-out (“LIFO”) value by $ 124.1 million and $ 8.4 million , respectively.

We treated inventory acquired in conjunction with the Warrick acquisition (as defined in Note 4 below) as current year purchases within our existing single LIFO pool.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

Based on market conditions during the six months ended June 30, 2021, $ 19.8 million within Construction in progress as of June 30, 2021 related to temporarily idled projects, all of which are expected to resume at a future date.

Based on market conditions during the nine months ended September 30, 2021, $ 19.8 million within Construction in progress as of September 30, 2021 related to temporarily idled projects, all of which are expected to resume at a future date.

Temporary idled projects as of December 31, 2020 totaled $ 20.0 million.

2 unchanged sentences

Our leases have remaining lease terms of approximately one to 59 years , some of which may include options to extend the lease for up to 60 years and some of which may include options to terminate the lease within one year .

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

For purposes of calculating lease liabilities, these options are included within the lease term when it has become reasonably certain that we will exercise such options .

11 unchanged sentences

Our lease agreements do not contain any material restrictive covenants.

The following table presents lease terms and discount rates as of June 30, 2021:

The following table presents lease terms and discount rates as of September 30, 2021:

Finance Leases

4 unchanged sentences

Classification

As of June 30, 2021

As of September 30, 2021

As of December 31, 2020

13 unchanged sentences

Total lease liabilities

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

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

Quarter Ended June 30,

Six Months Ended June 30,

Quarter Ended September 30,

Nine Months Ended September 30,

Operating lease cost

4 unchanged sentences

Total lease cost

The following table presents the maturity of our lease liabilities as of June 30, 2021 (in millions of dollars):

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

The following table presents the maturity of our lease liabilities as of September 30, 2021 (in millions of dollars):

Maturity of Lease Liabilities

7 unchanged sentences

On March 31, 2021, we acquired Alcoa Warrick LLC and certain assets comprising the aluminum casting and rolling mill facility located in Warrick County, Indiana (collectively, “Warrick”) for a purchase price of $ 670.0 million.

Warrick is a leading producer of can stock for the beverage and food packaging industry in North America.

Warrick is a leading producer of bare and coated aluminum coil used for can stock applications in the beverage and food packaging industry in North America.

The transaction provides us with non-cyclical end market diversification and re-entry into the packaging end market.

Acquisition-related costs incurred and expensed during the quarter and six months ended June 30, 2021 were $ 3.0 million and $ 14.0 million, respectively, primarily related to legal and consulting fees and included within Selling, general, administrative, research and development (“SG&A and R& D”) .

Acquisition-related costs incurred and expensed during the quarter and nine months ended September 30, 2021 were $ 1.0 million and $ 15.0 million, respectively, primarily related to legal and consulting fees and included within Selling, general, administrative , research and development (“SG&A and R& D”) .

The preliminary purchase consideration to allocate was determined as follows (in millions of dollars):

3 unchanged sentences

Cash paid at acquisition close on March 31, 2021

Estimate of post-close adjustments

Total preliminary purchase consideration to allocate

The preliminary purchase consideration to allocate is subject to customary post-closing adjustments, estimates of which are included in the table above.

Cash received for post-close adjustments

Total purchase consideration to allocate

We prepared an initial allocation of the purchase consideration as of the acquisition date based on our understanding of the fair value of the acquired assets and assumed liabilities.

As we continue to obtain additional information supporting the final valuation of inventories, property, plant and equipment, intangible assets, other assets and long-term liabilities, we will refine the estimates of fair value and may revise our allocation of the purchase consideration.

We expect to finalize the valuation of the assets and liabilities, as well as the post-closing adjustments as soon as practicable, but in any event no later than one year from the acquisition date.

We expect to finalize the valuation of the assets and liabilities as soon as practicable, but in any event no later than one year from the acquisition date.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of the acquisition date as well as adjustments made up to June 30, 2021 (in millions of dollars):

The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of the acquisition date as well as adjustments made up to September 30, 2021 (in millions of dollars):

Initial Allocation

20 unchanged sentences

Goodwill related to the Warrick acquisition is primarily attributable to the assembled workforce and is expected to be deductible for income tax purposes.

The following table presents the changes to goodwill during the six months ended June 30, 2021 (in millions of dollars):

The following table presents the changes to goodwill during the nine months ended September 30, 2021 (in millions of dollars):

Gross Carrying Value

3 unchanged sentences

Warrick acquisition

Balance as of June 30, 2021

Balance as of September 30, 2021

Other Assets.

Represents assets to be purchased or constructed by Alcoa Corporation (“Alcoa”) following the close of the acquisition in connection with separating the rolling mill from the other businesses retained by Alcoa.

Represents assets to be purchased or constructed by Alcoa Corporation (“Alcoa”) following the close of the acquisition and subsequently conveyed to us in connection with separating the rolling mill from the other businesses retained by Alcoa.

Results of Warrick.

See Note 15 for the net sales from the continuing operations of Warrick included in our Statements of Consolidated (Loss) Income for the quarter and six months ended June 30, 2021.

Net (loss) income for the quarter and six months ended June 30, 2021 are not provided as the Warrick results have been fully integrated and discrete financial information cannot be obtained without unreasonable effort.

See Note 15 for the quarter and six months net sales from the continuing operations of Warrick included in our Statements of Consolidated (Loss) Income for the quarter and nine months ended September 30, 2021, respectively.

Net (loss) income for the quarter and nine months ended September 30, 2021 are not provided as the Warrick results have been fully integrated and discrete financial information cannot be obtained without unreasonable effort.

Certain Unaudited Pro Forma Information.

8 unchanged sentences

The unaudited pro forma information presented below is for informational purposes only and is not necessarily indicative of our consolidated results of operations of the consolidated business had the acquisition occurred at the beginning of fiscal year 2020 or of the results of our future operations of the consolidated business .

Quarter Ended June 30,

Six Months Ended June 30,

Quarter Ended September 30,

Nine Months Ended September 30,

Net (loss) income

9 unchanged sentences

Most of our production facilities have similar programs for both hourly and salaried employees.

As of June 30, 2021, we had a liability of $ 6.7 million recorded within Accrued salaries, wages and related expenses for estimated probable future payments relating to the six month performance period of our 2021 STI Plan.

As of September 30, 2021, we had a liability of $ 7.3 million recorded within Accrued salaries, wages and related expenses for estimated probable future payments relating to the nine month performance period of our 2021 STI Plan.

Pension and Similar Benefit Plans.

7 unchanged sentences

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 and are accounted for as equity investments with changes in fair value recorded within Other (expense) income, net (see Note 11).

Assets of our deferred compensation plan are included in Other assets, classified within Level 2 of the fair value hierarchy and are measured and recorded at fair value based on their quoted market prices.

The fair value of these assets at June 30, 2021 and December 31, 2020 was $ 10.3 million and $ 9.6 million, respectively.

The fair value of these assets at September 30, 2021 and December 31, 2020 was $ 10.4 million and $ 9.6 million, respectively.

Offsetting liabilities relating to the deferred compensation plan are included in Other accrued liabilities and Long-term liabilities.

29 unchanged sentences

The following table presents the total expense related to all postretirement benefit plans (in millions of dollars):

Quarter Ended June 30,

Six Months Ended June 30,

Quarter Ended September 30,

Nine Months Ended September 30,

Defined contribution plans 1

6 unchanged sentences

The deferred compensation plan and the current service cost component of Net periodic postretirement benefit cost relating to Salaried VEBA are included within our Statements of Consolidated (Loss) 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) income, net, on our Statements of Consolidated (Loss) Income.

All other components of Net periodic postretirement benefit cost relating to Salaried VEBA are included within Other expense, net, on our Statements of Consolidated (Loss) Income.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

1 unchanged sentence

The current service cost component of Net periodic postretirement benefit cost relating to both the Warrick pension plan and the Warrick OPEB plan are included within our Statements of Consolidated (Loss) Income in COGS for all periods presented.

All other components of Net periodic postretirement benefit cost relating to both the Warrick pension plan and the Warrick OPEB plan are included within Other ( expense ) income , net, on our Statements of Consolidated (Loss) Income.

All other components of Net periodic postretirement benefit cost relating to both the Warrick pension plan and the Warrick OPEB plan are included within Other expense, net, on our Statements of Consolidated (Loss) Income.

Components of Net Periodic Postretirement Benefit Cost.

5 unchanged sentences

and (v) amortization of net actuarial differences.

