KAISER ALUMINUM CORP 10-K

Item 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm (PCAOB ID: 34 ) 46 Consolidated Balance Sheets 50 Statements of Consolidated (Loss) Income 51 Statements of Consolidated Comprehensive (Loss) Income 52 Statements of Consolidated Stockholders’ Equity 53 Statements of Consolidated Cash Flows 54 Notes to Consolidated Financial Statements 55 45 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Kaiser Aluminum Corporation Foothill Ranch, California Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Kaiser Aluminum Corporation and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of (loss) income, comprehensive (loss) income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. As described in Management’s Annual Report on Internal Control over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Warrick, which was acquired on March 31, 2021. Total assets (excluding goodwill and intangible assets) and total revenues subject to Warrick’s internal control over financial reporting represented approximately 34% and 44% of consolidated total assets and total revenues as of and for the year ended December 31, 2021, respectively. Accordingly, our audit did not include the internal control over financial reporting at Warrick. Basis for Opinion The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding 46 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (CONTINUED) prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Revenue Recognition—Refer to Note 1 to the financial statements Critical Audit Matter Description The Company recognizes revenue as it fulfills their performance obligations and transfers control of products to its customers. For products that have no alternative use and for which the Company has an enforceable right to payment (including a reasonable profit) throughout the production process, revenue is recognized over time. In general, a majority of the Company’s revenue for Aero/HS products and Automotive Extrusions are recognized over time, with the revenue for the remainder of its products recognized at a point in time. For contracts recognized over time, control transfer occurs incrementally during the Company’s production process as progress is made on fulfilling the performance obligation. The Company uses the input method of determining the progress, capturing direct costs beginning at the point that billet or cast ingot is introduced into production at either the extrusion phase or the rolling phase, respectively. For products in production, the Company recognizes revenue using the cost incurred to date plus an estimate of reasonable margin. As of December 31, 2021, net sales were $2,622.0 million, of which $554.1 million was recognized over time. Given the volume of contracts that are recognized over time and the complexity of the determination of over time revenue, we identified revenue for over time contracts as a critical audit matter. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to revenue recognized over time, included the following, among others: • We tested management’s controls over revenue recognized over time, including those over cost incurred to date and estimates of reasonable margin. • We tested the mathematical accuracy of management’s calculation of revenue recognized over time. • We selected a sample of contracts with customers and performed the following: o We evaluated whether the contracts were properly included in management’s calculation of revenue recognized over time based on the terms and conditions of each contract. o We tested that control transfer occurred as progress was made toward fulfilling the performance obligation. • We evaluated the estimates of reasonable margin by developing a range of independent estimates and comparing our estimates to those used by management. • We evaluated management’s ability to accurately estimate reasonable margins by comparing actual margins to management’s historical estimates. Environmental Contingencies—Refer to Notes 1 and 10 to the financial statements Critical Audit Matter Description The Company is subject to a number of environmental laws and regulations, to potential fines or penalties assessed for alleged breaches of such laws and regulations and to potential claims based upon such laws and regulations. The Company records an environmental loss contingency whenever a contingency is probable and reasonably estimable. At December 31, 2021, the Company’s 47 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (CONTINUED) $16.8 million accrual for expected environmental costs is included in other accrued liabilities and long-term liabilities and represents the Company’s undiscounted estimate of costs reasonably expected to be incurred based on presently enacted laws and regulations, existing requirements, currently available facts, existing technology and its assessment of the likely remediation actions to be taken. We identified environmental contingencies as a critical audit matter because auditing management’s estimate of the costs reasonably expected to be incurred for environmental contingencies involved especially subjective judgment and an increased extent of audit procedures, including the need to involve environmental specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to management’s estimate of the costs reasonably expected to be incurred for environmental contingencies included the following, among others: • We tested management’s controls over environmental contingencies, including controls over the estimates of costs expected to be incurred. • We evaluated management’s ability to accurately estimate the costs expected to be incurred by comparing actual costs incurred to historical estimates. • With the assistance of our environmental specialists, we evaluated the reasonableness of management’s estimates of costs reasonably expected to be incurred by comparing the estimates to: o Information obtained directly from the Company’s external environmental specialists. o Communications and feasibility studies the Company received from its regulators and other environmental associations, including Washington State Department of Ecology and Ohio Environmental Protection Agency. o Information obtained directly from public domain searches. o Actual costs incurred to date and the progress of management’s remediation activities. Business Combinations, Goodwill and Intangible Assets — Refer to Notes 1 and 4 to the financial statements Critical Audit Matter Description On March 31, 2021, the Company acquired Alcoa Warrick LLC and certain assets comprising the aluminum casting and rolling mill facility located in Warrick County, Indiana (collectively, “Warrick”) for the purchase price of $670.0 million. The Company accounted for the acquisitions under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, resulting in intangible assets of $50.0 million and goodwill of $20.5 million. Management estimated the fair value of the intangible assets using the income approach valuation methodology, which was based on the Company’s best estimates of the expected future period of benefit of the asset, the various characteristics of the asset, long-term forecasts of the business, market prices, projected cash flows and the rate used in the discounting of those cash flows. Determining the fair value of the intangible assets acquired required significant judgment, including the amount and timing of expected future cash flows and the selected discount rates. We identified the assumptions related to estimating the amount and timing of expected future cash flows and discount rates to be a critical audit matter given the inherent judgment involved in estimating these amounts. Performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort, including the need to involve fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures applied to the amount and timing of expected future cash flows and the selection of the discount rates for intangibles included the following, among others: • We tested the effectiveness of controls over the valuation of intangibles, including management’s controls over the amount and timing of expected future cash flows and the selection of discount rates. 48 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (CONTINUED) • We assessed the reasonableness of management’s forecasts of future cash flows by performing inquiries of appropriate individuals outside of the finance organization, comparing the projections to historical results, contractual agreements, certain peer companies, third-party industry forecasts, and internal communications to management and board of directors. • With the assistance of our fair value specialists, we evaluated the reasonableness of (1) the valuation methodology and (2) the discount rates utilized, including testing the source information underlying the determination of the discount rates, testing the mathematical accuracy of the calculation, and developing a range of independent estimates and comparing those to the discount rates selected by management. • We evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit. /s/ Deloitte & Touche LLP Costa Mesa, California March 1, 2022 We have served as the Company’s auditor since 2002. 49 KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEETS As of December 31, 2021 2020 (In millions of dollars, except share and per share amounts) ASSETS Current assets: Cash and cash equivalents $ 303.2 $ 780.3 Receivables: Trade receivables, net 332.7 112.8 Other 53.0 11.6 Contract assets 63.2 36.1 Inventories 404.6 152.0 Prepaid expenses and other current assets 48.7 28.6 Total current assets 1,205.4 1,121.4 Property, plant and equipment, net 955.2 627.2 Operating lease assets 46.2 26.5 Deferred tax assets, net 3.4 — Intangible assets, net 67.7 26.7 Goodwill 39.3 18.8 Other assets 105.2 44.1 Total $ 2,422.4 $ 1,864.7 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 351.4 $ 86.1 Accrued salaries, wages and related expenses 46.9 30.8 Other accrued liabilities 58.4 41.4 Total current liabilities 456.7 158.3 Long-term portion of operating lease liabilities 40.8 25.6 Pension and other postretirement benefits 92.5 1.3 Net liabilities of Salaried VEBA 20.6 17.8 Deferred tax liabilities 10.5 13.9 Long-term liabilities 72.5 77.3 Long-term debt 1,036.3 838.1 Total liabilities 1,729.9 1,132.3 Commitments and contingencies – Note 10 Stockholders’ equity: Preferred stock, 5,000,000 shares authorized at both December 31, 2021 and December 31, 2020; no shares were issued and outstanding at December 31, 2021 and December 31, 2020 — — Common stock, par value $ 0.01 , 90,000,000 shares authorized at both December 31, 2021 and December 31, 2020; 22,700,404 shares issued and 15,865,118 shares outstanding at December 31, 2021; 22,647,455 shares issued and 15,812,169 shares outstanding at December 31, 2020 0.2 0.2 Additional paid in capital 1,078.9 1,068.6 Retained earnings 93.0 158.2 Treasury stock, at cost, 6,835,286 shares at both December 31, 2021 and December 31, 2020 ( 475.9 ) ( 475.9 ) Accumulated other comprehensive loss ( 3.7 ) ( 18.7 ) Total stockholders’ equity 692.5 732.4 Total $ 2,422.4 $ 1,864.7 The accompanying notes to consolidated financial statements are an integral part of these statements. 50 KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED (LOSS) INCOME Year Ended December 31, 2021 2020 2019 (In millions of dollars, except share and per share amounts) Net sales $ 2,622.0 $ 1,172.7 $ 1,514.1 Costs and expenses: Cost of products sold, excluding depreciation and amortization and other items 2,348.1 941.3 1,215.2 Depreciation and amortization 91.5 52.2 49.1 Selling, general, administrative, research and development 118.8 91.2 98.0 Goodwill impairment — — 25.2 Restructuring (benefit) costs ( 0.8 ) 7.5 — Other operating charges (income), net — ( 0.6 ) 0.9 Total costs and expenses 2,557.6 1,091.6 1,388.4 Operating income 64.4 81.1 125.7 Other expense: Interest expense ( 49.5 ) ( 40.9 ) ( 24.6 ) Other expense, net – Notes 9 and 13 ( 38.9 ) ( 1.4 ) ( 20.7 ) (Loss) income before income taxes ( 24.0 ) 38.8 80.4 Income tax benefit (provision) 5.5 ( 10.0 ) ( 18.4 ) Net (loss) income $ ( 18.5 ) $ 28.8 $ 62.0 Net (loss) income per common share: Basic $ ( 1.17 ) $ 1.82 $ 3.88 Diluted $ ( 1.17 ) $ 1.81 $ 3.83 Weighted-average number of common shares outstanding (in thousands): Basic 15,836 15,802 15,997 Diluted 15,836 15,913 16,203 The accompanying notes to consolidated financial statements are an integral part of these statements. 51 KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED COMPREHENSIVE (LOSS) INCOME Year Ended December 31, 2021 2020 2019 (In millions of dollars) Net (loss) income $ ( 18.5 ) $ 28.8 $ 62.0 Other comprehensive (loss) income, net of tax – Note 11: Defined benefit pension plan and Salaried VEBA ( 1.6 ) 13.4 2.4 Available for sale securities — ( 0.3 ) — Cash flow hedges 16.6 6.7 7.8 Foreign currency translation — 0.1 — Other comprehensive income, net of tax 15.0 19.9 10.2 Comprehensive (loss) income $ ( 3.5 ) $ 48.7 $ 72.2 The accompanying notes to consolidated financial statements are an integral part of these statements. 52 KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED STOCKHOLDERS’ EQUITY Common Shares Outstanding Common Stock Additional Paid In Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Loss Total (In millions of dollars, except share and per share amounts) BALANCE, December 31, 2018 16,234,603 $ 0.2 $ 1,059.3 $ 150.2 $ ( 420.5 ) $ ( 48.8 ) $ 740.4 Net income — — — 62.0 — — 62.0 Other comprehensive income, net of tax — — — — — 10.2 10.2 Common shares issued (including impacts from Long-Term Incentive programs) 137,905 — 0.3 — — — 0.3 Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares ( 58,783 ) — ( 6.2 ) — — — ( 6.2 ) Repurchase of common stock 1 ( 445,421 ) — — — ( 42.9 ) — ( 42.9 ) Cash dividends declared 2 — — — ( 39.4 ) — — ( 39.4 ) Amortization of unearned equity compensation — — 9.5 — — — 9.5 BALANCE, December 31, 2019 15,868,304 $ 0.2 $ 1,062.9 $ 172.8 $ ( 463.4 ) $ ( 38.6 ) $ 733.9 Net income — — — 28.8 — — 28.8 Other comprehensive income, net of tax — — — — — 19.9 19.9 Common shares issued (including impacts from Long-Term Incentive programs) 142,173 — 0.4 — — — 0.4 Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares ( 45,545 ) — ( 4.3 ) — — — ( 4.3 ) Repurchase of common stock 1 ( 152,763 ) — — — ( 12.5 ) — ( 12.5 ) Cash dividends declared 2 — — — ( 43.4 ) — — ( 43.4 ) Amortization of unearned equity compensation — — 9.6 — — — 9.6 BALANCE, December 31, 2020 15,812,169 $ 0.2 $ 1,068.6 $ 158.2 $ ( 475.9 ) $ ( 18.7 ) $ 732.4 Net loss — — — ( 18.5 ) — — ( 18.5 ) Other comprehensive income, net of tax — — — — — 15.0 15.0 Common shares issued (including impacts from Long-Term Incentive programs) 75,748 — 0.3 — — — 0.3 Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares ( 22,799 ) — ( 2.6 ) — — — ( 2.6 ) Cash dividends declared 2 — — — ( 46.7 ) — — ( 46.7 ) Amortization of unearned equity compensation — — 12.6 — — — 12.6 BALANCE, December 31, 2021 15,865,118 $ 0.2 $ 1,078.9 $ 93.0 $ ( 475.9 ) $ ( 3.7 ) $ 692.5 1. Weighted-average repurchase price (dollars per share) was $ 81.94 for the year ended December 31, 2020 and $ 96.18 for the year ended December 31, 2019. At December 31, 2021, $ 93.1 million remained available to repurchase our common shares pursuant to the stock repurchase program. 2 . Dividends declared per common share were $ 2.88 , $ 2.68 and $ 2.40 during 2021, 2020 and 2019, respectively. The accompanying notes to consolidated financial statements are an integral part of these statements. 53 KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES STATEMENTS OF CONSOLIDATED CASH FLOWS Year Ended December 31, 2021 2020 2019 (In millions of dollars) Cash flows from operating activities: Net (loss) income $ ( 18.5 ) $ 28.8 $ 62.0 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation of property, plant and equipment 82.5 49.3 46.3 Amortization of definite-lived intangible assets 9.0 2.9 2.8 Amortization of debt premium and debt issuance costs 2.1 2.0 1.2 Deferred income taxes ( 11.4 ) 15.2 21.1 Non-cash equity compensation 12.9 10.0 9.8 Non-cash asset impairment charges — 0.5 26.1 Loss on extinguishment of debt 35.9 — 20.3 (Gain) loss on disposition of property, plant and equipment ( 0.5 ) 0.2 — Loss (gain) on disposition of short-term investments — ( 0.7 ) ( 0.9 ) Non-cash defined benefit net periodic postretirement benefit cost 9.4 5.2 7.0 Changes in operating assets and liabilities, net of effects of acquisition: Trade and other receivables ( 90.3 ) 60.8 20.2 Contract assets ( 27.1 ) 18.5 0.3 Inventories ( 43.5 ) 25.6 37.5 Prepaid expenses and other current assets ( 0.9 ) ( 6.8 ) 4.2 Accounts payable 112.5 ( 5.9 ) ( 24.5 ) Accrued liabilities 17.3 ( 0.6 ) ( 5.0 ) Annual variable cash contributions to Salaried VEBA ( 1.7 ) ( 2.9 ) ( 2.1 ) Long-term assets and liabilities, net ( 8.3 ) 4.8 6.0 Net cash provided by operating activities 79.4 206.9 232.3 Cash flows from investing activities 1 : Capital expenditures ( 58.0 ) ( 51.9 ) ( 60.2 ) Purchase of short-term investments — ( 39.1 ) ( 132.2 ) Purchase of equity securities ( 0.4 ) ( 0.5 ) ( 0.7 ) Proceeds from disposition of short-term investments — 118.1 91.1 Cash payment for acquisition of Warrick, net of cash received – Note 4 ( 609.2 ) — — Proceeds from disposal of property, plant and equipment 1.8 0.3 0.2 Net cash (used in) provided by investing activities ( 665.8 ) 26.9 ( 101.8 ) Cash flows from financing activities 1 : Repayment of principal and redemption premium of 6.50 % Senior Notes ( 380.9 ) — — Repayment of principal and redemption premium of 5.875 % Senior Notes — — ( 391.5 ) Issuance of 4.50 % Senior Notes 550.0 — — Issuance of 4.625 % Senior Notes — — 500.0 Issuance of 6.50 % Senior Notes — 350.0 — Cash paid for debt issuance costs ( 8.6 ) ( 6.2 ) ( 8.8 ) Repayment of finance lease ( 2.1 ) ( 1.7 ) ( 1.4 ) Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares ( 2.6 ) ( 4.3 ) ( 6.2 ) Repurchase of common stock — ( 12.5 ) ( 44.2 ) Cash dividends and dividend equivalents paid ( 46.7 ) ( 43.4 ) ( 39.4 ) Net cash provided by financing activities 109.1 281.9 8.5 Net (decrease) increase in cash, cash equivalents and restricted cash during the period ( 477.3 ) 515.7 139.0 Cash, cash equivalents and restricted cash at beginning of period 794.3 278.6 139.6 Cash, cash equivalents and restricted cash at end of period $ 317.0 $ 794.3 $ 278.6 1 See Note 16 for supplemental disclosure of cash flow information. The accompanying notes to consolidated financial statements are an integral part of these statements. 