0001564590-21-024392 | 10-Q | XBRL Viewer

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Document and Entity Information - shares	3 Months Ended
Document and Entity Information - shares	Mar. 31, 2021	May 03, 2021
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2021
Document Transition Report	false
Entity File Number	1-09447
Entity Registrant Name	KAISER ALUMINUM CORPORATION
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	94-3030279
Entity Address, Address Line One	27422 Portola Parkway
Entity Address, Address Line Two	Suite 200
Entity Address, City or Town	Foothill Ranch
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92610-2831
City Area Code	949
Local Phone Number	614-1740
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Title of 12(b) Security	Common stock, par value $0.01 per share
Trading Symbol	KALU
Security Exchange Name	NASDAQ
Entity Common Stock, Shares Outstanding		15,847,938
Entity Central Index Key	0000811596
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1
Amendment Flag	false

CONSOLIDATED BALANCE SHEETS (UNAUDITED) - USD ($) $ in Millions	Mar. 31, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 128.0	$ 780.3
Receivables:
Trade receivables, net	305.8	112.8
Other	31.5	11.6
Contract assets	44.4	36.1
Inventories	385.3	152.0
Prepaid expenses and other current assets	35.8	28.6
Total current assets	930.8	1,121.4
Property, plant and equipment, net	1,006.6	627.2
Operating lease assets	38.9	26.5
Intangible assets, net	82.5	26.7
Goodwill	46.2	18.8
Other assets	47.8	44.1
Total	2,152.8	1,864.7
Current liabilities:
Accounts payable	259.6	86.1
Accrued salaries, wages and related expenses	31.9	30.8
Other accrued liabilities	58.9	41.4
Total current liabilities	350.4	158.3
Long-term portion of operating lease liabilities	34.1	25.6
Pension and other postretirement benefits	85.0	1.3
Net liabilities of Salaried VEBA	17.4	17.8
Deferred tax liabilities	15.9	13.9
Long-term liabilities	76.3	77.3
Long-term debt	838.7	838.1
Total liabilities	1,417.8	1,132.3
Commitments and contingencies
Stockholders’ equity:
Preferred stock, 5,000,000 shares authorized at both March 31, 2021 and December 31, 2020; no shares were issued and outstanding at March 31, 2021 and December 31, 2020
Common stock, par value $0.01, 90,000,000 shares authorized at both March 31, 2021 and December 31, 2020; 22,683,224 shares issued and 15,847,938 shares outstanding at March 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	1,069.3	1,068.6
Retained earnings	151.0	158.2
Treasury stock, at cost, 6,835,286 shares at both March 31, 2021 and December 31, 2020	(475.9)	(475.9)
Accumulated other comprehensive loss	(9.6)	(18.7)
Total stockholders’ equity	735.0	732.4
Total	$ 2,152.8	$ 1,864.7

CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Parenthetical) - $ / shares	Mar. 31, 2021	Dec. 31, 2020
Statement Of Financial Position [Abstract]
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	90,000,000	90,000,000
Common Stock, shares issued	22,683,224	22,647,455
Common stock, shares outstanding	15,847,938	15,812,169
Treasury stock, shares	6,835,286	6,835,286

STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED) - USD ($) shares in Thousands, $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Income Statement [Abstract]
Net sales	$ 324.0	$ 369.3
Costs and expenses:
Cost of products sold, excluding depreciation and amortization and other items	262.5	286.6
Depreciation and amortization	13.5	13.2
Selling, general, administrative, research and development	31.8	23.9
Restructuring benefit	(0.7)
Total costs and expenses	307.1	323.7
Operating income	16.9	45.6
Other expense:
Interest expense	(12.3)	(6.1)
Other expense, net – Note 11	(0.4)	(0.8)
Income before income taxes	4.2	38.7
Income tax benefit (provision)	0.3	(9.6)
Net income	$ 4.5	$ 29.1
Net income per common share:
Basic	$ 0.28	$ 1.83
Diluted	$ 0.28	$ 1.81
Weighted-average number of common shares outstanding (in thousands):
Basic	15,805	15,838
Diluted	15,987	16,008

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Statement Of Income And Comprehensive Income [Abstract]
Net income	$ 4.5	$ 29.1
Other comprehensive income (loss), net of tax
Defined benefit pension plan and Salaried VEBA	0.7	1.1
Available for sale securities		(0.2)
Cash flow hedges	8.5	(15.9)
Fair value hedges		(0.5)
Foreign currency translation	(0.1)
Other comprehensive income (loss), net of tax	9.1	(15.5)
Comprehensive income	$ 13.6	$ 13.6

STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY (UNAUDITED) - USD ($)
$ in Millions

Total

Common Stock

Additional Paid in Capital

Retained Earnings

Treasury Stock

Accumulated Other Comprehensive Loss

Beginning balance at Dec. 31, 2019

$ 733.9

$ 0.2

$ 1,062.9

$ 172.8

$ (463.4)

$ (38.6)

Beginning balance (shares) at Dec. 31, 2019

15,868,304

Stockholders' Equity [Roll Forward]

Net income

29.1

Other comprehensive income (loss), net of tax

(15.5)

Common shares issued (including impacts from Long-Term Incentive programs) (shares)

119,598

Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares

(4.3)

Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares (shares)

(45,545)

Repurchase of common stock

^[1]

(12.5)

Repurchase of common stock (shares)

^[1]

(152,763)

Cash dividends declared

^[2]

(11.3)

Amortization of unearned equity compensation

1.7

Ending balance at Mar. 31, 2020

721.1

$ 0.2

1,060.3

190.6

(475.9)

(54.1)

Ending balance (shares) at Mar. 31, 2020

15,789,594

Beginning balance at Dec. 31, 2020

$ 732.4

$ 0.2

1,068.6

158.2

(475.9)

(18.7)

Beginning balance (shares) at Dec. 31, 2020

15,812,169

^[3],[4]

Stockholders' Equity [Roll Forward]

Net income

$ 4.5

4.5

Other comprehensive income (loss), net of tax

9.1

Common shares issued (including impacts from Long-Term Incentive programs) (shares)

^[3],[4]

56,394

Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares

(2.4)

Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares (shares)

^[3],[4]

(20,625)

Repurchase of common stock (shares)

Cash dividends declared

^[5]

(11.7)

Amortization of unearned equity compensation

3.1

Ending balance at Mar. 31, 2021

$ 735.0

$ 0.2

$ 1,069.3

$ 151.0

$ (475.9)

$ (9.6)

Ending balance (shares) at Mar. 31, 2021

15,847,938

^[3],[4]

[1]	Weighted-average repurchase price (dollars per share) for the quarter ended March 31, 2020 was $81.94.
[2]	Dividends declared per common share was $0.67 for the quarter ended March 31, 2020.
[3]	At March 31, 2021, 232,320 shares were available for awards under the Kaiser Aluminum Corporation 2016 Equity and Incentive Compensation Plan (“2016 Plan”).
[4]	There were no repurchases of common stock during the quarter ended March 31, 2021. At March 31, 2021, $93.1 million remained available to repurchase our common shares pursuant to the stock repurchase program.
[5]	Dividends declared per common share was $0.72 for the quarter ended March 31, 2021.

STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY (UNAUDITED) (Parenthetical) - USD ($)
$ in Millions

3 Months Ended

Mar. 31, 2021

Mar. 31, 2020

Shares available for awards (shares)

232,320

Weighted average repurchase price (in dollars per share)

$ 81.94

Repurchase amount remaining

$ 93.1

Cash dividends declared (in dollars per share)

$ 0.72

$ 0.67

Common Stock

Repurchases of common stock

152,763

^[1]

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

STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Cash flows from operating activities:
Net income	$ 4.5	$ 29.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment	12.8	12.5
Amortization of definite-lived intangible assets	0.7	0.7
Amortization of debt premium and debt issuance costs	0.7	0.3
Deferred income taxes	(0.9)	14.8
Non-cash equity compensation	3.1	1.7
Gain on disposition of short-term investments		(0.5)
Loss on disposition of property, plant and equipment		0.2
Changes in operating assets and liabilities, net of effects of acquisition:
Trade and other receivables	(31.7)	(12.6)
Contract assets	(8.3)	7.5
Inventories	(24.3)	(17.0)
Prepaid expenses and other current assets	(0.4)	(2.6)
Accounts payable	33.0	21.7
Accrued liabilities	4.2	(2.4)
Annual variable cash contributions to Salaried VEBA	(1.7)	(2.9)
Long-term assets and liabilities, net	(3.1)	1.9
Net cash (used in) provided by operating activities	(11.4)	52.4
Cash flows from investing activities:
Capital expenditures	(9.1)	(21.1)
Cash payment for acquisition of Warrick Rolling Mill	(617.5)
Purchase of short-term investments		(39.1)
Proceeds from disposition of short-term investments		78.8
Net cash (used in) provided by investing activities	(626.6)	18.6
Cash flows from financing activities:
Repayment of finance lease	(0.4)	(0.4)
Cancellation of shares to cover employees' tax withholdings upon vesting of non-vested shares	(2.4)	(4.3)
Repurchase of common stock		(12.5)
Cash dividends and dividend equivalents paid	(11.7)	(11.3)
Net cash used in financing activities	(14.5)	(28.5)
Net (decrease) increase in cash, cash equivalents and restricted cash during the period	(652.5)	42.5
Cash, cash equivalents and restricted cash at beginning of period	794.3	278.6
Cash, cash equivalents and restricted cash at end of period	$ 141.8	$ 321.1