Net periodic benefit cost related to our Canadian pension plan was not material for the quarter and six months ended June 30, 2021 and June 30, 2020.

Net periodic benefit cost related to our Canadian pension plan was not material for the quarters and nine months ended September 30, 2021 and September 30, 2020.

The following table presents the components of Net periodic postretirement benefit cost relating to Salaried VEBA (in millions of dollars):

Quarter Ended June 30,

Six Months Ended June 30,

Quarter Ended September 30,

Nine Months Ended September 30,

Salaried VEBA:

4 unchanged sentences

Total net periodic postretirement benefit cost relating to Salaried VEBA

The service cost was insignificant for all periods presented.

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.

The following table presents the components of Net periodic postretirement benefit cost relating to Warrick Pension (in millions of dollars):

Quarter Ended June 30,

Six Months Ended June 30,

Quarter Ended September 30,

Nine Months Ended September 30,

Warrick pension plan:

2 unchanged sentences

The following table presents the components of Net periodic postretirement benefit cost relating to Warrick OPEB (in millions of dollars):

Quarter Ended June 30,

Six Months Ended June 30,

Quarter Ended September 30,

Nine Months Ended September 30,

Warrick OPEB plan:

7 unchanged sentences

(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.

and (iii) foreign currency requirements with respect to cash commitments for equipment purchases and/or other agreements denominated in foreign currency.

We do not use derivative financial instruments for trading or other speculative purposes.

10 unchanged sentences

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 zero at June 30, 2021 and $ 2.7 million at December 31, 2020, and we had no collateral posted as of those dates.

The aggregate fair value of our derivative instruments that were in a net liability position was zero at September 30, 2021 and $ 2.7 million at December 31, 2020, 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.

We had no cash collateral posted from our customers at June 30, 2021 and December 31, 2020.

We had no cash collateral posted from our customers at September 30, 2021 and December 31, 2020.

For more information about concentration risks concerning customers and suppliers, see Note 15.

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.

We designate as cash flow hedges forward swap contracts for aluminum, energy and, from time-to-time, zinc and copper (“Alloying Metals”) used in our fabrication operations and foreign currency forward contracts for supplies and services for which payments are due in foreign currency.

Unrealized gains and losses associated with our cash flow hedges are deferred in Other comprehensive income, 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 9 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 income (loss) (“AOCI”), as well as the related reclassifications into earnings and tax effects.

10 unchanged sentences

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.

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 Alloying Metals prices that are not passed through customer contracts .

Energy Hedges .

We are exposed to risk of fluctuating prices for natural gas and electricity.

The following table summarizes the volume of our derivative and/or physical delivery commitments with energy companies in place to cover our exposure to price fluctuations of our expected variable priced energy purchases as of June 30, 2021:

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 that are not passed through pursuant to the terms of our customer contracts.

Foreign Currency Hedges.

We are exposed to foreign currency exchange risk related to certain supply and service agreements with vendors for which payments are due in foreign currency.

We, from time to time, in the ordinary course of business, use foreign currency forward contracts in order to mitigate the exposure to currency exchange rate fluctuations related to these purchases.

Fair Value Hedges

6 unchanged sentences

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) income, net, depending on whether it relates to commodity risk or foreign currency risk, respectively.

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.

Notional Amount of Derivative Contracts

The following table summarizes our derivative positions at June 30, 2021:

The following table summarizes our derivative positions at September 30, 2021:

Maturity Period

13 unchanged sentences

10/21 through 12/21

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

Maturity Period

6 unchanged sentences

10/21 through 12/22

Maturity Period

Notional Amount of Contracts (euro)

Fixed price forward contracts

12/21 through 3/23

Regional premiums represent the premium over the London Metal Exchange price for primary aluminum which is incurred on our purchases of primary aluminum.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

Regional premiums represent the premium over the London Metal Exchange price for primary aluminum which is incurred on our purchases of primary aluminum.

The following table summarizes the amount of (gain) loss included on our Statements of Consolidated (Loss) Income associated with all derivative contracts (in millions of dollars):

Quarter Ended June 30,

Six Months Ended June 30,

Quarter Ended September 30,

Nine Months Ended September 30,

Statements of Consolidated

5 unchanged sentences

Depreciation and amortization

Fair value hedges

Other expense, net

(Gain) loss recognized in our Statements of Consolidated (Loss) Income related to cash flow hedges:

7 unchanged sentences

Total (gain) loss recognized in our Statements of Consolidated (Loss) Income related to cash flow hedges

(Gain) loss recognized in our Statements of Consolidated (Loss) Income related to fair value hedges:

Loss (gain) recognized in our Statements of Consolidated (Loss) Income related to fair value hedges:

Foreign exchange contracts

4 unchanged sentences

Reclassification from AOCI related to early termination of firm commitment

Other (expense) income, net

Other expense, net

Net settlement related to early termination of forward contracts

Other (expense) income, net

Other expense, net

Total loss recognized in our Statements of Consolidated (Loss) Income related to fair value hedges

Loss recognized in our Statements of Consolidated (Loss) Income related to non-designated hedges:

(Gain) loss recognized in our Statements of Consolidated (Loss) Income related to non-designated hedges:

Alloying Metals – Realized (gain) loss

Cost of products sold

Alloying Metals – Unrealized loss

Alloying Metals – Unrealized loss (gain)

Cost of products sold

Total loss recognized in our Statements of Consolidated (Loss) Income related to non-designated hedges

Total loss (gain) recognized in our Statements of Consolidated (Loss) Income related to non-designated hedges

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

7 unchanged sentences

The following table presents the fair value of our derivative financial instruments (in millions of dollars):

As of June 30, 2021

As of September 30, 2021

As of December 31, 2020

12 unchanged sentences

The following table presents the total amounts of derivative assets and liabilities on our Consolidated Balance Sheets (in millions of dollars):

As of June 30, 2021

As of September 30, 2021

As of December 31, 2020

15 unchanged sentences

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

The unamortized amount of debt issuance costs as of June 30, 2021 was $ 8.5 million .

Interest expense, including amortization of debt issuance costs and debt premium, relating to the 4 .50% Senior Notes was $ 2.9 million for the quarter and six months ended June 30, 2021 .

The unamortized amount of debt issuance costs as of September 30, 2021 relating to the 4.50% Senior Notes was $ 8.3 million .

Interest expense, including amortization of debt issuance costs and debt premium, relating to the 4 .50% Senior Notes was $ 6.4 million and $ 9.3 million for the quarter and nine months ended September 30, 2021 .

Interest accrues on the 4.50 % Senior Notes beginning May 20, 2021 at a rate of 4.50% per annum and is payable semiannually on June 1 and December 1 of each year.

2 unchanged sentences

The 4.50% 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 4.50% Senior Notes, which are Level 1 liabilities calculated based on pricing from trades around the balance sheet date, was approximately $ 566.0 million at June 30, 2021.

The fair value of the outstanding 4.50% Senior Notes, which are Level 1 liabilities calculated based on pricing from trades around the balance sheet date, was approximately $ 565.4 million at September 30, 2021.

The 4.50% 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).

4 unchanged sentences

On May 21, 2021 we redeemed in full the remaining balance of our 6.50% Senior Notes at a redemption price of 108.83 % of the principal amount plus $ 1.3 million of accrued and unpaid interest for a total net cash outflow of $ 382.2 million.

Upon redemption of the 6.50% Senior Notes, we recorded a loss on extinguishment of debt of $ 35.9 million within Other (expense) income, net on our Statements of Consolidated (Loss) Income, which included the premium payment of $ 30.9 million and a write-off of the remaining unamortized premium and debt issuance costs of $ 5.0 million (See Note 11 for details).

Upon redemption of the 6.50% Senior Notes, we recorded a loss on extinguishment of debt of $ 35.9 million within Other expense, net on our Statements of Consolidated (Loss) Income, which included the premium payment of $ 30.9 million and a write-off of the remaining unamortized premium and debt issuance costs of $ 5.0 million (See Note 11 for details).

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.

Interest expense, including amortization of debt issuance costs, relating to the 6.50 % Senior Notes was $ 3.2 million and $ 9.2 million for the quarter and six months ended June 30, 2021, respectively, and was $ 4.2 million for both the quarter and six months ended June 30, 2020.

Interest expense, including amortization of debt issuance costs, relating to the 6.50 % Senior Notes was $ 9.2 million for the nine months ended September 30, 2021.

Interest expense, including amortization of debt issuance costs, relating to the 6.50 % Senior Notes was $ 6.0 million and $ 10.2 million for the quarter and nine months ended September 30, 2020, respectively.