54 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTES INDEX Note 1 Summary of Significant Accounting Policies 56 Note 2 Supplemental Balance Sheet Information 62 Note 3 Leases 62 Note 4 Business Combinations, Goodwill and Intangible Assets 63 Note 5 Employee Benefits 66 Note 6 Multiemployer Pension Plans 71 Note 7 Employee Incentive Plans 72 Note 8 Derivatives, Hedging Programs and Other Financial Instruments 75 Note 9 Debt and Credit Facility 78 Note 10 Commitments and Contingencies 81 Note 11 Accumulated Other Comprehensive Loss 84 Note 12 Restructuring 85 Note 13 Other Expense, Net 85 Note 14 Income Tax Matters 86 Note 15 Net (Loss) Income Per Share 88 Note 16 Supplemental Cash Flow Information 89 Note 17 Business, Product and Geographical Area Information and Concentration of Risk 89 Note 18 Subsequent Events 90 55 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies In this Annual Report on Form 10-K (this “Report”), unless the context otherwise requires, references in these notes to consolidated financial statements to “Kaiser Aluminum Corporation,” “Kaiser,” “we,” “us,” “our,” “the Company” and “our Company” refer collectively to Kaiser Aluminum Corporation and its subsidiaries. Organization and Nature of Operations. Kaiser Aluminum Corporation specializes in the production of semi-fabricated specialty aluminum mill products, such as aluminum plate and sheet, bare and coated coil and extruded and drawn products, for the following end market applications: (i) aerospace and high strength (“Aero/HS products”); (ii) beverage and food packaging (“Packaging”); (iii) automotive (“Automotive Extrusions”); (iv) general engineering (“GE products”); and (v) other industrial (“Other products”). Our business is organized into one operating segment. See Note 17 for additional information regarding our business, product and geographical area information and concentration of risk. Principles of Consolidation and Basis of Presentation. Our consolidated financial statements include the accounts of our wholly owned subsidiaries and are prepared in accordance with United States generally accepted accounting principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). Intercompany balances and transactions are eliminated. We have reclassified certain amounts in prior-period financial statements to conform to the current period's presentation. On the Consolidated Balance Sheets, prior period presentation of the Canadian pension plan in Long-term liabilities is now reflected in Pension and other postretirement benefits. On the Statements of Consolidated Cash Flows, prior period presentation of Other non-cash changes in assets and liabilities is now reflected in Changes in operating assets and liabilities within the following categories: (i) Prepaid expenses and other current assets; (ii) Accrued liabilities; and (iii) Long-term assets and liabilities, net. Use of Estimates in the Preparation of Financial Statements. The preparation of financial statements in accordance with GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published and the reported amounts of revenues and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of our consolidated financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions, which could have a material effect on the reported amounts of our consolidated financial position and results of operations. The severity, magnitude and duration, as well as the economic consequences of the Coronavirus Disease 2019 (“COVID-19”) pandemic, are uncertain, rapidly changing and difficult to predict. Therefore, our accounting estimates and assumptions may change over time in response to the COVID-19 pandemic and may change materially in future periods. Supply Chain Financing . Upon our acquisition of Warrick (as defined in Note 4 below), we became party to several supply chain financing arrangements, in which we may sell certain of our customers’ trade accounts receivable to such customers’ financial institutions without recourse. We sell our undivided interests in certain of these receivables at our discretion when we determine that the cost of these arrangements is less than the cost of servicing our receivables with existing debt. Under the terms of the agreements, we retain no rights or interest, have no obligations with respect to the sold receivables and do not service the receivables after the sale. As such, these transactions are being accounted for as a sale. During 2021, we sold trade accounts receivable totaling $1,102.8 million , related to these supply chain financing arrangements, of which our customers’ financial institutions applied discount fees totaling $ 6.2 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, net. As of December 31, 2021, we had been and/or expected to be fully reimbursed by our customers for these discount fees. Fair Value Measurements. We apply the fair value hierarchy established by GAAP for the recognition and measurement of certain financial assets and liabilities. An asset or liability’s fair value classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and consider counterparty risk in our assessment of fair value. We also review the underlying inputs that are significant to the fair value measurement of financial instruments to determine if a transfer among hierarchy levels is appropriate. Financial assets and liabilities that we measure at fair value each period include our derivative instruments and equity investments related to our deferred compensation plan (see Note 5 and Note 8). Additionally, we measure at fair value once each year at December 31 the plan assets of our defined benefit pension and postretirement plans including the Salaried VEBA (defined in Note 5). In determining the fair value of the plan assets at an annual period end, we utilize primarily the results of valuations supplied by the investment advisors responsible for managing the assets of each plan, which we independently review for reasonableness. We record our remaining financial assets and liabilities at carrying value. Goodwill is tested for impairment during the fourth quarter on an annual basis, as well as on an interim basis, as warranted, at the time of relevant events and changes in circumstances. Intangible asset fair values and useful lives are determined using the income approach valuation methodology, which is based on, among other factors, the expected future period of benefit of the asset, the various characteristics of the asset, long‑term forecasts of the business, market prices, projected cash flows and the rate used in discounting those cash flows. Intangible assets with definite lives are initially recognized at fair value and subsequently amortized over the estimated useful lives to reflect the pattern in which the economic benefits of the intangible assets are consumed. In the event the pattern cannot be reliably determined, we use a straight-line amortization method. Whenever events or changes in circumstances indicate that the carrying amount of the intangible assets may not be recoverable, the intangible assets are reviewed for impairment. See Note 4 for a discussion of our business acquisition in 2021 and the goodwill impairment charges we recorded during 2019. 56 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For a majority of our remaining non-financial assets and liabilities, which include inventories, debt issuance costs and property, plant and equipment, we are not required to measure their fair value on a recurring basis. However, if certain triggering events occur, an evaluation of the affected non-financial asset or liability will be required, which could result in a reduction to the carrying amount of such asset or liability. See “ Property, Plant and Equipment, Net” below for a discussion of impairment charges on idled assets recorded during 2021, 2020 and 2019. 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 they are receivable. During 2020, our subsidiary Kaiser Aluminum Canada Limited received $ 1.3 million of payroll subsidies under the Canada Emergency Wage Subsidy Program. These subsidies were recorded within Other operating charges (income), net. Cash and Cash Equivalents. We consider only those short-term, highly liquid investments which, when purchased, have maturities of 90 days or less to be cash equivalents. Our cash equivalents consist primarily of funds in money market funds, which are classified within Level 1 of the fair value hierarchy. Restricted Cash. We are required to keep on deposit certain amounts that are pledged or held as collateral relating to workers’ compensation and other agreements. We account for such deposits as restricted cash (see Note 16). From time to time, such restricted funds could be returned to us or we could be required to pledge additional cash. Available for Sale Securities. We have historically accounted for investments in certain marketable debt securities with maturities of greater than 90 days as available for sale securities. Such securities were recorded at fair value with net unrealized gains and losses, net of income taxes, reflected in Accumulated other comprehensive loss as a component of Stockholders’ equity. Realized gains and losses from the sale of available for sale securities, if any, were determined on a specific identification basis. We settled all outstanding available for sale securities during the year ended December 31, 2020. Trade Receivables and Allowance for Credit Losses. Trade receivables primarily consist of amounts billed to customers for products sold. Accounts receivable are generally due within 30 to 90 days . For the majority of our receivables, we establish an allowance for credit losses based upon collection experience and other factors including , but not limited to, customer credit ratings, bankruptcy filings, published or estimated credit default rates, age of receivables, expected loss rates and collateral exposures . On certain other receivables where we are aware of a specific customer’s inability or reluctance to pay, an allowance for credit losses is established against amounts due, to reduce the net receivable balance to the amount we reasonably expect to collect. However, if circumstances change, our estimate of the recoverability of accounts receivable could be different. Circumstances that could affect our estimates include, but are not limited to, customer credit issues and general economic conditions. Accounts are written off once deemed to be uncollectible. Any subsequent cash collections relating to accounts that have been previously written off are typically recorded as a reduction to total bad debt expense in the period of payment. Write-offs for 2021, 2020 and 2019 were immaterial to our consolidated financial statements. Inventories. Inventories are stated at the lower of cost or market value. Finished products, work-in-process and raw material inventories are stated on the last-in, first-out (“LIFO”) basis. At December 31, 2021 and December 31, 2020, the cost of our inventory on a first-in, first-out (“FIFO”) basis, which approximates the current replacement cost, exceeded its stated LIFO value by $ 137.1 million and $ 8.4 million, respectively. During the year ended December 31, 2020, we decremented a prior year, lower cost LIFO layer, which resulted in a benefit of $ 0.2 million. Other inventories are stated on the FIFO basis and consist of operating supplies, which are materials and supplies to be consumed during the production process. Inventory costs consist of material, labor and manufacturing overhead, including depreciation. Abnormal costs, such as idle facility expenses, freight, handling costs and spoilage, are accounted for as current period charges (see Note 2 for the components of inventories). Replacement Parts. Replacement parts consist of preventative maintenance and capital spare parts, which are stated on the FIFO basis. Replacement parts are recorded within Prepaid expenses and other current assets or Other assets depending on whether or not the expected utilization of the replacement parts is to occur within the next 12 months. 57 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Property, Plant and Equipment, Net. Property, plant and equipment, net, is recorded at cost and includes construction in progress (see Note 2). Property, plant and equipment acquired in the Warrick acquisition was recorded at fair value as of the date of acquisition (see Note 4). Interest related to the construction of qualifying assets is capitalized as part of the construction costs. The amount of interest expense capitalized as construction in progress was $ 1.2 million, $ 1.0 million and $ 1.6 million during 2021, 2020 and 2019, respectively. Depreciation is computed using the straight-line method at rates based on the estimated useful lives of the various classes of assets. Depreciable finance lease assets and leasehold improvements are amortized on a straight-line basis over the shorter of the estimated useful lives of the assets or the lease term. The estimated useful lives are as follows: Range (in years) Land improvements 1-25 Buildings and leasehold improvements 2-45 Machinery and equipment 1-22 Depreciable finance lease assets 2-120 Depreciation expense is not included in Cost of products sold, but is included in Depreciation and amortization. Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset or group of assets may not be recoverable. We regularly assess whether events and circumstances with the potential to trigger impairment have occurred and rely on a number of factors, including operating results, business plans, economic projections and anticipated future cash flow, to make such assessments. We use an estimate of the future undiscounted cash flows of the related asset or asset group over the estimated remaining life of such asset(s) in measuring whether the asset(s) are recoverable. There were no impairment charges recorded in 2021. We recorded impairment charges of $ 0.5 million and $ 0.9 million in 2020 and 2019, respectively, to reflect the scrap value of idled assets we determined not to deploy for future use. Asset impairment charges are included in Other operating charges (income), net, in our Statements of Consolidated (Loss) Income. We classify assets as held for sale only when an asset is being actively marketed and expected to sell within 12 months. Assets held for sale are initially measured at the lesser of the assets’ carrying amount and the fair value less costs to sell. Cloud Computing Implementation Costs. We defer implementation costs associated with a software hosting arrangement that is a service contract. We recognized $ 1.1 million and $ 0.4 million as of December 31, 2021 and December 31, 2020, respectively, within Prepaid expenses and other current assets and $ 6.7 million and $ 2.7 million as of December 31, 2021 and December 31, 2020, respectively, within Other assets related to hosted cloud‑computing software for our enterprise resource planning system refresh project. We began amortizing the deferred implementation costs associated with this project in December 2021 and will amortize the development costs within Selling, general, administrative, research and development over nine years . We recorded amortization expense associated with this project of $ 0.1 million in 2021 and no amortization expense in 2020. Leases. We determine whether an agreement is a lease at inception. We have operating and finance leases for equipment and real estate that primarily have fixed lease payments. For purposes of calculating lease liabilities, options to extend or terminate a lease are included within the lease term when it is reasonably certain that we will exercise such options. Short-term leases with an initial term of 12 months or less are not recorded on our Consolidated Balance Sheets. As most of our leases do not provide an implicit rate, we use information available at the lease commencement date in determining an incremental borrowing rate when calculating our right-of-use lease assets and liabilities. In determining the inputs to the incremental borrowing rate calculation, we make judgments about the value of the leased asset, our credit rating and the lease term, including the probability of our exercising options to extend or terminate the underlying lease. Additionally, we make judgments around contractual asset substitution rights in determining whether a contract contains a lease. We have lease agreements with lease and non-lease components, which are generally accounted for separately. These non-lease components include items such as common area maintenance, taxes and insurance for our real estate leases, as well as maintenance charges related to our equipment leases. We have, however, applied the practical expedient within Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842): Amendments to the Financial Accounting Standards Board Accounting Standards Codification (“ASU 2016-02”), to not separate lease and non-lease components to our embedded supply system equipment leases and have therefore accounted for both lease and non‑lease components in determining the lease assets and liabilities. 