Basis of Presentation and Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Basis of Presentation and Recent Accounting Pronouncements

1. Basis of Presentation and Recent Accounting Pronouncements

This Quarterly Report on Form 10-Q (this “Report”) should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Unless the context otherwise requires, references in these notes to interim consolidated financial statements - unaudited to “Kaiser Aluminum Corporation,” “we,” “us,” “our,” “the Company” and “our Company” refer collectively to Kaiser Aluminum Corporation and its subsidiaries.

Principles of Consolidation and Basis of Presentation. The accompanying unaudited 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”) applicable for interim periods and, therefore, do not include all information and footnotes required by GAAP for complete financial statements. In management’s opinion, all adjustments (which include normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for our interim periods are not necessarily indicative of the results of operations that may be achieved for the entire 2021 fiscal year. The financial information as of December 31, 2020 is derived from our audited consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2020. 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.

Supply Chain Financing. Upon our acquisition of the Warrick Rolling Mill (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. Discount fees related to the sale of trade accounts receivable under supply chain financing arrangements will be included in Other expense, net. There were no such discount fees recognized during the quarter ended March 31, 2021.

Adoption of New Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which 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 (“ASC”) 740 Income Taxes. Most amendments within ASU 2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. 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.

Accounting Pronouncements Issued But Not Yet Adopted

In March 2020, the FASB 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.

Supplemental Balance Sheet Information

3 Months Ended

Mar. 31, 2021

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Supplemental Balance Sheet Information

2. Supplemental Balance Sheet Information

	As of March 31, 2021			As of December 31, 2020
	(In millions of dollars)
Trade Receivables, Net
Billed trade receivables	$	306.7		$	113.6
Allowance for doubtful receivables		(0.9	)		(0.8	)
Trade receivables, net	$	305.8		$	112.8

Inventories¹
Finished products	$	83.0		$	37.2
Work-in-process		178.5			46.0
Raw materials		117.7			62.3
Operating supplies		6.1			6.5
Total	$	385.3		$	152.0

Property, Plant and Equipment, Net
Land and improvements	$	26.9		$	21.5
Buildings and leasehold improvements		176.0			117.2
Machinery and equipment		1,144.7			847.4
Construction in progress²		68.4			37.8
Property, plant and equipment, gross		1,416.0			1,023.9
Accumulated depreciation and amortization		(411.1	)		(398.4	)
Assets held for sale		1.7			1.7
Property, plant and equipment, net	$	1,006.6		$	627.2

Other Accrued Liabilities
Uncleared cash disbursements	$	7.0		$	2.1
Accrued income taxes and other taxes payable		10.4			5.2
Accrued annual contribution to Salaried VEBA		—			1.7
Accrued interest		11.5			11.6
Short-term environmental accrual – Note 8		4.0			3.7
Other – Note 3 and Note 6		26.0			17.1
Total	$	58.9		$	41.4

Long-Term Liabilities
Workers' compensation accrual	$	30.2		$	30.6
Long-term environmental accrual – Note 8		14.0			15.1
Other long-term liabilities		32.1			31.6
Total	$	76.3		$	77.3

At March 31, 2021 and December 31, 2020 the current cost of our inventory exceeded its stated last-in, first-out (“LIFO”) value by $24.0 million and $8.4 million, respectively. We treated inventory acquired in conjunction with the Warrick Rolling Mill acquisition (as defined in Note 4 below) as current year purchases within our existing single LIFO pool.