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.

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In November 2019, we issued $ 500.0 million aggregate 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 June 30, 2021 was $ 6.0 million.

Interest expense, including amortization of debt issuance costs, relating to the 4.625% Senior Notes was $ 6.0 million and $ 12.0 million for both the quarters and six months ended June 30, 2021 and June 30, 2020, respectively.

The unamortized amount of debt issuance costs as of September 30, 2021 was $ 5.8 million.

Interest expense, including amortization of debt issuance costs, relating to the 4.625% Senior Notes was $ 6.0 million and $ 18.0 million for both the quarters and nine months ended September 30, 2021 and September 30, 2020, 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 $ 516.2 million and $ 521.3 million at June 30, 2021 and December 31, 2020, respectively.

The amount of interest expense capitalized as construction in progress was $ 0.3 million and $ 0.2 million during the quarters ended June 30, 2021 and June 30, 2020, respectively.

The amount of interest expense capitalized as construction in progress was $ 0.4 million and $ 0.5 million during the six months ended June 30, 2021 and June 30, 2020, respectively.

The fair value of the outstanding 4.625% Senior Notes, which are Level 1 liabilities, was approximately $ 517.9 million and $ 521.3 million at September 30, 2021 and December 31, 2020, respectively.

The amount of interest expense capitalized as construction in progress was $ 0.2 million and $ 0.3 million during the quarters ended September 30, 2021 and September 30, 2020, respectively.

The amount of interest expense capitalized as construction in progress was $ 0.6 million and $ 0.8 million during the nine months ended September 30, 2021 and September 30, 2020, respectively.

Revolving Credit Facility

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

The following table summarizes availability and usage of our Revolving Credit Facility as determined by a borrowing base calculated as of June 30, 2021 (in millions of dollars except for borrowing rate):

The following table summarizes availability and usage of our Revolving Credit Facility as determined by a borrowing base calculated as of September 30, 2021 (in millions of dollars):

Revolving Credit Facility borrowing commitment

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Remaining borrowing availability

Borrowing rate (if applicable) 1

Such borrowing rate, if applicable, represents the interest rate for any overnight borrowings under the Revolving Credit Facility.

Commitments and Contingencies

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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 September 30, 2021.

We are currently preparing the required feasibility study, which we expect to submit to the OEPA for review during the quarter ending December 31, 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 completed, which we expect to occur in the next 12 to 18 months.

At June 30, 2021, our environmental accrual of $ 17.4 million represented our estimate of the incremental remediation cost based on:

At September 30, 2021, our environmental accrual of $ 17.2 million represented our estimate of the incremental remediation cost based on:

(i) proposed alternatives in the final feasibility study related to the Trentwood facility;

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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

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.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

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 .

Warrick Rolling Mill Potential CARO Liability.

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We are required to record the fair value of CAROs if they can be reasonably estimated.

As of June 30, 2021, we are in the process of evaluating and determining the fair value of a potential CARO, if any, acquired as part of the Warrick acquisition.

As of September 30, 2021, we are in the process of evaluating and determining the fair value of a potential CARO, if any, acquired as part of the Warrick acquisition.

No liability has been recorded on our accompanying Consolidated Balance Sheets as the liability is currently indeterminable.

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The following table presents the changes in the accumulated balances for each component of AOCI (in millions of dollars):

Quarter Ended June 30,

Six Months Ended June 30,

Quarter Ended September 30,

Nine Months Ended September 30,

Defined Benefit Pension Plan and Salaried VEBA:

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Net (gain) loss reclassified from AOCI to Net (loss) income

Other comprehensive income (loss), net of tax

Other comprehensive income, net of tax

Ending balance 4

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Net unrealized gain (loss) on fair value hedges

Excluded component amortized from OCI to Net income

Excluded component amortized from OCI to Net (loss) income

Reclassification due to cancellation of firm commitment

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NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

Amounts amortized out of AOCI relating to Salaried VEBA adjustments were included within Other (expense) income, net, as a component of Net periodic postretirement benefit cost relating to Salaried VEBA.

Income tax amounts reclassified out of AOCI were included as a component of Income tax benefit (provision).

Amounts reclassified out of AOCI relating to sales of available for sale securities were included as a component of Other income (expense), net.

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.

Income tax amounts reclassified out of AOCI were included as a component of Income tax (provision) benefit.

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.

As of June 30, 2021, we estimate a net mark-to-market gain before tax of $ 28.7 million in AOCI will be reclassified into Net (loss) income upon settlement within the next 12 months.

As of September 30, 2021, we estimate a net mark-to-market gain before tax of $ 38.8 million in AOCI will be reclassified into Net (loss) income upon settlement within the next 12 months.

Restructuring

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Substantially all of the costs associated with the restructuring efforts initiated under the 2020 Plan were incurred and expensed as of December 31, 2020.

We have incurred total Restructuring costs of $ 6.7 million under the 2020 Plan through June 30, 2021.

The following table summarizes the changes to our 2020 Plan liabilities during the six months ended June 30, 2021 (in millions of dollars):

Six Months Ended June 30, 2021

We have incurred total Restructuring costs of $ 6.7 million under the 2020 Plan through September 30, 2021.

The following table summarizes the changes to our 2020 Plan liabilities during the nine months ended September 30, 2021 (in millions of dollars):

Nine Months Ended September 30, 2021

Balance as of December 31, 2020

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Other adjustments 1

Balance as of June 30, 2021

Balance as of September 30, 2021

In March 2021 and May 2021, 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 $ 0.8 million with an offset to Restructuring costs to accommodate the revised headcount requirements.

Other ( Expense) Income, Net

Other ( expense) income, net, consisted of the following (in millions of dollars):

Quarter Ended June 30,

Six Months Ended June 30,

Other Expense , Net

Other expense , net, consisted of the following (in millions of dollars):

Quarter Ended September 30,

Nine Months Ended September 30,

Interest income

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Unrealized gain on equity securities

(Loss) gain on extinguishment of debt

Gain (loss) on extinguishment of debt

All other, net

Other (expense) income, net

Other expense, net

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

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Income Tax Matters

The income tax benefit (provision) consisted of the following (in millions of dollars):

Quarter Ended June 30,

Six Months Ended June 30,

The income tax benefit (provision) for the quarters ended June 30, 2021 and June 30, 2020 was $ 15.5 million and $( 1.3 ) million, respectively, reflecting an effective tax rate of 41 % and ( 24 %), respectively.

The difference between the effective tax rate and the projected blended statutory tax rate for the quarter ended June 30, 2021 was primarily due to:

(i) an increase of 22 % related to non‑deductible compensation expense;

(ii) an increase of 5 % related to foreign withholding tax;

(iii) an increase of 4 % due to various permanent items not deductible for tax purposes;

(iv) an increase of 1 % related to the valuation allowance for certain state net operating losses;

and (v) an increase of 1 % for the recognition of excess tax benefits from stock-based compensation, partially offset by a decrease of 15 % related to a Federal R&D Credit.

The difference between the effective tax rate and the projected blended statutory tax rate for the quarter ended June 30, 2020 was primarily due to:

(i) an increase of 37 % to the tax provision for a change in forecasted earnings and its impact on the annual effective tax rate and (ii) an increase of 19 % to the tax provision for an increase to the valuation allowance for certain state net operating losses.

The income tax benefit (provision) for the six months ended June 30, 2021 and June 30, 2020 was $ 15.8 million and $( 10.9 ) million, respectively, reflecting an effective tax rate of 47 % and 33 % respectively.

The difference between the effective tax rate and the projected blended statutory tax rate for the six months ended June 30, 2021 was primarily due to:

(i) an increase of 22 % related to non-deductible compensation expense;

(ii) an increase of 5 % related to foreign withholding tax;

(iii) an increase of 4 % due to various permanent items not deductible for tax purposes;

(iv) an increase of 3 % related to the valuation allowance for certain state net operating losses ;

(v) an increase of 2 % for a foreign tax rate difference ;

(vi) an increase of 2 % for the recognition of excess tax benefits from stock-based compensation;

and (vii) an increase of 2 % for a change in state tax rate due to the Warrick acquisition, partially offset by a decrease of 15 % related to a Federal R&D Credit.

The difference between the effective tax rate and the projected blended statutory tax rate for the six months ended June 30, 2020 was primarily due to:

(i) an increase of 4 % to the tax provision related to the valuation allowance for certain state net operating losses and (ii) an increase of 2 % to the tax provision related to non-deductible compensation expense, partially offset by a decrease of 2 % to the tax provision for the recognition of excess tax benefits from stock-based compensation.