58 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Many of our equipment leases contain clauses that require us to return the equipment with certain functionality intact. We account for these costs as residual value guarantees when the guarantee becomes probable of being owed. Our lease agreements do not contain any material restrictive covenants. Derivative Financial Instruments. Consistent with guidelines established by management and approved by our Board of Directors, we use derivative financial instruments to mitigate our exposure to changes in the market price of aluminum, certain alloying metals, energy and, to a lesser extent, foreign currency exchange rates. We do not use derivative financial instruments for trading or other speculative purposes. Hedging transactions are executed centrally on behalf of all of our operations to minimize transaction costs, monitor consolidated net exposures and allow for increased responsiveness to changes in market factors. We reflect the fair value of all of our derivative instruments on our Consolidated Balance Sheets. The fair value of hedges settling within one year is included in Prepaid expenses and other current assets or Other accrued liabilities. The fair value of hedges settling beyond one year is included in Other assets or Long-term liabilities. Cash flows related to all of our derivative instruments are reported in our Statements of Consolidated Cash Flows within the same category as the items being hedged. See Note 8 for additional information on our derivative financial instruments. Self Insurance of Workers’ Compensation and Employee Healthcare Liabilities . We self-insure the majority of the costs of workers’ compensation benefits and employee healthcare benefits and rely on insurance coverage to protect us from large losses on individual claims. Workers’ compensation liabilities are based on a combination of estimates for: (i) incurred-but-not-reported claims and (ii) the ultimate expense of incurred claims. Such estimates are based on judgment, using our historical claims data and information and analysis provided by actuarial and claims advisors, our insurance carriers and other professionals. As of December 31, 2020, we revised our methodology of calculating our estimated workers’ compensation liabilities from a discounted basis to an undiscounted basis, resulting in a charge of $ 0.6 million . Accrued liabilities for employee healthcare benefits, which are estimates of unpaid incurred medical and prescription drug costs as provided by our healthcare administrators, were $ 9.0 million and $ 3.1 million at December 31, 2021 and December 31, 2020, respectively. Debt Issuance Costs. Costs incurred in connection with debt financing are deferred and amortized over the estimated term of the related borrowing. Such amortization is included in Interest expense and may be capitalized as part of construction in progress (see Note 9). Conditional Asset Retirement Obligations ( “ CAROs ” ). We have CAROs at several of our manufacturing facilities. Our CAROs can be separated into two primary categories: (i) legal obligations related to the removal and disposal of asbestos and (ii) asset retirement obligations related to future lease terminations. The majority of our CAROs relate to the first category and consist of incremental costs that would be associated with the removal and disposal of asbestos (all of which is believed to be fully contained and encapsulated within walls, floors, roof, piping or equipment insulation) of certain of our older facilities if such facilities were to undergo major renovation or be demolished. We estimate incremental costs for special handling, removal and disposal costs of materials that may or will give rise to CAROs and then discount the expected costs back to the current year using a credit-adjusted, risk-free rate. When it is unclear when or if CAROs will be triggered, we use probability weighting for possible timing scenarios to determine the probability-weighted liability amounts that should be recognized in our consolidated financial statements (see Note 10). Environmental Contingencies. With respect to environmental loss contingencies, we record a loss contingency whenever a contingency is probable and reasonably estimable (see Note 10). Accruals for estimated losses from environmental remediation obligations are generally recognized no later than the completion of the remedial feasibility study. Such accruals are adjusted as information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Accruals for expected environmental costs are included in Other accrued liabilities or Long-term liabilities, as appropriate (see Note 2). Environmental expense relating to continuing operations is included in Cost of products sold excluding depreciation and amortization and other items (“Cost of products sold” or “COGS”) in our Statements of Consolidated (Loss) Income. Environmental expense relating to non-operating locations is included in Selling, general, administrative, research and development (“SG&A and R&D”) in our Statements of Consolidated (Loss) Income. Revenue Recognition. We recognize revenue as we fulfill our performance obligations and transfer control of products to our customers. For products that have an alternative use and/or for which we do not have an enforceable right to payment (including a reasonable profit) during the production process, we recognize revenue at a point in time. For products that have no alternative use and for which we have an enforceable right to payment (including a reasonable profit) throughout the production process, we recognize revenue over time. In general, revenue recognized over time primarily relates to our Aero/HS products and our Automotive Extrusions with the remainder of our products recognized at a point in time. In limited circumstances, we have concluded that we are an agent in certain Packaging end market arrangements. For these transactions, revenue has been recognized on a net basis. For the majority of our business, contracts with customers begin when we acknowledge a purchase order for a specific customer order of product to be delivered in the near term. These purchase orders are short term in nature, although they may reference a longer 59 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS term “ blanket purchase order ” or a “ terms and conditions ” agreement, both of which may span multiple years. For revenue recognized at a point in time, transfer of control usually occurs upon shipment or upon customer receipt of the product, depending on shipping terms. For contracts recognized over time, control transfer occurs incrementally during our production process as progress is made on fulfilling the performance obligation. We use the input method of determining our progress, capturing direct costs beginning at the point that billet or cast ingot is introduced into production at either the extrusion phase or the rolling phase, respectively. We believe the input method more accurately reflects the transfer of control as it represents the best information available of work completed to date for which we have an enforceable right to payment. For products in production, we recognize revenue using estimates of the cost incurred to date plus a reasonable margin. As the duration of our contracts for accounting purposes is typically less than one year, we do not present quantitative information about the aggregate transaction price allocated to unsatisfied performance obligations at the end of the reporting period. We adjust the amount of revenue recognized on all products, regardless of timing of revenue recognition, for variable price consideration, which could include metal market price adjustments, volume rebates and sales discounts. We estimate rebate and discount values based on forecasted order data and historical payment trends for specific customers, adjusted as necessary at each reporting period. Accounts receivable is recorded when our right to consideration becomes unconditional. Payment terms for a majority of our domestic customers are 30 days after invoice date. To accommodate shipping time to overseas locations, payment terms for foreign customers are typically several weeks longer than domestic terms. As such, we do not adjust the promised amount of consideration for the effects of a significant financing component as we do not expect the period between the transfer of control of products to our customers and receipt of payment will be greater than one year. Contract assets primarily relate to our enforceable right to consideration for work completed but not billed at the reporting date on contracts for products recognized over time. Contract assets also include amounts related to our contractual right to consideration for finished goods recognized over time that were in transit as of period end. Incremental Costs of Obtaining a Contract . We expense the costs of obtaining a contract as incurred as the amortization period of the asset that we otherwise would have recognized is one year or less. Shipping and Handling Activities. We account for shipping and handling activities that occur after the customer has obtained control of a product as fulfillment activities (i.e., an expense) rather than as a promised service (i.e., a revenue element). Advertising Costs. Advertising costs, which are included in SG&A and R&D, are expensed as incurred. Advertising costs for 2021, 2020 and 2019 were $ 0.1 million, $ 0.2 million and $ 0.4 million, respectively. Research and Development Costs. Research and development costs, which are included in SG&A and R&D, are expensed as incurred. Research and development costs for 2021, 2020 and 2019 were $ 9.3 million, $ 9.1 million and $ 10.5 million, respectively. Major Maintenance Activities. All major maintenance costs are accounted for using the direct expensing method. Stock-Based Compensation. Stock-based compensation in the form of service-based awards is provided to executive officers, certain employees and non-employee directors and is accounted for at fair value. We measure the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of the award and the number of awards expected to ultimately vest. The grant-date fair value is determined based on the stock price on the date of grant, adjusted for expected dividends or dividend equivalents to be paid during the vesting period. We also grant performance-based awards to executive officers and other key employees. The methodology used to value these performance-based awards is based on the nature of the performance conditions within those awards. Awards that are subject to performance conditions pertaining to total shareholder return (market-based awards) are valued on the date of grant using a Monte Carlo valuation model. The key assumptions in applying this model are an expected volatility and a risk-free interest rate. Awards with certain other performance conditions (non-market-based awards) are valued based on our stock price at the date of grant. Our non‑market-based awards have performance conditions pertaining to our cost performance and adjusted EBITDA margin performance, which is measured by our adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) as a percentage of value added revenue. Holders of performance-based awards receive a one-time payment at the time of issuance of vested shares based on the total dividends they would have received if the vested shares had been held of record from the date of grant through the date of issuance. For more information on our stock-based compensation (see Note 7). The cost of service-based awards, including time-vested restricted stock and performance shares, is recognized as an expense over the requisite service period of the award on a straight-line basis. Adjustments to expense related to forfeitures are recorded in the period in which they occur. For performance shares with performance conditions pertaining to our cost performance and Adjusted EBITDA margin performance, the related expense is updated quarterly by adjusting the estimated number of shares expected to vest based on the most probable outcome of the performance condition (see Note 7). 60 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Adoption of New Accounting Pronouncements ASU No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”) was issued in December 2019 and is intended to simplify the accounting for income taxes by eliminating certain exceptions and implementing additional requirements which result in a more consistent application of Accounting Standards Codification 740 Income Taxes . Most amendments within ASU 2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. 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. ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”) was issued in October 2021. Under ASU 2021-08, we are required to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) . We early adopted ASU 2021-08 during the quarter ended December 31, 2021 and applied the amendments retrospectively to the beginning of the year. Our adoption of ASU 2021-08 did not result in a material impact on our consolidated financial statements. Accounting Pronouncements Issued But Not Yet Adopted In March 2020, the Financial Accounting Standards Board issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”) and also issued subsequent amendments to the initial guidance (collectively, “Topic 848”). Topic 848 is effective for all entities as of March 12, 2020 through December 31, 2022 and provides optional guidance for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. We will adopt Topic 848 when our relevant contracts are modified upon transition to alternative reference rates. We do not expect our adoption of Topic 848 to have a material impact on our consolidated financial statements. ASU No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance (“ASU 2021-10”) was issued in November 2021. Under ASU 2021-10, the accounting entities with transactions with a government that are accounted for by analogy to a grant or contribution accounting model are required to annually disclose certain information regarding the transaction including: (i) nature and related accounting policy used; (ii) line items on the balance sheet and income statement affected by the transactions; (iii) amounts applicable to each line item; and (iv) significant terms and conditions. We are currently in the process of evaluating the impact of adopting ASU 2021-10 using a prospective approach, but do not expect it to have a material impact on our consolidated financial statements. 61 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. Supplemental Balance Sheet Information As of December 31, 2021 2020 (In millions of dollars) Trade Receivables, net Billed trade receivables $ 333.5 $ 113.6 Allowance for doubtful receivables ( 0.8 ) ( 0.8 ) Trade receivables, net $ 332.7 $ 112.8 Inventories Finished products $ 90.3 $ 37.2 Work-in-process 162.2 46.0 Raw materials 143.0 62.3 Operating supplies 9.1 6.5 Total $ 404.6 $ 152.0 Property, Plant and Equipment, net Land and improvements $ 26.0 $ 21.5 Buildings and leasehold improvements 179.0 117.2 Machinery and equipment 1,151.5 847.4 Construction in progress 1 75.3 37.8 Property, plant and equipment, gross 1,431.8 1,023.9 Accumulated depreciation and amortization ( 480.4 ) ( 398.4 ) Assets held for sale 3.8 1.7 Property, plant and equipment, net $ 955.2 $ 627.2 Other Accrued Liabilities Uncleared cash disbursements $ 10.9 $ 2.1 Accrued income taxes and other taxes payable 9.5 5.2 Accrued annual contribution to Salaried VEBA – Note 5 — 1.7 Accrued interest 9.9 11.6 Short-term environmental accrual – Note 10 2.6 3.7 Other – Note 3 and Note 8 25.5 17.1 Total $ 58.4 $ 41.4 Long-Term Liabilities Workers' compensation accruals $ 31.9 $ 30.6 Long-term environmental accrual – Note 10 14.2 15.1 Other long-term liabilities 26.4 31.6 Total $ 72.5 $ 77.3 1 Based on market conditions, we temporarily idled projects within Construction in progress totaling $ 24.9 million and $ 20.0 million as of December 31, 2021 and December 31, 2020, respectively, all of which are expected to resume at a future date. 3. Leases Our leases have remaining lease terms of approximately one to 60 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 . The following table presents lease terms and discount rates as of December 31, 2021: Finance Leases Operating Leases Weighted-average lease term (in years) 26.1 7.4 Weighted-average discount rate 3.4 % 3.8 % 62 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes the classification of lease assets and lease liabilities on our Consolidated Balance Sheets (in millions of dollars): As of December 31, Leases Classification 2021 2020 Assets Operating lease assets Operating lease assets $ 46.2 $ 26.5 Finance lease assets Property, plant and equipment, net 8.2 8.1 Total lease assets $ 54.4 $ 34.6 Liabilities Current: Operating lease liabilities Other accrued liabilities $ 9.0 $ 4.4 Finance lease liabilities Other accrued liabilities 2.1 1.9 Non-current: Operating lease liabilities Long-term portion of operating lease liabilities 40.8 25.6 Finance lease liabilities Long-term liabilities 6.1 6.2 Total lease liabilities $ 58.0 $ 38.1 The following table summarizes the components of lease cost on our Statements of Consolidated (Loss) Income (in millions of dollars): Year Ended December 31, 2021 2020 2019 Operating lease cost $ 11.0 $ 6.8 $ 7.5 Short-term lease cost 3.2 1.6 1.2 Finance lease cost: Amortization of leased assets 2.1 1.6 1.5 Interest on lease liabilities 0.3 0.3 0.3 Total lease cost $ 16.6 $ 10.3 $ 10.5 The following table presents the maturity of our lease liabilities as of December 31, 2021 (in millions of dollars): Finance Leases Operating Leases 2022 $ 2.3 $ 9.4 2023 2.0 9.8 2024 1.4 9.1 2025 1.0 5.9 2026 0.7 4.0 Thereafter 5.7 20.7 Total minimum lease payments $ 13.1 $ 58.9 Less: interest ( 4.9 ) ( 9.1 ) Present value $ 8.2 $ 49.8 4. Business Combinations, Goodwill and Intangible Assets Warrick Rolling Mill Acquisition . 