²	Based on market conditions during the quarter ended March 31, 2021, $20.1 million within Construction in progress as of March 31, 2021 related to temporarily idled projects, all of which are expected to resume at a future date.

Leases

3 Months Ended

Mar. 31, 2021

Leases [Abstract]

Leases

3. Leases

We determine whether an agreement is a lease at inception. We have operating and finance leases for equipment and real estate that primarily have fixed lease payments. Our leases have remaining lease terms of approximately one to 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. For purposes of calculating lease liabilities, these options are included within the lease term when it has become reasonably certain

that we will exercise such options. Short-term leases with an initial term of 12 months or less are not recorded on our Consolidated Balance Sheets.

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

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

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

The following table presents lease terms and discount rates as of March 31, 2021:

	Finance Leases			Operating Leases
Weighted-average lease term (in years)		24.0			7.5
Weighted-average discount rate		3.5	%		4.2	%

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

Leases	Classification	As of March 31, 2021		As of December 31, 2020
Assets
Operating lease assets	Operating lease assets	$	38.9	$	26.5
Finance lease assets	Property, plant and equipment, net		9.6		8.1
Total lease assets		$	48.5	$	34.6
Liabilities
Current:
Operating lease liabilities	Other accrued liabilities	$	8.1	$	4.4
Finance lease liabilities	Other accrued liabilities		2.0		1.9
Non-current:
Operating lease liabilities	Long-term portion of operating lease liabilities		34.1		25.6
Finance lease liabilities	Long-term liabilities		7.6		6.2
Total lease liabilities		$	51.8	$	38.1

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

	Quarter Ended March 31,
	2021		2020
Operating lease cost	$	2.0	$	1.8
Short-term lease cost		0.2		0.3
Finance lease cost:
Amortization of leased assets		0.5		0.4
Interest on lease liabilities		0.1		0.1
Total lease cost	$	2.8	$	2.6

The following table presents the maturity of our lease liabilities as of March 31, 2021 (in millions of dollars):

Maturity of Lease Liabilities	Finance Leases			Operating Leases
Remainder of 2021	$	1.8		$	7.3
2022		2.1			8.9
2023		1.8			7.5
2024		1.3			6.7
2025		1.1			3.6
Thereafter		6.6			17.0
Total minimum lease payments	$	14.7		$	51.0
Less: interest		(5.1	)		(8.8	)
Present value	$	9.6		$	42.2

Business Combinations, Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2021

Business Combinations And Goodwill Disclosure [Abstract]

Business Combinations, Goodwill and Intangible Assets

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, the “Warrick Rolling Mill”) for a purchase price of $670.0 million. The Warrick Rolling Mill is a leading producer of can stock for the beverage and food packaging industry in North America. The transaction provides us with non-cyclical end market diversification and re-entry into the packaging end market. Acquisition-related costs incurred and expensed during the quarter ended March 31, 2021 were $11.0 million, primarily related to legal and consulting fees and included within Selling, general, administrative, research and development (“SG&A and R&D”).

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

Contract purchase price	$	670.0
Preliminary 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
Estimate of post-close adjustments		(12.7	)
Total preliminary purchase consideration to allocate	$	604.8

The preliminary purchase consideration to allocate is subject to customary post-closing adjustments, estimates of which are included in the table above. We prepared an initial allocation of the purchase consideration as of the acquisition date based on our understanding of the fair value of the acquired assets and assumed liabilities. As we continue to obtain additional information supporting the final valuation of inventories, property, plant and equipment, intangible assets and long-term liabilities, we will refine the estimates of fair value and may revise our allocation of the purchase consideration. We expect to finalize the valuation of the assets and liabilities, as well as the post-closing adjustments as soon as practicable, but in any event no later than one year from the acquisition date.

The following table summarizes the preliminary fair values of assets acquired and liabilities assumed at the acquisition date (in millions of dollars):

Trade receivables	$	162.4
Other receivables		6.2
Inventories, including step up		209.0
Property, plant and equipment		385.4
Operating lease assets		12.3
Intangible assets		56.5
Goodwill		27.4
Accounts payable		(143.0	)
Accrued salaries, wages and related expenses		(5.9	)
Other accrued liabilities		(11.5	)
Long-term portion of operating lease liabilities		(8.7	)
Pension and other postretirement benefits		(83.7	)
Long-term liabilities		(1.6	)
Preliminary allocated purchase consideration	$	604.8

Intangible Assets. The following table presents the components of acquired intangible assets and their estimated useful lives as of the date of acquisition (in millions of dollars):