Our gross unrecognized benefits relating to uncertain tax positions were $ 4.0 million and $ 3.8 million at June 30, 2021 and December 31, 2020, respectively, of which, $ 1.5 million would be recorded through our income tax provision and thus impact the effective tax rate at June 30, 2021 and December 31, 2020, respectively, if the gross unrecognized tax benefits were to be recognized.

The income tax (provision) benefit consisted of the following (in millions of dollars):

Quarter Ended September 30,

Nine Months Ended September 30,

The income tax (provision) benefit for the quarters ended September 30, 2021 and September 30, 2020 was $( 8.4 ) million and $ 0.7 million, respectively, reflecting an effective tax rate of 137 % and 222 %, respectively.

The difference between the effective tax rate and the projected blended statutory tax rate for the quarter ended September 30, 2021 was primarily due to an increase of 116 % of taxable income for a change in forecasted earnings and its impact on the annual effective tax rate, partially offset by a decrease of 2 % related to the valuation allowance for certain state net operating losses and a decrease of 1 % for the recognition of excess tax benefits from stock-based compensation.

The difference between the effective tax rate and the projected blended statutory tax rate for the quarter ended September 30, 2020 was primarily due to a decrease of 211 % of taxable income for a change in forecasted earnings and its impact on the annual effective tax rate, partially offset by an increase of 22 % of taxable income to the valuation allowance for certain state net operating losses.

The income tax benefit (provision) for the nine months ended September 30, 2021 and September 30, 2020 was $ 7.4 million and $( 10.2 ) million, respectively, reflecting an effective tax rate of 27 % and 31 % respectively.

The difference between the effective tax rate and the projected blended statutory tax rate for the nine months ended September 30, 2021 was primarily due to:

(i) an increase of 4 % related to the valuation allowance for certain state net operating losses;

(ii) an increase of 3 % related to tax credits;

(iii) an increase of 2 % for the recognition of excess tax benefits from stock-based compensation;

and (iv) an increase of 2 % for a change in state tax rate due to the Warrick acquisition, partially offset by a decrease related to permanent items of 7 %, including non-deductible compensation expense and foreign withholding tax.

The difference between the effective tax rate and the projected blended statutory tax rate for the nine months ended September 30, 2020, was primarily due to an increase of 4 % of taxable income related to non-deductible compensation expense and an increase of 4 % of taxable income to the valuation allowance for certain state net operating losses, partially offset by a decrease of 2 % of taxable income for the recognition of excess tax benefits from stock-based compensation.

Our gross unrecognized benefits relating to uncertain tax positions were $ 4.1 million and $ 3.8 million at September 30, 2021 and December 31, 2020, respectively, of which, $ 4.1 million and $ 3.8 million would be recorded through our income tax provision and thus impact the effective tax rate at September 30, 2021 and December 31, 2020, respectively, if the gross unrecognized tax benefits were to be recognized.

We do not expect our gross unrecognized tax benefits to significantly change within the next 12 months.

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The basic weighted-average number of common shares outstanding during the period excludes non-vested share-based payment awards.

Diluted net (loss) income per share was calculated under the treasury stock method for the quarters and six months ended June 30, 2021 and June 30, 2020, which in both periods was more dilutive than the two-class method.

Diluted net (loss) income per share was calculated under the treasury stock method for the quarters and nine months ended September 30, 2021 and September 30, 2020, which in both periods was more dilutive than the two-class method.

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

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The following table sets forth the computation of basic and diluted net (loss) income per share (in millions of dollars, except share and per share amounts):

Quarter Ended June 30,

Six Months Ended June 30,

Quarter Ended September 30,

Nine Months Ended September 30,

Net (loss) income

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Quantities in the following discussion are denoted in whole shares.

For the quarter ended June 30, 2021, the quarter ended June 30, 2020 and the six months ended June 30, 2021, approximately 226,000 , 71,000 and 214,000 potentially dilutive shares, respectively, were excluded from the computation of net loss per share as their effect would have been anti-dilutive.

During the six months ended June 30, 2020, approximately 38,000 shares were excluded from the weighted‑average diluted shares computation as their inclusion would have been anti-dilutive.

During the quarter and nine months ended September 30, 2021, approximately 210,000 and 198,000 potentially dilutive shares, respectively, were excluded from the computation of net loss per share as their effect would have been anti-dilutive.

During the quarter and nine months ended September 30, 2020, approximately, 69,000 and 41,000 shares, respectively, were excluded from the weighted-average diluted shares computation as their inclusion would have been anti‑dilutive.

Supplemental Cash Flow Information

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions of dollars)

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Finance lease liabilities arising from obtaining finance lease assets

As of June 30,

As of September 30,

(In millions of dollars)

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The following table presents Net sales by end market applications and by timing of control transfer (in millions of dollars):

Quarter Ended June 30,

Six Months Ended June 30,

Quarter Ended September 30,

Nine Months Ended September 30,

Aero/HS products

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The following table presents geographic information for income taxes paid (in millions of dollars):

Quarter Ended June 30,

Six Months Ended June 30,

Quarter Ended September 30,

Nine Months Ended September 30,

Income taxes paid:

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Dividend Declaration.

On July 13, 2021 , we announced that our Board of Directors declared a quarterly cash dividend of $ 0.72 per common share.

As such, we expect to pay approximately $ 11.6 million (including dividend equivalents) on or about August 13, 2021 to stockholders of record and the holders of certain restricted stock units at the close of business on July 23, 2021 .

On October 15, 2021 , we announced that our Board of Directors declared a quarterly cash dividend of $ 0.72 per common share.

As such, we expect to pay approximately $ 11.6 million (including dividend equivalents) on or about November 15, 2021 to stockholders of record and the holders of certain restricted stock units at the close of business on October 25, 2021 .

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

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(i) the effectiveness of management ’ s strategies and decisions, including strategic investments, capital spending strategies and the execution of those strategies;

(ii) general economic and business conditions, including the impact of the global outbreak of Coronavirus Disease 2019 (“COVID-19”) and governmental and other actions taken in response, cyclicality, reshoring, supply interruptions and other conditions that impact demand drivers in the aerospace/high strength, automotive, general engineering, packaging and other end markets we serve;

(ii) general economic and business conditions, including the impact of the global outbreak of Coronavirus Disease 2019 (“COVID-19”) and governmental and other actions taken in response, cyclicality, reshoring, supply interruptions, including the most recent disruptions resulting from the supply demand imbalances in the magnesium and silicon markets, and other conditions that impact demand drivers in the aerospace/high strength, automotive, general engineering, packaging and other end markets we serve;

(iii) our ability to participate in mature and anticipated new automotive programs expected to launch in the future and successfully launch new automotive programs;

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However, for some of our higher VAR products sold on a spot basis, competitive dynamics may limit the amount and/or delay the timing of selling price increases to recover our increased aluminum costs, resulting in a lag up to several months during which we may be exposed to metal price risk.

As a result, we can experience an adverse impact when metal prices increase, and a favorable impact to us when metal prices decline, as we and our competitors tend to defer adjusting pricing unless

market dynamics require such in a declining metal cost environment.

As a result, we can experience an adverse impact when metal prices

increase, and a favorable impact to us when metal prices decline, as we and our competitors tend to defer adjusting pricing unless market dynamics require such in a declining metal cost environment.

Additionally, we sometimes enter into firm-price customer sales agreements that specify a firm underlying metal price plus a conversion price.

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We primarily serve North American demand for extruded mill products.

Our rolling mill in Spokane, Washington (“Trentwood”) produces heat treat plate and sheet for aerospace and general engineering end market applications and our rolling mill in Warrick County, Indiana (“Warrick”) produces flat rolled aluminum coil for packaging applications.

Our rolling mill in Spokane, Washington (“Trentwood”) produces heat treat plate and sheet for aerospace and general engineering end market applications and our rolling mill in Warrick County, Indiana (“Warrick”) produces bare and coated aluminum coil used for can stock applications in the beverage and food packaging industry.

Our 11 extrusion/drawing facilities, 10 of which are in the United States and one of which is in Canada, serve aerospace, automotive or general engineering applications.

Additionally, we have a facility in Columbia, New Jersey that focuses on multi-material advanced manufacturing methods and techniques, which include multi-axis computer numerical control (“CNC”) machining, additive manufacturing (“3D Printing”), welding and fabrication for demanding aerospace and defense, automotive, high tech and general industrial applications.