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 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 years ended December 31, 2021 and December 31, 2020 were $ 16.7 million and $ 5.5 million, respectively, primarily related to professional fees and included within SG&A and R&D. 63 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the purchase consideration to allocate (in millions of dollars): Contract purchase price $ 670.0 Working capital adjustment 31.0 Initial outstanding indebtedness – Other postretirement benefits liabilities ( 83.5 ) Cash paid at acquisition close on March 31, 2021 617.5 Estimated post-close adjustments ( 12.7 ) Preliminary purchase consideration to allocate 604.8 Revision to estimated post-close adjustments 4.4 Final purchase consideration to allocate $ 609.2 We accounted for the acquisition using the acquisition method of accounting, which requires the assets acquired and liabilities assumed to be recorded at the date of acquisition at their respective estimated fair values. We prepared the purchase consideration as of the acquisition date based on our understanding of the fair value of the acquired assets and assumed liabilities. During the year ended December 31, 2021, we finalized the valuation and completed the purchase price allocation, which included the adjustments listed below. The following table summarizes the finalized fair values of assets acquired and liabilities assumed (in millions of dollars): Initial Allocation Adjustments Final Allocation Trade receivables $ 162.4 $ ( 2.4 ) $ 160.0 Other receivables 6.2 4.8 11.0 Inventories 209.0 0.1 209.1 Prepaid expenses and other current assets — 0.3 0.3 Property, plant and equipment 385.4 ( 41.7 ) 343.7 Operating lease assets 12.3 — 12.3 Intangible assets 56.5 ( 6.5 ) 50.0 Goodwill 1 27.4 ( 6.9 ) 20.5 Other Assets 2 — 56.8 56.8 Accounts payable ( 143.0 ) ( 0.2 ) ( 143.2 ) Accrued salaries, wages and related expenses ( 5.9 ) ( 1.0 ) ( 6.9 ) Other accrued liabilities ( 11.5 ) 0.9 ( 10.6 ) Long-term portion of operating lease liabilities ( 8.7 ) — ( 8.7 ) Pension and other postretirement benefits ( 83.7 ) 0.2 ( 83.5 ) Long-term liabilities ( 1.6 ) — ( 1.6 ) Total allocated purchase consideration $ 604.8 $ 4.4 $ 609.2 1 Goodwill is primarily attributable to the assembled workforce and is expected to be deductible for income tax purposes. 2 Other assets 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. For the period from April 1, 2021 through December 31, 2021, Warrick contributed $1,141.2 million of net sales from continuing operations included in our Statements of Consolidated (Loss) Income for the year ended December 31, 2021. Net (loss) income for the nine months ended December 31, 2021 is not provided as the Warrick results have been fully integrated and discrete financial information cannot be obtained without unreasonable effort. The following unaudited pro forma financial information presents results assuming Warrick had been acquired on January 1, 2020. The unaudited pro forma information includes adjustments and consequential tax effects related to: (i) amortization and depreciation for intangible assets and property, plant and equipment acquired; (ii) the effects of certain reclassifications and conforming accounting policies; and (iii) acquisition-related transaction costs. 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. Year Ended December 31, 2021 2020 Net sales $ 2,936.8 $ 2,256.3 Net income (loss) $ 0.8 $ ( 35.7 ) 64 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Warrick rolling mill has historically purchased molten aluminum and electrical power from Alcoa’s smelter and power plant in Warrick County, Indiana. Alcoa’s Warrick smelter historically sold the molten aluminum to the Warrick rolling mill at smelter cost and electrical power from Alcoa’s power plant at negotiated prices between the parties. As part of the acquisition of Warrick, we negotiated pricing for molten aluminum and electrical power with Alcoa at alternative rates which more closely align with market pricing. The table above does not reflect the cost of molten aluminum and electrical power under these negotiated rates. Goodwill. The following table presents the changes in the carrying value of our goodwill (in millions of dollars): As of December 31, 2021 2020 Gross carrying value: Beginning balance $ 37.2 $ 37.2 Warrick acquisition 20.5 — Ending balance 57.7 37.2 Accumulated impairment loss ( 18.4 ) ( 18.4 ) Net carrying value $ 39.3 $ 18.8 In conjunction with our 2018 acquisition of Imperial Machine & Tool Co (“IMT”), we added $ 25.2 million of goodwill after allocating the consideration paid, net of cash received, to all other identifiable assets. Having determined that the carrying value of IMT exceeded its fair value as of November 30, 2019, we recognized an impairment charge of $ 25.2 million for the year ended December 31, 2019 within Operating income in our Statements of Consolidated (Loss) Income. As this goodwill is deductible for tax purposes, the deferred tax effects were included in the impairment charge and income tax provision. Intangible Assets. The following table presents the gross carrying amount and accumulated amortization by major intangible asset class (in millions of dollars, except amortization periods): Weighted- Average Amortization Period (in years) Gross Amount Accumulated Amortization Intangible Assets, Net As of December 31, 2021 Customer relationships 1 19 $ 68.1 $ ( 17.8 ) $ 50.3 Trade name 10 2.4 ( 0.8 ) 1.6 Non-compete agreement 5 5.4 ( 3.5 ) 1.9 Favorable commodity contracts 2 2 11.0 ( 4.1 ) 6.9 Favorable lease contracts 2 120 7.0 — 7.0 Total $ 93.9 $ ( 26.2 ) $ 67.7 As of December 31, 2020 Customer relationships 24 $ 36.1 $ ( 14.2 ) $ 21.9 Trade name 10 2.4 ( 0.6 ) 1.8 Non-compete agreement 5 5.4 ( 2.4 ) 3.0 Total $ 43.9 $ ( 17.2 ) $ 26.7 1 Of the total acquired customer relationships, $ 32.0 million was purchased in conjunction with the Warrick acquisition and had a weighted average amortization period of 12 years. 2 The favorable lease and commodity contracts were purchased in conjunction with the Warrick acquisition. We identified no indicators of impairment associated with our intangible assets during the years ended December 31, 2021, December 31, 2020 or December 31, 2019. 65 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Amortization expense relating to definite-lived intangible assets was $ 9.0 million, $ 2.9 million and $ 2.8 million for 2021, 2020 and 2019, respectively. The following table presents the expected amortization of intangible assets for each of the next five calendar years and thereafter as of December 31, 2021 (in millions of dollars): 2022 $ 12.4 2023 5.3 2024 4.5 2025 4.5 2026 4.5 Thereafter 36.5 Total $ 67.7 5. Employee Benefits Defined Contribution Plans We sponsor defined contribution 401(k) savings plans for certain hourly and salaried employees. Employees may contribute a portion of their compensation to the plans and we match a specified percentage of these contributions in equivalent form of the investments elected by the employee. Additionally, we make fixed annual contributions for certain hourly and salaried employees in varying amounts depending on hire date. Deferred Compensation Plan We sponsor a non-qualified, unfunded, unsecured plan of deferred compensation for certain employees who would otherwise suffer a loss of benefits under our defined contribution plan as a result of the limitations imposed by the Internal Revenue Code of 1986. Despite the plan being an unfunded plan, we make an annual contribution to a rabbi trust to fulfill future funding obligations, as contemplated by the terms of the plan. The assets in the trust are held in various investment funds at certain registered investment companies (see “ Fair Value of Plan Assets” below) and are at all times subject to the claims of our general creditors. No participant has a claim to any assets of the trust; however, participants are eligible to receive distributions from the trust subject to vesting and other eligibility requirements. Offsetting liabilities relating to the deferred compensation plan are included within Other accrued liabilities and Long-term liabilities. Assets in the trust are accounted for as equity investments with changes in fair value recorded within Other expense, net (see Note 13). Other Benefits We provide other benefits for certain members of senior management, including certain of our named executive officers, related to terminations of employment in specified circumstances, including in connection with a change in control, by us without cause and by the executive officer with good reason. Defined Benefit Plans Pension. We sponsor defined benefit pension plans for certain hourly bargaining unit employees and salaried employees. Pension benefits generally depend on length of service, job grade and remuneration. Substantially all benefits are paid through pension trusts that are sufficiently funded to ensure that all plans can pay benefits to retirees as they become due. We use a December 31 measurement date for our pension plans. OPEB. We sponsor a healthcare and life insurance postretirement benefit plan (“OPEB”) covering certain eligible retirees. Generally, the medical plans are unfunded and pay a percentage of medical expenses, reduced by deductibles and other coverage. Life benefits are generally provided by insurance contracts. We use a December 31 measurement date for our OPEB plan. Salaried VEBA Postretirement Obligation. Certain retirees who retired prior to 2004 and certain employees who were hired prior to February 2002 and have subsequently retired or will retire with the requisite age and service, along with their surviving spouses and eligible dependents, are eligible to participate in a voluntary employees’ beneficiary association (“VEBA”) that provides healthcare cost, medical cost and long-term care insurance cost reimbursement benefits (“Salaried VEBA”). The accumulated postretirement benefit obligation (“APBO”) for the Salaried VEBA was computed based on the level of benefits being provided. Since the Salaried VEBA pays out a fixed annual amount to its participants, no future cost trend rate increase was assumed in computing the APBO for the Salaried VEBA. 66 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS We have an ongoing obligation with no express termination date to make variable cash contributions up to a maximum of $ 2.9 million to the Salaried VEBA. The Salaried VEBA assets were invested in various managed funds based on information we received from the trustee of the Salaried VEBA. Our variable payment, if any, is treated as a funding/contribution policy and not counted as a Salaried VEBA asset at the accrual date for actuarial purposes. There was no required accrual for variable c ontributions as of December 31, 2021. We paid $ 1.7 million with respect to 2020 during the first quarter of 2021. We account for the Salaried VEBA as a defined benefit plan in our financial statements using a December 31 measurement date . Key Assumptions. The following table presents the weighted average assumptions used to determine benefit obligations: Pension 1 OPEB Salaried VEBA As of December 31, As of December 31, As of December 31, 2021 2020 2021 2020 2021 2020 Discount rate 2.90 % 2.50 % 2.64 % n/a 2.49 % 2.05 % Rate of compensation increase 2.74 % 3.00 % — % n/a — % — % 1. Beginning in 2021, the Warrick pension assumptions were weighted with the Canadian pension assumptions based on the total benefit obligations of each. The following table presents the weighted average assumptions used to determine net periodic postretirement benefit cost: Pension 1 OPEB Salaried VEBA Year Ended December 31, Year Ended December 31, Year Ended December 31, 2021 2020 2019 2021 2020 2019 2021 2020 2019 Discount rate 2.89 % 3.10 % 3.90 % 2.97 % n/a n/a 2.05 % 2.95 % 3.90 % Expected long-term return on plan assets 2 5.78 % 4.45 % 4.45 % — % n/a n/a 5.50 % 5.50 % 5.50 % Rate of compensation increase 2.74 % 3.00 % 3.00 % — % n/a n/a — % — % — % 1. Beginning in 2021, the Warrick pension assumptions were weighted with the Canadian pension assumptions based on the total benefit obligations of each. 2. The expected long-term rate of return assumption for the Salaried VEBA is based on the targeted investment portfolios provided to us by the trustee of the Salaried VEBA. 67 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Benefit Obligations and Funded Status. The following table presents the benefit obligations and funded status of our pension plans, OPEB and the Salaried VEBA and the corresponding amounts that are included in our Consolidated Balance Sheets (in millions of dollars): Pension OPEB Salaried VEBA As of December 31, As of December 31, As of December 31, 2021 2020 2021 2020 2021 2020 Change in benefit obligation: Obligation at beginning of year $ 10.0 $ 8.8 $ — n/a $ 78.3 $ 90.2 Obligation assumed through acquisition of Warrick 6.5 — 78.1 n/a — — Foreign currency translation adjustment — 0.3 — n/a — — Service cost 4.1 0.3 1.1 n/a 0.1 0.1 Interest cost 0.5 0.3 1.7 n/a 1.5 2.5 Prior service cost (credit) 1 — — — n/a 14.0 ( 12.3 ) Actuarial (gain) loss 2 ( 0.3 ) 0.6 2.6 n/a ( 6.9 ) 4.7 Benefits paid ( 0.5 ) ( 0.3 ) — n/a ( 7.2 ) ( 6.9 ) Obligation at end of year 3 20.3 10.0 83.5 n/a 79.8 78.3 Change in plan assets: Fair market value of plan assets at beginning of year 8.7 7.8 — n/a 60.5 57.6 Foreign currency translation adjustment — 0.2 — n/a — — Actual return on assets 1.1 0.7 — n/a 5.9 8.1 Company contributions 0.5 0.3 — n/a — 1.7 Benefits paid ( 0.5 ) ( 0.3 ) — n/a ( 7.2 ) ( 6.9 ) Fair market value of plan assets at end of year 9.8 8.7 — n/a 59.2 60.5 Net funded status 4 $ ( 10.5 ) $ ( 1.3 ) $ ( 83.5 ) n/a $ ( 20.6 ) $ ( 17.8 ) Cumulative loss recognized in Accumulated Other Comprehensive: Accumulated net actuarial loss $ ( 1.0 ) $ ( 2.1 ) $ ( 2.6 ) n/a $ ( 1.2 ) $ ( 11.2 ) Prior service cost — — — n/a ( 34.6 ) ( 24.1 ) Total $ ( 1.0 ) $ ( 2.1 ) $ ( 2.6 ) n/a $ ( 35.8 ) $ ( 35.3 ) 1. The prior service cost (credit) relating to the Salaried VEBA in both 2021 and 2020 resulted from increases (decreases) in the annual healthcare reimbursement benefit in 2021 and 2020, respectively for plan participants. 2. The actuarial gain relating to the Salaried VEBA in 2021 was comprised of a $ 3.9 million gain due to changes in census information and a $ 3.0 million gain due to a change in the discount rate. The actuarial loss relating to the Salaried VEBA in 2020 was comprised of a $ 5.7 million loss due to a change in the discount rate, partially offset by a $ 1.0 million gain due to changes in census information. 3. For the pension plans, the benefit obligation is the projected benefit obligation. For the Salaried VEBA and OPEB, the benefit obligation is the APBO. 4. Net funded status relating to the pension plans and Salaried VEBA at December 31, 2021 and December 31, 2020 was included within Long term liabilities on our Consolidated Balance Sheets. Of the Net funded status relating to the OPEB at December 31, 2021, $ 1.6 million was included within current liabilities and $ 81.9 million was included within Long term liabilities of on our Consolidated Balance Sheets. The accumulated benefit obligation for the pension plans was $ 19.3 million and $ 9.2 million at December 31, 2021 and December 31, 2020, respectively. We expect to contribute $ 8.6 million to the pension plans in 2022. The following table presents the net benefits expected to be paid (in millions of dollars): Year Ended December 31, 2022 2023 2024 2025 2026 2027-2031 Pension benefit payments $ 0.5 $ 0.6 $ 0.8 $ 0.9 $ 1.0 $ 7.8 Salaried VEBA benefit payments 1 7.4 7.1 6.7 6.4 6.0 25.4 OPEB payments 1.6 2.4 3.1 3.7 4.3 30.0 Total net benefits $ 9.5 $ 10.1 $ 10.6 $ 11.0 $ 11.3 $ 63.2 68 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Such amounts are based on benefit amounts and certain key assumptions obtained from the Salaried VEBA and will be paid out of the Salaried VEBA plan assets. Plan Assets. The following table presents the asset class allocation per our pension plan investment policy and the weighted average asset allocation at December 31, 2021: Asset class Policy range As of December 31, 2021 Equities 54% - 60% 66 % Fixed income 35% - 40% 28 % Other investments 5% - 6% 6 % Fair Value of Plan Assets. The plan assets of our pension plans and the Salaried VEBA are measured annually on December 31 and reflected in our Consolidated Balance Sheets at fair value. In determining the fair value of the plan assets at an annual period end, we utilize primarily the results of valuations supplied by the investment advisors responsible for managing the assets of each plan, which we independently review for reasonableness. With respect to the Salaried VEBA, the investment advisors providing the valuations are engaged by the Salaried VEBA trustees. Certain plan assets are valued based upon unadjusted quoted market prices in active markets that are accessible at the measurement date for identical, unrestricted assets (e.g., liquid securities listed on an exchange). Such assets are classified within Level 1 of the fair value hierarchy. Valuation of other plan invested assets are based on significant observable inputs (e.g., valuations derived from actual market transactions, broker-dealer supplied valuations or correlations between a given U.S. market and a non-U.S. security). Valuation model inputs can generally be verified and valuation techniques do not involve significant judgment. The fair values of such financial instruments are classified within Level 2 of the fair value hierarchy. The remainder of plan assets are valued based on the net asset value (“NAV”) of shares held by the plans at year end using the NAV practical expedient. 