	Useful Life (in years)		Fair Value
Favorable lease contract		120	$	7.0
Favorable commodity contracts		2		11.0
Customer relationships		12		38.5
Total			$	56.5

Goodwill. Goodwill related to the Warrick Rolling Mill acquisition is primarily attributable to the assembled workforce and is expected to be deductible for income tax purposes. The following table presents the changes to goodwill during the quarter ended March 31, 2021 (in millions of dollars):

	Gross Carrying Value		Accumulated Impairment Loss			Net Carrying Value
Balance as of December 31, 2020	$	37.2	$	(18.4	)	$	18.8
Warrick Rolling Mill acquisition		27.4		—			27.4
Balance as of March 31, 2021	$	64.6	$	(18.4	)	$	46.2

Results of the Warrick Rolling Mill. The acquisition of the Warrick Rolling Mill was completed after the close of business on March 31, 2021. As such, there are no amounts to be included in our Statements of Consolidated Income.

Certain Unaudited Pro Forma Information. The following unaudited pro forma financial information presents what our results would have been had the Warrick Rolling Mill 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.

	Quarter Ended March 31,
	2021		2020
Net sales	$	635.9	$	636.1
Net income	$	9.9	$	3.5

The Warrick Rolling Mill has historically purchased aluminum and electrical power from Alcoa Corporation's smelter in Warrick County, Indiana. Alcoa Corporation’s Warrick smelter historically sold the aluminum to the Warrick Rolling Mill at smelter cost and electrical power from Alcoa Corporation's power plant in Warrick County, Indiana at negotiated prices between the parties.

As part of the acquisition of the Warrick Rolling Mill, we negotiated pricing for aluminum and electrical power with Alcoa Corporation at alternative rates which more closely align with market pricing. The table above does not reflect the cost of aluminum and electrical power under these negotiated rates.

Employee Benefits

3 Months Ended

Mar. 31, 2021

Compensation And Retirement Disclosure [Abstract]

Employee Benefits

5. Employee Benefits

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 earnings before interest, taxes, depreciation and amortization (“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 March 31, 2021, we had a liability of $2.7 million recorded within Accrued salaries, wages and related expenses for estimated probable future payments relating to the three month performance period of our 2021 STI Plan.

Pension and Similar Benefit Plans. We provide contributions to: (i) defined contribution 401(k) savings plans for salaried employees and certain hourly employees; (ii) a non-qualified, unfunded, unsecured plan of deferred compensation (see “Deferred Compensation Plan” below); (iii) multi-employer pension plans sponsored by the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO, CLC, the International Association of Machinists and certain other unions at certain of our production facilities; and (iv) a defined benefit pension plan for salaried employees at our London, Ontario (Canada) facility.

Deferred Compensation Plan. We have 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 and are accounted for as equity investments with changes in fair value recorded within Other expense, net (see Note 11). Assets of our deferred compensation plan are included in Other assets, classified within Level 2 of the fair value hierarchy and are measured and recorded at fair value based on their quoted market prices. The fair value of these assets at March 31, 2021 and December 31, 2020 was $9.5 million and $9.6 million, respectively. Offsetting liabilities relating to the deferred compensation plan are included in Other accrued liabilities and Long-term liabilities.

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

Warrick Rolling Mill Pension and Other Postretirement Benefits. In conjunction with the Warrick Rolling Mill acquisition, we assumed certain defined benefit pension obligations for certain union employees hired prior to January 1, 2020 and other postretirement benefit (“OPEB”) obligations relating to retiree medical and life insurance benefits for certain union employees hired prior to July 1, 2010, and were active union employees of the Warrick Rolling Mill on March 31, 2021 and we agreed to establish new plans with respect to each. Pension and OPEB liabilities and expenses are determined using actuarial methodologies and incorporate significant assumptions, including the interest rate used to discount the future estimated liability, the expected long-term rate of return on plan assets and several assumptions relating to the employee workforce (salary increases, health care cost trend rates, retirement age and mortality). The following data presents the key assumptions used and the amounts reflected in our consolidated financial statements with respect to the Warrick Rolling Mill’s pension plan and OPEB. We used a March 31 measurement date for both of the plans.

The following table presents the assumptions used to determine the Warrick Rolling Mill pension and OPEB obligations:

	Warrick Pension Plan			Warrick OPEB
	As of March 31, 2021			As of March 31, 2021
Discount rate		3.24	%		2.97	%
Expected long-term return on plan assets		7.00	%	N/A
Trend rate (initial)	N/A				5.40	%
Trend rate (ultimate)	N/A				4.00	%
Years to reach ultimate trend	N/A				14
Rate of compensation increase		2.50	%		—

The accumulated benefit obligation at March 31, 2021 for the Warrick Rolling Mill’s pension plan and OPEB was $6.7 million and $78.0 million, respectively, of which $1.0 million was recorded within Other accrued liabilities. Our expected minimum contributions to the Warrick Rolling Mill pension plan and OPEB in 2021 is $0.1 million and $0.7 million, respectively.

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

	Year Ended December 31,
	2021		2022		2023		2024		2025		2026-2030
Warrick pension plan benefit payments	$	0.1	$	0.1	$	0.2	$	0.3	$	0.5	$	4.4
Warrick OPEB plan benefit payments		0.7		1.6		2.3		3.0		3.7		27.2
Total net benefits	$	0.8	$	1.7	$	2.5	$	3.3	$	4.2	$	31.6

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

	Quarter Ended March 31,
	2021		2020
Defined contribution plans¹	$	3.4	$	3.9
Deferred compensation plan²		—		(0.4	)
Multiemployer pension plans¹		1.1		1.3
Net periodic postretirement benefit cost relating to Salaried VEBA²		0.6		1.2
Total	$	5.1	$	6.0

¹	^{Substantially all of the expense related to employee benefits are in Cost of products sold, excluding depreciation and amortization and other items (“Cost of products sold” or “COGS”) with the remaining balance in SG&A and R&D.}

^{The deferred compensation plan and the current service cost component of Net periodic postretirement benefit cost relating to Salaried VEBA are included within our Statements of Consolidated 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, on our Statements of Consolidated Income.}

Components of Net Periodic Postretirement Benefit Cost. Our results of operations included the following impacts associated with our Canadian pension plan and the Salaried VEBA: (i) a charge for service rendered by employees; (ii) a charge for accretion of interest; (iii) a benefit for the expected return on plan assets; (iv) amortization of prior service costs associated with plan amendments;

and (v) amortization of net actuarial differences. Net periodic benefit cost related to our Canadian pension plan was not material for the quarter ended March 31, 2021.

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

	Quarter Ended March 31,
	2021			2020
Salaried VEBA¹:
Interest cost	$	0.4		$	0.6
Expected return on plan assets		(0.8	)		(0.7	)
Amortization of prior service cost²		0.9			1.2
Amortization of net actuarial loss		0.1			0.1
Total net periodic postretirement benefit cost relating to Salaried VEBA	$	0.6		$	1.2

¹	^{The service cost was insignificant for all periods presented.}

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.}

- Definition

The entire disclosure for retirement benefits.

+ References

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+ Details

Derivatives, Hedging Programs and Other Financial Instruments

3 Months Ended

Mar. 31, 2021

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivatives, Hedging Programs and Other Financial Instruments

6. Derivatives, Hedging Programs and Other Financial Instruments

Overview. In conducting our business, we enter into derivative transactions, including forward contracts and options, to limit our exposure to: (i) metal price risk related to our sale of fabricated aluminum products and the purchase of metal used as raw material for our fabrication operations; (ii) energy price risk relating to fluctuating prices of natural gas and electricity used in our production processes; and (iii) foreign currency requirements with respect to cash commitments for equipment purchases denominated in foreign currency. We do not use derivative financial instruments for trading or other speculative purposes. Hedging transactions are executed centrally on behalf of all of our operations to minimize transaction costs, monitor consolidated net exposures and allow for increased responsiveness to changes in market factors.

Our derivative activities are overseen by a committee (“Hedging Committee”), which is composed of our chief executive officer, chief financial officer, chief accounting officer, vice president of treasury, risk and procurement and other officers and employees selected by the chief executive officer. The Hedging Committee meets regularly to review commodity price exposure, derivative positions and strategy. Management reviews the scope of the Hedging Committee’s activities with our Board of Directors.

We are exposed to counterparty credit risk on all of our derivative instruments, which we manage by monitoring the credit quality of our counterparties and allocating our hedging positions among multiple counterparties to limit exposure to any single entity. Our counterparties are major investment grade financial institutions or trading companies. Hedging transactions are governed by negotiated reciprocal credit lines, which generally require collateral to be posted above specified credit thresholds. We believe the risk of loss is remote and contained due to counterparty credit quality, our diversification practice and collateral requirements.

In a majority of our hedging counterparty agreements, our counterparty offers us a credit line that adjusts up or down, depending on our liquidity. Below specified liquidity thresholds, we may have to post collateral if the fair value of our net liability with such counterparty exceeds our reduced credit line. We manage this risk by allocating hedging transactions among multiple counterparties, using options as part of our hedging activities or both. The aggregate fair value of our derivative instruments that were in a net liability position was $0.2 million and $2.7 million at March 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 both March 31, 2021 and December 31, 2020. For more information about concentration risks concerning customers and suppliers, see Note 15.

Cash Flow Hedges

We designate forward swap contracts for aluminum, energy and, from time-to-time, zinc and copper (“Alloying Metals”), used in our fabrication operations as cash flow hedges. Unrealized gains and losses associated with our cash flow hedges are deferred in Other comprehensive income (loss), net of tax, and reclassified to COGS when such hedges settle or when it is probable that the original forecasted transactions will not occur by the end of the originally specified time period. See Note 9 for the total amount of gain or loss on derivative instruments designated and qualifying as cash flow hedging instruments and fair value hedging instruments that was reported in Accumulated other comprehensive loss (“AOCI”), as well as the related reclassifications into earnings and tax effects. Cumulative gains and losses related to cash flow hedges are reclassified out of AOCI and recorded within COGS when the associated hedged commodity purchases impact earnings.

Aluminum Hedges. Our pricing of fabricated aluminum products is generally intended to lock in a conversion margin (representing the value added from the fabrication process(es)) and to pass through metal price fluctuations to our customers. For some of our higher value added products sold on a spot basis, the pass through of metal price movements can sometimes lag by as much as several months, with a favorable impact to us when metal prices decline and an adverse impact to us when metal prices increase. Additionally, in certain instances, we enter into firm-price arrangements with our customers for stipulated volumes to be delivered in the future. Because we generally purchase primary and secondary aluminum on a floating price basis, the lag in passing through metal price movements to customers on some of our higher value added products sold on a spot basis and the volume that we have committed to sell to our customers under a firm-price arrangement create metal price risk for us. We use third-party hedging instruments to limit exposure to metal price risk related to the metal pass through lag on some of our products and firm-price customer sales contracts.

Alloying Metals Hedges. We are exposed to risk of fluctuating prices for Alloying Metals used as raw materials in our fabrication operations. We, from time to time, in the ordinary course of business, use third-party hedging instruments to mitigate our risk from price fluctuations in Alloying Metals.

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

The following table summarizes the volume of our derivative and/or physical delivery commitments with energy companies in place to cover our exposure to price fluctuations of our expected variable priced energy purchases as of March 31, 2021:

Remainder

of 2021

2022

2023

2024

2025

2026

Natural Gas

46%

50%

49%

45%

20%

Electricity

96%

76%

44%

—

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 and foreign currency exchange contracts that are not designated as hedging instruments to mitigate certain short-term commodity and currency impacts, as identified. For derivative instruments that are not designated as hedging instruments, the gain or loss on these derivatives is recognized within COGS or Other expense, net, depending on whether it relates to commodity risk or foreign currency risk, respectively.

Notional Amount of Derivative Contracts

The following table summarizes our derivative positions at March 31, 2021:

Aluminum	Maturity Period (month/year)	Notional Amount of Contracts (mmlbs)
Fixed price purchase contracts	4/21 through 12/23		113.5
Fixed price sales contracts	4/21 through 11/21		0.9
Midwest premium swap contracts¹	4/21 through 12/23		69.1

Alloying Metals

Maturity Period

(month/year)

Notional Amount of Contracts (mmlbs)

Fixed price purchase contracts

4/21 through 12/22

9.1

Fixed price sales contracts

4/21 through 12/21

3.2

Natural Gas

Maturity Period

(month/year)

Notional Amount of Contracts (mmbtu)

Fixed price purchase contracts

4/21 through 12/24

6,060,000

Electricity

Maturity Period

(month/year)

Notional Amount of Contracts (Mwh)

Fixed price purchase contracts

4/21 through 12/22

417,030

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 (gain) loss included on our Statements of Consolidated Income associated with all derivative contracts (in millions of dollars):

Quarter Ended March 31,		Statements of Consolidated
2021	2020	Income Classification