Our consolidated Net sales for the six months ended June 30, 2021 totaled $1,065.0 million on 473.5 million pounds shipped from our facilities.

We employed 3,780 people at June 30, 2021.

Our consolidated Net sales for the nine months ended September 30, 2021 totaled $1,815.6 million on 788.7 million pounds shipped from our facilities.

We employed approximately 3,900 people at September 30, 2021.

We have long-standing relationships with our customers, which consist primarily of blue-chip companies including leading aerospace and automotive manufacturers, tier one aerospace and automotive suppliers, food and beverage packaging manufacturers and metal service centers.

As of June 30, 2021, approximately 65% of our shipments has been sold direct to manufacturers or tier one suppliers and approximately 35% has been sold to metal service centers.

As of September 30, 2021, approximately 69% of our shipments has been sold direct to manufacturers or tier one suppliers and approximately 31% has been sold to metal service centers.

In our served markets, we seek to be the supplier of choice by pursuing “Best in Class” customer satisfaction driven by quality, availability, service and delivery performance.

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Warrick Acquisition

On March 31, 2021, after the close of business, we completed our purchase of Alcoa Warrick LLC and certain assets comprising the aluminum casting and rolling mill facility located in Warrick County, Indiana from Alcoa Corporation.

This acquisition will

provide us re- entry into the North American aluminum beverage and food packaging industry, which is a strong and growing non ‑ cyclical end market driven by sustainability trends and the secular shift from plastic to aluminum.

This acquisition will provide us re-entry into the North American aluminum beverage and food packaging industry, which is a strong and growing non‑cyclical end market driven by sustainability trends and the secular shift from plastic to aluminum.

We believe the addition of this non‑cyclical end market will be highly complementary to our existing aerospace, automotive and general engineering cyclical end markets and will provide excellent opportunities for long-term growth.

The acquisition of Warrick further demonstrates our strategy to serve technically challenging end market applications for which we can deploy our core metallurgical and process technology capabilities to produce highly engineered mill products with differentiated characteristics that present opportunities for us to receive premium pricing and to create long-term profitable growth.

Highlights of the quarter ended June 30, 2021 include:

For the quarter ended June 30, 2021, reported Operating income was $11.1 million, VAR was $317.9 million and Adjusted EBITDA was $58.7 million, all of which included the first full quarter of Warrick results, including costs associated with integrating the business;

Improving Aero/HS products demand as commercial aerospace begins to recover with recovery in air travel and continuing strong demand for business jets and defense applications;

GE products experienced strong service center customer demand supported by continuing re-stocking in the supply chain and strong demand for semi-conductor, industrial and machine tool applications;

Automotive Extrusions demand improved slightly, temporarily impacted by semi-conductor shortages in the automotive industry;

Issued $550.0 million aggregate principal amounts of 4.50% unsecured senior notes due June 1, 2031 (“4.50% Senior Notes”) resulting in proceeds of $541.4 million, net of $8.6 million of transaction fees;

Redeemed all outstanding 6.50% unsecured senior notes due May 2025 (“6.50% Senior Notes”) using proceeds from our 4.50% Senior Notes offering, resulting in a cash outflow for principal, redemption premium and accrued interest of $382.2 million;

Combined cash and cash equivalents and net borrowing availability under our revolving credit facility with Wells Fargo Bank, National Association, as administrative agent, and the other financial institutions party thereto (”Revolving Credit Facility”) was $650.4 million as of June 30, 2021;

Paid cash dividends and dividend equivalents of $0.72 per share or $11.7 million during the quarter ended June 30, 2021.

Highlights of the quarter ended September 30, 2021 include:

Commercial aerospace recovery continues;

General engineering demand remains robust;

Packaging demand continues to demonstrate strong strategic growth opportunities;

Automotive demand strong;

recovery delayed due to semiconductor chip shortage;

Continued labor constraints and inefficiencies, rapidly rising material and other inflationary costs, supply chain disruptions impacted efficiencies and production levels;

Paid cash dividends and dividend equivalents of $0.72 per share or $11.6 million during the quarter ended September 30, 2021.

Results of Operations

Consolidated Results of Operations

Net sales totaled $741.0 million and $275.7 million for the quarters ended June 30, 2021 and June 30, 2020, respectively, reflecting a 218.0 million pound (184%) increase in shipment volume and a $(0.12)/lb (5%) decrease in average realized sales price per pound.

Net sales totaled $750.6 million and $255.7 million for the quarters ended September 30, 2021 and September 30, 2020, respectively, reflecting a 206.3 million pound (189%) increase in shipment volume and a $0.03/lb (1%) increase in average realized sales price per pound.

The shipment volume increase reflected:

(i) a 173.6 million pound addition in Packaging due to our Warrick acquisition;

(ii) a 21.5 million pound (37%) increase in GE products reflecting the impacts of customer restocking, reshoring of supply lines in North America and stronger demand as the industrial markets recover from the COVID-19 pandemic;

(iii) a 14.1 million pound (148%) increase in Automotive Extrusions reflecting the launch and ramp up of new programs, as well as the COVID‑19 pandemic related automotive production shutdowns that occurred during the quarter ended June 30, 2020;

and (iv) a 3.9 million pound (144%) increase in Other products reflecting an increase of non-strategic rolled products acquired with the Warrick acquisition, partially offset by a 7.4 million pound (15%) decrease in Aero/HS products compared to the quarter ended June 30, 2020, primarily due to the impact of the COVID-19 pandemic on commercial aerospace demand.

The average realized sales price per pound reflected a $0.41/lb (48%) increase in average Hedged Cost of Alloyed Metal price per pound offset by a $0.53/lb (36%) decrease in VAR per pound due primarily to the introduction of lower VAR per pound Packaging products.

(ii) a 21.1 million pound (39%) increase in GE products reflecting continued strength in underlying demand and restocking in the service center supply chain;

and (iii) a 14.8 million pound (54%) increase in Aero/HS products compared to the quarter ended September 30, 2020, reflecting continued strength in demand for defense applications, increasing demand for business jets and improving demand for commercial aerospace as airline travel recovers, partially offset by a 5.1 million pound (21%) decrease in Automotive Extrusions driven by the shortage of semiconductor chips that has impacted North American production levels.

The average realized sales price per pound reflected a $0.48/lb (52%) increase in average Hedged Cost of Alloyed Metal price per pound offset by a $0.45/lb (32%) decrease in VAR per pound due primarily to the introduction of lower VAR per pound Packaging products, as well as approximately $15.0 million of additional revenue recognized in the quarter ended September 30, 2020 related to modifications to the 2020 customer declarations under multi-year contracts.

See the table in “ Selected Operational and Financial Information” below for further details.

Net sales totaled $1,065.0 million and $645.0 million for the six months ended June 30, 2021 and June 30, 2020, respectively, reflecting a 199.3 million pound (73%) increase in shipment volume and a $0.10/lb (4%) decrease in average realized sales price per pound.

Net sales totaled $1,815.6 million and $900.7 million for the nine months ended September 30, 2021 and September 30, 2020, respectively, reflecting a 405.6 million pound (106%) increase in shipment volume and a $0.05/lb (2%) decrease in average realized sales price per pound.

The shipment volume increase primarily reflected:

(i) 185.9 million pound addition in Packaging due to our Warrick acquisition;

(ii) a 30.3 million pound (25%) increase in GE products reflecting continued strong underlying demand and restocking in the supply chain;

(iii) a 17.0 million pound (50%) increase in Automotive Extrusions reflecting the launch and ramp up of new programs, as well as the COVID‑19 pandemic related automotive production shutdowns that occurred during the quarter ended June 30, 2020;

and (iv) a 3.8 million pound (73%) increase in Other products reflecting an increase of non-strategic rolled products acquired with the Warrick acquisition, partially offset by a 37.7 million pound (33%) decrease in Aero/HS products reflecting

COVID ‑19 pandemic related lower demand for our commercial aerospace products .

(i) a 359.5 million pound addition in Packaging due to our Warrick acquisition;

(ii) a 51.4 million pound (29%) increase in GE products reflecting strong underlying demand;

and (iii) an 11.9 million pound (20%) increase in Automotive Extrusions primarily reflecting the recovery from the COVID‑19 pandemic related automotive supply chain shutdowns that occurred during the quarter ended September 30, 2020, partially offset by a 22.9 million pound (16%) decrease in Aero/HS products reflecting COVID‑19 pandemic related lower demand for our commercial aerospace products.