69 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the fair value of plan assets, classified under the appropriate level of the fair value hierarchy (in millions of dollars): Level 1 Level 2 Level 3 Total As of December 31, 2021: Plan Assets in the Fair Value Hierarchy: Salaried VEBA – Equity investment funds in registered investment companies 1 $ 38.6 $ — $ — $ 38.6 Salaried VEBA – Fixed income investment funds in registered investment companies 2 20.6 — — 20.6 Deferred compensation program – Diversified investment funds in registered investment companies 3 10.5 — — 10.5 Total plan assets in the fair value hierarchy $ 69.7 $ — $ — $ 69.7 Plan Assets Measured at NAV 4 : Pension plans – Equity investment funds in registered investment companies 1 $ 0.1 Pension plans – Fixed income investment funds in registered investment companies 2 0.1 Pension plans – Diversified investment funds in registered investment companies 3 9.6 Total plan assets at fair value $ 79.5 As of December 31, 2020: Plan Assets in the Fair Value Hierarchy: Salaried VEBA – Cash and money market investments $ 1.4 $ — $ — $ 1.4 Deferred compensation program – Diversified investment funds in registered investment companies 3 — 9.6 — 9.6 Total plan assets in the fair value hierarchy $ 1.4 $ 9.6 $ — $ 11.0 Plan Assets Measured at NAV 4 : Salaried VEBA – Equity investment funds in registered investment companies 1 $ 34.7 Salaried VEBA – Fixed income investment funds in registered investment companies 2 22.7 Pension plans – Diversified investment funds in registered investment companies 3 8.7 Total plan assets at fair value $ 77.1 1. Equity investment funds in registered investment companies. This category represents investments in equity funds that invest in portfolios comprised primarily of equity and equity-related securities of U.S. and non-U.S. issuers across all market capitalizations. 2. Fixed income investment funds in registered investment companies . This category represents investments in various fixed income funds with multiple registered investment companies. Such funds invest primarily in bonds, debentures, notes, securities with equity and fixed-income characteristics, cash equivalents, securities backed by mortgages and other assets, loans, pooled or collective investment vehicles made up of fixed‑income securities and other fixed-income obligations of banks, corporations and governmental authorities. 3. Diversified investment funds in registered investment companies . The plan assets are invested in investment funds that hold a diversified portfolio of: (i) U.S. and international debt and equity securities; (ii) fixed income securities such as corporate bonds and government bonds; (iii) mortgage-related securities; and (iv) cash and cash equivalents. 4. NAV . The market value of these funds has not been categorized in the fair value hierarchy and is being presented in the table above to permit a reconciliation of the fair value hierarchy to our Consolidated Balance Sheets and are comprised primarily of unitized mutual funds without externally published net asset values, which can be redeemed daily without restriction. As of December 31, 2020, equity investment funds measured at fair value using the NAV practical expedient were managed by an investment adviser registered with the SEC under the Investment Advisers Act of 1940 and were subject to certain exercise restrictions. 70 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the total expense related to all benefit plans (in millions of dollars): Year Ended December 31, 2021 2020 2019 Defined contribution plans 1 $ 13.9 $ 8.3 $ 8.8 Deferred compensation plan 2 0.7 1.5 1.6 Multiemployer pension plans 1,3 5.0 4.9 5.0 Net periodic postretirement benefit cost relating to Salaried VEBA 2,3 2.3 4.8 6.6 Net periodic postretirement benefit cost relating to pension plans 4 4.3 0.4 0.4 Net periodic postretirement benefit cost relating to OPEB 4 2.8 n/a n/a Total $ 29.0 $ 19.9 $ 22.4 1. Substantially all of these charges related to employee benefits are in Cost of products sold with the remaining balance in SG&A and R&D. 2. Deferred compensation plan expense 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, net, in our Statements of Consolidated (Loss) Income. 3. See Note 6 for more information on our multiemployer defined benefit pension plans. 4. The current service cost component of Net periodic postretirement benefit cost relating to both the pension plans and the 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 pension plans and the OPEB plan are included within Other expense, net, on our Statements of Consolidated (Loss) Income. Components of Net Periodic Postretirement Benefit Cost. Our results of operations included the following impacts associated with our pension plans, OPEB plan and the Salaried VEBA: (i) a charge for service rendered by employees; (ii) a charge for accretion of interest; (iii) a benefit for the return on plan assets; (iv) amortization of prior service costs associated with plan amendments; and (v) amortization of net actuarial differences. The following table presents the components of Net periodic postretirement benefit cost relating to our pension plans, OPEB plan and the Salaried VEBA (in millions of dollars): Pension 1 OPEB Salaried VEBA Year Ended December 31, Year Ended December 31, Year Ended December 31, 2021 2020 2019 2021 2020 2019 2021 2020 2019 Service cost $ 4.1 $ 0.3 $ 0.3 $ 1.1 n/a n/a $ 0.1 $ 0.1 $ 0.1 Interest cost 0.5 0.3 0.3 1.7 n/a n/a 1.5 2.5 3.2 Expected return on plan assets ( 0.4 ) ( 0.3 ) ( 0.3 ) — n/a n/a ( 3.1 ) ( 2.8 ) ( 2.7 ) Amortization of prior service cost 2 — — — — n/a n/a 3.5 4.7 5.6 Amortization of net actuarial loss 0.1 0.1 0.1 — n/a n/a 0.3 0.3 0.4 Net periodic postretirement benefit cost $ 4.3 $ 0.4 $ 0.4 $ 2.8 n/a n/a $ 2.3 $ 4.8 $ 6.6 1. Net periodic postretirement benefit cost for 2019 and 2020 included only the Canadian pension plan. Net periodic postretirement benefit cost for the Warrick pension plan was included in 2021 from the acquisition date of March 31, 2021 through December 31 2021. 2. We amortize prior service cost on a straight-line basis over the average remaining years of service to full eligibility for benefits of the active plan participants. 6. Multiemployer Pension Plans Overview. We contribute to multiemployer defined benefit pension plans under the terms of collective bargaining agreements that cover our union-represented employees at certain facilities. At December 31, 2021, approximately 35 % of our total employees were union-represented employees at facilities participating in these multiemployer pension plans. We currently estimate that contributions will range from $ 4.0 million to $ 6.0 million in 2022. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects: 71 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS • Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers. • If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. • If we choose to stop participating in any of our multiemployer plans, we may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability. The following table presents information about multiemployer pension plans in which we participate: Pension FIP/RP Status Contributions of Employer Protection Act Pending/ the Company Surcharge Expiration Date Identification Zone Status 1 Implemented Year Ended December 31, Imposed of Collective- Pension Fund Number 2021 2020 in 2021 2 2021 2020 2019 in 2021 Bargaining Agreements (in millions of dollars) Steelworkers Pension Trust (USW) 3 23-6648508 Green Green No $ 3.6 $ 3.8 $ 3.8 No Sep 2025 - Nov 2026 Other Funds 4 1.4 1.1 1.2 $ 5.0 $ 4.9 $ 5.0 1. The zone status is based on information that we received from the plan and is certified by the plan’s actuary. Among other factors, plans in the green zone are at least 80 % funded. 2. The “FIP/RP Status Pending/Implemented” column indicates if a Financial Improvement Plan (FIP) or a Rehabilitation Plan (RP) is either pending or has been implemented for the plan under the Pension Protection Act. 3. We are party to three collective bargaining agreements with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO, CLC (“USW”) that require contributions to the Steelworkers Pension Trust. As of December 31, 2021, USW collective bargaining agreements covering employees at our Newark, Ohio (“Newark”) and Spokane, Washington (“Trentwood”) facilities covered 86 % of our USW-represented employees and expire in September 2025. Our monthly contributions per hour worked by each bargaining unit employee at our Newark and Trentwood facilities were (in whole dollars) $ 1.75 in 2021. The union contracts covering employees at our Richmond, Virginia facility and Florence, Alabama facility cover 11 % and 3 % of our USW-represented employees, respectively, and expire in November 2026 and March 2026, respectively. 4. Other Funds consists of plans that are not individually significant. We were not listed in any of the plans’ Forms 5500 or the Canada-Wide Industrial Pension Plan financial statements as providing more than 5 % of the total contributions for any of the plan years disclosed. At December 31, 2021, financial statements and Forms 5500 were not available for the plan year ending in 2021. Further, there were no significant changes to the number of employees covered by our multiemployer plans that would affect the period-to-period comparability of the contributions for the years presented. 7. Employee Incentive Plans Short-Term Incentive Plans (“STI Plans”) We have annual short-term incentive compensation plans for senior management and certain other employees payable at our election in cash, shares of common stock or a combination of cash and shares of common stock. Amounts earned under STI Plans are based on our Adjusted EBITDA, modified for certain safety, quality, delivery, cost and individual performance factors. The Adjusted EBITDA targets are determined based on the return on adjusted net assets. Most of our production facilities have similar programs for both hourly and salaried employees. As of December 31, 2021, we had a liability of $ 9.3 million recorded within Accrued salaries, wages and related expenses for estimated probable future payments relating to the 12-month performance period of our 2021 STI Plans. 72 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Long-Term Incentive Programs (“LTI Programs”) General . Executive officers and other key employees of the Company, as well as non-employee directors of the Company, are eligible to participate in the Kaiser Aluminum Corporation 2021 Equity and Incentive Compensation Plan (“2021 Plan”). The 2021 Plan was approved by stockholders on June 3, 2021 and replaced and succeeded in its entirety the Kaiser Aluminum Corporation Amended and Restated 2016 Equity and Performance Incentive Plan, except with regard to awards previously granted thereunder that continued to be outstanding. At December 31, 2021, 716,496 shares were available for awards under the 2021 Plan. We issue new shares of our common stock upon vesting under the 2021 Plan. Non-Vested Common Shares and Restricted Stock Units. We grant non-vested common shares (“RSAs”) to our non-employee directors and restricted stock units (“RSUs”) to our executive officers and other key employees. The RSUs have rights similar to the rights of RSAs and each RSU that becomes vested entitles the recipient to receive one common share or a cash amount equaling the value of one common share. The service period is generally one year for RSAs granted to non-employee directors and three years for RSUs granted to executive officers and other key employees. The following table summarizes activity relating to RSAs and RSUs for the year ended December 31, 2021: Shares Weighted- Average Grant-Date Fair Value per Share Outstanding at December 31, 2020 249,731 $ 72.22 Granted 121,827 107.24 Vested ( 58,451 ) 90.36 Forfeited ( 2,434 ) 103.91 Outstanding at December 31, 2021 310,673 $ 91.05 Performance Shares. We grant performance shares to executive officers and other key employees that vest upon the achievement of specified market or internal performance goals. Performance goals can include: (i) our achieving a total shareholder return (“TSR”) compared to the TSR of a specified group of peer companies over a three-year performance period (“TSR-Based Performance Shares”); (ii) achieving targeted improvements to our total controllable cost performance over a three-year performance period; and/or (iii) achieving targeted improvements to our Adjusted EBITDA margin performance, measured by our Adjusted EBITDA as a percentage of value added revenue, over a three-year performance period. Each performance share that becomes vested and earned entitles the recipient to receive one common share or a cash amount equaling the value of one common share. The number of performance shares that may be earned and result in the issuance of cash or common shares ranges between 0 % to 200 % of the target number of underlying common shares, which is approximately one-half of the maximum payout. The following table presents the weighted average inputs and assumptions used in the Monte Carlo simulations to calculate the fair value at grant date of our TSR-Based Performance Shares: Year Ended December 31, 2021 2020 2019 Grant date fair value $ 151.98 $ 105.88 $ 134.72 Grant date stock price $ 114.71 $ 91.22 $ 108.79 Expected volatility of Kaiser Aluminum 1 45.71 % 27.40 % 27.35 % Expected volatility of peer companies 1 50.69 % 36.94 % 39.08 % Risk-free interest rate 0.29 % 0.58 % 2.51 % Dividend yield 2.51 % 2.96 % 2.21 % 1. Weighted average expected volatility based on 2.8 years of daily closing share prices from the valuation date to the end of the performance period. 73 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes activity relating to performance shares for the year ended December 31, 2021: Shares Weighted- Average Grant-Date Fair Value per Share Outstanding at December 31, 2020 364,658 $ 102.32 Granted 1 104,246 137.06 Vested ( 23,497 ) 125.67 Forfeited 1 ( 2,080 ) 121.17 Canceled 1 ( 92,947 ) 101.62 Outstanding at December 31, 2021 350,380 $ 118.56 1. The number of shares granted and forfeited are presented at their maximum payout; and the number of shares canceled includes the number of shares that did not vest due to performance results falling below those required for maximum payout. Non-Cash Compensation Expense. Non-cash compensation expense relating to all awards is included in SG&A and R&D. The following table presents non-cash compensation expense by type of award under LTI Programs (in millions of dollars): Year Ended December 31, 2021 2020 2019 RSAs and RSUs $ 8.1 $ 6.1 $ 6.1 Performance shares 4.5 3.5 3.6 Total non-cash compensation expense $ 12.6 $ 9.6 $ 9.7 Recognized tax benefits relating to the non-cash compensation expense presented in the table above were $ 3.0 million, $ 2.3 million and $ 2.4 million for 2021, 2020 and 2019, respectively. The aggregate fair value of awards that vested was $ 9.7 million, $ 12.4 million and $ 16.4 million for 2021, 2020 and 2019, respectively, which represents the market value of our common stock on the date that the awards vested. Unrecognized Gross Compensation Cost Data. The following table presents unrecognized gross compensation costs and the expected period over which the remaining gross compensation costs will be recognized by type of award as of December 31, 2021: Unrecognized Gross Compensation Costs (in millions of dollars) Expected Period (in years) Over Which the Remaining Gross Compensation Costs Will Be Recognized RSAs and RSUs $ 14.3 2.4 Performance shares $ 6.4 1.8 The following table presents the weighted-average grant-date fair value per share for shares granted by type of award: Year Ended December 31, 2021 2020 2019 RSAs and RSUs $ 107.24 $ 71.75 $ 97.52 Performance shares $ 137.06 $ 99.87 $ 124.10 74 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Participants may elect to have us withhold common shares to satisfy minimum statutory tax withholding obligations arising in connection with the vesting of RSAs, RSUs and performance shares. We cancel any such shares withheld on the applicable vesting dates or earlier dates when service requirements are satisfied, which correspond to the times at which income to the employee is recognized. When we withhold these common shares, we are required to remit to the appropriate taxing authorities the fair value of the shares withheld as of the vesting date. The withholding of common shares by us could be deemed a purchase of the common shares. 