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 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 economic value added ("EVA") of our Fabricated Products business. Most of our production facilities have similar programs for both hourly and salaried employees.

Total costs relating to STI Plans were recorded as follows, for each period presented (in millions of dollars):



	Quarter Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Cost of products sold, excluding depreciation and amortization and other items	$	1.4	$	1.4	$	2.2	$	2.5
Selling, general, administrative, research and development	3.2		3.2		5.7		4.5
Total costs recorded in connection with STI Plans	$	4.6	$	4.6	$	7.9	$	7.0

The following table presents the allocation of the charges detailed above, by segment (in millions of dollars):



	Quarter Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Fabricated Products	$	3.1	$	3.5	$	5.5	$	5.4
All Other	1.5		1.1		2.4		1.6
Total costs recorded in connection with STI Plans	$	4.6	$	4.6	$	7.9	$	7.0

Long-Term Incentive Programs ("LTI Programs")

General. Executive officers and other key employees of the Company or one or more of its subsidiaries, as well as directors of the Company, are eligible to participate in the Kaiser Aluminum Corporation Amended and Restated 2006 Equity and Performance Incentive Plan (as amended, "Equity Incentive Plan"). Subject to certain adjustments that may be required from time to time to prevent dilution or enlargement of the rights of participants under the Equity Incentive Plan, a total of 2,722,222 common shares have been authorized for issuance under the Equity Incentive Plan. At June 30, 2015, 706,471 common shares were available for additional awards under the Equity Incentive Plan.

Non-Vested Common Shares and Restricted Stock Units. We grant non-vested common shares to our non-employee directors, executive officers and other key employees. We also grant restricted stock units to certain employees. The restricted stock units have rights similar to the rights of non-vested common shares and each restricted stock unit that becomes vested entitles the recipient to receive one common share. For both non-vested common shares and restricted stock units, the service period is generally one year for non-employee directors and three years for executive officers and other key employees.

In addition to non-vested common shares and restricted stock units, we grant performance shares to executive officers and other key employees. Each performance share that becomes vested entitles the recipient to receive one common share. Performance shares granted prior to 2014 ("EVA-Based Performance Shares") are subject to performance conditions pertaining to our EVA performance, measured over specified three-year performance periods. The number of EVA-Based Performance Shares that will ultimately vest and result in the issuance of common shares ranges between 0% to 200% of the target number of underlying common shares (constituting approximately one half of the maximum payout) and depends on the average annual EVA achieved for the specified three-year performance period. Performance shares granted after 2013 ("TSR-Based Performance Shares") are subject to performance conditions pertaining to our total shareholder return ("TSR") over specified three-year performance periods compared to the TSR of a specified group of peer companies. The number of TSR-Based Performance Shares that will ultimately vest under both the 2014-2016 and 2015-2017 LTI Programs and result in the issuance of common shares ranges between 0% to 200% of the target number of underlying common shares (constituting approximately one-half of the maximum payout) and depends on the percentile ranking of our TSR compared to the group of peer companies.

During the first quarter of 2015, a portion of the EVA-Based Performance shares granted under the 2012-2014 LTI Program vested (see "Summary of Activity" below). The vesting of performance shares resulting in the issuance and delivery of common shares, if any, under the 2013-2015, 2014-2016 and 2015-2017 LTI Programs will occur in 2016, 2017 and 2018, respectively.

Non-Cash Compensation Expense. Compensation expense relating to all awards under the Equity Incentive Plan is included in Selling, general, administrative, research and development. Non-cash compensation expense by type of award under LTI Programs were as follows for each period presented (in millions of dollars):



	Quarter Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Non-vested common shares and restricted stock units	$	1.1	$	1.2	$	2.2	$	2.3
EVA-Based Performance Shares	0.3		0.5		0.7		1.0
TSR-Based Performance Shares	1.0		0.6		1.7		1.0
Total non-cash compensation expense	$	2.4	$	2.3	$	4.6	$	4.3

The following table presents the allocation of the charges detailed above, by segment (in millions of dollars):



	Quarter Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014
Fabricated Products	$	0.9	$	1.1	$	1.6	$	2.1
All Other	1.5		1.2		3.0		2.2
Total non-cash compensation expense	$	2.4	$	2.3	$	4.6	$	4.3

Unrecognized Gross Compensation Cost Data. The following table presents unrecognized gross compensation cost data by type of award as of June 30, 2015:



	Unrecognized gross compensation costs (in millions of dollars)		Expected period (in years) over which the remaining gross compensation costs will be recognized
Non-vested common shares and restricted stock units	$	8.0	2.2
EVA-Based Performance Shares	$	0.9	0.7
TSR-Based Performance Shares	$	9.9	2.4

Summary of Activity. A summary of the activity with respect to non-vested common shares, restricted stock units, EVA-Based Performance Shares and TSR-Based Performance Shares for the six months ended June 30, 2015 was as follows:



	Non-Vested Common Shares				Restricted Stock Units				EVA-Based Performance Shares				TSR-Based Performance Shares
	Shares		Weighted-Average Grant-Date Fair Value per Share		Units		Weighted-Average Grant-Date Fair Value per Unit		Shares		Weighted-Average Grant-Date Fair Value per Share		Shares		Weighted-Average Grant-Date Fair Value per Share
Outstanding at December 31, 2014	158,770		$	59.88	5,357		$	59.71	353,576		$	50.35	150,223		$	83.18
Granted¹	62,285		71.67		2,325		69.83		—		—		150,424		95.68
Vested	(57,849	)	52.68		(2,161	)	52.91		(48,648	)	44.48		—		—
Forfeited¹	(540	)	66.89		—		—		(432	)	57.54		(404	)	83.18
Canceled²	—		—		—		—		(146,016	)	44.48		—		—
Outstanding at June 30, 2015	162,666		$	66.93	5,521		$	66.64	158,480		$	57.75	300,243		$	89.44

____________


¹	For EVA-Based Performance Shares and TSR-Based Performance Shares, the number of shares granted and forfeited are presented at their maximum payout.


²	For EVA-Based Performance Shares and TSR-Based Performance Shares, canceled represents the number of shares that did not vest due to EVA or TSR performance results falling below those required for maximum payout.

Stock Options. We have fully-vested stock options that were granted in 2007. There were 16,645 fully-vested options outstanding as of June 30, 2015 and December 31, 2014, in each case exercisable to purchase common shares at $80.01 per share and having a remaining contractual life of 1.75 and 2.25 years, respectively. The average grant date fair value of the options was $39.90. No options were granted, exercised or forfeited during the six months ended June 30, 2015.

Vested Stock. From time to time, we issue common shares to non-employee directors electing to receive common shares in lieu of all or a portion of their annual retainer fees. The fair value of these common shares is based on the fair value of the shares at the date of issuance and is immediately recognized in earnings as a period expense. For each six month period ended June 30, 2015 and June 30, 2014, we recorded $0.2 million relating to common shares granted to non-employee directors in lieu of all or a portion of their annual retainer fees.

Under the Equity Incentive Plan, participants may elect to have us withhold common shares to satisfy minimum statutory tax withholding obligations arising in connection with the exercise of stock options and vesting of non-vested shares, restricted stock units 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. During the six months ended June 30, 2015 and June 30, 2014, 34,969 and 33,006 common shares, respectively, were withheld and canceled for this purpose. The withholding of common shares by us could be deemed a purchase of the common shares.