The decrease in average realized sales price per pound reflected a $0.36/lb (39%) increase in average Hedged Cost of Alloyed Metal prices per pound offset by a $0.41/lb (29%) decrease in VAR per pound due primarily to the introduction of lower VAR per pound Packaging products.

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Cost of Products Sold, Excluding Depreciation and Amortization and Other Items.

Cost of products sold, excluding depreciation and amortization and other items for the quarter ended June 30, 2021 totaled $673.3 million, or 91% of Net sales, compared to $224.5 million, or 81% of Net sales, for the quarter ended June 30, 2020.

The increase of $448.8 million reflected:

(i) a $321.8 million increase in Hedged Cost of Alloyed Metal and (ii) a $127.0 million increase in net manufacturing conversion and other.

Of the $321.8 million increase in Hedged Cost of Alloyed Metal, $186.2 million was due to higher shipment volume, as discussed above in “ Net Sales,” and $135.6 million was due to higher hedged metal prices .

The $127.0 million increase in net manufacturing conversion and other costs reflected:

(i) a $73.8 million increase related to higher sales and an increase of manufacturing costs to meet increased end market application demand;

(ii) $24.5 million of higher benefits and overhead costs;

(iii) a $7.9 million increase in other manufacturing costs due to lower manufacturing efficiencies;

(iv) a $5.6 million increase in other fixed costs;

(v) a $5.3 million increase in freight costs;

(vi) a $4.4 million increase in acquisition costs;

(vii) a $3.8 million increase in major maintenance costs;

and (viii) a $1.2 million increase in other variable costs.

See “ Selected Operational and Financial Information” below for a further discussion of the comparative results of operations for the quarters ended June 30, 2021 and June 30, 2020.

Cost of products sold, excluding depreciation and amortization and other items for the six months ended June 30, 2021 totaled $935.8 million, or 88% of Net sales, compared to $511.1 million, or 79% of Net sales, for the six months ended June 30, 2020.

The increase of $424.7 million reflected a $321.5 million increase in Hedged Cost of Alloyed Metal and a $103.2 million increase in net manufacturing conversion and other costs.

Cost of products sold, excluding depreciation and amortization and other items for the quarter ended September 30, 2021 totaled $677.8 million, or 90% of Net sales, compared to $208.4 million, or 82% of Net sales, for the quarter ended September 30, 2020.

The increase of $469.4 million was largely attributable to the addition of Packaging and reflected a $343.9 million increase in Hedged Cost of Alloyed Metal and a $125.5 million increase in net manufacturing conversion and other.

Of the $343.9 million increase in Hedged Cost of Alloyed Metal, $191.7 million was due to

higher shipment volume, as discussed above in “ Net Sales,” and $152.2 million was due to higher hedged metal prices .

The $125.5 million increase in net manufacturing conversion and other costs was primari ly due to the addition of Packaging and additional overhead associated with the related increase in volume.

See “ Selected Operational and Financial Information ” below for a further discussion of the comparative results of operations for the quarters ended September 30, 2021 and September 30, 2020 .

Cost of products sold, excluding depreciation and amortization and other items for the nine months ended September 30, 2021 totaled $1,613.6 million, or 89% of Net sales, compared to $719.5 million, or 80% of Net sales, for the nine months ended September 30, 2020.

The increase of $894.1 million was largely attributable to the addition of Packaging and reflected a $665.4 million increase in Hedged Cost of Alloyed Metal and a $228.7 million increase in net manufacturing conversion and other costs.

Of the $665.4 million increase in Hedged Cost of Alloyed Metal, $375.9 million was due to higher shipment volume and $289.5 million was due to higher hedged metal prices, as discussed above in “ Net Sales.

” The $103.2 million increase in net manufacturing conversion and other costs reflected:

(i) a $53.6 million increase related to higher sales and an increase of manufacturing costs to meet increased end market application demand;

(ii) $19.3 million of higher benefits and overhead costs;

(iii) a $9.5 million increase in other manufacturing costs due to lower manufacturing efficiencies;

(iv) a $7.0 million increase in other fixed costs;

(v) a $4.6 million increase in freight costs;

(vi) a $4.4 million increase in acquisition costs;

(vii) a $3.2 million increase in major maintenance costs;

and (viii) $1.6 million in higher energy costs.

See “ Selected Operational and Financial Information” below for a further discussion of the comparative results of operations for the six months ended June 30, 2021 and June 30, 2020.

” The $228.7 million increase in net manufacturing conversion and other costs was primarily due to the addition of Packaging and additional overhead associated with the related increase in volume.

See “ Selected Operational and Financial Information” below for a further discussion of the comparative results of operations for the nine months ended September 30, 2021 and September 30, 2020.

Selling, General, Administrative, Research and Development ( “ SG&A and R&D ” ).

SG&A and R&D expense totaled $30.9 million and $22.7 million for the quarters ended June 30, 2021 and June 30, 2020, respectively and $62.7 million and $46.6 million for the six months ended June 30, 2021 and June 30, 2020, respectively.

The increase during the quarter ended June 30, 2021 was due primarily to:

(i) a $4.7 million increase in legal, consulting and outsourced services expense primarily related to the Warrick acquisition;

(ii) a $2.9 million increase in employee incentive programs;

and (iii) a $1.1 million increase in salaries and benefits, partially offset by a $1.5 million reduction in environmental expenses.

The increase for the six months ended June 30, 2021 compared with June 30, 2020 was due primarily to:

(i) a $14.9 million increase in legal, consulting and outsourced services expense primarily related to the Warrick acquisition and (ii) a $3.3 million increase in employee incentive programs, partially offset by a $1.9 million reduction in environmental expenses.

SG&A and R&D expense totaled $28.1 million and $21.3 million for the quarters ended September 30, 2021 and September 30, 2020, respectively and $90.8 million and $67.9 million for the nine months ended September 30, 2021 and September 30, 2020, respectively.

The increase during the quarter ended September 30, 2021 was primarily due to a $4.0 million increase in costs related to the addition of Warrick operations and related transition service agreements (“TSAs”) with Alcoa to facilitate the integration and a $2.4 million increase in salaries, benefits and incentives.

The increase for the nine months ended September 30, 2021 compared with September 30, 2020 was due primarily to:

(i) a $13.7 million increase in acquisition related costs, which were primarily comprised of professional fees;

(ii) an $8.1 million increase in costs related to the addition of Warrick operations and related TSAs with Alcoa to facilitate the integration;

and (iii) a $4.2 million increase in salaries and benefits, partially offset by a $1.7 million reduction in legacy environmental expenses.

Restructuring (Benefit) Cost.

See Note 10 of Notes to Interim Consolidated Financial Statements included in this Report for further information regarding the restructuring plan.

Other Operating Income, net .

During the quarter and six months ended June 30, 2020, our London, Ontario facility recognized a total of $1.1 million of payroll subsidies under the Canada Emergency Wage Subsidy Program.

Other Operating Charges (Income), net .

Other operating charges (income), net, was $0.3 million of charges for the quarter ended September 30, 2020 and $0.8 million of income for the nine months ended September 30, 2020.

During the quarter and nine months ended September 30, 2020, we recognized $0.4 million and $0.5 million of impairment charges related to property, plant and equipment, which in both periods were offset by government grants received (see Note 1 of Notes to Interim Consolidated Financial Statements included in this Report for details of government grants received).

Interest Expense.

Interest expense represents cash and non-cash interest expense incurred on our unsecured senior notes and our Revolving Credit Facility, net of capitalized interest.

Interest expense was $12.4 million and $10.5 million for the quarters ended June 30, 2021 and June 30, 2020, respectively and $24.7 million and $16.6 million for the six months ended June 30, 2021 and June 30, 2020, respectively.

See Note 7 of Notes to Interim Consolidated Financial Statements included in this Report for a discussion of:

(i) our debt and credit facilities that were in effect during the quarters and six months ended June 30, 2021 and June 30, 2020 and (ii) interest expense capitalized as part of construction in progress.

Other (Expense) Income, Net.

Interest expense represents cash and non-cash interest expense incurred on our unsecured senior notes and our credit agreement with Wells Fargo Bank, National Association, as administrative agent, and the other financial institutions party thereto (“Revolving Credit Facility”), net of capitalized interest.

Interest expense was $12.5 million and $12.1 million for the quarters ended September 30, 2021 and September 30, 2020, respectively, and $37.2 million and $28.7 million for the nine months ended September 30, 2021 and September 30, 2020, respectively.