8. Derivatives, Hedging Programs and Other Financial Instruments Overview . In conducting our business, we enter into derivative transactions, including forward contracts and options, to limit our exposure to: (i) metal price risk related to our sale of fabricated aluminum products and the purchase of metal, including primary and scrap, or recycled, aluminum, our main raw material, and certain alloys used as raw material for our fabrication operations; (ii) energy price risk relating to fluctuating prices of natural gas and electricity used in our production processes; and (iii) foreign currency requirements with respect to cash commitments for equipment purchases and/or other agreements denominated in foreign currency. We do not use derivative financial instruments for trading or other speculative purposes. Hedging transactions are executed centrally on behalf of all of our operations to minimize transaction costs, monitor consolidated net exposures and allow for increased responsiveness to changes in market factors. Our derivative activities are overseen by a committee (“Hedging Committee”), which is composed of our chief executive officer, chief financial officer, chief accounting officer, vice president of treasury, risk and procurement and other officers and employees selected by the chief executive officer. The Hedging Committee meets regularly to review commodity price exposure, derivative positions and strategy. Management reviews the scope of the Hedging Committee’s activities with our Board of Directors. We are exposed to counterparty credit risk on all of our derivative instruments, which we manage by monitoring the credit quality of our counterparties, allocating our hedging positions among multiple counterparties to limit exposure to any single entity, and using options as part of the hedging strategy. Our counterparties are major investment grade financial institutions or trading companies and our hedging transactions are governed by negotiated reciprocal credit lines, which generally require collateral to be posted above specified credit thresholds which may adjust up or down, depending on our liquidity. As a result, we believe the risk of loss is remote and contained. The aggregate fair value of our derivative instruments that were in a net liability position was zero and $ 2.7 million at December 31, 2021 and December 31, 2020, respectively, and we had no collateral posted as of those dates. Additionally, our firm-price customer sales commitments create incremental customer credit risk related to metal price movements. Under certain circumstances, we mitigate this risk by periodically requiring cash collateral from them, which we classify as deferred revenue and include as a component of Other accrued liabilities. We had no cash collateral posted from our customers at December 31, 2021. For more information about concentration risks concerning customers and suppliers, see Note 17. Cash Flow Hedges 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 (loss) 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 11 for the total amount of gain or loss on derivative instruments designated and qualifying as cash flow hedging instruments and fair value hedging instruments that was reported in Accumulated other comprehensive loss (“AOCI”), as well as the related reclassifications into earnings and tax effects. Cumulative gains and losses related to cash flow hedges are reclassified out of AOCI and recorded within COGS when the associated hedged commodity purchases impact earnings. Aluminum Hedges . Our pricing of fabricated aluminum products is generally intended to lock in a conversion margin (representing the value added from the fabrication process(es)) and to pass through aluminum price fluctuations to our customers. For some of our higher value added products sold on a spot basis, the pass through of aluminum price movements can sometimes lag by as much as several months, with a favorable impact to us when aluminum prices decline and an adverse impact to us when aluminum prices increase. Additionally, in certain instances, we enter into firm-price arrangements with our customers for stipulated volumes to be delivered in the future. Because we generally purchase primary and secondary aluminum on a floating price basis, the lag in passing through aluminum price movements to customers on some of our higher value added products sold on a spot basis and the volume that we have committed to sell to our customers under a firm-price arrangement create aluminum price risk for us. We use third-party hedging instruments to limit exposure to aluminum price risk related to the aluminum pass through lag on some of our products and firm-price customer sales contracts. 75 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Alloying Metals Hedges . We are exposed to risk of fluctuating prices for a lloying m etals used as raw materials in our fabrication operations. We, from time to time, in the ordinary cou rse of business, enter into hedging transactions and/or physical delivery commitments with third parties to mitigate our risk from fluctuations in a lloying m etals prices that are not passed through pursuant to the terms of our customer contracts . Energy Hedges . We are exposed to risk of fluctuating prices for natural gas and electricity. We, from time to time, in the ordinary course of business, enter into hedging transactions and/or physical delivery commitments with third parties to mitigate our risk from fluctuations in natural gas and electricity prices that are not passed through pursuant to the terms of our customer contracts. The following table summarizes the percentage of our expected variable priced purchases of metal alloys and energy for which we have executed derivative and/or physical delivery commitments in place to reduce price fluctuations for the next five years as of December 31, 2021: 2022 2023 2024 2025 2026 Zinc 61 % — — — — Copper 64 % — — — — Magnesium 1 100 % — — — — Silicon 100 % — — — — Natural Gas 48 % 47 % 45 % 25 % 20 % Electricity 74 % 43 % — — — 1. We have contracts in place to cover the noted percentage of our requirements at a firm or predetermined price, however our primary supplier of magnesium declared force majeure and is supplying less than the full volume contracted and our magnesium cost will fluctuate for any shortfalls until our supplier’s capacity is fully restored. 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 We are exposed to foreign currency exchange risk related to firm-price commitments for equipment purchases from foreign manufacturers. We, from time to time, in the ordinary course of business, use third-party hedging instruments to mitigate our exposure to currency exchange rate fluctuations on these purchases and designate such hedging instruments as fair value hedges. Gain or loss related to components excluded from the assessment of effectiveness from these fair value hedges is first recognized in AOCI and subsequently reclassified to Depreciation and amortization on a straight-line basis over the term of the hedge. Gain or loss on the hedged item (e.g., equipment purchase firm commitments) and the remaining gain or loss on the fair value hedge is recorded within Depreciation and amortization in the period that the gain or loss occurs. Any difference between the change in the fair value of the excluded component and amounts recognized in income on a straight-line basis over the term of the hedge is recognized in AOCI. Non-Designated Hedges of Operational Risks From time-to-time, we enter into commodity contracts that are not designated as hedging instruments to mitigate certain short‑term commodity impacts, as identified. The gain or loss on these derivatives is recognized within COGS. Notional Amount of Derivative Contracts The following table summarizes our derivative positions at December 31, 2021: Aluminum Maturity Period (month/year) Notional Amount of Contracts (mmlbs) Fixed price purchase contracts 1/22 through 12/23 80.3 Midwest premium swap contracts 1 1/22 through 12/23 80.2 Alloying Metals Maturity Period (month/year) Notional Amount of Contracts (mmlbs) Fixed price purchase contracts 1/22 through 12/22 6.3 76 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Natural Gas Maturity Period (month/year) Notional Amount of Contracts (mmbtu) Fixed price purchase contracts 1/22 through 12/25 5,160,000 Electricity Maturity Period (month/year) Notional Amount of Contracts (Mwh) Fixed price purchase contracts 1/22 through 12/22 219,000 Euro Maturity Period (month/year) Notional Amount of Contracts (euro) Fixed price forward contracts 3/22 through 3/23 173,400 1. Regional premiums represent the premium over the London Metal Exchange price for primary aluminum which is incurred on our purchases of primary aluminum. (Gain) Loss The following table summarizes the amount of loss (gain) included on our Statements of Consolidated (Loss) Income associated with all derivative contracts (in millions of dollars): Year Ended December 31, Statements of Consolidated 2021 2020 2019 (Loss) Income Classification Total of income and expense line items presented in our Statements of Consolidated (Loss) Income in which the effects of hedges are recorded: Cash flow hedges $ 2,348.1 $ 941.3 $ 1,215.2 Cost of products sold Fair value hedges n/a $ 52.2 n/a Depreciation and amortization Fair value hedges n/a $ 1.4 n/a Other expense, net (Gain) loss recognized in our Statements of Consolidated (Loss) Income related to cash flow hedges: Aluminum $ ( 35.2 ) $ 13.7 $ 18.4 Cost of products sold Alloying Metals (effective hedges) 0.1 1.4 1.1 Cost of products sold Alloying Metals (reclassification from AOCI due to forecasted transactions no longer probable of occurring) — 0.8 — Cost of products sold Natural gas ( 2.1 ) 1.3 0.2 Cost of products sold Electricity ( 4.7 ) 0.5 — Cost of products sold Total (gain) loss recognized in our Statements of Consolidated (Loss) Income related to cash flow hedges $ ( 41.9 ) $ 17.7 $ 19.7 Loss (gain) recognized in our Statements of Consolidated (Loss) Income related to fair value hedges: Foreign exchange contracts $ — $ ( 0.1 ) $ — Depreciation and amortization Hedged item — 0.1 — Depreciation and amortization Excluded component amortized from AOCI — 0.4 — Depreciation and amortization Reclassification from AOCI related to early termination of firm commitment — 0.6 — Other expense, net Net settlement related to early termination of forward contracts — ( 0.7 ) — Other expense, net Total loss recognized in our Statements of Consolidated (Loss) Income related to fair value hedges $ — $ 0.3 $ — (Gain) loss recognized in our Statements of Consolidated (Loss) Income related to non-designated hedges: Alloying Metals – Realized (gain) loss $ ( 5.0 ) $ 0.2 $ — Cost of products sold Alloying Metals – Unrealized loss (gain) 1.2 ( 3.5 ) — Cost of products sold Total (gain) loss recognized in our Statements of Consolidated (Loss) Income related to non-designated hedges: $ ( 3.8 ) $ ( 3.3 ) $ — 77 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fair Values of Derivative Contracts The fair values of our derivative contracts are based upon trades in liquid markets. Valuation model inputs can be verified, and valuation techniques do not involve significant judgment. The fair values of such financial instruments are classified within Level 1 of the fair value hierarchy. All of our derivative contracts with counterparties are subject to enforceable master netting arrangements. We reflect the fair value of our derivative contracts on a gross basis on our Consolidated Balance Sheets. The following table presents the fair value of our derivative financial instruments (in millions of dollars): As of December 31, 2021 As of December 31, 2020 Assets Liabilities Net Amount Assets Liabilities Net Amount Cash Flow Hedges: Aluminum – Fixed price purchase contracts $ 12.2 $ ( 1.1 ) $ 11.1 $ 4.6 $ ( 0.1 ) $ 4.5 Midwest premium swap contracts 5.5 ( 0.1 ) 5.4 0.2 ( 1.2 ) ( 1.0 ) Natural gas – Fixed price purchase contracts 3.0 ( 0.1 ) 2.9 0.2 ( 1.5 ) ( 1.3 ) Electricity – Fixed price purchase contracts 4.4 ( 0.6 ) 3.8 2.0 ( 2.5 ) ( 0.5 ) Total cash flow hedges 25.1 ( 1.9 ) 23.2 7.0 ( 5.3 ) 1.7 Non-Designated Hedges: Alloying Metals – Fixed price purchase contracts 1.6 ( 0.1 ) 1.5 3.9 — 3.9 Fixed price sales contracts — — — — ( 1.3 ) ( 1.3 ) Total non-designated hedges 1.6 ( 0.1 ) 1.5 3.9 ( 1.3 ) 2.6 Total $ 26.7 $ ( 2.0 ) $ 24.7 $ 10.9 $ ( 6.6 ) $ 4.3 The following table presents the total amounts of derivative assets and liabilities on our Consolidated Balance Sheets (in millions of dollars): As of December 31, 2021 2020 Derivative assets: Prepaid expenses and other current assets $ 25.0 $ 8.4 Other assets 1.7 2.5 Total derivative assets $ 26.7 $ 10.9 Derivative liabilities: Other accrued liabilities $ ( 1.9 ) $ ( 3.8 ) Long-term liabilities ( 0.1 ) ( 2.8 ) Total derivative liabilities $ ( 2.0 ) $ ( 6.6 ) Fair Value of Other Financial Instruments All Other Financial Assets and Liabilities. We believe that the fair values of our accounts receivable, contract assets, accounts payable and accrued liabilities approximate their respective carrying values due to their short maturities and nominal credit risk. 9. Debt and Credit Facility Senior Notes 4.50% Senior Notes. In May 2021, we issued $ 550.0 million aggregate principal amount of 4.50% unsecured senior notes due June 1, 2031 at 100 % of the principal amount (“4.50% Senior Notes”). The restrictions and covenants related to our 4.50% Senior Notes are similar to those governing our pre-existing 4.625% unsecured senior notes due March 1, 2028 (“4.625% Senior Notes”). The unamortized amount of debt issuance costs as of December 31, 2021 relating to the 4.50% Senior Notes was $ 8.1 million. Interest expense, including amortization of debt issuance costs and debt premium, relating to the 4.50% Senior Notes was $ 15.7 million for the year ended December 31, 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. The first interest payment date was December 1, 2021 . The effective interest rate of the 4.50% Senior Notes is approximately 4.7 % per annum, taking into account the amortization of debt issuance costs. 78 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 $ 542.6 million at December 31, 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). We may redeem the 4.50% Senior Notes at our option in whole or part at any time on or after June 1, 2026 at a redemption price (expressed as a percentage of principal amount) of 102.25 %, declining to 101.50 %, 100.75 % and 100 % on or after June 1, 2027, June 1, 2028 and June 1, 2029, respectively, in each case plus any accrued and unpaid interest. At any time prior to June 1, 2026, we may also redeem some or all of the 4.50% Senior Notes at a redemption price equal to 100 % of the principal amount of the 4.50% Senior Notes redeemed, plus the “applicable premium” (as defined in the indenture) as of the redemption date and any accrued and unpaid interest thereon. In addition, subject to the conditions set forth in the indenture, at any time prior to June 1, 2026, we may also redeem up to 40 % of the 4.50% Senior Notes using the net proceeds from certain equity offerings at a redemption price equal to 104.50 % of the principal amount plus any accrued and unpaid interest. Holders of the 4.50 % Senior Notes have the right to require us to repurchase the 4.50 % Senior Notes at a price in cash equal to 101 % of the aggregate principal amount plus any accrued and unpaid interest following the occurrence of both: (i) a change of control and (ii) a “ratings decline” (as defined in the indenture). A change of control includes: (i) the sale, lease or transfer of all or substantially all of our assets; (ii) certain ownership changes; (iii) certain recapitalizations, mergers and dispositions; and (iv) stockholder approval of any plan or proposal for the liquidation or dissolution of us. We may also be required to offer to repurchase the 4.50 % Senior Notes at 100 % of the principal amount, plus any accrued and unpaid interest, with the net proceeds of certain asset sales. 6.50% Senior Notes. In April 2020 and May 2020, we issued $ 300.0 million and $ 50.0 million, respectively, aggregate principal amounts of our 6.50 % unsecured senior notes due May 1, 2025 at 100 % and 101 %, respectively, of the principal amounts (“6.50% Senior Notes”). On May 21, 2021, we redeemed in full $ 350.0 million in aggregate principal amount 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, 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 13 for details). The effective interest rate of the 6.50% Senior Notes was 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 $ 9.2 million and $ 16.2 million for the years ended December 31, 2021 and December 31, 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. 4.625% Senior Notes. In November 2019, we issued $ 500.0 million principal amount of 4.625 % unsecured senior notes due March 1, 2028 at 100 % of the principal amount. The unamortized amount of debt issuance costs as of December 31, 2021 was $ 5.6 million. Interest expense, including amortization of debt issuance costs, relating to the 4.625% Senior Notes was $ 24.0 million for both years ended December 31, 2021 and December 31, 2020. 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 $ 506.9 million and $ 521.3 million at December 31, 2021 and December 31, 2020, respectively. The 4.625% Senior Notes are unsecured obligations and are guaranteed by each of our existing and future domestic subsidiaries that is a borrower or guarantor under the revolving credit facility (see Revolving Credit Facility below). We may redeem the 4.625% Senior Notes at our option in whole or part at any time on or after March 1, 2023 at redemption prices (expressed as percentages of principal amount) of 102.313 %, declining to 101.156 % and 100 % on or after March 1, 2024 and March 1, 2025, respectively, in each case plus any accrued and unpaid interest to the applicable redemption date. At any time prior to March 1, 2023, we may also redeem some or all of the 4.625% Senior Notes at a redemption price equal to 100 % of the principal amount of the 4.625% Senior Notes redeemed, plus the “applicable premium” (as defined in the indenture) as of the redemption date and any accrued and unpaid interest thereon. In addition, subject to the conditions set forth in the indenture, at any time prior to March 1, 2023, we may also redeem up to 40.0 % of the 4.625% Senior Notes using the net proceeds from certain equity offerings at a redemption price equal to 104.625 % of the principal amount plus any accrued and unpaid interest. 79 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Holders of the 4.625 % Senior Notes have the right to require us to repurchase the 4.625 % Senior Notes at a price in cash equal to 101 % of the aggregate principal amount plus any accrued and unpaid interest following the occurrence of both: (i) a change of control and (ii) a “ratings decline” (as defined in the indenture). A change of control includes: (i) the sale, lease or transfer of all or substantially all of our assets; (ii) certain ownership changes; (iii) certain recapitalizations, mergers and dispositions; and (iv) stockholder approval of any plan or proposal for the liquidation or dissolution of us. We may also be required to offer to repurchase the 4.625 % Senior Notes at 100 % of the principal amount, plus any accrued and unpaid interest, with the net proceeds of certain asset sales. The indenture governing the 4.625% Senior Notes (“indenture”) places limitations on our and our restricted subsidiaries’ ability to, among other things: (i) incur liens; (ii) consolidate, merge or sell all or substantially all of our and our restricted subsidiaries’ assets; (iii) incur or guarantee additional indebtedness; (iv) enter into transactions with affiliates; and (v) make “restricted payments” (as defined in the indenture to include certain loans, investments, dividend payments, share repurchases and prepayments, redemptions and repurchases of certain indebtedness). Certain types and amounts of restricted payments are allowed by various provisions of the indenture. In particular, the indenture provisions permit us to make restricted payments in any amount if, after giving effect to such restricted payments, our “consolidated net debt ratio” (as defined in the indenture) equals or is less than 2.75 :1.00. 5.875% Senior Notes. In May 2016, we issued $ 375.0 million principal amount of 5.875 % unsecured senior notes due May 15, 2024 (“5.875% Senior Notes”) at 100 % of the principal amount. On December 18, 2019, we redeemed in full all outstanding 5.875% Senior Notes at a redemption price of 104.406 % of the principal amount. The effective interest rate of the 5.875% Senior Notes was approximately 6.1 % per annum, taking into account the amortization of debt issuance costs. Interest expense, including amortization of debt issuance costs, relating to the 5.875% Senior Notes was $ 22.0 million for the year ended December 31, 2019. Revolving Credit Facility In October 2019, we entered into a revolving credit facility with Wells Fargo Bank, National Association, as administrative agent, and the other financial institutions party thereto (“Revolving Credit Facility”). The Revolving Credit Facility provides us with a $ 375.0 million funding commitment through October 30, 2024. Joining us as borrowers (“Co-Borrowers”) under the Revolving Credit Facility are four of our wholly owned domestic operating subsidiaries: (i) Kaiser Aluminum Investments Company; (ii) Kaiser Aluminum Fabricated Products, LLC; (iii) Kaiser Aluminum Washington, LLC; and (iv) Kaiser Aluminum Warrick, LLC. The Revolving Credit Facility replaces the previously existing facility that was due to mature in December 2020. The Revolving Credit Facility is secured by a first priority lien on substantially all of the Co-borrowers’ accounts receivable, inventory, cash or cash equivalents and certain other related assets and proceeds, as well as certain machinery and equipment. Under the Revolving Credit Facility, we are able to borrow from time to time an aggregate amount equal to the lesser of $ 375.0 million and a borrowing base comprised of: (i) 90 % of eligible accounts receivable in which the account debtor is an investment-grade domestic account debtor; (ii) 85 % of eligible accounts receivable in which the account debtor is a domestic account debtor, but not an investment-grade domestic account debtor; (iii) the lesser of (a) 85 % of eligible accounts receivable in which the account debtor is not a domestic account debtor and (b) an amount equal to 25 % of the lesser of (a) the maximum revolver amount or (b) the borrowing base; (iv) the lesser of (a) the product of 75 % multiplied by the value of eligible inventory and (b) the product of 85 % multiplied by the net recovery percentage identified in the most recent acceptable appraisal of inventory, multiplied by the value of eligible inventory; (v) certain eligible machinery and equipment supporting up to $ 71.5 million of borrowing availability; and (vi) at our option, 100 % of eligible cash, reduced by certain reserves, all as specified in the Revolving Credit Facility. Up to a maximum of $ 40.0 million of availability under the Revolving Credit Facility may be utilized for letters of credit. At maturity, all principal amounts outstanding under the Revolving Credit Facility will be due and payable. Borrowings under the Revolving Credit Facility bear interest at a rate equal to either a base rate, as defined in the Revolving Credit Facility or the London Interbank Offered Rate (“LIBOR”), plus, in each case, a specified variable percentage determined by reference to the then-remaining borrowing availability under the Revolving Credit Facility. The Applicable Margin for Base Rate Loans is 25 basis points, while the Applicable Margin for LIBOR Rate Loans is 125 basis points. We will also pay a monthly commitment fee equal to 0.25 % per annum multiplied by the result of the aggregate amount of revolver commitments, less the average revolver usage during the immediately preceding month. The Revolving Credit Facility may, subject to certain conditions and the agreement of lenders thereunder, be increased up to $ 575.0 million, subject to certain conditions and the agreement of lenders thereunder. 80 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Amounts owed under the Revolving Credit Facility may be accelerated upon the occurrence of various events of default, including, without limitation, the failure to make principal or interest payments when due and breaches of covenants, representations and warranties set forth therein. The Revolving Credit Facility places limitations on our ability and the ability of certain of our subsidiaries to, among other things: (i) grant liens; (ii) engage in mergers; (iii) sell assets; (iv) incur debt; (v) enter into sale and leaseback transactions; (vi) make investments; (vii) undertake transactions with affiliates; (viii) prepay certain debt; (ix) pay dividends; and (x) repurchase shares. We are allowed to prepay debt, pay dividends and repurchase shares in any amount if, in accordance with terms as defined in the Revolving Credit Facility, no “default” or “event of default” has occurred and is continuing or would result after giving effect to such action and, after giving effect to such proposed action, “excess availability” calculated on a pro forma basis is greater than a defined minimum level. A lower minimum level applies if the “fixed charge coverage ratio,” calculated on a pro forma basis after giving effect to such proposed action for the period of four consecutive fiscal quarters ending on the last day of the most recently ended fiscal quarter for which financial statements have been delivered, is greater than 1.10 :1.0. In addition, we are required to maintain a fixed charge coverage ratio on a consolidated basis at or above 1.0 :1.0 if borrowing availability under the Revolving Credit Facility is less than a defined minimum level. At December 31, 2021, we were in compliance with all covenants contained in the Revolving Credit Facility. The following table summarizes availability and usage of our Revolving Credit Facility as determined by a borrowing base calculated as of December 31, 2021 (in millions of dollars): Revolving Credit Facility borrowing commitment $ 375.0 Borrowing base availability $ 375.0 Less: Outstanding borrowings under Revolving Credit Facility — Less: Outstanding letters of credit under Revolving Credit Facility ( 7.7 ) Remaining borrowing availability $ 367.3 10. Commitments and Contingencies Commitments. We have a variety of financial commitments, including purchase agreements, forward foreign exchange and forward sales contracts, indebtedness and letters of credit (see Note 3, Note 8 and Note 9). CAROs. The inputs in estimating the fair value of CAROs include: (i) the timing of when any such CARO cash flows may be incurred; (ii) incremental costs associated with special handling or treatment of CARO materials; and (iii) the credit-adjusted risk-free rate applicable at the time additional CARO cash flows are estimated; all of these are considered Level 3 inputs as they involve significant judgment from us. The following table summarizes activity relating to CARO liabilities (in millions of dollars): Year Ended December 31, 2021 2020 2019 Beginning balance $ 6.7 $ 6.5 $ 6.3 Liabilities settled during the period ( 0.1 ) ( 0.1 ) ( 0.2 ) Accretion expense 0.6 0.5 0.5 Adjustment to accretion expense due to revisions to estimated cash flow and timing of expenditure 1 — ( 0.2 ) ( 0.1 ) Ending balance $ 7.2 $ 6.7 $ 6.5 1. The adjustments to accretion expense had a $ 0.01 impact on the basic and diluted net income per share for both 2020 and 2019. The estimated fair value of CARO liabilities were based upon the application of a weighted-average credit-adjusted risk-free rate of 8.7 % at both December 31, 2021 and December 31, 2020 . CAROs are included in Other accrued liabilities or Long-term liabilities, as appropriate. 81 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Warrick Rolling Mill Potential CARO Liability. We identified potential CAROs related to the future removal and disposal of asbestos that is contained within the Warrick rolling mill facility. We believe that the asbestos is appropriately contained in accordance with current environmental regulations. If the facility were demolished or subject to renovation activities that disturb the asbestos, certain environmental regulations are in place which specify the manner in which the asbestos must be handled and disposed. We are required to record the fair value of CAROs if they can be reasonably estimated. As of December 31, 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. We may conclude at a future date that a CARO exists and we could be required to record a liability for the related obligations in amounts that are material to our consolidated financial statements. While we do not currently expect that the CARO liability will be material to our consolidated financial statements, there can be no assurance as to the existence of a CARO obligation and corresponding liabilities that we may be required to record in the future. Environmental Contingencies. We are subject to a number of environmental laws and regulations, to potential fines or penalties assessed for alleged breaches of such laws and regulations and to potential claims based upon such laws and regulations. We are also subject to legacy environmental contingencies related to activities that occurred at operating facilities prior to July 6, 2006, which represent the majority of our environmental accruals. The status of these environmental contingencies are discussed below. We have established procedures for regularly evaluating environmental loss contingencies. Our environmental accruals represent our undiscounted estimate of costs reasonably expected to be incurred based on presently enacted laws and regulations, currently available facts, existing requirements, existing technology and our assessment of the likely remediation actions to be taken. We continue to pursue remediation activities, primarily to address the historical use of oils containing polychlorinated biphenyls (“PCBs”) at our Trentwood facility. Our remediation efforts are in collaboration with the Washington State Department of Ecology (“Ecology”), to which we submitted a feasibility study in 2012 of remediation alternatives and from which we received permission to begin certain remediation activities pursuant to a signed work order. We have completed a number of sections of the work plan and have received satisfactory completion approval from Ecology on those sections. In cooperation with Ecology, we constructed an experimental treatment facility to determine the treatability and evaluate the feasibility of removing PCBs from ground water under the Trentwood facility. In 2015, we began treatment operations involving a walnut shell filtration system, which we optimized for maximum PCB capture during 2020. Furthermore, based on advancements in technology, we signed an Amended Agreed Order with Ecology in 2020 to evaluate and implement new technologies for PCB removal from groundwater on a pilot basis. The primary technology we are evaluating is Ultraviolet Light Advanced Oxidation Process. As the long-term success of the new methodology cannot be reasonably determined at this time, it is possible we may need to make upward adjustments to our related accruals and cost estimates as the long term results become available. Pursuant to a consent agreement with the Ohio Environmental Protection Agency (“OEPA”), we initiated an investigational study of our Newark facility related to historical contamination. During the quarter ended December 31, 2018, we submitted our remedial investigation study to the OEPA for review and approval. The final remedial investigation report was approved by the OEPA during the quarter ended December 31, 2020. We are currently preparing the required feasibility study, which we expect to submit to the OEPA for review during the quarter ending September 30, 2022. 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 20 to 26 months. The following table presents the changes in our environmental accrual, which was primarily included in Long-term liabilities (in millions of dollars): Year Ended December 31, 2021 2020 2019 Beginning balance $ 18.7 $ 17.0 $ 16.9 Additional accruals 0.1 5.2 1.8 Less: expenditures ( 2.0 ) ( 3.5 ) ( 1.7 ) Ending balance $ 16.8 $ 18.7 $ 17.0 At December 31, 2021, our environmental accrual of $ 16.8 million represented our estimate of the incremental remediation cost based on: (i) proposed alternatives in the final feasibility study related to the Trentwood facility; (ii) currently available facts with respect to our Newark facility; and (iii) facts related to certain other locations owned or formerly owned by us. In accordance with approved and proposed remediation action plans, we expect that the implementation and ongoing monitoring could occur over a period of 30 or more years . 82 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As additional facts are developed, feasibility studies are completed, remediation plans are modified, necessary regulatory approvals for the implementation of remediation are obtained, alternative technologies are developed and/or other factors change, there may be revisions to management’s estimates and actual costs may exceed the current environmental accruals. We believe at this time that it is reasonably possible that undiscounted costs associated with these environmental matters may exceed current accruals by amounts that could be, in the aggregate, up to an estimated $ 11.6 million over the remediation period. It is reasonably possible that our recorded estimate will change in the next 12 months. Other Contingencies. We are party to various lawsuits, claims, investigations and administrative proceedings that arise in connection with past and current operations. We evaluate such matters on a case-by-case basis and our policy is to vigorously contest any such claims we believe are without merit. We accrue for a legal liability when it is both probable that a liability has been incurred and the amount of the loss is reasonably estimable. Quarterly, in addition to when changes in facts and circumstances require it, we review and adjust these accruals to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. While uncertainties are inherent in the final outcome of such matters and it is presently impossible to determine the actual cost that may ultimately be incurred, we believe that we have sufficiently accrued for such matters and that the ultimate resolution of pending matters will not have a material impact on our consolidated financial position, operating results or liquidity. 83 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. Accumulated Other Comprehensive Loss The following table presents the changes in the accumulated balances for each component of AOCI (in millions of dollars): Year Ended December 31, 2021 2020 2019 Pension and Other Postretirement Benefits: Beginning balance $ ( 19.8 ) $ ( 33.2 ) $ ( 35.6 ) Actuarial gain (loss) arising during the period 8.0 0.4 ( 0.4 ) Less: income tax (expense) benefit ( 1.9 ) ( 0.1 ) 0.1 Net actuarial gain (loss) arising during the period 6.1 0.3 ( 0.3 ) Prior service (cost) credit arising during the period ( 14.0 ) 12.3 ( 2.5 ) Less: income tax benefit (expense) 3.3 ( 3.0 ) 0.6 Net prior service (cost) credit arising during the period ( 10.7 ) 9.3 ( 1.9 ) Amortization of net actuarial loss 1 0.4 0.4 0.5 Amortization of prior service cost 1 3.5 4.7 5.6 Less: income tax expense 2 ( 0.9 ) ( 1.2 ) ( 1.4 ) Net amortization reclassified from AOCI to Net (loss) income 3.0 3.9 4.7 Translation impact on Canadian pension plan AOCI balance — ( 0.1 ) ( 0.1 ) Other comprehensive (loss) income, net of tax ( 1.6 ) 13.4 2.4 Ending balance $ ( 21.4 ) $ ( 19.8 ) $ ( 33.2 ) Available for Sale Securities: Beginning balance $ — $ 0.3 $ 0.3 Unrealized gain on available for sale securities — 1.3 4.4 Less: income tax benefit (expense) — ( 0.7 ) ( 1.1 ) Net unrealized gain on available for sale securities — 0.6 3.3 Reclassification of unrealized loss (gain) upon sale of available for sale securities 3 — ( 2.0 ) ( 4.4 ) Less: income tax benefit 2 — 1.1 1.1 Net loss (gain) reclassified from AOCI to Net (loss) income — ( 0.9 ) ( 3.3 ) Other comprehensive income (loss), net of tax — ( 0.3 ) — Ending balance $ — $ — $ 0.3 Cash Flow Hedges: Beginning balance $ 1.1 $ ( 5.6 ) $ ( 13.4 ) Unrealized gain (loss) on cash flow hedges 63.6 ( 9.4 ) ( 9.5 ) Less: income tax (expense) benefit ( 15.0 ) 2.3 2.3 Net unrealized gain (loss) on cash flow hedges 48.6 ( 7.1 ) ( 7.2 ) Reclassification of unrealized (gain) loss upon settlement of cash flow hedges ( 41.9 ) 17.4 19.7 Reclassification due to forecasted transactions no longer probable of occurring — 0.8 — Less: income tax benefit (expense) 2 9.9 ( 4.4 ) ( 4.7 ) Net (gain) loss reclassified from AOCI to Net (loss) income ( 32.0 ) 13.8 15.0 Other comprehensive income, net of tax 16.6 6.7 7.8 Ending balance 4 $ 17.7 $ 1.1 $ ( 5.6 ) Fair Value Hedges: Beginning balance $ — $ — $ — Unrealized gain (loss) on fair value hedges — ( 1.0 ) — Less: income tax benefit — 0.2 — Net unrealized gain (loss) on fair value hedges — ( 0.8 ) — Excluded component amortized from OCI to Net (loss) income — 0.4 — Reclassification due to cancellation of firm commitment — 0.6 — Less: income tax benefit (expense) 2 — ( 0.2 ) — Net loss reclassified from AOCI to Net (loss) income — 0.8 — Other comprehensive income, net of tax — — — Ending balance $ — $ — $ — Foreign Currency Translation: Beginning balance $ — $ ( 0.1 ) $ ( 0.1 ) Other comprehensive income, net of tax — 0.1 — Ending balance $ — $ — $ ( 0.1 ) Total AOCI ending balance $ ( 3.7 ) $ ( 18.7 ) $ ( 38.6 ) 84 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Amounts amortized out of AOCI related to pension and other postretirement benefits were included within Net periodic postretirement benefit cost (see Note 5). 2. Income tax amounts reclassified out of AOCI were included as a component of Income tax benefit (provision). 3. 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. 4. As of December 31, 2021, we estimate a net mark-to-market gain before tax of $ 21.6 million in AOCI will be reclassified into Net (loss) income upon settlement within the next 12 months. 12. Restructuring 2020 Plan. In order to align our projected operational requirements with reduced short and mid-term commercial aerospace demand as a result of the COVID-19 pandemic, we initiated a restructuring plan during the quarter ended June 30, 2020, which consisted primarily of reduction in force measures (“2020 Plan”). Employee costs related to the 2020 Plan were included within Restructuring (benefit) costs in our Statements of Consolidated (Loss) Income and consisted of severance, voluntary buyout packages, outplacement services, estimated medical costs and associated payroll costs . Substantially all of the costs associated with the restructuring efforts initiated under the 2020 Plan were incurred and expensed as of December 31, 2020. As of December 31, 2021, we completed the 2020 Plan and do not anticipate incurring restructuring charges in connection with this plan in future periods. We have incurred total restructuring costs of $ 6.7 million under the 2020 Plan through December 31, 2021. The following table summarizes activity relating to restructuring plan liabilities (in millions of dollars): Year Ended December 31, 2021 2020 Beginning balance $ 1.4 $ — Restructuring costs — 12.4 Cash payments ( 0.6 ) ( 6.1 ) Other adjustments 1 ( 0.8 ) ( 4.9 ) Ending balance $ — $ 1.4 1 In December 2020, March 2021 and May 2021, we revised our production forecasts, thereby reducing the estimated number of headcount reductions necessary as compared with our initial restructuring plan. These reductions to accommodate the revised headcount requirements are included in Other adjustments with an offset to Restructuring (benefit) costs. 13. Other Expense, Net Other expense, net, consisted of the following (in millions of dollars): Year Ended December 31, 2021 2020 2019 Interest income $ 0.2 $ 0.6 $ 0.6 Net periodic postretirement benefit cost ( 4.1 ) ( 4.7 ) ( 6.5 ) Realized gain on available for sale securities — 2.0 4.4 Unrealized (loss) gain on equity securities ( 0.2 ) 0.7 0.7 (Loss) gain on extinguishment of debt – Note 9 ( 35.9 ) — ( 20.3 ) All other, net 1.1 — 0.4 Other expense, net $ ( 38.9 ) $ ( 1.4 ) $ ( 20.7 ) 85 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 14. Income Tax Matters The following table presents (Loss) income before income taxes by geographic area (in millions of dollars): Year Ended December 31, 2021 2020 2019 Domestic $ ( 30.2 ) $ 35.2 $ 76.3 Foreign 6.2 3.6 4.1 (Loss) income before income taxes $ ( 24.0 ) $ 38.8 $ 80.4 Tax Benefit (Provision) . Income taxes are classified as either domestic or foreign based on whether payment is made or due to the United States or a foreign country. Certain income classified as foreign is also subject to domestic income taxes. Income tax benefit (provision) consisted of the following (in millions of dollars): Federal Foreign State Total Year Ended December 31, 2021 Current $ — $ ( 2.4 ) $ ( 3.5 ) $ ( 5.9 ) Deferred 2.1 0.5 4.2 6.8 Benefit applied to decrease Other comprehensive income 3.7 0.3 0.6 4.6 Income tax benefit (provision) $ 5.8 $ ( 1.6 ) $ 1.3 $ 5.5 Year Ended December 31, 2020 Current $ 6.1 $ ( 0.4 ) $ ( 0.6 ) $ 5.1 Deferred ( 18.8 ) ( 0.1 ) ( 2.3 ) ( 21.2 ) Benefit (expense) applied to decrease (increase) Other comprehensive income 5.1 ( 0.1 ) 1.1 6.1 Income tax provision $ ( 7.6 ) $ ( 0.6 ) $ ( 1.8 ) $ ( 10.0 ) Year Ended December 31, 2019 Current $ 5.7 $ ( 1.1 ) $ ( 1.8 ) $ 2.8 Deferred ( 19.6 ) ( 0.3 ) ( 4.5 ) ( 24.4 ) Benefit (expense) applied to decrease (increase) Other comprehensive income 2.7 ( 0.1 ) 0.6 3.2 Income tax provision $ ( 11.2 ) $ ( 1.5 ) $ ( 5.7 ) $ ( 18.4 ) The following table presents a reconciliation between the benefit (provision) for income taxes and the amount computed by applying the federal statutory income tax rate to (Loss) income before income taxes (in millions of dollars): Year Ended December 31, 2021 2020 2019 Amount of federal income tax benefit (provision) based on the statutory rate $ 5.0 $ ( 8.1 ) $ ( 16.9 ) Decrease (increase) in federal valuation allowances 0.2 — ( 0.1 ) Non-deductible compensation expense ( 0.5 ) ( 1.1 ) ( 1.7 ) Non-deductible (expense) benefit ( 0.2 ) 0.4 0.1 State income tax benefit (provision), net of federal benefit 1 1.0 ( 1.5 ) ( 4.5 ) Research and development credit 0.6 0.4 7.7 Gross decreases (increases) for tax positions from current year — — ( 0.3 ) Gross decreases (increases) for tax positions from prior years — 0.4 ( 2.4 ) Foreign income tax expense ( 0.3 ) ( 0.4 ) ( 0.1 ) Foreign undistributed earnings ( 0.3 ) ( 0.1 ) ( 0.2 ) Income tax benefit (provision) $ 5.5 $ ( 10.0 ) $ ( 18.4 ) 1. The state income tax benefit was $ 0.7 million in 2021, reflecting an increase of $ 1.3 million due to state net operating loss (“NOL”) carryforward expirations and tax rate true-ups in various states, offset by a $ 1.6 million decrease in the valuation allowance relating to certain state net operating losses. State income taxes were $ 1.3 million in 2020, reflecting an increase of $ 3.7 million due to state NOL carryforward expirations and tax rate true-ups in various states, partially offset by a $ 3.5 million decrease in the valuation allowance relating to certain state net operating losses. State income taxes were $ 3.8 million in 2019, 86 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS reflecting a decrease of $ 0.7 million due to lower tax rate true-ups in various states, partially offset by an increase of $ 1.4 million due to a change in the valuation allowance relating to certain state net operating losses. Deferred Income Taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. The following table presents the components of our net deferred income tax liabilities (in millions of dollars): As of December 31, 2021 2020 Deferred income tax assets: Loss and credit carryforwards $ 51.5 $ 33.4 Pension Benefits 7.1 4.8 Other assets 29.0 29.4 Leased assets 11.7 7.3 Inventories 50.4 6.9 Valuation allowances ( 4.6 ) ( 6.4 ) Total deferred income tax assets 145.1 75.4 Deferred income tax liabilities: Property, plant and equipment ( 138.9 ) ( 80.8 ) Leased liability ( 10.9 ) ( 6.4 ) Undistributed foreign earnings ( 2.4 ) ( 2.1 ) Total deferred income tax liabilities ( 152.2 ) ( 89.3 ) Net deferred income tax liabilities $ ( 7.1 ) $ ( 13.9 ) Tax Attributes. At December 31, 2021, we had $ 187.1 million of NOL carryforwards available to reduce future cash payments for federal income taxes in the United States. H.R.1, commonly referred to as the Tax Cut and Jobs Act, allows net operating losses (NOLs) generated prior to December 31, 2017 (including our NOL carryforwards) to be fully deducted against 100% of taxable income until fully utilized or expired. NOL carryforwards generated after December 31, 2017 do not expire and can be carried forward indefinitely. Deductions allowed for net operating losses arising in taxable years beginning after December 31, 2020 are limited to 80% of the excess (if any) of taxable income. Our State NOL carryforwards expire periodically through 2030. In addition, we had $ 8.8 million of federal research and development (“R&D”) credit carryforwards to offset regular federal income tax requirements. Our R&D credit carryforwards expire periodically through 2041. In assessing the realizability of deferred tax assets, management considers whether it is “more likely than not” that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers taxable income in carryback years, the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. Due to uncertainties surrounding the realization of some of our deferred tax assets, primarily including state NOL carryforwards sustained during the prior years and expiring tax benefits, we have a valuation allowance against our deferred tax assets. When recognized, the tax benefits relating to any reversal of this valuation allowance will be recorded as a reduction of income tax expense. There was a decrease in the valuation allowance of $ 1.8 million in 2021, a decrease in the valuation allowance of $ 3.5 million in 2020 and an increase in the valuation allowance of $ 1.5 million in 2019. The decrease in the valuation allowance for 2021 was primarily due to the expiration of state NOL carryforwards and the related reversal of their valuation allowances. The decrease in the valuation allowance for 2020 was primarily due to the expiration of state NOL carryforwards and the related reversal of their valuation allowances. The increase in the valuation allowance for 2019 was primarily due to unutilized state NOL carryforwards and Federal Separate Return Limitation Year losses that were expected to expire. Other . We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. 87 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Our tax returns for certain past years are still subject to examination by taxing authorities and the use of NOL carryforwards in future periods could trigger a review of attributes and other tax matters in years that are not otherwise subject to examination. We have gross unrecognized benefits relating to uncertain tax positions. The following table presents a reconciliation of changes in the gross unrecognized tax benefits (in millions of dollars): Year Ended December 31, 2021 2020 2019 Gross unrecognized tax benefits at beginning of period $ 3.8 $ 4.1 $ 1.5 Gross increases for tax positions of current year 0.3 0.1 0.3 Gross increases for tax positions of prior years 0.4 — 2.3 Gross decreases for tax positions of prior years ( 0.3 ) ( 0.4 ) — Settlements ( 0.1 ) — — Gross unrecognized tax benefits at end of period $ 4.1 $ 3.8 $ 4.1 If and when the $ 4.1 million of gross unrecognized tax benefits at December 31, 2021 are recognized, $ 4.1 million will be reflected in our income tax provision and thus affect the effective tax rate in future periods. In addition, we recognize interest and penalties related to unrecognized tax benefits in the income tax provision. We had $0.2 million and $ 0.3 million accrued for interest and penalties at December 31, 2021 and December 31, 2020, respectively. Of these amounts, no ne were considered current and, as such, were included in Long-term liabilities on our Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020. We recognized an increase in interest and penalty of $ 0.1 million in our tax provision in 2019. We do not expect our gross unrecognized tax benefits to significantly change within the next 12 months. 15. Net (Loss) Income Per Share Basic net (loss) income per share is computed by dividing distributed and undistributed net (loss) income allocable to common shares by the weighted-average number of common shares outstanding during the applicable period. The basic weighted-average number of common shares outstanding during the period excludes non-vested share-based payment awards. Diluted net (loss) income per share was calculated under the treasury stock method for 2021, 2020 and 2019, which in all years was more dilutive than the two‑class method. 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): Year Ended December 31, 2021 2020 2019 Numerator: Net (loss) income $ ( 18.5 ) $ 28.8 $ 62.0 Denominator – Weighted-average common shares outstanding (in thousands): Basic 15,836 15,802 15,997 Add: dilutive effect of non-vested common shares, restricted stock units and performance shares 1 — 111 206 Diluted 15,836 15,913 16,203 Net (loss) income per common share, Basic: $ ( 1.17 ) $ 1.82 $ 3.88 Net (loss) income per common share, Diluted: $ ( 1.17 ) $ 1.81 $ 3.83 1. Quantities in the following discussion are denoted in whole shares. For the year ended December 31, 2021, approximately 213,000 potentially dilutive shares were excluded from the computation of net loss per share as their effect would have been anti‑dilutive. A total of 44,000 non-vested RSAs, RSUs and performance shares for the year ended December 31, 2020 were excluded from the weighted-average diluted shares computation as their inclusion would have been anti-dilutive. No shares were excluded for the year ended December 31, 2019. 88 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 16. Supplemental Cash Flow Information Year Ended December 31, 2021 2020 2019 (in millions of dollars) Interest paid $ 48.7 $ 29.4 $ 23.6 Non-cash investing and financing activities (included in Accounts payable): Unpaid purchases of property and equipment $ 14.0 $ 4.5 $ 4.5 Supplemental lease disclosures: Operating lease liabilities arising from obtaining operating lease assets $ 27.8 $ 5.4 $ 1.8 Cash paid for amounts included in the measurement of operating lease liabilities $ 8.2 $ 4.5 $ 3.8 Finance lease liabilities arising from obtaining finance lease assets $ 2.2 $ 3.2 $ 1.0 As of December 31, 2021 2020 2019 Components of cash, cash equivalents and restricted cash: Cash and cash equivalents $ 303.2 $ 780.3 $ 264.3 Restricted cash included in Prepaid expenses and other current assets — — 0.3 Restricted cash included in Other assets 13.8 14.0 14.0 Total cash, cash equivalents and restricted cash shown in our Statements of Consolidated Cash Flows $ 317.0 $ 794.3 $ 278.6 17. Business, Product and Geographical Area Information and Concentration of Risk Our primary line of business is the production of semi-fabricated specialty aluminum mill products, such as bare and coated coils, plate and sheet and extruded and drawn products, primarily used in our Aero/HS products, Packaging, Automotive Extrusions, GE products and Other products end markets. We operate 13 focused production facilities in the United States and one in Canada. Our chief operating decision maker reviews and evaluates our business as a single operating segment. At December 31, 2021, approximately 66 % of our employees were covered by collective bargaining agreements and 15 % of those employees were covered by collective bargaining agreements with expiration dates occurring within one year from December 31, 2021. The following table presents Net sales by end market applications and by timing of control transfer (in millions of dollars): Year Ended December 31, 2021 2020 2019 Net sales: Aero/HS products $ 533.7 $ 537.9 $ 803.2 Packaging 1,119.3 — — Automotive Extrusions 225.0 161.4 190.5 GE products 706.1 458.8 480.1 Other products 37.9 14.6 40.3 Total net sales $ 2,622.0 $ 1,172.7 $ 1,514.1 Timing of revenue recognition: Products transferred at a point in time $ 2,067.9 $ 690.9 $ 866.9 Products transferred over time 554.1 481.8 647.2 Total net sales $ 2,622.0 $ 1,172.7 $ 1,514.1 89 Notes Index KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents geographic information for net sales based on country of origin, income taxes paid and long-lived assets (in millions of dollars): Year Ended December 31, 2021 2020 2019 Net sales to unaffiliated customers: Domestic $ 2,545.0 $ 1,126.8 $ 1,461.4 Foreign 1 77.0 45.9 52.7 Total net sales $ 2,622.0 $ 1,172.7 $ 1,514.1 Income taxes paid: Domestic $ 4.5 $ 0.7 $ 3.5 Foreign 1.1 0.3 2.0 Total income taxes paid $ 5.6 $ 1.0 $ 5.5 As of December 31, 2021 2020 2019 Long-lived assets: 2 Domestic $ 925.3 $ 597.5 $ 592.9 Foreign 1 29.9 29.7 29.1 Total long-lived assets $ 955.2 $ 627.2 $ 622.0 1. Foreign reflects our London, Ontario production facility. 2. Long-lived assets represent Property, plant and equipment, net. The aggregate foreign currency transaction gain (loss) included in determining net (loss) income were immaterial for 2021, 2020 and 2019. Concentrations. For the years ended December 31, 2021, December 31, 2020 and December 31, 2019, one customer represented 16 %, 26 % and 25 %, respectively, of Net sales and a second customer represented 15 %, 11 % and 17 %, respectively, of Net sales. One individual customer accounted for 16 %, a second individual customer accounted for 13 % and a third individual customer accounted for 11 % of the accounts receivable balance at December 31, 2021. One individual customer accounted for 20 % and another individual customer accounted for 13 % of the accounts receivable balance at December 31, 2020. The following table presents information about export sales and primary aluminum supply from our major suppliers: Year Ended December 31, 2021 2020 2019 Percentage of Net sales: Export sales 10 % 10 % 14 % Percentage of total annual primary aluminum supply (lbs): Supply from our top five major suppliers 78 % 72 % 74 % Supply from our largest supplier 47 % 21 % 22 % Supply from our second and third largest suppliers combined 20 % 32 % 32 % 18. Subsequent Events Dividend Declaration . On January 13, 2022 , we announced that our Board of Directors declared a quarterly cash dividend of $ 0.77 per common share, or approximately $ 12.4 million (including dividend equivalents), representing a 7 % increase over the prior dividend declared during the quarter ended December 31, 2021. The dividend was paid on February 15, 2022 to stockholders of record and the holders of certain restricted stock units at the close of business on January 24, 2022 . 90 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.