See Note 7 of Notes to Interim Consolidated Financial Statements included in this Report for a discussion of our debt and credit facilities that were in effect during the quarters and nine months ended September 30, 2021 and September 30, 2020 and interest expense capitalized as part of construction in progress.

Other Expense, Net.

See Note 11 of Notes to Interim Consolidated Financial Statements included in this Report for details.

Income Tax Benefit (Provision).

See Note 12 of Notes to Interim Consolidated Financial Statements included in this Report for disclosure regarding our income tax benefit (provision).

Income Tax (Provision) Benefit.

See Note 12 of Notes to Interim Consolidated Financial Statements included in this Report for disclosure regarding our income tax (provision) benefit.

Selected Operational and Financial Information

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

Quarter Ended June 30,

Six Months Ended June 30,

Quarter Ended September 30,

Nine Months Ended September 30,

Net (loss) income

Interest expense

Other expense (income) , net

Income tax (benefit) provision

Other expense, net

Income tax provision (benefit)

Depreciation and amortization

Non-run-rate items:

Restructuring (benefit) cost

Restructuring cost (benefit)

Adjustments to plant-level LIFO 1

Mark-to-market loss on derivative instruments 2

Mark-to-market loss (gain) on derivative instruments 2

Workers' compensation cost due to discounting

Non-cash asset impairment charge

Environmental expenses 3

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This line item represents the conversion from GAAP LIFO applied on a consolidated basis to monthly LIFO applied on a plant-by-plant basis.

For the quarter and six months ended June 30, 2021, this line item reflects a $7.8 million non-run-rate LIFO charge that resulted from a purchase accounting adjustment to step-up Warrick’s inventory to fair value.

Mark-to-market loss on derivative instruments for 2021 and 2020 represents:

(i) the reversal of mark-to-market (gain) loss on commodity hedges entered into prior to the adoption of Accounting Standards Update (“ASU”) No.

For the quarter and nine months ended September 30, 2021, this line item reflects a $1.4 million non-run-rate LIFO benefit and a $6.4 million non-run-rate LIFO charge, respectively, that resulted from a purchase accounting adjustment to step-up Warrick’s inventory to fair value.

Mark-to-market loss (gain) on derivative instruments for 2021 and 2020 represents:

(i) the reversal of mark-to-market loss (gain) on commodity hedges entered into prior to the adoption of Accounting Standards Update (“ASU”) No.

2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”) and settled in the periods presented above;

(ii) (gain) loss on non-designated commodity hedges;

(ii) loss (gain) on non-designated commodity hedges;

and (iii) reclassifications out of Accumulated other comprehensive loss due to forecasted transactions no longer probable of occurring.

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Acquisition costs are non-run-rate acquisition-related transaction costs, which include legal and consulting fees, as well non‑cash hedging charges recorded in connection with our Warrick acquisition.

Adjusted EBITDA for the quarter ended June 30, 2021 was $24.3 million higher than Adjusted EBITDA for the quarter ended June 30, 2020, primarily reflecting a $75.0 million sales impact driven by the addition of Packaging and improvements in our other end markets, partially offset by:

(i) an $18.3 million increase in plant and corporate overhead;

(ii) $18.0 million in manufacturing inefficiencies as we continue to incorporate the Warrick operation into our systems;

(iii) a $4.8 million increase in incentive compensation;

(iv) $3.8 million of major maintenance;

and (v) $3.2 million of increased lease and insurance costs.

Adjusted EBITDA for the six months ended June 30, 2021 was $2.4 million higher than Adjusted EBITDA for the six months ended June 30, 2020, primarily reflecting a $48.6 million sales impact driven by the addition of Packaging and improvements in our other end markets, partially offset by:

(i) $17.3 million in manufacturing inefficiencies as we continue to incorporate the Warrick operation into our systems;

(ii) a $12.7 million increase in plant and corporate overhead;

(iii) a $4.9 million increase in incentive compensation;

(iv) $4.6 million of increased lease and insurance costs;

and (v) $3.2 million of major maintenance.

The results for both the quarter and nine months ended September 30, 2020 were adjusted to reflect $1.3 million now classified as Warrick acquisition-related costs.

Adjusted EBITDA for the quarter ended September 30, 2021 was $18.9 million higher than Adjusted EBITDA for the quarter ended September 30, 2020, which was inclusive of the additional $15.0 million of revenue as discussed in “Net sales” above.

Adjusted EBITDA for the quarter ended September 30, 2021 reflected the addition of Packaging and improvement in our Aero/HS products and GE products, partially offset by higher costs as discussed in “Consolidated Results of Operations” above.

Adjusted EBITDA for the nine months ended September 30, 2021 was $21.3 million higher than Adjusted EBITDA for the nine months ended September 30, 2020, which had the benefit of the additional $15.0 million of revenue as discussed in “Net sales” above.

Adjusted EBITDA for the nine months 2021 reflected the benefit of Packaging in addition to improvement in our Automotive Extrusions and GE products, partially offset by higher costs related to labor, materials and supply chain disruptions and approximately $1.5 million of redundancy costs associated with the Warrick integration.

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

Quarter Ended June 30,

Six Months Ended June 30,

Quarter Ended September 30,

Nine Months Ended September 30,

Aero/HS Products:

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Hedged Cost of Alloyed Metal

We continue to anticipate improving trends across our end markets with strong secular demand growth for Aero/HS products, Packaging and Automotive Extrusions and solid market dynamics continuing to support growth in our GE Products.

Aero/HS products is beginning to build positive momentum as commercial air travel recovers and aerospace/high strength demand is expected to continue improving through the balance of 2021 driven by growth in defense related programs and business jet production.

We continue to expect the aerospace market to recover to record 2019 levels by the 2023/2024 timeframe and then resume its pre-pandemic 3% to 4% compound annual growth rate (“CAGR”).

Demand for our Automotive Extrusions remains robust with multiple new programs successfully launched and underway.

Automotive Extrusions demand is temporarily dampened as ongoing shortages of semi-conductor chips has affected North American light vehicle production, we anticipate this issue will abate and volume will recover in the second half of 2021.

Over the longer term, we anticipate a greater than 5% CAGR for automotive demand growth driven by light weighting and fuel efficiency with further opportunities as the shift to electric vehicles continues.

Demand for our GE Products remains strong, led by service center restocking and stronger demand as the markets recover from the pandemic.

In addition, as we have previously noted, reshoring of supply lines in North America as original equipment manufacturers (“OEMs”) shift supply strategies to have a larger portion of their material needs sourced domestically provides significant upside for further growth opportunities.

In addition to diversifying the business, our re-entry into Packaging through Warrick provides a significant opportunity for further long-term growth as food and beverage packaging continues to shift to aluminum in response to growing consumer demand.

North American aluminum packaging markets are expected to remain in deficit for the foreseeable future as the strongly preferred, North American supply struggles to keep pace with North American demand.

We anticipate a 3% to 5% CAGR over the next several years.

Included in the VAR per pound calculations for the quarter and nine months ended September 30, 2020 for Aero/HS products is approximately $15.0 million of additional revenue recognized related to modifications to the 2020 customer declarations under multi-year contracts.

VAR for the quarter ended December 31, 2021 is anticipated to increase low single digits on a percentage basis from the quarter ended September 30, 2021 with EBITDA margin (Adjusted EBITDA as a percentage of VAR) to remain similar to the quarter ended September 30, 2021.

While our end market demand remains positive, we anticipate cost issues and supply chain disruptions will

continue during the quarter ended December 31, 2021 .

In addition, the most recent industry wide disruptions in the magnesium and silicon markets and resulting supply demand imbalances are continuing to evolve and remain uncertain at this time.

Although our outlook contemplates the anticipated impact to our costs and operations, the situation is fluid and could further impact our results for the quarter ended December 31, 2021.

Longer-term, our strategy remains unchanged, and we are well positioned for continued long-term growth with a diversified portfolio and strong secular growth trends in each of our served end markets.

Notwithstanding near-term challenges, the fundamentals of our Aero/HS products, Automotive Extrusions and GE products end markets are solid and we are increasingly optimistic in our ability to deliver significant margin expansion and long-term profitability for our Packaging end market where we have a significant market position.

We remain confident around the timing of the recovery in commercial aerospace and we are optimistic that as semiconductor chip shortages are alleviated, automotive production will ramp back up and, our program launches will resume.

Liquidity and Capital Resources

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

As of June 30, 2021

As of September 30, 2021

As of December 31, 2020

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Total liquidity

Borrowing availability under the Revolving Credit Facility as determined by a borrowing base calculated as of June 30, 2021 and December 31, 2020.

Borrowing availability under the Revolving Credit Facility as determined by a borrowing base calculated as of September 30, 2021 and December 31, 2020.

We place our cash in bank deposits and money market funds with high credit quality financial institutions.

Cash equivalents consist primarily of investment-grade commercial paper, money market accounts and investments which, when purchased, have a maturity of 90 days or less.

See Note 14 of Notes to Interim Consolidated Financial Statements included in this Report for information regarding restricted cash at June 30, 2021.

There were no borrowings under our Revolving Credit Facility (see Note 7 of Notes to Interim Consolidated Financial Statements included in this Report) as of June 30, 2021 or as of December 31, 2020.

See Note 14 of Notes to Interim Consolidated Financial Statements included in this Report for information regarding restricted cash at September 30, 2021.

There were no borrowings under our Revolving Credit Facility (see Note 7 of Notes to Interim Consolidated Financial Statements included in this Report) as of September 30, 2021 or as of December 31, 2020.

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

Six Months Ended June 30,

Total cash (used in) provided by:

Nine Months Ended September 30,

Total cash provided by (used in):

Operating activities

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Financing activities

Cash provided by operating activities for the six months ended June 30, 2021 reflected:

(i) an increase in trade and other receivables of $130.5 million, the majority of which was driven by Warrick receivables added during the quarter ended June 30, 2021 and the remainder of which was due to the timing and mix of sales with extended terms and an increase in metal price;

(ii) an increase in accounts payable of $115.5 million, the majority of which was driven by Warrick payables added during the quarter ended June 30, 2021 and the remainder of which was driven by the volume of metal purchases;

Cash provided by operating activities for the nine months ended September 30, 2021 reflected results of business activity described within “Consolidated Results of Operations” above, as well as the following working capital changes:

(i) an increase in trade and other receivables of $110.7 million, the majority of which was driven by Warrick receivables added during the nine months ended September 30, 2021 and the remainder of which was due to the timing and mix of sales and an increase in metal price;

(ii) an increase in accounts payable of $105.8 million, the majority of which was driven by Warrick payables added during the nine months ended September 30, 2021 and the remainder of which was driven by the volume of metal purchases;

and (iii) an increase in inventory of $52.5 million due primarily to higher inventory pounds to satisfy increased demand.

Cash provided by operating activities for the six months ended June 30, 2020 reflected:

Cash provided by operating activities for the nine months ended September 30, 2020 reflected results of business activity described within “Consolidated Results of Operations” above, as well as the following working capital changes :

(i) a decrease in trade and other receivables of $43.4 million driven primarily by lower Net sales;

(ii) a decrease in accounts payable of $28.7 million driven predominantly by the volume of metal purchases ;

and (iii) a reduction in contract assets of $13.0 million driven primarily by timing of shipments related to revenue on products recognized over-time .

See Statements of Consolidated Cash Flows included in this Report for further details on our cash flows from operating, investing and financing activities for the six months ended June 30, 2021 and June 30, 2020.

(ii) a decrease in accounts payable of $27.

6 million driven predominantly by the volume of metal purchases;

and (iii) a reduction in contract assets of $19.8 million driven primarily by timing and volume of shipments related to revenue on products recognized over-time.

See Statements of Consolidated Cash Flows included in this Report for further details on our cash flows from operating, investing and financing activities for the nine months ended September 30, 2021 and September 30, 2020.

Sources of Liquidity

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

At July 19, 2021, there were no borrowings under the Revolving Credit Facility.

At October 18, 2021, there were no borrowings under the Revolving Credit Facility.

See Note 9 of Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 for a description of our Revolving Credit Facility.

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Receivables transferred under these customer-based supply chain financing programs generally meet the requirements to be accounted for as sales resulting in the derecognition of such receivables from our consolidated balance sheets.

Receivables involved with these customer‑based supply chain finance programs for the quarter ended June 30, 2021 constitute approximately 40% of our net sales.

Receivables involved with these customer‑based supply chain finance programs for the quarter ended September 30, 2021 constituted approximately 52% of our net sales.

See Note 1 of Notes to Interim Consolidated Financial Statements included in this Report for further details with respect to these supply chain financing programs.

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The following table provides an update to our contractual obligations and commercial commitments table in Part II, Item 7.

“Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10‑K for the year ended December 31, 2020 with respect to our 4.50% Senior Notes, consisting of mandatory principal and cash interest payments (in millions of dollars):

“Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10‑K for the year ended December 31, 2020 with respect to our 4.50% Senior Notes (as defined in Note 7 of Notes to Interim Consolidated Financial Statements included in this Report), consisting of mandatory principal and cash interest payments (in millions of dollars):

Payments Due by Period

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These improvements have allowed us to gain incremental manufacturing capacity to enable future sales growth.

During the quarter ended June 30, 2021, we initiated our first growth capital investment in the Warrick facility of $150.0 million for an additional roll coat line that is expected to be qualified and operational by early 2024.

In addition, we continue to spend capital for sustainability and efficiency improvements throughout the portfolio.

Our capital investment plans remain focused on supporting demand growth.

The $150.0 million investment in a new roll coat line at our Warrick packaging facility that we initiated during the quarter ended June 30, 2021 is proceeding as planned, and by early 2024 is expected to provide additional capacity to support further growth in our higher margin coated products.

In addition, we continue to deploy our capital thoughtfully to ensure that our investment decisions are aligned with our demand expectations in order to maximize the earnings potential of our business.

Deploying our capital thoughtfully has allowed us to create value and maintain our financial strength and flexibility over time, and we will continue to manage our business with a long-term focus.

Excluding our cash payment for the acquisition of Warrick, we anticipate that total capital spending in 2021 will be approximately $70.0 million to $80.0 million.

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

See our Statements of Consolidated Stockholders’ Equity and Note 16 of Notes to Interim Consolidated Financial Statements included in this Report for information regarding dividends paid during the quarters ended June 30, 2021 and June 30, 2020, and declared subsequent to June 30, 2021.

See our Statements of Consolidated Stockholders’ Equity and Note 16 of Notes to Interim Consolidated Financial Statements included in this Report for information regarding dividends paid during the quarters ended September 30, 2021 and September 30, 2020, and declared subsequent to September 30, 2021.

Repurchases of Common Stock

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

See our Statements of Consolidated Stockholders’ Equity included in this Report for information regarding repurchases of common stock during the quarters ended June 30, 2021 and June 30, 2020 and the amount authorized and available for future repurchases of common stock under our stock repurchase program.

See our Statements of Consolidated Stockholders’ Equity included in this Report for information regarding minimum statutory tax withholding obligations arising during the quarters and six months ended June 30, 2021 and June 30, 2020, in connection with the vesting of non-vested shares, restricted stock units and performance shares.

See our Statements of Consolidated Stockholders’ Equity included in this Report for information regarding repurchases of common stock during the quarters ended September 30, 2021 and September 30, 2020 and the amount authorized and available for future repurchases of common stock under our stock repurchase program.

See our Statements of Consolidated Stockholders ’ Equity included in this Report for information regarding minimum statutory tax withholding obligations arising during the quarters and nine months ended September 30, 2021 and September 30, 2020 , in connection with the vesting of non-vested shares, restricted stock units and performance shares.

Environmental Commitments and Contingencies

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Contractual Obligations, Commercial Commitments and Off-Balance Sheet Arrangements

During the six months ended June 30, 2021, we granted additional stock-based awards to executive officers, certain key employees and non-employee directors under our equity incentive plan.

During the nine months ended September 30, 2021, we granted additional stock-based awards to executive officers, certain key employees and non-employee directors under our equity incentive plan.

Additional awards are expected to be made in future years.

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For updated maturities of lease liabilities, as well as net benefits expected to be paid for pension and other postretirement benefit obligations that include Warrick, see Note 3 and Note 5, respectively, of Notes to Interim Consolidated Financial Statements included in this Report.

Except as otherwise disclosed herein, there has been no material change in our contractual obligations, commercial commitments or off-balance sheet arrangements other than in the ordinary course of business since December 31, 2020.

Except as otherwise disclosed in this Report, there has been no material change in our contractual obligations, commercial commitments or off-balance sheet arrangements other than in the ordinary course of business since December 31, 2020.

Critical Accounting Estimates and Policies

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements