10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

Commission file number 0-52105

KAISER ALUMINUM CORPORATION

(Exact name of registrant as specified in its charter)

Delaware
(State of Incorporation)
27422 PORTOLA PARKWAY, SUITE 350,
FOOTHILL RANCH, CALIFORNIA
(Address of principal executive offices) 94-3030279
(I.R.S. Employer Identification No.)
92610-2831
(Zip Code)

Registrant’s telephone number, including area code:
(949) 614-1740

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

     Indicate by check mark whether the registrant is a large accelerated filter, an accelerated filter, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ  Accelerated filer o  Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company o 

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes þ No o

     As of July 15, 2009, there were 20,276,571 shares of the Common Stock of the registrant outstanding.

 

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2009			2008
	(Unaudited)
	(In millions of dollars, except
	share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	14.6		$	.2
Receivables:
Trade, less allowance for doubtful receivables of $.8 at June 30, 2009 and December 31, 2008		74.2			98.5
Due from affiliate		—			11.8
Other		3.1			17.5
Inventories		128.1			172.3
Prepaid expenses and other current assets		102.1			128.4
Total current assets		322.1			428.7
Property, plant, and equipment — net		323.6			296.7
Net asset in respect of VEBA		55.5			56.2
Deferred tax assets — net		295.7			313.3
Other assets		38.6			50.5
Total	$	1,035.5		$	1,145.4
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	37.7		$	52.4
Accrued salaries, wages, and related expenses		30.2			41.2
Other accrued liabilities		57.2			113.9
Payable to affiliate		21.1			27.5
Total current liabilities		146.2			235.0
Net liability in respect of VEBA		15.9			14.0
Long-term liabilities		59.3			65.3
Revolving credit facility and other long-term debt		7.1			43.0
		228.5			357.3
Commitments and contingencies (Note 11)
Stockholders’ equity:
Common stock, par value $.01, 90,000,000 shares authorized at both June 30, 2009 and December 31, 2008; 20,276,203 shares issued and outstanding at June 30, 2009 and 20,044,913 at December 31, 2008		.2			.2
Additional capital		964.9			958.6
Retained earnings		47.8			34.1
Common stock owned by Union VEBA subject to transfer restrictions, at reorganization value, 4,845,465 shares at both June 30, 2009 and December 31, 2008		(116.4	)		(116.4	)
Treasury stock, at cost, 572,706 shares at both June 30, 2009 and December 31, 2008		(28.1	)		(28.1	)
Accumulated other comprehensive loss		(61.4	)		(60.3	)
Total stockholders’ equity		807.0			788.1
Total	$	1,035.5		$	1,145.4

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

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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED INCOME

	Quarter Ended						Six Months Ended
	June 30,						June 30,
	2009			2008			2009			2008
	(Unaudited)
	(In millions of dollars, except share and per share amounts)
Net sales	$	232.1		$	413.5		$	498.0		$	812.5
Costs and expenses:
Cost of products sold:
Cost of products sold, excluding depreciation, amortization and other items		170.3			352.0			395.9			660.5
Lower of cost or market inventory write-down		—			—			9.3			—
Impairment of investment in Anglesey		1.2			—			1.8			—
Restructuring costs and other charges		5.1			—			6.3			—
Depreciation and amortization		4.3			3.7			8.4			7.2
Selling, administrative, research and development, and general		17.1			19.7			35.0			38.5
Other operating (benefits) charges, net		(.9	)		.1			(.9	)		.2
Total costs and expenses		197.1			375.5			455.8			706.4
Operating income		35.0			38.0			42.2			106.1
Other income (expense):
Interest expense		(.2	)		(.3	)		(.4	)		(.5	)
Other income (expense), net		—			.6			(.1	)		1.2
Income before income taxes		34.8			38.3			41.7			106.8
Income tax provision		(15.2	)		(15.5	)		(18.3	)		(44.9	)
Net income	$	19.6		$	22.8		$	23.4		$	61.9
Earnings per share — Basic (Note 13):
Net income per share	$	.97		$	1.11		$	1.16		$	3.00
Earnings per share — Diluted (Note 13):
Net income per share	$	.97		$	1.11		$	1.16		$	3.00
Weighted-average number of common shares outstanding (000):
Basic		19,538			20,042			19,506			20,034
Diluted		19,538			20,042			19,506			20,034

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

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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED STOCKHOLDERS’ EQUITY AND
COMPREHENSIVE INCOME (LOSS)

												Common
												Stock
												Owned by
												Union
												VEBA						Accumulated
	Common											Subject to						Other
	Shares			Common		Additional			Retained			Transfer			Treasury			Comprehensive
	Outstanding			Stock		Capital			Earnings			Restriction			Stock			Loss			Total
	(Unaudited)
	(In millions of dollars, except for shares)
BALANCE, December 31, 2008		20,044,913		$	.2	$	958.6		$	34.1		$	(116.4	)	$	(28.1	)	$	(60.3	)	$	788.1
Net income		—			—		—			23.4			—			—			—			23.4
Foreign currency translation adjustment, net of tax of $0		—			—		—			—			—			—			(1.1	)		(1.1	)
Comprehensive income																						22.3
Issuance of non-vested shares to employees		196,829			—		—			—			—			—			—			—
Issuance of common shares to employees in lieu of cash bonus		15,674			—		.3			—			—			—			—			.3
Issuance of common shares to directors		3,734			—		.1			—			—			—			—			.1
Issuance of common shares to employees upon vesting of restricted stock units and performance shares		20,721			—		—			—			—			—			—			—
Cancellation of employee non-vested shares		(5,668	)		—		—			—			—			—			—			—
Cash dividends on common stock		—			—		—			(9.7	)		—			—			—			(9.7	)
Excess tax deficiency upon vesting of non-vested shares and dividend payment on unvested shares expected to vest		—			—		(.1	)		—			—			—			—			(.1	)
Amortization of unearned equity compensation		—			—		6.0			—			—			—			—			6.0
BALANCE, June 30, 2009		20,276,203		$	.2	$	964.9		$	47.8		$	(116.4	)	$	(28.1	)	$	(61.4	)	$	807.0

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

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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

STATEMENTS OF CONSOLIDATED CASH FLOWS

	Six Months Ended
	June 30,
	2009			2008
	(Unaudited)
	(In millions of dollars)
Cash flows from operating activities:
Net income	$	23.4		$	61.9
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including deferred financing costs of $.4 for the six months ended June 30, 2009 and $.1 for the six months ended June 30, 2008)		8.7			7.3
Deferred income taxes		17.6			35.8
Excess tax deficiency upon vesting of non-vested shares and dividend payment on unvested shares expected to vest		.1			—
Non-cash equity compensation		6.1			5.8
Net non-cash LIFO (benefits) charges and lower of cost or market inventory write-down		(4.0	)		30.3
Non-cash unrealized gains on derivative positions		(22.3	)		(37.8	)
Non-cash impairment charges		2.1			—
Equity in income of unconsolidated affiliate		(1.8	)		(4.4	)
Loss on disposition of property, plant and equipment		.1			—
Other non-cash changes in assets and liabilities		2.7			(.1	)
Changes in assets and liabilities:
Decrease (increase) in trade and other receivables		38.7			(19.9	)
Decrease in receivable from affiliate		11.7			9.5
Decrease (increase) in inventories, excluding LIFO charges and lower of cost or market write-down		48.2			(61.2	)
Decrease (increase) in prepaid expenses and other current assets		1.6			(2.0	)
(Decrease) increase in accounts payable		(13.6	)		2.8
Decrease in other accrued liabilities		(28.7	)		(15.3	)
Decrease in payable to affiliate		(6.4	)		(7.3	)
Increase (decrease) in accrued income taxes		(.5	)		.8
Net cash impact of changes in long-term assets and liabilities		2.9			(1.3	)
Other		—			(.1	)
Net cash provided by operating activities		86.6			4.8
Cash flows from investing activities:
Capital expenditures, net of change in accounts payable of $1.1 for the six months ended June 30, 2009 and $.6 for the six months ended June 30, 2008		(36.6	)		(38.3	)
Decrease (increase) in restricted cash		11.2			(.1	)
Net cash used in investing activities		(25.4	)		(38.4	)
Cash flows from financing activities:
Borrowings under the revolver credit facility		90.3			—
Repayment of borrowings under the revolving credit facility		(126.3	)		—
Financing costs		(1.1	)		—
Excess tax (deficiency) benefit upon vesting of non-vested shares and dividend payment on unvested shares expected to vest		(.1	)		.2
Cancellation of common stock to cover employee tax withholding upon vesting of equity awards		—			(.5	)
Cash dividend paid to stockholders		(9.7	)		(7.4	)
Net cash used in financing activities		(46.9	)		(7.7	)
Foreign currency impact on cash and cash equivalents		.1			—
Net increase (decrease) in cash and cash equivalents during the period		14.4			(41.3	)
Cash and cash equivalents at beginning of period		.2			68.7
Cash and cash equivalents at end of period	$	14.6		$	27.4

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

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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(In millions of dollars, except share and per share amounts)
(Unaudited)

1. Summary of Significant Accounting Policies

     This Report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

     Principles of Consolidation and Basis of Presentation. The consolidated financial statements include the statements of the Company and its wholly owned subsidiaries. Investments in 50%-or-less-owned entities are accounted for by the equity method. The only such entity for the periods covered by this Report relates to the Company’s 49% ownership interest in Anglesey Aluminium Limited (“Anglesey”). Intercompany balances and transactions are eliminated.

     The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, these financial statements do not include all of the disclosures required by US GAAP for complete financial statements. In the opinion of management, the unaudited interim consolidated financial statements furnished herein include all adjustments, all of which are of a normal recurring nature unless otherwise noted, necessary for a fair statement of the results for the interim periods presented.

     Use of Estimates and Assumptions. The preparation of financial statements in accordance with US 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 the Company’s 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 the Company’s consolidated financial position and results of operation.

     Operating results for the six months ended June 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.

     Recognition of Sales. Sales are recognized when title, ownership and risk of loss pass to the buyer and collectability is reasonably assured. From time to time, in the ordinary course of business, the Company may enter into agreements with customers requiring the Company to allocate certain amounts of its annual capacity in return for a fee. Such fees are recognized as revenue ratably over the life of the agreement which may be in excess of one year in length.

     In certain circumstances, based on the terms of certain sales contracts which provide for periodic, such as quarterly or annual, billing throughout the contract, the Company may recognize revenue prior to billing the customer. At June 30, 2009 and December 31, 2008, the Company had $4.7 and $.1 of unbilled receivables, respectively, included within Trade receivables on the Company’s Consolidated Balance Sheets. A provision for estimated sales returns from and allowances to customers is made in the same period as the related revenues are recognized, based on historical experience or the specific identification of an event necessitating a reserve.

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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Earnings per Share. On January 1, 2009, the Company adopted Financial Accounting Standards Board (“FASB”) Staff Position Emerging Issues Task Force 03-6-1, “Determining Whether Instruments Granted in Share-based Payment Transactions are Participating Securities” (“FSP EITF 03-6-1”). Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) were treated as participating securities and were included in the computation of earnings per share pursuant to the two-class method in accordance with Statement of Financial Accounting Standards No. 128, Earnings per Share (“SFAS No. 128”). Upon adoption, the Company retrospectively adjusted its earnings per share data to conform to the provisions in FSP EITF 03-6-1. The retrospective application resulted in a $.03 and $.09 per share reduction in basic earnings per common share for the quarter and six months ended June 30, 2008, respectively, and a $.01 and $.04 per share reduction in diluted earnings per common share for the quarter and six months ended June 30, 2008, respectively (see Note 13).

     Basic earnings per share is computed by dividing distributed and undistributed earnings allocable to common shares by the weighted-average number of common shares outstanding during the applicable period. The shares owned by a voluntary employee beneficiary association (“VEBA”) for the benefit of certain union retirees, their surviving spouses and eligible dependents (the “Union VEBA”) that are subject to transfer restrictions, while treated in the Consolidated Balance Sheets as being similar to treasury stock (i.e., as a reduction in Stockholders’ equity), are included in the computation of basic shares outstanding in the Statements of Consolidated Income because such shares were irrevocably issued and have full dividend and voting rights. Diluted earnings per share is calculated as the more dilutive result of computing earnings per share under: (i) the treasury stock method or (ii) the two-class method (see Note 13).

     Stock-Based Compensation. The Company accounts for stock-based compensation plans at fair value. Stock based compensation is provided to employees, directors and a director emeritus. The Company measures 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 fair value of awards provided to the director emeritus is not material. The cost of the award is recognized as an expense over the period that the recipient provides service for the award. The Company has elected to amortize compensation expense for equity awards with graded vesting using the straight line method. The Company recognized compensation expense for the quarters ended June 30, 2009 and 2008 of $3.0 and $2.8, respectively, and for the six months ended June 30, 2009 and 2008 of $5.5 and $5.1, respectively, in connection with vested awards and non-vested stock, restricted stock units and stock options (see Note 10).

     The Company grants performance shares to executive officers and other key employees. These awards are subject to performance requirements pertaining to the Company’s economic value added (“EVA”) performance measured over a three year performance period. The EVA is a measure of the excess of the Company’s pretax operating income for a particular year over a pre-determined percentage of the net assets of the immediately preceding year, as defined in the 2008-2010 and 2009-2011 Long-Term Incentive (“LTI”) programs. The number of performance shares, if any, that will ultimately vest and result in the issuance of common shares depends on the average annual EVA achieved for the specified three year performance periods. The Company accounts for these awards at fair value in accordance with Statement of Financial Accounting Standards No. 123 (revised 2004), Share-based Payments (“SFAS No. 123R”). The fair value is measured based on the most probable outcome of the performance condition which is estimated quarterly using the Company’s plan and actual results. The Company expenses the fair value, after assuming an estimated forfeiture rate, over the specified three year performance periods on a ratable basis. The Company recognized compensation expense for the quarters ended June 30, 2009 and 2008 of $.7 and $.5, respectively, and for the six months ended June 30, 2009 and 2008 of $.7 and $.7, respectively, in connection with the performance shares.

     Realization of Excess Tax Benefits. The Company follows the tax law ordering approach in assessing the realization of excess tax benefits upon vesting of non-vested stock, restricted stock units and performance shares, exercising of stock options and payment of dividends on non-vested stock, restricted stock units and performance shares expected to vest. Under the tax law ordering approach, realization of excess tax benefits is determined based on the ordering provisions of the tax law. Current year deductions, which include the tax benefits from current year equity award activities, are used first before using the Company’s net operating loss (“NOL”) carryforwards from prior years. Under this method, Additional capital would be credited when an excess tax benefit is realized, creating an additional paid in capital pool, to absorb potential future tax deficiencies resulting from vesting of non-vested stock, restricted stock units and performance shares and from the exercise of stock options. During the six months ended June 30, 2009, the Company recorded a reduction of $.1 to a previously recorded excess tax benefit resulting

7

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

from the vesting of non-vested stock, restricted stock units and from dividend equivalents paid to non-vested stock and restricted stock units expected to vest. This adjustment was reflected as a reduction to Additional capital.

     Restructuring Costs and Other Charges. Restructuring costs and other charges include employee severance and benefit costs, impairment of owned equipment to be disposed of and other costs associated with the exit activities. The Company applies the provisions of Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities (“SFAS No. 146”) relating to one-time termination benefits. Severance costs accounted for under SFAS No. 146 are recognized when the Company’s management with the proper level of authority has committed to a restructuring plan and communicated those actions to employees. For owned facilities and equipment, impairment losses recognized are based on the fair value less costs to sell, with fair value estimated based on existing market prices for similar assets. Other exit costs include costs to consolidate facilities or close facilities, terminate contractual commitments and relocate employees. A liability for such costs is recorded at its fair value in the period in which the liability is incurred. At each reporting date, the Company evaluates its accruals for exit costs and employee separation costs to ensure the accruals are still appropriate. During the quarter and six months ended June 30, 2009, the Company recorded $5.1 and $6.3, respectively, of restructuring costs and other charges relating to employee termination and other personnel costs, and contract termination and other facility-related activities, in connection with the Company’s closure of its Tulsa, Oklahoma extrusion facility, significant reduction of operations at its Bellwood, Virginia facility, and streamlining its personnel infrastructure in other locations (See Note 15).

     Restricted Cash. The Company is required to keep certain amounts on deposit relating to workers’ compensation, derivative contracts, letters of credit and other agreements. Such amounts totaled $25.6 and $36.8 at June 30, 2009 and December 31, 2008, respectively. Of the restricted cash balance, $.9 and $1.4 were considered short term and included in Prepaid expenses and other current assets on the Consolidated Balance Sheets at June 30, 2009 and December 31, 2008, respectively, and $24.7 and $35.4 were considered long term and included in Other assets on the Consolidated Balance Sheets at June 30, 2009 and December 31, 2008, respectively. Included in long-term restricted cash were $7.0 and $17.2 of margin call deposits with the Company’s derivative counterparties at June 30, 2009 and December 31, 2008, respectively (see Note 6).

     Trade Receivables and Allowance for Doubtful Accounts. Trade receivables consist of amounts billed to customers for products sold. Accounts receivable are generally due within 30 days. For the majority of our receivables, the Company establishes an allowance for doubtful accounts based upon collection experience and other factors. On certain other receivables where the Company is aware of a specific customer’s inability or reluctance to pay, an allowance for doubtful accounts is established against amounts due to reduce the net receivable balance to the amount the Company reasonably expects to collect. However, if circumstances change, the Company’s estimate of the recoverability of accounts receivable could be different. Circumstances that could affect the Company’s estimates include, but are not limited to, customer credit issues and general economic conditions. Accounts are written off once deemed to be uncollectible.

     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. Other inventories, principally operating supplies and repair and maintenance parts, are stated at average cost. 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). During the first quarter of 2009, the Company recorded an inventory write-down of $9.3 to reflect the market value as of March 31, 2009 (see Note 2). According to Accounting Research Bulletin No. 43 (“ARB No. 43”), Chapter 4, Inventory Pricing, market value is determined based on the current replacement cost, by purchase or by reproduction, except that it does not exceed the net realizable value and it is not less than net realizable value reduced by an approximate normal profit margin.

     Derivative Financial Instruments. Hedging transactions using derivative financial instruments are primarily designed to mitigate the Company’s exposure to changes in prices for certain of the products which the Company sells and consumes and, to a lesser extent, to mitigate the Company’s exposure to changes in foreign currency exchange rates and energy prices. The Company does not utilize derivative financial instruments for trading or other speculative purposes. The Company’s derivative activities are initiated within guidelines established by management and approved by the Company’s Board of Directors. Hedging transactions are executed centrally on behalf of all of the Company’s business segments to minimize transaction costs, monitor consolidated net exposures and allow for increased responsiveness to changes in market factors.

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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The Company recognizes all derivative instruments as assets or liabilities in its balance sheet and measures those instruments at fair value by “marking-to-market” all of its hedging positions at each period-end (see Note 12). The Company does not meet the documentation requirements for hedge (deferral) accounting under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”). Changes in the market value of the Company’s open derivative positions resulting from the mark-to-market process are reflected in Cost of products sold, excluding depreciation, amortization and other items.

     Concentration of credit risk. Financial arrangements, which potentially subject the Company to concentrations of credit risk consist of metal, currency, natural gas derivative contracts and cash arrangements related to its cash equivalents. If the market value of the Company’s net derivative positions with the counterparty exceeds a specified threshold, if any, the counterparty is required to transfer cash collateral in excess of the threshold to the Company. Conversely, if the market value of the net derivative positions falls below a specified threshold, the Company is required to transfer cash collateral below the threshold to the counterparty. The Company is exposed to credit loss in the event of nonperformance by counterparties on derivative contracts used in hedging activities as well as failure of counterparties to return cash collateral previously transferred to the counterparties. The counterparties to the Company’s derivative contracts are major financial institutions and the Company has not experienced nonperformance by any of its counterparties.

     The Company, in accordance with its loan covenants, places its cash in money market funds with high credit quality financial institutions which invest primarily in commercial paper of prime quality, short term repurchase agreements, and U.S. government agency notes. The Company has not experienced losses on its temporary cash investments.

     Fair Value Measurement. The Company applies the provisions Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS No. 157”) in measuring the fair value of its derivative contracts. See Note 1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 for definitions of Level 1, 2 and 3 fair value measurements under the SFAS No. 157 fair value hierarchy. The Company’s derivative contracts are valued at fair value using significant observable and unobservable inputs. Such financial instruments consist of primary aluminum, natural gas, and foreign currency contracts. The fair values of a majority of these derivative contracts are based upon trades in liquid markets, such as aluminum options. Valuation model inputs can generally be verified and valuation techniques do not involve significant judgment. The fair values of such financial instruments are generally classified within Level 2 of the fair value.

     The Company has some derivative contracts that do not have observable market quotes. For these financial instruments, management uses significant other observable inputs (i.e., information concerning regional premiums for swaps). Where appropriate, valuations are adjusted for various factors, such as bid/offer spreads.

     The following table presents the Company’s assets and liabilities that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of June 30, 2009:

	Level 1		Level 2			Level 3			Total
Derivative assets:
Aluminum swap contracts	$	—	$	7.9		$	—		$	7.9
Aluminum option contracts		—		16.1			—			16.1
Canadian dollar and Pound Sterling forward contracts		—		0.1			—			0.1
Total	$	—	$	24.1		$	—		$	24.1
Derivative liabilities:
Aluminum swap contracts	$	—	$	(47.1	)	$	—		$	(47.1	)
Aluminum option contracts		—		(7.2	)		—			(7.2	)
Pound Sterling forward contract		—		(2.8	)		—			(2.8	)
Canadian dollar forward contract		—		(.5	)		—			(0.5	)
Euro dollar forward contracts		—		(.2	)		—			(.2	)
Krona forward contract		—		(.2	)		—			(.2	)
Natural gas swap contracts		—		(2.7	)		—			(2.7	)
Midwest premium swap contracts		—		—			(.6	)		(.6	)
Total	$	—	$	(60.7	)	$	(.6	)	$	(61.3	)

9

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Financial instruments classified as Level 3 in the fair value hierarchy represent derivative contracts in which management has used at least one significant unobservable input in the valuation model. The following table presents a reconciliation of activity for such derivative contracts on a net basis:

	Level 3
Balance at January 1, 2009:	$	(1.1	)
Total realized/unrealized losses included in:
Cost of goods sold excluding depreciation, amortization and other items		.2
Purchases, sales, issuances and settlements		.3
Transfers in and (or) out of Level 3		—
Balance at June 30, 2009	$	(.6	)
Total gains included in earnings attributable to the change in unrealized losses relating to derivative contracts still held at June 30, 2009:	$	.2

New Accounting Pronouncements

Recently adopted accounting pronouncements:

- FASB Staff Position FAS 107-1, Interim Disclosures about Fair Value of Financial Instruments (“FSP FAS107-1”). During the quarter ended June 30, 2009, the Company adopted FSP FAS 107-1, which amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FSP 107-1 also amends Accounting Principles Board Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. The adoption of FSP FAS 107-1 did not have an impact on the consolidated financial statement disclosures.

- FASB Staff Position FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“FSP FAS 157-4”). Beginning April 1, 2009, the Company adopted FSP FAS 157-4, which affirms that the objective of fair value when the market for an asset is not active is the price that would be received to sell the asset in an orderly transaction; clarifies, and includes additional factors for, determining whether there has been a significant decrease in market activity for an asset when the market for that asset is not active and eliminates the proposed presumption that all transactions are distressed (not orderly) unless proven otherwise. FSP FAS 157-4 instead requires an entity to base its conclusion about whether a transaction was not orderly on the weight of the evidence. In addition, FSP FAS 157-4 requires an entity to disclose a change in valuation technique (and the related inputs) resulting from the application of FSP FAS 157-4 and to quantify its effects, if practicable. The adoption of FSP FAS 157-4 did not have a material impact on the consolidated financial statements.

- Statement of Financial Accounting Standards No. 165, Subsequent Events (“SFAS No. 165”). During the quarter ended June 30, 2009, the Company adopted SFAS No. 165, which establishes general standards of accounting for, and disclosure of, events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. The adoption of SFAS No. 165 did not have a material effect on the financial statements.

Recently issued accounting pronouncements not yet adopted:

Statement of Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the Heirarchy of Generally Accepted Accounting Principles (“SFAS No. 168”) was issued in June 2009. SFAS No. 168 establishes the FASB Accounting Standards Codification (“the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial standards in conformity with US GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative US GAAP for SEC registrants. SFAS No. 168 will be effective for financial statements issued by the Company for interim and annual periods after September 15, 2009. On the effective date of the SFAS No. 168, all then-existing non-SEC accounting and reporting standards are superseded, with the exception of certain promulgations listed in SFAS No. 168. The Company currently anticipates that the adoption of SFAS No. 168 will have no effect on its consolidated financial statements as the purpose of the Codification is not to create new accounting and reporting guidance. Rather, the Codification is meant to simplify user access to all authoritative US GAAP. References to US GAAP in the Company’s published financial statements will be updated, as appropriate, to cite the Codification, following the effective date of SFAS No. 168.

10

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2. Inventories

     Inventories are stated at the lower of cost or market value. For the Fabricated Products segment, finished products, work in process and raw material inventories are stated on a LIFO basis and other inventories, principally operating supplies and repair and maintenance parts, are stated at average cost. All inventories in the Primary Aluminum segment are stated on the first-in, first-out (“FIFO”) basis. 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.

     Inventories consist of the following:

	June 30,		December 31,
	2009		2008
Fabricated Products segment —
Finished products	$	38.8	$	52.7
Work in process		42.9		57.5
Raw materials		30.6		48.1
Operating supplies and repairs and maintenance parts		13.5		13.2
		125.8		171.5
Primary Aluminum segment —
Primary aluminum		2.3		.8
	$	128.1	$	172.3

     The Company recorded net non-cash LIFO benefits of approximately $2.1 and $13.2 during the quarter and six months ended June 30, 2009, respectively. The Company recorded net non-cash LIFO charges of approximately $16.2 and $30.6 during the quarter and six months ended June 30, 2008, respectively. These amounts are primarily a result of changes in metal prices and changes in inventory volumes.

     With the inevitable ebb and flow of business cycles, non-cash LIFO benefits (charges) will result when inventory levels and metal prices fluctuate. Further, lower of cost or market adjustments can occur when metal prices decline and margins compress. At December 31, 2008, due to the decline in the London Metal Exchange (“LME) price of primary aluminum, the Company recorded a $65.5 lower of cost or market inventory write-down to reflect inventory at market value. During the first three months of 2009, the Company recorded an additional lower of cost or market inventory write-down of $9.3 due to the continued decline in the LME price of primary aluminum. There were no lower of cost or market inventory write-downs during the quarter ended June 30, 2009 or the six months ended June 30, 2008.

3. Investment In and Advances To Unconsolidated Affiliate

     The Company has a 49% ownership interest in Anglesey, which owns an aluminum smelter at Holyhead, Wales. The Company accounts for its 49% ownership in Anglesey using the equity method. The Company’s equity in income before income taxes of Anglesey is treated as a reduction or increase in cost of products gross of the Company’s share of United Kingdom corporation tax. The income tax effects of the Company’s equity in income are included in the Company’s income tax provision.

     The following table shows a summary of Anglesey’s selected operating results for the quarters and six month periods ended June 30, 2009 and 2008:

	Quarter					Six Months
	Ended June 30,					Ended June 30,
	2009			2008		2009		2008
Net sales	$	61.8		$	91.7	$	120.0	$	181.2
Gross profit	$	(.6	)	$	7.1	$	3.0	$	17.7
Net income	$	2.4		$	5.0	$	4.1	$	12.1
Company’s equity income(1)	$	—		$	3.2	$	—	$	6.5

11

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(1) For the quarter and six months ended June 30, 2009, the Company’s equity income differs from 49% of the summary net income from Anglesey due primarily to an impairment charge that reduced the Company’s investment in Anglesey to zero. The Company began impairing its investment in Anglesey during the fourth quarter of 2008 (see further discussion regarding the impairment below). For the quarter and six months ended June 30, 2008, the Company’s equity income differs from 49% of the summary net income from Anglesey primarily due to (a) share based compensation adjustments of $.1 and $.2, respectively, relating to Anglesey’s separate reimbursement agreement with its parent (“Rio Tinto”) under Anglesey’s share based award arrangement, and (b) US GAAP adjustment relating to Anglesey’s CAROs (defined below in Note 4) in the amount of $(.3) and $(.7), respectively.

     At December 31, 2008, receivables from Anglesey were $11.8, all of which were received during the first quarter. No amounts were due from Anglesey at June 30, 2009. At June 30, 2009 and December 31, 2008, payables to Anglesey were $21.1 and $27.5, respectively.

     Anglesey operates under a power agreement that provides sufficient power to sustain its aluminum reduction operations at full capacity through the end of September 2009, at which time we expect Anglesey to fully curtail its smelting operations. The nuclear plant that supplies power to Anglesey is currently slated for decommissioning in late 2010. Anglesey has worked intensively with government authorities and agencies to find a sustainable alternative to the power supply needs of the smelter. However, as of the filing date of this Report, no sources have been identified that would allow the uninterrupted continuation of smelting operations. Additionally, Anglesey continues to evaluate alternative operating activities in line with the needs of the local community and market opportunities, including the potential continuation of remelt and casting operations. Taking into account (i) Anglesey’s inability to obtain affordable power, (ii) the resulting expected curtailment of smelting operations, (iii) the growing uncertainty with respect to the future of Anglesey’s operations, and (iv) Anglesey’s expected cash requirements for redundancy and pension payments, the Company concluded that it should not expect to receive any dividends from Anglesey in the foreseeable future and, as a result, the Company fully impaired the investment in Anglesey during the fourth quarter of 2008. For the quarter and six months ended June 30, 2009, the Company continued to believe that it should not expect to receive any dividends from Anglesey in the foreseeable future and, as such, continued to fully impair its investment in Anglesey. For the quarter and six months ended June 30, 2009, the Company recorded impairment charges of $1.2 and $1.8, respectively, relating to its investment in Anglesey.

     On June 12, 2008, Anglesey suffered a significant failure in the rectifier yard that resulted in a localized fire in one of the power transformers. As a result of the fire, Anglesey operated below its production capacity during the latter half of 2008 until normal production resumed in December 2008 and incurred incremental costs, primarily associated with repair and maintenance costs, as well as loss of margin due to the outage. Anglesey has property damage and business interruption insurance that is expected to recover financial losses (net of applicable deductibles). Anglesey received a partial insurance settlement payment of $20.0 in December 2008 of which $10.0 was recorded as the Company’s equity income. During the first quarter of 2009, Anglesey received another partial insurance settlement of $8.2, 49% of which (or $4.0) was recorded as the Company’s equity income. Anglesey did not receive additional insurance settlements during the quarter ended June 30, 2009. The timing and the total amount of any remaining insurance recovery are uncertain. The value of the insurance proceeds received by Anglesey during the first quarter of 2009 reflected in the Company’s equity income was fully impaired, as the Company does not expect to receive any such proceeds.

4. Conditional Asset Retirement Obligations

     The Company has conditional asset retirement obligations (“CAROs”) at several of its fabricated products facilities. The vast majority of such CAROs 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, ceilings, or piping) at certain of the older plants if such plants were to undergo major renovation or be demolished. No plans currently exist for any such renovation or demolition of such facilities and the Company’s current assessment is that the most probable scenarios are that no material CARO will be triggered for 20 or more years.

12

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The Company’s estimates and judgments that affect the probability weighted estimated future contingent cost amounts did not change during the six months ended June 30, 2009. For the six months ended June 30, 2008, there was a revision to the estimated timing for certain future contingent costs recorded during the quarter ended June 30, 2008 that resulted in a $.1 charge to net income in that period. The Company’s results for the quarters ended June 30, 2009 and 2008 each reflect an accretion of the estimated liability of $.1 (recorded in Cost of products sold). In addition, the Company’s results for the six months ended June 30, 2009 and 2008 each reflect an accretion of the estimated liability of $.1 (recorded in Cost of products sold). The estimated fair value of the CAROs at June 30, 2009 was $3.4.

     Anglesey (see Note 3) also recorded CAROs of approximately $24.0 in its financial statements in prior years. The time period over which the fair value of CAROs is estimated under United Kingdom generally accepted accounting principles (“UK GAAP”) treatment applied by Anglesey is different from the time period over which the fair value of CAROs is estimated under the principles of Statement of Accounting Standards No. 143, Accounting for Asset Retirement Obligations or FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations. As such, the resulting accretion expenses are different under UK GAAP and US GAAP. Accordingly, the Company adjusted its equity in earnings for Anglesey for the quarters ended June 30, 2009 and 2008 each by $.3, and for the six months ended June 30, 2009 and 2008 by $.6 and $.7, respectively, to reflect the impact of applying US GAAP with respect to the Anglesey CAROs.

     For purposes of the Company’s fair value estimates with respect to the CAROs, a credit adjusted risk free rate of 7.5% was used.

5. Property, Plant, and Equipment

     The major classes of property, plant, and equipment are as follows:

	June 30,			December 31,
	2009			2008
Land and improvements	$	23.6		$	22.8
Buildings		31.6			29.6
Machinery and equipment		239.9			211.0
Construction in progress		66.7			63.3
		361.8			326.7
Accumulated depreciation		(38.2	)		(30.0	)
Property, plant, and equipment, net	$	323.6		$	296.7

13

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The major components of Construction in progress were as follows:

	June 30,		December 31,
	2009		2008
Kalamazoo, Michigan facility (1)	$	51.1	$	23.0
Spokane, Washington facility (2)		.5		8.9
Other (3)		15.1		31.4
Total Construction in progress	$	66.7	$	63.3

(1)	The Kalamazoo, Michigan facility is planned to be equipped with two extrusion presses and a remelt operation. Completion of this investment program is expected to occur by early 2010.
(2)	The Company substantially completed the $139 million heat treat plate expansion project at its Trentwood facility in Spokane, Washington, in 2008.
(3)	Other construction in progress is spread among most of the Company’s manufacturing locations.

     As discussed in Note 15, the Company impaired certain assets in connection with the restructuring plans to shut down the Tulsa, Oklahoma facility and curtail operations at the Bellwood, Virginia location.

     For the quarters and six months ended June 30, 2009, the Company recorded depreciation expense of $4.2 and $8.3, respectively, relating to the Company’s operating facilities in its Fabricated Products segment. For the quarters and six months ended June 30, 2008, the Company recorded depreciation expense of $3.7 and $7.2, respectively, relating to the Company’s operating facilities in its Fabricated Products segment. An immaterial amount of depreciation expense was also recorded in the Company’s Corporate segment for all such periods.

6. Supplemental Balance Sheet Information

     Trade Receivables. Trade receivables were comprised of the following:

	June 30,			December 31,
	2009			2008
Billed trade receivables	$	70.3		$	99.2
Unbilled trade receivables (Note 1)		4.7			.1
		75.0			99.3
Allowance for doubtful receivables		(.8	)		(.8	)
	$	74.2		$	98.5

     Prepaid Expenses and Other Current Assets. Prepaid expenses and other current assets were comprised of the following:

	June 30,		December 31,
	2009		2008
Current derivative assets (Note 12)	$	6.5	$	32.2
Current deferred tax assets		83.9		84.1
Option premiums paid		7.0		5.3
Short term restricted cash		.9		1.4
Prepaid expenses		3.8		5.4
Total	$	102.1	$	128.4

     Other Assets. Other assets were comprised of the following:

	June 30,		December 31,
	2009		2008
Derivative assets (Note 12)	$	7.5	$	5.2
Option premiums paid		3.1		4.6
Restricted cash		24.7		35.4
Long term income tax receivables		1.5		4.4
Other		1.8		.9
Total	$	38.6	$	50.5

14

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Other Accrued Liabilities. Other accrued liabilities were comprised of the following:

	June 30,		December 31,
	2009		2008
Current derivative liabilities (Note 12)	$	40.9	$	79.0
Current FASB Interpretation No. 48 (“FIN 48”) income tax liabilities		7.9		11.8
Accrued income taxes and other taxes payable		1.9		1.8
Accrued book overdraft — see below		—		4.0
Accrued annual VEBA contribution		—		4.9
Accrued freight		1.2		2.1
Environmental accrual		2.3		3.3
Other		3.0		7.0
Total	$	57.2	$	113.9

     The accrued book overdraft balance at June 30, 2009 and December 31, 2008 represents uncleared cash disbursements.

     Long-term Liabilities. Long-term liabilities were comprised of the following:

	June 30,		December 31,
	2009		2008
Derivative liabilities (Note 12)	$	20.4	$	27.9
FIN 48 income tax liabilities		11.6		10.0
Workers’ compensation accruals		15.9		15.9
Environmental accruals		6.3		6.3
Asset retirement obligations		3.4		3.3
Other long term liabilities		1.7		1.9
Total	$	59.3	$	65.3

7. Secured Debt and Credit Facilities

     Secured credit facility and long term debt consisted of the following:

	June 30,		December 31,
	2009		2008
Revolving Credit Facility	$	—	$	36.0
Other		7.1		7.0
Total		7.1		43.0
Less — Current portion		—		—
Long-term debt	$	7.1	$	43.0

     Revolving Credit Facility. At June 30, 2009, the Company had in place a Senior Secured Revolving Credit Agreement with a group of lenders providing for a $265.0 revolving credit facility (the “Revolving Credit Facility”), of which up to a maximum of $60.0 may be utilized for letters of credit. Under the Revolving Credit Facility, the Company is able to borrow (or obtain letters of credit) from time to time in an aggregate amount equal to the lesser of a stated amount of $265.0 or a borrowing base comprised of eligible accounts receivable, eligible inventory, and certain eligible machinery, equipment, and real estate, reduced by certain reserves, all as specified in the Revolving Credit Facility. The Revolving Credit Facility matures in July 2011, at which time all principal amounts outstanding thereunder will be due and payable. Borrowings under the Revolving Credit Facility bear interest at a rate equal to either a base prime rate or LIBOR, at the Company’s option, plus a specified variable percentage determined by reference to the then remaining borrowing availability under the Revolving Credit Facility. The Revolving Credit Facility may, subject to certain conditions and the agreement of lenders thereunder, be increased to up to $275.0 at the request of the Company.

     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. The Revolving Credit Facility is secured by a first priority lien on substantially all of the assets of the Company and certain of its domestic operating subsidiaries that are also borrowers thereunder. The Revolving Credit Facility places restrictions on the ability of the Company and certain of

15

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

its subsidiaries to, among other things, incur debt, create liens, make investments, pay dividends, repurchase shares, sell assets, undertake transactions with affiliates, and enter into unrelated lines of business. At June 30, 2009, the Company was in compliance or has obtained a waiver in connection with all covenants contained in the Revolving Credit Facility.

     At June 30, 2009, based on the borrowing base determination in effect as of that date, the Company had $163.4 available for borrowing and letters of credit under the Revolving Credit Facility, of which $10.0 of letters of credit were outstanding, leaving $153.4 available for additional borrowing and letters of credit. There were no borrowings under the Revolving Credit Facility at June 30, 2009, but the interest rate applicable to any borrowings under Revolving Credit Facility would have been 4.75% at June 30, 2009.

     Other. As of June 30, 2009, the Company had a promissory note obligation (the “Note”) in the amount of $7.0 in connection with the purchase of real property of the Los Angeles, California facility. Interest is payable on the unpaid principal balance of the Note monthly in arrears on the outstanding principal balance at the prime rate, as defined in the Note, plus 1.5%, in no event exceeding 10% per annum. A principal payment of $3.5 will be due on February 1, 2012 and the remaining $3.5 will be due on February 1, 2013. The Note is secured by a deed of trust on the property. For the six months ended June 30, 2009, the Company incurred $.2 in interest expense relating to the Note. The interest rate applicable to borrowings under the Note was 4.75% at June 30, 2009.

8. Income Tax Matters

     Tax Provision. The provision for income taxes for the quarters and six month periods ended June 30, 2009 and 2008 consisted of:

	Quarter					Six Months
	Ended June 30,					Ended June 30,
	2009			2008		2009			2008
Domestic	$	17.2		$	12.6	$	19.0		$	38.8
Foreign		(2.0	)		2.9		(.7	)		6.1
Total	$	15.2		$	15.5	$	18.3		$	44.9

The income tax provision for the six months ended June 30, 2009 was $18.3, or an effective tax rate of 43.9%. The difference between the effective tax rate and the projected blended statutory tax rate was primarily related to the impact of a non-deductible compensation expense, resulting in an increase to the income tax rate of approximately 5.7%. This was partially offset by a reduction of unrecognized tax benefits, including interest and penalties, resulting in a 1.5% decrease in the effective tax rate.

     The foreign currency impact on unrecognized tax benefits, interest and penalties resulted in a $1.1 currency translation adjustment that was recorded in Accumulated other comprehensive income.

     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 the amounts used for income tax purposes.

     At December 31, 2008, the Company had $878.6 of net operating loss (“NOL”) carryforwards available to reduce future cash payments for income taxes in the United States. Such NOL carryforwards expire periodically through 2027. The Company also had $32.1 of other tax attributes, including $31.7 of alternative minimum tax (“AMT”) credit carryforwards with an indefinite life, available to offset regular federal income tax requirements. The remaining tax attributes are general business credits that will expire periodically through 2011.

     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. As of December 31, 2008, due to uncertainties surrounding the realization of some of the Company’s deferred tax assets including state NOLs sustained during the prior years and expiring tax benefits, the Company has a valuation allowance of $29.5 against its deferred tax assets. When recognized, the tax benefits relating to any reversal of the valuation allowance will be recorded as a reduction of income tax expense pursuant to Statement of Financial Accounting Standards No. 141R, Business Combinations.

16

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Foreign taxes primarily represent Canadian income taxes in respect of the Company’s facility in London, Ontario and United Kingdom income taxes in respect of the Company’s ownership in Anglesey. The provision for income tax is based on the projected rate for each applicable period.

     Other. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The audit of the Company’s federal income tax return for the 2004 tax year was completed in April 2008. The results of the audit did not have a material effect on the Company’s financial condition or results of operations. The Canada Revenue Agency audited and issued assessment notices for 1998 through 2001 for which Notices of Objection have been filed. In addition, the Canada Revenue Agency has audited and issued assessment notices for 2002 through 2004 and an expected payment of approximately $8.9 will be paid against previously accrued tax reserves in the third quarter of 2009. 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.

     No U.S. federal or state liability has been recorded for the undistributed earnings of the Company’s Canadian subsidiary at December 31, 2008. These undistributed earnings are considered to be indefinitely reinvested. Accordingly, no provision for U.S. federal and state income taxes or foreign withholding taxes has been provided on such undistributed earnings. Determination of the potential amount of unrecognized deferred U.S. income tax liability and foreign withholding taxes is not practicable because of the complexities associated with its hypothetical calculation.

     The Company had gross unrecognized tax benefits of $16.7 and $15.8 at June 30, 2009 and December 31, 2008, respectively. The change during the quarter and six months ended June 30, 2009 was primarily due to currency fluctuations and the assessment by Canada Revenue Agency for the 2002 through 2004 income tax audit. The Company recognizes interest and penalties related to these unrecognized tax benefits in the income tax provision. The Company had approximately $8.2 and $9.4 accrued at June 30, 2009 and December 31, 2008, respectively, for interest and penalties. Of the $9.4 of total interest and penalties at December 31, 2008, $5.2 is included in current liabilities and $4.2 is included in Long-term liabilities in the Consolidated Balance Sheet. Of the $8.2 of total interest and penalties at June 30, 2009, $3.7 is included in current liabilities and $4.5 is included in Long-term liabilities in the Consolidated Balance Sheet. During the quarter and six months ended June 30, 2009, the Company reduced its liability for interest and penalties by approximately $2.4 and $2.0, respectively. During the six months ended June 30, 2009, the foreign currency impact on gross unrecognized tax benefits, interest and penalties resulted in a $1.1 currency translation adjustment that was recorded in Accumulated other comprehensive income, of which $.8 related to gross unrecognized tax benefits and $.3 related to accrued interest and penalties. The Company expects its gross unrecognized tax benefits to be reduced by $2.8 within the next twelve months related to a Canadian income tax audit.

17

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

9. Employee Benefits

     Pension and Similar Plans. Pensions and similar plans include:

• Monthly contributions of one dollar per hour worked by each bargaining unit employee to the appropriate multi-employer pension plans sponsored by the United Steelworkers, International Brotherhood of Teamsters, and International Association of Machinists at certain of our production facilities. The Company currently estimates that contributions will range from $2 to $4 per year.

• A defined contribution 401(k) savings plan for hourly bargaining unit employees at five of the Company’s production facilities. The Company is required to make contributions to this plan for active bargaining unit employees at four of these production facilities ranging from (in whole dollars) $800 to $2,400 per employee per year, depending on the employee’s age. The Company currently estimates that contributions to such plans will range from $1 to $3 per year.

• A defined benefit plan for our salaried employees at the Company’s facility in London, Ontario with annual contributions based on each salaried employee’s age and years of service. At December 31, 2008, approximately 53% of the plan assets were invested in equity securities, 40% of plan assets were invested in debt securities and the remaining plan assets were invested in short term securities. The Company’s investment committee reviews and evaluates the investments portfolio. The asset mix target allocation on the long term investments is approximately 60% in equity securities and 36% in debt securities with the remaining assets in short term securities.

• A defined contribution savings plan for salaried and certain hourly employees providing for a concurrent match up to 4% of certain contributions made by employees plus an annual contribution of between 2% and 10% of their compensation depending on their age and years of service. All new hires after January 1, 2004 receive a fixed 2% contribution annually. The Company currently estimates that the contributions to such plan will range from $4 to $6 per year.

• A non-qualified defined contribution plan for key employees who would otherwise suffer a loss of benefits under the Company’s defined contribution plan as a result of the limitations imposed by the Internal Revenue Code.

     Postretirement Medical Obligations. As a part of the Company’s reorganization efforts, the Company’s postretirement medical plan was terminated in 2004. Participants were given the option of coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), with the Company’s filing of its plan of reorganization as the qualifying event, or participation in the applicable VEBA (the Union VEBA or the VEBA that provides benefits for certain other eligible retirees and their surviving spouse and eligible dependents (the “Salaried VEBA”)). Qualifying bargaining unit employees who do not, or are not eligible to, elect COBRA coverage are covered by the Union VEBA. The Salaried VEBA covers all other retirees including employees who retired prior to the 2004 termination of the prior plan or who retire with the required age and service requirements so long as their employment commenced prior to February 2002. The benefits paid by the VEBAs are at the sole discretion of the respective VEBA trustees and are outside the Company’s control. Upon the Company’s emergence from chapter 11 bankruptcy on July 6, 2006, both the Salaried VEBA and the Union VEBA had rights to receive shares of the Company’s newly issued common stock (see Note 10 of Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008). As of June 30, 2009, the Union VEBA and Salaried VEBA own approximately 23.9% and zero percent, respectively, of the Company’s outstanding common stock.

     As of the date of filing of this Report, the Company’s only obligation to the Union VEBA and the Salaried VEBA is an annual variable cash contribution which, with respect to the Union VEBA terminates for periods beginning after December 31, 2012. The amount to be contributed to the VEBAs through 2012 is 10% of the first $20.0 of annual cash flow (as defined; in general terms, the principal elements of cash flow are earnings before interest expense, provision for income taxes, and depreciation and amortization less cash payments for, among other things, interest, income taxes and capital expenditures), plus 20% of annual cash flow, as defined, in excess of

18

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$20.0. Such annual payments may not exceed $20.0 and are also limited (with no carryover to future years) to the extent that the payments would cause the Company’s liquidity to be less than $50.0. Such amounts are determined on an annual basis and payable within 120 days following the end of each fiscal year, or within 15 days following the date on which the Company files its Annual Report on Form 10-K with the SEC (or, if no such report is required to be filed, within 15 days of the delivery of the independent auditor’s opinion of the Company’s annual financial statements), whichever is earlier. At December 31, 2008, the Company had preliminarily determined that $4.2 and $.7 were owed to the Union VEBA and the Salaried VEBA, respectively, under the contribution obligation, which amounts were recorded in Other accrued liabilities in the Company’s Consolidated Balance Sheets with a corresponding increase/decrease in Net asset/liability in respect of VEBA. In March 2009, these amounts were paid to the VEBAs following the final determination of the contribution obligation. In addition, the Company is obligated to pay one-half of the administrative expenses of the Union VEBA, up to $.3, in each successive calendar year. During 2008, the Company paid $.3 in administrative expenses of the Union VEBA. No administrative expenses of the Union VEBA were paid for the six months ended June 30, 2009.

     For accounting purposes, after discussions with the staff of the SEC, the Company treats the postretirement medical benefits to be paid by the VEBAs and the Company’s related annual variable contribution obligations as defined benefit postretirement plans with the current VEBA assets and future variable contributions described above, and earnings thereon, operating as a cap on the benefits to be paid. While the Company’s only obligation to the VEBAs is to pay the annual variable contribution amount and the Company has no control over the plan assets, the Company nonetheless accounts for net periodic postretirement benefit costs in accordance with Statement of Financial Accounting Standards No. 106, Employers’ Accounting for Postretirement Benefits other than Pensions and records any difference between the assets of each VEBA and its accumulated postretirement benefit obligation in the Company’s financial statements.

     Components of Net Periodic Benefit Cost and Cash Flow and Charges. The following tables present the components of net periodic benefit cost for the quarters and six month periods ended June 30, 2009 and 2008:

	Quarter						Six Months
	Ended June 30,						Ended June 30,
	2009			2008			2009			2008
VEBAs:
Service cost	$	.6		$	.4		$	1.1		$	.9
Interest cost		4.6			4.3			9.3			8.5
Expected return on plan assets		(5.2	)		(5.2	)		(10.4	)		(10.3	)
Amortization of prior service cost		.4			.2			.8			.4
Amortization of net loss		1.0			.1			1.9			.2
		1.4			(.2	)		2.7			(.3	)
Defined contribution plans		2.2			2.8			5.2			6.0
	$	3.6		$	2.6		$	7.9		$	5.7

     The following tables present the allocation of these charges:

	Quarter				Six Months
	Ended June 30,				Ended June 30,
	2009		2008		2009		2008
Fabricated Products segment	$	1.9	$	2.5	$	4.4	$	5.2
Corporate and Other segment		1.7		.1		3.5		.5
	$	3.6	$	2.6	$	7.9	$	5.7

     For all periods presented, substantially all of the Fabricated Products segment’s related charges are in Cost of products sold, excluding depreciation, amortization and other items, with the balance being in Selling, administrative, research and development and general expense.

     See Note 10 of Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 for key assumptions used with respect to the Company’s pension plans and key assumptions made in computing the net obligation of each VEBA.

19

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

10. Employee Incentive Plans

     Short term incentive plans

     The Company has a short term incentive compensation plan for senior management and certain salaried employees payable at the Company’s election in cash, non-restricted shares of common stock, or a combination of cash and non-restricted shares. Amounts earned under the plan are based primarily on EVA of the Company’s core Fabricated Products business, adjusted for certain safety and performance factors. Most of the Company’s production facilities have similar programs for both hourly and salaried employees.

     Long term incentive plans

     General. On July 6, 2006, the 2006 Equity and Performance Incentive Plan (as amended, the “Equity Incentive Plan”) became effective. Officers and other key employees of the Company or one or more of its subsidiaries, as well as directors and directors emeritus of the Company, are eligible to participate in the Equity Incentive Plan. The Equity Incentive Plan permits the granting of awards in the form of options to purchase common shares, stock appreciation rights, shares of non-vested and vested stock, restricted stock units, performance shares, performance units and other awards. The Equity Incentive Plan will expire on July 6, 2016. No grants will be made after that date, but all grants made on or prior to that date will continue in effect thereafter subject to the terms thereof and of the Equity Incentive Plan. The Company’s Board of Directors may, in its discretion, terminate the Equity Incentive Plan at any time. The termination of the Equity Incentive Plan will not affect the rights of participants or their successors under any awards outstanding and not exercised in full on the date of termination. In December 2008, the Company amended the Equity Incentive Plan to include a new French sub-plan in order to issue restricted stock units to eligible employees of the Company’s French subsidiary. Under the French sub-plan, the restriction period on the restricted stock units cannot be shorter than two years from the date of grant and the holder of such restricted stock units is not entitled to dividend equivalent payments in the event that the Company declares dividends on shares of its common stock. In June 2009, the Company amended the Equity Incentive Plan to clarify and confirm that directors emeritus are permitted to participate in the 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, upon its effectiveness 2,222,222 common shares were reserved for issuance under the Equity Incentive Plan. At June 30, 2009, 815,357 common shares were available for additional awards under the Equity Incentive Plan.

     Compensation charges, all of which are included in Selling, administrative, research and development and general expenses, related to the Equity Incentive Plan for the quarters and six month periods ended June 30, 2009 and 2008 were as follows:

	Quarter				Six Months
	Ended June 30,				Ended June 30,
	2009		2008		2009		2008
Service-based vested and non-vested common shares and restricted stock units	$	2.9	$	2.8	$	5.3	$	5.0
Performance shares		.7		.5		.7		.7
Service-based stock options		.1		—		.2		.1
Total compensation charge	$	3.7	$	3.3	$	6.2	$	5.8

     Non-vested Common Shares, Restricted Stock Units, and Performance Shares. In March 2009, the Company granted 180,696 non-vested common shares, 5,181 restricted stock units and 455,880 performance shares to executive officers and other key employees. The performance shares were granted under the 2009 — 2011 LTI Program.

     During the quarter ended June 30, 2009, the Company granted 1,778 non-vested common shares and 4,318 performance shares to a member of the senior management. In addition, the Company granted 13,920 non-vested common shares to its non-employee directors and issued an additional 3,734 common shares to non-employee directors who elected to receive shares of common stock in lieu of all or a portion of their annual cash retainers. The Company also granted 435 non-vested common shares to its director emeritus.

20

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     The non-vested common shares granted to executive officers and other members of senior management during the quarters ended March 31, 2009 and June 30, 2009 are subject to a vesting requirement that lapses in March 2012. The non-vested common shares granted to other key employees in March 2009 vest one-third on each of the first, second and third anniversaries of the grant date. The non-vested common shares granted to directors and a director emeritus in June 2009 are subject to a vesting requirement that lapses on June 2, 2010. The total grant date fair value of the non-vested shares issued, after assuming a forfeiture rate, is being amortized to expense over the various vesting period on a ratable basis.

     With the exception of restricted stock units granted under the French sub-plan, restricted stock units have rights similar to the rights of non-vested common shares and vest one third on each of the first, second and third anniversaries of the grant date. The employee will receive one common share for each restricted stock unit upon the vesting of the restricted stock unit. Restricted stock units granted under the French sub-plan vest two-thirds on the second anniversary of the grant date and one third on the third anniversary of the grant date. The grant date fair value of the restricted stock units issued, after assuming a forfeiture rate, is being amortized to expense over the vesting period on a ratable basis.

     The performance shares, granted in March 2009 and May 2009, are subject to performance requirements pertaining to the Company’s average annual EVA measured over a three year performance period, 2009 through 2011. EVA is a measure of the Company’s pretax operating income for a particular year over a pre-determined percentage of net assets of the immediately preceding year, as defined in the 2009 — 2011 LTI Program. The number of performance shares, if any, that will ultimately vest and result in the issuance of common shares in 2012 will depend on the average annual EVA achieved during the three year performance period. The Company accounts for these awards at fair value in accordance with SFAS No. 123R. The total fair value to be recognized as compensation expense has been estimated based on the most probable outcome of the performance condition which is evaluated quarterly using the Company’s plan and actual results. The total fair value, based on the Company’s best estimate as of June 30, 2009, after assuming an estimated forfeiture rate, is being amortized to expense over the requisite service period of three years on a ratable basis.

     The fair value of the non-vested common shares, restricted stock units, and performance shares was determined based on the closing trading price of the common shares on the grant date. A summary of the activity with respect to non-vested common shares and restricted stock units for the six months ended June 30, 2009 is as follows:

	Non-Vested					Restricted
	Common Shares					Stock Units
				Weighted-					Weighted-
				Average					Average
				Grant-Date					Grant-Date
				Fair Value					Fair Value
	Shares			per Share		Units			per Unit
Outstanding at January 1, 2009		553,712		$	47.79		2,969		$	36.05
Granted		196,829			15.57		5,181			13.92
Vested		(29,572	)		52.76		(254	)		78.15
Forfeited		(5,668	)		25.08		—			—
Outstanding at June 30, 2009		715,301		$	38.87		7,896		$	20.18

     A summary of the activity with respect to the performance shares for the six months ended June 30, 2009 is as follows:

	Performance Shares
				Weighted-
				Average
				Grant-Date
				Fair Value
	Shares			per Share
Outstanding at January 1, 2009		89,951		$	74.40
Granted		460,198			14.06
Vested		(20,467	)		24.83
Forfeited		(21,468	)		27.15
Outstanding at June 30, 2009		508,214		$	23.75

21

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

For the six months ended June 30, 2008, 51,551 non-vested common shares were granted to employees and non-employee directors at the weighted-average grant date fair value per share of $72.21. Additionally, 702 shares of restricted stock units and 101,586 performance shares were granted to employees during this period at the weighted-average grant date fair value per share of $74.82 and $74.45, respectively. 26,189 non-vested common shares and 419 restricted stock units vested during the six months ended June 30, 2008.

22

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     As of June 30, 2009, there was $6.0 of unrecognized compensation cost related to the non-vested common shares and the restricted stock units and $1.6 of unrecognized compensation cost related to the performance shares. The cost related to the non-vested common shares and the restricted stock units is expected to be recognized over a weighted-average period of 1.7 years and the cost related to the performance shares is expected to be recognized over a weighted-average period of 2.3 years.

     Stock Options. As of June 30, 2009, the Company had 22,077 outstanding options for executives and other key employees to purchase its common shares. The options were granted on April 3, 2007 and have a contractual life of ten years. The options vested one-third on April 3, 2008 and one-third on April 3, 2009, and will vest one-third on the third anniversary of the grant date. The weighted-average fair value of the options granted was $39.90 (see Note 11 of Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 for key assumptions used in the Black Scholes pricing model). No new options were granted during the six months ended June 30, 2009.

     A summary of the Company’s stock option activity for the six months ended June 30, 2009 is as follows:

			Weighted-		Weighted-
			Average		Average
			Exercise		Remaining		Aggregate
	Number of		Price per		Contractual		Intrinsic
	Options		Share		Life		Value
					(In years)		(In millions)
Outstanding at January 1, 2009		22,077	$	80.01		—	$	—
Grants		—		—		—		—
Forfeited		—		—		—		—
Exercise		—		—		—		—
Outstanding at June 30, 2009		22,077	$	80.01		7.75	$	—
Fully vested and expected to vest at June 30, 2009		21,869	$	80.01		7.75	$	—
Exercisable at June 30, 2009		15,143	$	80.01		7.75	$	—

     At June 30, 2009, there was $.2 of unrecognized compensation expense related to stock options. The expense is expected to be recognized over a weighted-average period of 9 months.

11. Commitments and Contingencies

     Commitments. The Company and its subsidiaries have a variety of financial commitments, including purchase agreements, forward foreign exchange and forward sales contracts (see Note 12), letters of credit (see Note 7), and guarantees. The Company and its subsidiaries also have agreements to supply alumina to and to purchase aluminum from Anglesey (see Note 3).

     Minimum rental commitments under operating leases at December 31, 2008 were as follows: years ending December 31, 2009 — $5.6; 2010 — $4.1; 2011 — $2.7; 2012 — $2.3 and 2013 and thereafter — $37.1.

     Environmental Contingencies. The Company and its subsidiaries are subject to a number of environmental laws, fines or penalties assessed for alleged breaches of the environmental laws, and to claims based upon such laws.

     Based on the Company’s evaluation of the existing environmental matters, the Company had environmental accruals totaling $8.7 at June 30, 2009. Such amounts are primarily related to potential solid waste disposal and soil and groundwater remediation matters. These environmental accruals represent the Company’s undiscounted estimate of costs reasonably expected to be incurred based on presently enacted laws and regulations, currently available facts, existing technology, and the Company’s assessment of the likely remediation action to be taken. The Company expects that these remediation actions will be taken over the next several years and estimates that expenditures to be charged to these environmental accruals will be approximately $1.4 in 2009, $1.9 in 2010, $2.4 in 2011, $.9 in 2012, and $2.1 in 2013 and thereafter.

23

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     As additional facts are developed and definitive remediation plans and necessary regulatory approvals for implementation of remediation are established or alternative technologies are developed, changes in these and other factors may result in actual costs exceeding the current environmental accruals. The Company believes 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 $16.8. As the resolution of these matters is subject to further regulatory review and approval, no specific assurance can be given as to when the factors upon which a substantial portion of this estimate is based can be expected to be resolved. However, the Company is currently working to resolve certain of these matters.

     Other Contingencies. The Company and its subsidiaries are party to various lawsuits, claims, investigations, and administrative proceedings that arise in connection with its past and current operations. The Company evaluates such matters on a case by case basis, and its policy is to vigorously contest any such claims it believes are without merit. In accordance with Statement of Financial Accounting Standards No. 5, Accounting for Contingencies, the Company reserves for a legal liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Quarterly, in addition to when changes in facts and circumstances require it, the Company reviews and adjusts these reserves 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, management believes that it has sufficiently reserved for such matters and that the ultimate resolution of pending matters will not have a material adverse impact on its consolidated financial position, operating results, or liquidity.

12. Derivative Financial Instruments and Related Hedging Programs

     In conducting its business, the Company uses various instruments, including forward contracts and options, to manage the risks arising from fluctuations in aluminum prices, energy prices and exchange rates. The Company has historically entered into derivative transactions from time to time to limit its economic (i.e., cash) exposure resulting from (i) its anticipated sales of primary aluminum and fabricated aluminum products, net of expected purchase costs for items that fluctuate with aluminum prices, (ii) the energy price risk from fluctuating prices for natural gas used in its production process, and (iii) foreign currency requirements with respect to its cash commitments for equipment purchases and with respect to its foreign subsidiaries and affiliate. As the Company’s hedging activities are generally designed to lock-in a specified price or range of prices, realized gains or losses on the derivative contracts utilized in the hedging activities generally offset at least a portion of any losses or gains, respectively, on the transactions being hedged at the time the transaction occurs. However, due to mark-to-market accounting, during the life of the derivative contract, significant unrealized, non-cash gains and losses are recorded in the income statement as a reduction or increase in Cost of products sold, excluding depreciation, amortization and other items. The Company may also be exposed to margin calls, which the Company tries to minimize or offset through counterparty credit lines and/or use of options. From time to time, the Company may modify the terms of the derivative contracts based on operational needs.

     As a result of the expected curtailment of Anglesey’s smelting operations discussed in Note 3 of this Report, the Company believes its exposure to alumina and primary aluminum price risk with respect to the Company’s income and cash flow related to its share of Anglesey production is expected to decrease in the third quarter of 2009 and will likely be eliminated in the fourth quarter of 2009 and beyond.

     The Company’s 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 metal price risk on to its customers. However, in certain instances the Company does enter into firm price arrangements. In such instances, the Company does have price risk on its anticipated primary aluminum purchases in respect of the customer’s orders. The Company currently uses third party hedging instruments to limit exposure to primary aluminum price risks related to substantially all fabricated products firm price arrangements.

     Total fabricated products shipments during the six months ended June 30, 2009 and 2008 that contained fixed price terms were (in millions of pounds) 91.3 and 127.7, respectively. At June 30, 2009, the Fabricated Products business held contracts for the delivery of fabricated aluminum products that have the effect of creating price risk on

24

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

anticipated purchases of primary aluminum during the last six months of 2009 and for the period 2010 through 2012 totaling approximately (in millions of pounds): 2009 — 82.1, 2010 — 90.3, 2011 — 76.6, and 2012 — 13.4.

     The following table summarizes the Company’s material derivative positions at June 30, 2009:

		Notional
		Amount of
		Contracts		Fair
Commodity	Period	(mmlbs)		Value
Aluminum —
Option purchase contracts	7/2009 through 12/2011		285.4	$	8.8
Fixed priced purchase contracts	7/2009 through 12/2012		227.4	$	(45.4	)
Fixed priced sales contracts	7/2009 through 12/2011		70.7	$	6.2
Regional premium swap contracts(1)	7/2009 through 12/2012		195.1	$	(0.6	)

		Notional
		Amount of
		Contracts		Fair
Foreign Currency	Period	(mm)		Value
Pound Sterling —
Fixed priced purchase contracts	7/2009 through 9/2009	£	17.1	$	(2.7	)
Candian dollar —
Fixed priced purchase contracts	8/2009	C$	9.1	$	(.5	)
Fixed priced sales contracts	8/2009	C$	9.1	$	.1
Euro —
Fixed priced purchase contracts	7/2009 through 3/2010	€	3.5	$	(.2	)
Krona—
Fixed priced purchase contracts	7/2009 through 9/2009	Kr	6.3	$	(.2	)

		Notional
		Amount of
		Contracts		Fair
Energy	Period	(mmbtu)		Value
Natural gas —
Fixed priced purchase contracts(2)	7/2009 through 12/2009		940,000	$	(2.7	)

(1)	Regional premiums represent the premium over the LME price for primary aluminum which is incurred on the Company’s purchases of primary aluminum.
(2)	As of June 30, 2009, the Company’s exposure to increases and decreases in natural gas prices had been substantially limited for approximately 66% of natural gas purchases for July 2009 through September 2009 and approximately 53% of the natural gas purchases for October 2009 through December 2009.

     The Company reflects the fair value of its derivative contracts on a gross basis in the Consolidated Balance Sheets (See Note 6). As more fully discussed in Note 1, the Company reflects changes in the market value of its derivative instruments in Net income (rather than deferring such gains/losses to the date of the underlying transactions to which the related hedges occur). The realized and unrealized gains (losses) for the quarters and six month periods ended June 30, 2009 and 2008 were as follows:

	Quarter					Six Months
	Ended June 30,					Ended June 30,
	2009			2008		2009			2008
Realized gains (losses):
Aluminum	$	(7.9	)	$	6.0	$	(13.5	)	$	8.8
Foreign currency		(4.1	)		.4		(10.6	)		.6
Natural gas		(2.2	)		1.1		(6.5	)		.5
Total realized gains (losses)	$	(14.2	)	$	7.5	$	(30.6	)	$	9.9
Unrealized gains (losses):
Aluminum	$	16.9		$	1.2	$	7.9		$	31.8
Foreign currency		7.8			.8		12.1			1.9
Natural gas		1.9			2.9		2.3			4.1
Total unrealized gains (losses)	$	26.6		$	4.9	$	22.3		$	37.8

25

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Both realized and unrealized gains (losses) on derivative instruments are included in Cost of products sold, excluding depreciation, amortization and other items, for the periods presented.

     All of the Company’s derivative contracts contain credit-risk related contingencies. If the fair value of the Company’s net derivative positions with the counterparty exceeds a specified threshold, if any, the counterparty is required to transfer cash collateral in excess of the threshold to the Company. Conversely, if the fair value of the net derivative positions falls below a specified threshold, the Company is required to transfer cash collateral below the threshold to the counterparty. At June 30, 2009, the Company had $7.0 of margin deposits with its counterparties as a result of the credit-risk related contingency features.

13. Earnings Per Share

     On January 1, 2009, the Company adopted FSP EITF 03-6-1. Under FSP EITF 03-6-1, unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are treated as participating securities and are included in the computation of earnings per share pursuant to the two-class method in accordance with SFAS No. 128. Certain of the Company’s unvested share-based payment awards contain nonforfeitable rights to dividends and dividend equivalents. Upon adoption of FSP EITF 03-6-1, the Company used the two-class method in the computation of earnings per share for the quarter and six months ended June 30, 2009 and retrospectively adjusted its earnings per share data for the quarter and six months ended June 30, 2008 to conform with the provisions in FSP EITF 03-6-1.

     Basic and diluted earnings per share using the two-class method for the quarters and six month periods ended June 30, 2009 and 2008 were calculated as follows:

	Quarter						Six Months
	Ended June 30,						Ended June 30,
	2009			2008			2009			2008
Numerator:
Net Income	$	19.6		$	22.8		$	23.4		$	61.9
Less: net income attributable to participating securities (1)		(.6	)		(.6	)		(.7	)		(1.7	)
Net income available to common stockholders	$	19.0		$	22.2		$	22.7		$	60.2
Denominator:
Weighted-average common shares outstanding — Basic		19,537,848			20,041,886			19,505,611			20,034,423
Weighted-average common shares outstanding — Diluted		19,537,848			20,041,886			19,505,611			20,034,423
Income per common share:
Basic	$	.97		$	1.11		$	1.16		$	3.00
Diluted	$	.97		$	1.11		$	1.16		$	3.00

26

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(1) Net income attributable to participating securities includes both distributed and undistributed net income. Distributed net income attributed to participating securities represents dividend and dividend equivalents declared on the participating securities that the Company expects to ultimately vest. Distributed net income to participating securities was $.1 for each of the quarters ended June 30, 2009 and 2008 and was $.3 and $.2 for the six months ended June 30, 2009 and 2008, respectively. Undistributed net income attributed to participating securities was $.4 and $.7 for the quarters ended June 30, 2009 and 2008, respectively, and $.4 and $1.8 for the six month periods ended June 30, 2009 and 2008, respectively. For the quarters and six month periods ended June 30, 2009 and 2008, undistributed net income was apportioned to common stockholders and participating securities based on the weighted average number of each class of securities outstanding during the applicable period as a percentage of the combined weighted average number of these securities outstanding during the period. For the quarters and six month periods ended June 30, 2009 and 2008, undistributed net income apportioned to the participating securities represented approximately 3% of total undistributed net income.

     In computing the diluted weighted average common shares outstanding for the quarters and six month periods ended June 30, 2009 and 2008, the Company used the two-class method assuming that participating securities are not exercised, vested or converted. The Company included the dilutive effect of stock options in calculating the diluted weighted average common shares. Options to purchase 22,077 common shares at an average exercise price per share of $80.01 were outstanding at both June 30, 2009 and 2008. The potential dilutive effect of such shares was zero for each of the quarters ended June 30, 2009 and 2008 and zero for each of the six month periods ended June 30, 2009 and 2008.

     For the six months ended June 30, 2009 and 2008, the Company paid a total of $9.7, or $.48 per common share, and $7.4, or $.36 per common share, respectively, in cash dividends to stockholders, including the holders of restricted stock, and dividend equivalents to the holders of restricted stock units and to the holders of performance shares with respect to one half of the performance shares.

14. Segment and Geographical Area Information

     The Company’s primary line of business is the production of semi-fabricated specialty aluminum products. In addition, the Company owns a 49% interest in Anglesey (see Note 3).

     The Company’s continuing operations are organized and managed by product type and include two operating segments of the aluminum industry and the Corporate segment. The aluminum industry segments consist of: Fabricated Products and Primary Aluminum. The Fabricated Products segment sells value-added products such as heat treat aluminum sheet and plate, extrusions and forgings which are used in a wide range of industrial applications, including aerospace, defense, automotive and general engineering end-use applications. The Primary Aluminum segment produces, through its investment in Anglesey, commodity grade products as well as value-added products such as ingot and billet, for which the Company receives a premium over normal commodity market prices, and conducts hedging activities in respect of the Company’s exposure to primary aluminum price risk. The accounting policies of the segments are the same as those described in Note 1 of Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. Segment results are evaluated internally by management before any allocation of corporate overhead and without any charge for income taxes, interest expense, or Other operating charges, net.

27

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Financial information by operating segment for the quarters and six month periods ended June 30, 2009 and 2008 is as follows:

	Quarter						Six Months
	Ended June 30,						Ended June 30,
	2009			2008			2009			2008
Net Sales:
Fabricated Products	$	204.8		$	359.2		$	445.6		$	708.4
Primary Aluminum		27.3			54.3			52.4			104.1
	$	232.1		$	413.5		$	498.0		$	812.5
Segment Operating Income (Loss):
Fabricated Products	$	18.6		$	42.9		$	32.6		$	82.9
Primary Aluminum		26.9			8.1			31.3			48.7
Corporate and Other		(11.4	)		(12.9	)		(22.6	)		(25.3	)
Other Operating Charges, Net		.9			(.1	)		.9			(.2	)
Total operating income	$	35.0		$	38.0		$	42.2		$	106.1
Interest expense		(.2	)		(.3	)		(.4	)		(.5	)
Other income (expense), net		—			.6			(.1	)		1.2
Income before income taxes	$	34.8		$	38.3		$	41.7		$	106.8

	Quarter				Six Months
	Ended June 30,				Ended June 30,
	2009		2008		2009		2008
Depreciation and Amortization:
Fabricated Products	$	4.2	$	3.7	$	8.3	$	7.2
Corporate and Other		.1		—		.1		—
	$	4.3	$	3.7	$	8.4	$	7.2
Capital expenditures, net of change in accounts payable:
Fabricated Products	$	14.4	$	23.3	$	36.6	$	38.3
Corporate and Other		—		—		—		—
	$	14.4	$	23.3	$	36.6	$	38.3

	June 30,		December 31,
	2009		2008
Segment assets:
Fabricated Products	$	455.5	$	498.8
Primary Aluminum(1)		41.5		99.9
Corporate and Other(2)		538.5		546.7
	$	1,035.5	$	1,145.4

(1)	Primary Aluminum includes the Company’s derivative assets.
(2)	Corporate and Other includes all of the Company’s Cash and cash equivalents, Net assets in respect of VEBA and net deferred income tax assets.

	Quarter				Six Months
	Ended June 30,				Ended June 30,
	2009		2008		2009		2008
Income Taxes Paid:
Fabricated Products —
United States	$	1.8	$	1.8	$	1.8	$	1.9
Canada		.1		.8		.4		2.0
	$	1.9	$	2.6	$	2.2	$	3.9

28

KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

15. Restructuring costs and other charges

Fourth Quarter 2008 Restructuring Plans

     In December 2008, the Company announced plans to close operations at its Tulsa, Oklahoma facility and significantly reduce operations at its Bellwood, Virginia facility. The Tulsa, Oklahoma facility produced, and the Bellwood, Virginia produces, primarily extruded seamless tube and rod and bar products sold principally to service centers for general engineering applications. The operations and workforce reductions were a result of deteriorating economic and market conditions. Approximately 45 employees at the Tulsa, Oklahoma facility and 125 employees at the Bellwood, Virginia facility were affected. As a result, the Company incurred restructuring costs and other charges of $8.8 during the fourth quarter of 2008, of which $4.5 was related to involuntary employee terminations and $4.3 related to asset impairment. During the first quarter of 2009, the Company recorded additional charges of $1.2 in connection with these restructuring efforts, consisting primarily of contract termination and facility shut-down costs. Approximately $0.6 of the first quarter expense represents cash obligations, with the balance represented by non-cash charges. The restructuring efforts initiated during the fourth quarter of 2008 were substantially completed by the end of the first quarter of 2009.

All restructuring costs and other charges described above were incurred and recorded in the Company’s Fabricated Products segment.

Second Quarter 2009 Restructuring Plans

     In May 2009, the Company announced plans to: (i) further curtail operations at its Bellwood, Virginia facility to focus solely on drive shaft and seamless tube products and (ii) shut down the Bellwood, Virginia facility temporarily during the month of July 2009, in response to planned shutdowns in the automotive industry and continued weak economic and market conditions. In addition, the Company reduced its personnel in certain other locations in the quarter ended June 30, 2009, in an effort to streamline costs. Approximately 85 employees were affected by the reduction in force, principally at the Bellwood location. In connection with the foregoing plans, the Company recorded restructuring costs and other charges of $5.1 in the second quarter of 2009. Of these charges, $4.8 were related to involuntary employee terminations and other personnel costs, and the remaining $0.3 were principally related to a non-cash asset impairment. Of the personnel-related costs recorded during the second quarter, approximately $0.8 represented incremental non-cash expense during the period, in connection with the accelerated vesting of previously granted share-based payments. The restructuring efforts initiated during the second quarter of 2009 are expected to be substantially completed by the end of the third quarter of 2009.

Of the $5.1 restructuring costs and other charges incurred in the quarter ended June 30, 2009, $4.2 were incurred and recorded in the Company’s Fabricated Products segment, with the remaining $0.9 incurred and reported in the Company’s Corporate segment.

     The following table summarizes the activity relating to cash obligations arising from the Company’s restructuring plans:

	Employee
	Termination
	and Other			Facility
	Personnel			related
	Costs			costs			Total
Restructuring obligations at December 31, 2008	$	4.5		$	—		$	4.5
Cash restructuring costs and other charges:
Recorded in the quarter ended March 31, 2009 (1)		.2			.4			.6
Recorded in the quarter ended June 30, 2009 (2)		4.0			.1			4.1
Total cash restructuring costs and other charges recorded for the six months ended June 30, 2009		4.2			.5			4.7
Cash payments		(4.1	)		(.5	)		(4.6	)
Restructuring obligations at June 30, 2009	$	4.6		$	—		$	4.6

(1)	In connection with the fourth quarter 2008 restructuring plans described above.
(2)	In connection with the second quarter 2009 restructuring plans described above.

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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

16. Supplemental cash flow information

	Six Months
	Ended June 30,
	2009		2008
Supplemental disclosure of cash flow information:
Interest paid, net of capitalized interest of $1.0 and zero, respectively	$	—	$	.4
Income taxes paid	$	2.2	$	3.9
Supplemental disclosure of non-cash transactions:
Dividend declared and unpaid	$	—	$	5.0
Acquisition of leased equipment	$	.1	$	—

17. Subsequent events

     The Company has evaluated events subsequent to June 30, 2009 to assess the need for potential recognition or disclosure in this Report. Such events were evaluated through July 29, 2009, the date these financial statements were issued. Based upon this evaluation, it was determined that no subsequent events occurred that require recognition in the financial statements and that the following item represents an event that merits disclosure herein:

     On July 15, 2009, the Company’s Board of Directors approved the declaration of a quarterly cash dividend of $.24 per common share to stockholders of record at the close of business on July 27, 2009, payable on August 17, 2009.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     This Item should be read in conjunction with Part I, Item., “Financial Statements” of this Report.

     This Report contains statements which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear in a number of places in this Report and can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “estimates,” “will,” “should,” “plans,” or “anticipates” or comparable terminology, or by discussions of strategy. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors. These factors include: the effectiveness of management’s strategies and decisions; general economic and business conditions; developments in technology; new or modified statutory or regulatory requirements; and changing prices and market conditions. Part I, Item 1A. “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2008, identifies other factors that could cause actual results to vary. No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements.

     Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. Our MD&A is presented in six sections:

• Overview;

• Results of Operations;

• Liquidity and Capital Resources;

• Contractual Obligations, Commercial Commitments, and Off-Balance-Sheet and Other Arrangements;

• Critical Accounting Estimates and Policies; and

• New Accounting Pronouncements.

     We believe our MD&A should be read in conjunction with the Consolidated Financial Statements and related Notes included in Part II, Item 8. “Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2008.

     In the discussion of operating results below, certain items are referred to as non-run-rate items. For purposes of such discussion, non-run-rate items are items that, while they may recur from period to period, (i) are particularly material to results, (ii) affect costs primarily as a result of external market factors, and (iii) may not recur in future periods if the same level of underlying performance were to occur. Non-run-rate items are part of our business and operating environment but are worthy of being highlighted for the benefit of the users of the financial statements. Our intent is to allow users of the financial statements to consider our results both in light of and separately from items such as fluctuations in underlying metal prices, natural gas prices, and currency exchange rates.

Overview

     We are a leading North American manufacturer of semi-fabricated specialty aluminum products for aerospace / high strength, general engineering and custom automotive and industrial applications. In addition, we own a 49% interest in Anglesey Aluminium Limited (“Anglesey”), which owns and operates an aluminum smelter in Holyhead, Wales.

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     We have two reportable operating segments, Fabricated Products and Primary Aluminum, and a Corporate segment. The Fabricated Products segment is comprised of all of our operations within the fabricated aluminum products industry including ten fabricating facilities in North America at June 30, 2009. The Fabricated Products segment sells value-added products such as heat treat aluminum sheet and plate, extrusions and forgings which are used in a wide range of industrial applications, including aerospace, defense, automotive and general engineering end-use applications.

     The Primary Aluminum segment, through our ownership interest in Anglesey, produces commodity grade products as well as value-added products such as ingot and billet, for which we receive a premium over normal commodity market prices, and conducts hedging activities in respect of our exposure to primary aluminum price risk.

     Changes in global, regional, or country-specific economic conditions can have a significant impact on overall demand for aluminum-intensive fabricated products in the market segments in which we participate. Such changes in demand can directly affect our earnings by impacting the overall volume and mix of such products sold. Demand for our products for general engineering, custom automotive and industrial applications dramatically declined in the final months of 2008 and the first half of 2009, reflecting weak end-use demand. This, along with significant inventory de-stocking by our service center customers and others in the value stream, adversely impacted our shipments. Supply chain de-stocking and weak demand also had a significant adverse impact on our second quarter shipments of aerospace and high strength products, but we nonetheless benefited from incremental aerospace plate shipments under contracts enabled by the Trentwood expansion.

     Primary aluminum prices fell significantly over the course of the last half of 2008 and the first half of 2009. The average London Metal Exchange, or LME, transaction price per pound of primary aluminum for the six months ended June 30, 2009 and June 30, 2008 were $.65 and $1.29, respectively. The average LME transaction price per pound of primary aluminum for the quarter ended June 30, 2009 and June 30, 2008 was $.67 and $1.33, respectively. At July 15, 2009, the LME transaction price per pound of primary aluminum was $.74. The Company’s Fabricated Products segment operates its business with an intent to remain neutral to primary aluminum price changes by passing such price changes on to its customers or, to the extent it has firm price contracts, hedging such exposures to primary aluminum prices with counterparties.

     Our operating results are also, albeit to a lesser degree, sensitive to changes in prices for power and natural gas and changes in certain foreign exchange rates. All of the foregoing have been subject to significant price fluctuations over recent years. For a discussion of our sensitivity to changes in market conditions, see Part I, Item 3. “Quantitative and Qualitative Disclosures About Market Risks” of this Report.

     Highlights of the quarter ended June 30, 2009 include:

• Fabricated Products segment shipments of 101 million pounds. Shipments of aerospace and high strength products sold to service centers were lower in the second quarter due to de-stocking and weaker demand, notwithstanding incremental contractual aerospace plate shipments. Segment shipments also continued to reflect softness in the ground transportation and industrial application markets.

• Consolidated net income of $19.6 million, or $.97 per diluted share, which includes $26.6 million of pre-tax, non-cash mark-to-market gains on our derivative positions, $5.1 million of restructuring charges as noted below, and $1.2 million of additional impairment charges relating to our investment in Anglesey.

• Announcement of plans to: (i) further curtail operations at our Bellwood, Virginia facility to focus solely on drive shaft and seamless tube products and (ii) take a temporary shutdown in the Bellwood facility, during the month of July, in response to planned shutdowns in the automotive industry and continued weak economic and market conditions. Additionally, we streamlined headcount in other locations during the quarter, for cost efficiency. Restructuring charges of $5.1 million were recorded during the quarter in connection with these plans.

• Cash generated from operations of $20.6 million; no borrowings under the Revolving Credit Facility as of June 30, 2009 and $153 million of borrowing capacity as of that date.

• Dividend payment on May 15, 2009 of $4.8 million, or $.24 per common share, to stockholders of record at the close of business on April 27, 2009.

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Results of Operations

Consolidated Selected Operational and Financial Information

     The table below provides selected operational and financial information on a consolidated basis (in millions of dollars, except shipments and average sales prices).

     The following data should be read in conjunction with our interim consolidated financial statements and the notes thereto contained elsewhere herein. See Note 16 of Notes to Consolidated Financial Statements included in Part II, Item 8. “Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2008 for further information regarding segments. Interim results are not necessarily indicative of those for a full year.

	Quarter Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008
				(In millions of dollars, except
				shipments and average sales price)
Shipments (millions of pounds):
Fabricated Products		101.4			148.4			210.4			300.2
Primary Aluminum		36.5			36.8			72.7			73.8
		137.9			185.2			283.1			374.0
Average Realized Third Party Sales Price (per pound):
Fabricated Products (1)	$	2.02		$	2.42		$	2.12		$	2.36
Primary Aluminum (2)	$	.75		$	1.48		$	.72		$	1.41
Net Sales:
Fabricated Products	$	204.8		$	359.2		$	445.6		$	708.4
Primary Aluminum		27.3			54.3			52.4			104.1
Total Net Sales	$	232.1		$	413.5		$	498.0		$	812.5
Segment Operating Income:
Fabricated Products (3)(4)	$	18.6		$	42.9		$	32.6		$	82.9
Primary Aluminum (5)		26.9			8.1			31.3			48.7
Corporate and Other		(11.4	)		(12.9	)		(22.6	)		(25.3	)
Other Operating Benefits (Charges), Net		.9			(.1	)		.9			(.2	)
Total Operating Income	$	35.0		$	38.0		$	42.2		$	106.1
Net Income	$	19.6		$	22.8		$	23.4		$	61.9
Capital Expenditures, net of change in accounts payable	$	14.4		$	23.3		$	36.6		$	38.3

(1)	Average realized prices for the Company’s Fabricated Products segment are subject to fluctuations due to changes in product mix as well as underlying primary aluminum prices and are not necessarily indicative of changes in underlying profitability. See Part I, Item 1. “Business” included in our Annual Report on Form 10-K for the year ended December 31, 2008.
(2)	Average realized prices for the Company’s Primary Aluminum segment exclude derivative gains/ losses.
(3)	Fabricated Products segment operating results for the quarter and six months ended June 30, 2009 include a non-cash last-in, first-out (“LIFO”) inventory benefit of $2.1 million and $13.2 million, respectively, and metal losses of approximately $1.0 million and $16.5 million, respectively. Also included in the Fabricated Products segment operating results for the six months ended June 30, 2009 is a $9.3 million lower of cost or market

33

	inventory write-down recognized in the first quarter of 2009. The Fabricated Products segment operating results for the quarter and six months ended June 30, 2009 also include $4.2 million and $5.4 million, respectively, of restructuring charges relating to the restructuring plans principally involving our Tulsa, Oklahoma and Bellwood, Virginia facilities. Fabricated Products segment operating results for the quarter and six months ended June 30, 2008 include a non-cash LIFO inventory charge of $16.2 million and $30.6 million, respectively, and metal gains of approximately $15.5 million and $26.9 million, respectively.
(4)	Fabricated Products segment includes non-cash mark-to-market gains on natural gas and foreign currency hedging activities totaling $2.2 million and $2.7 million in the quarters ended June 30, 2009 and 2008, respectively. Fabricated Products segment includes non-cash mark-to-market gains on natural gas and foreign currency hedging activities totaling $2.7 million and $4.5 million in the six months ended June 30, 2009 and 2008, respectively. For further discussion regarding mark-to-market matters, see Note 12 of Notes to Interim Consolidated Financial Statements included in Part I, Item 1. “Financial Statements” of this Report.
(5)	Primary Aluminum segment includes non-cash mark-to-market gains on primary aluminum hedging activities totaling $16.9 million and $1.2 million and on foreign currency derivatives totaling $7.5 million and $1.0 million for the quarters ended June 30, 2009 and 2008, respectively. Primary Aluminum segment includes non-cash mark-to-market gains on primary aluminum hedging activities totaling $7.9 million and $31.8 million and on foreign currency derivatives totaling $11.7 million and $1.5 million for the six months ended June 30, 2009 and 2008, respectively. For further discussion regarding mark-to-market matters, see Note 12 of Notes to Interim Consolidated Financial Statements included in Part I, Item 1. “Financial Statements” of this Report.

     Summary. We reported net income of $19.6 million for the quarter ended June 30, 2009 compared to net income of $22.8 million for the quarter ended June 30, 2008. For the six months ended June 30, 2009, we reported net income of $23.4 million compared to net income of $61.9 million for the six months ended June 30, 2008. Both quarters and six month periods include a number of non-run-rate items that are more fully explained in the sections below.

     Our operating income for the quarter ended June 30, 2009 was $35.0 million compared to $38.0 million for the quarter ended June 30, 2008. Included in the operating income for the quarter ended June 30, 2009 were $26.6 million of unrealized mark-to-market gains on our derivative positions. Included in the operating income for the quarter ended June 30, 2008 was $4.9 million of unrealized mark-to-market gains on our derivative positions. Our operating income for the six months ended June 30, 2009 was $42.2 million compared to $106.1 million for the six months ended June 30, 2008. Included in operating income for the six months ended June 30, 2009 were $22.3 million of unrealized mark-to-market gains on our derivative positions. Included in operating income for the six months ended June 30, 2008 were $37.8 million of unrealized mark-to-market gains on our derivative positions.

     Net Sales. We reported Net sales in the quarter ended June 30, 2009 of $232.1 million compared to $413.5 million in the quarter ended June 30, 2008. The decrease in revenues during the quarter ended June 30, 2009 is primarily the result of a 32% decrease in our Fabricated Products segment shipment volume, a 17% decrease in Fabricated Products segment realized prices, and a 49% decrease in Primary Aluminum segment pricing. The decrease in Fabricated Products segment prices primarily reflects the pass-through to customers of lower underlying hedged alloyed metal prices.

     For the six months ended June 30, 2009, we reported net sales of $498.0 million compared to $812.5 million for the six months ended June 30, 2008. The decrease in revenues during the six months ended June 30, 2009 is primarily the result of a 30% decrease in our Fabricated Products segment shipment volume, an 10% decrease in Fabricated Products segment realized prices, and a 49% decrease in Primary Aluminum segment pricing. The decrease in Fabricated Products segment prices reflects the pass-through to customers of lower underlying hedged alloyed metal prices, partially offset by an increase in value-added revenue per pound. Increases or decreases in primary aluminum market prices do not necessarily directly translate to increased or decreased profitability because (i) a substantial portion of the business conducted by the Fabricated Products segment passes primary aluminum price changes directly onto customers and (ii) our hedging activities in support of Fabricated Products firm price sales agreements limit our losses as well as gains from primary metal price changes.

     Cost of Products Sold Excluding Depreciation, Amortization and Other Items. Cost of products sold, excluding depreciation, amortization and other items for the quarter ended June 30, 2009 totaled $170.3 million, or 73% of Net sales, compared to $352.0 million, or 85% of Net sales, in the quarter ended June 30, 2008. Included in Cost of

34

products sold, excluding depreciation, amortization and other items were $26.6 million and $4.9 million of non-cash mark-to-market gains on our derivative positions in the quarter ended June 30, 2009 and 2008, respectively.

     Cost of products sold, excluding depreciation, amortization and other items for the six months ended June 30, 2009 totaled $395.9 million, or 80% of Net sales, compared to $660.5 million, or 81% of Net sales, in the six months ended June 30, 2008. Included in Cost of products sold, excluding depreciation, amortization and other items were $22.3 million and $37.8 million of non-cash mark-to-market gains on our derivative positions in the six months ended June 30, 2009 and 2008, respectively. See “Segment Information” below for a detailed discussion of the comparative results of operations for the quarters and six month periods ended June 30, 2009 and 2008.

     Lower of Cost or Market Inventory Write-down We recorded a lower of cost or market inventory write-down of $9.3 million in the first quarter of 2009, as the result of declining metal prices. There were no lower of cost or market inventory write-downs during the quarter ended June 30, 2009 or during the six months ended June 30, 2008.

     Impairment of Investment in Anglesey. Anglesey operates under a power agreement that provides sufficient power to sustain its aluminum reduction operations at full capacity through the end of September 2009, at which time we expect Anglesey to fully curtail its smelting operations. The nuclear plant that supplies power to Anglesey is currently slated for decommissioning in late 2010. Anglesey has worked intensively with government authorities and agencies to find a sustainable alternative to the power supply needs of the smelter. However, as of the filing date of this Report, no sources have been identified that would allow the uninterrupted continuation of smelting operations. Additionally, Anglesey continues to evaluate alternative operating activities in line with the needs of the local community and market opportunities, including the potential continuation of remelt and casting operations. Taking into account (i) Anglesey’s inability to obtain affordable power, (ii) the resulting expected curtailment of smelting operations, (iii) the growing uncertainty with respect to the future of Anglesey’s operations, and (iv) Anglesey’s expected cash requirements for redundancy and pension payments, we concluded that we should not expect to receive any dividends from Anglesey in the foreseeable future and, as a result, fully impaired the investment in Anglesey during the fourth quarter of 2008. For the quarter and six months ended June 30, 2009, we continued to believe that we should not expect to receive any dividends from Anglesey in the foreseeable future and, as such, continued to fully impair our investment in Anglesey. For the quarter and six months ended June 30, 2009, we recorded impairment charges of $1.2 million and $1.8 million, respectively, relating to our investment in Anglesey.

     Restructuring Costs and Other Charges. In December 2008, we announced plans to close our Tulsa, Oklahoma facility and to curtail operations at our Bellwood, Virginia facility. During the first quarter of 2009, we recorded $1.2 million in restructuring charges primarily related to contract termination costs and other costs pertaining the December 2008 restructuring initiatives.

     In May 2009, we announced plans to (i) further curtail operations at our Bellwood, Virginia facility to focus solely on drive shaft and seamless tube products and (ii) shut down in the Bellwood, Virginia facility temporarily during the month of July 2009, in response to planned shutdowns in the automotive industry and continued weak economic and market conditions. We also selectively reduced personnel at certain of our other locations. Approximately 85 employees were affected by the reduction in force, principally at the Bellwood, Virginia location. In connection with these restructuring plans, we recorded restructuring costs and other charges of $5.1 million in the second quarter of 2009. Of these charges, $4.8 million were related to involuntary employee terminations and other personnel costs, and the remaining $0.3 million were principally related to a non-cash asset impairment. Of the personnel-related costs recorded during the second quarter, approximately $0.8 million represented incremental non-cash expense during the period, in connection with the accelerated vesting of previously granted share-based payments. The restructuring efforts initiated during the second quarter of 2009 are expected to be substantially completed by the end of the third quarter of 2009.

     Depreciation and Amortization. Depreciation and amortization for the quarter ended June 30, 2009 was $4.3 million compared to $3.7 million for the quarter ended June 30, 2008. Depreciation and amortization for the six months ended June 30, 2009 was $8.4 million compared to $7.2 million for the six months ended June 30, 2008. The increase is primarily the result of placing additional construction in progress into service throughout 2008.

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     Selling, Administrative, Research and Development, and General. Selling, administrative, research and development, and general expense totaled $17.1 million in the quarter ended June 30, 2009 compared to $19.7 million in the quarter ended June 30, 2008. Selling, administrative, research and development, and general expense totaled $35.0 million in the six months ended June 30, 2009 compared to $38.5 million in the six months ended June 30, 2008. The decreases in selling, administrative, research and development and general expenses for the both the quarter ended June 30, 2009 and six months ended June 30, 2009, as compared to the corresponding period in 2008, is principally due to the net reductions in administrative expense within our Corporate and Other segment. See “Segment Information—Corporate and Other” below.

     Other Operating Benefits (Charges), Net. For the quarter and six months ended June 30, 2009, other operating benefits consisted primarily of the recovery of a pre-chapter 11 emergence obligation owed to us, for which we had previously fully-reserved against an expected collection. For the quarter and six months ended June 30, 2008, other operating charges represented professional fees and expenses incurred after our emergence from chapter 11 bankruptcy which related directly to our reorganization.

     Interest Expense. Interest expense was $.2 million in the quarter ended June 30, 2009, as compared to $.3 million for the quarter ended June 30, 2008. Interest expense was $.4 million for the six months ended June 30, 2009, as compared to $.5 million for the six month period ended June 30, 2008.

     Other Income (Expense), Net. Other income (expense), net was zero for the quarter ended June 30, 2009, as compared to $.6 million in the quarter ended June 30, 2008. Other income (expense), net was $(.1) million in the six months ended June 30, 2009, compared to $1.2 million in the six months ended June 30, 2008. The decrease for the six months ended June 30, 2009 was primarily related to lower interest income as a result of declining interest rates as well as a decrease in interest earning principal balance.

     Income Tax Provision. The income tax provision for the quarter ended June 30, 2009 was $15.2 million, for an effective tax rate of 43.6%. The effective tax rate for the quarter ended June 30, 2008 was approximately 40%. The income tax provision for the six months ended June 30, 2009 was $18.3 million, for an effective tax rate of 43.9%. The effective tax rate for the six months ended June 30, 2008 was approximately 42%. The difference between the effective tax rate and the projected blended statutory tax rate for the quarter end six months ended June 30, 2009 was primarily related to the impact of a non-deductible compensation expense, resulting in an increase to the income tax provision, partially offset by a reduction of unrecognized tax benefits, including interest and penalties. The effective tax rate for the six months ended June 30, 2008 was impacted by (i) the accounting for the income tax effects of equity income in our investment in Anglesey, which accounting had the impact of increasing the effective tax rate; (ii) unrecognized tax benefits, including interest and penalties, and (iii) changes in the United Kingdom and Canadian income tax rates and geographical distribution of income for the period.

Derivatives

     In conducting our business, we use various instruments, including forward contracts and options, to manage the risks arising from fluctuations in aluminum prices, energy prices and exchange rates. We have historically entered into derivative transactions from time to time to limit our economic (i.e., cash) exposure resulting from (i) our anticipated sales of primary aluminum and fabricated aluminum products, net of expected purchase costs for items that fluctuate with aluminum prices, (ii) the energy price risk from fluctuating prices for natural gas used in our production process, and (iii) foreign currency requirements with respect to our cash commitments for equipment purchases and with respect to our foreign subsidiaries and affiliate. As our hedging activities are generally designed to lock-in a specified price or range of prices, realized gains or losses on the derivative contracts utilized in the hedging activities generally offset at least a portion of any losses or gains, respectively, on the transactions being hedged at the time the transaction occurs. However, due to mark-to-market accounting, during the term of the derivative contract, significant unrealized, non-cash gains and losses may be recorded in the income statement as a reduction or increase in Cost of products sold, excluding depreciation, amortization and other items. We may also be exposed to margin calls placed on derivative contracts, which we try to minimize or offset through counterparty credit lines and/or the use of options. From time to time, we may modify the terms of the derivative contracts based on operational needs.

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     The fair value of our derivatives recorded on the Consolidated Balance Sheets at June 30, 2009 and December 31, 2008 was a net liability of $37.2 million and $59.6 million, respectively. The primary reasons for the decrease in the net liability were an increase in metal prices, the effect of changes in outstanding foreign currency hedge positions and changes in foreign currency rates compared to December 31, 2008. These changes resulted in the recognition of $26.6 million and $22.3 million of unrealized mark-to-market gains on derivatives for the quarter and six months ended June 30, 2009, respectively, which we consider to be a non-run-rate item (see Note 12 of Notes to Interim Consolidated Financial Statements included in Part I, Item 1. “Financial Statements” of this Report).

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Segment Information

     Our continuing operations are organized and managed by product type and include two operating segments and a Corporate segment. The accounting policies of the segments are the same as those described in Note 1 of Notes to Consolidated Financial Statements included in Part II, Item 8. “Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2008. Segment results are evaluated internally by us before any allocation of Corporate overhead and without any charge for income taxes, interest expense, or Other operating charges, net.

Fabricated Products

     The table below provides selected operational and financial information (in millions of dollars except shipments and average sales prices) for our Fabricated Products segment:

	Quarter				Six Months
	Ended June 30,				Ended June 30,
	2009		2008		2009		2008
Shipments (mm pounds)		101.4		148.4		210.4		300.2
Average realized third party sales price (per pound)	$	2.02	$	2.42	$	2.12	$	2.36
Net sales	$	204.8	$	359.2	$	445.6	$	708.4
Segment operating income	$	18.6	$	42.9	$	32.6	$	82.9

     Net sales of fabricated products decreased by 43% to $204.8 million for the quarter ended June 30, 2009 as compared to the quarter ended June 30, 2008, primarily due to a 32% decrease in shipments and a 17% decrease in average realized prices. Shipments of products for aerospace and high-strength applications were 12% lower in the quarter ended June 30, 2009 as compared to the quarter ended June 30, 2008, reflecting supply chain de-stocking and weaker demand for all aerospace and high strength products (including plate, sheet, cold finish rod and bar, and drawn tube products), partially offset by incremental contractual aerospace plate shipments. Shipments of general engineering products and automotive and custom industrial products declined 38% in the quarter ended June 30, 2009 as compared to the same quarter of 2008, reflecting continued weak ground transportation and other end-use demand as well as ongoing de-stocking by our service center customers. The reduction in average realized prices primarily reflected the pass through to customers of 34% lower underlying hedged, alloyed metal prices.

     For the six months ended June 30, 2009 as compared to the six months ended June 30, 2008, net sales of fabricated products decreased by 37% to $445.7 million, primarily due to a 30% decrease in shipments and a 10% decrease in average realized prices. Shipments of products for aerospace and high-strength applications were 3% higher in the six months ended June 30, 2009 as compared to the six months ended June 30, 2008, as higher contractual aerospace plate shipments were largely offset by lower shipments to service center customers and others in the value stream due to second quarter de-stocking and weaker overall demand. Shipments of general engineering products and automotive and custom industrial products declined 41% in the six months ended June 30, 2009 as compared to the same period of 2008, reflecting continued weak end-use demand as well as de-stocking by our service center customers. The reduction in average realized prices reflected the pass through to customers of 29% lower underlying hedged, alloyed metal prices, offset by a 9% increase in value-added revenue per pound. The increase in value-added revenue per pound was largely due to a higher proportion of higher value-added products within the mix of products shipped in the six months ended June 30, 2009. The table below summarizes the components of the change in average realized sales price per pound (per pound):

	Quarter				Six Months
	Ended June 30,				Ended June 30,
	2009		2008		2009		2008
Hedged cost of alloyed metal	$	.84	$	1.27	$	.85	$	1.20
Average realized third party value-added revenue		1.18		1.15		1.27		1.16
Average realized sales price	$	2.02	$	2.42	$	2.12	$	2.36

     The table below provides shipment and value-added revenue information for our three end-use product groupings for the quarters and six month periods ended June 30, 2009 and 2008:

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	Quarter				Six Months
	Ended June 30,				Ended June 30,
	2009		2008		2009		2008
Shipments (mm lbs):
Aerospace and high strength products		33.0		37.3		79.0		76.6
General engineering products		46.4		73.5		87.4		145.2
All other products		22.0		37.5		44.0		78.3
		101.4		148.3		210.4		300.1
Value added revenue(1):
Aerospace and high strength products	$	62.3	$	77.6	$	153.5	$	158.5
General engineering products		41.6		66.7		80.9		133.1
All other products		15.7		26.1		32.0		56.2
	$	119.6	$	170.4	$	266.4	$	347.8
Value added revenue per pound:
Aerospace and high strength products	$	1.89	$	2.08	$	1.94	$	2.07
General engineering products		.90		.91		.93		.92
All other products		.71		.70		.73		.72
	$	1.18	$	1.15	$	1.27	$	1.16

(1) Value added revenue represents net sales less hedged cost of alloyed metal.

     Recent trends that could affect the remaining quarters in 2009 include management’s expectation for short-term weaker demand for aerospace and high strength products exacerbated by continued destocking throughout the supply chain, especially for our higher value-added sheet and coil, cold finish and drawn tube products. However, we believe our contractual aerospace plate shipments will be higher than in mid-2008. For general engineering products, aggressive de-stocking may abate as service center inventories are at historic lows. Visibility is limited, however. Automotive demand is expected to improve in the second half of 2009 as automotive build rates improve from the very weak levels of the first half of 2009.

     Operating income for the quarter ended June 30, 2009 was $18.6 million as compared to $42.9 million for the second quarter of 2008. Operating income for the six months ended June 30, 2009 was $32.6 million as compared to $82.9 million for the first half of 2008. Operating income for each of the quarters and six month periods ended June 30, 2009 and 2008 includes several large non-run-rate items. These items are listed below (in millions of dollars):

	Quarter						Six Months
	Ended June 30,						Ended June 30,
	2009			2008			2009			2008
Operating income	$	18.6		$	42.9		$	32.6		$	82.9
Impact to operating income of non-run-rate items:
Metal (losses) gains (before considering LIFO)		(1.0	)		15.5			(16.5	)		26.9
Non-cash LIFO benefits (charges)		2.1			(16.2	)		13.2			(30.6	)
Non-cash lower of cost or market inventory write-down		—			—			(9.3	)		—
Mark-to-market gains on derivative instruments		2.2			2.7			2.7			4.5
Restructuring charges		(4.2	)		—			(5.4	)		—
Pre-emergence related environmental costs(1)		(.5	)		(1.1	)		(.5	)		(1.3	)
Total non-run-rate items		(1.4	)		.9			(15.8	)		(.5	)
Operating income excluding non-run-rate items	$	20.0		$	42.0		$	48.4		$	83.4

(1) Pre-emergence related environmental costs were related to environmental issues at our Spokane, Washington facility that existed before our emergence from chapter 11 bankruptcy in July 2006.

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     As noted above, operating income excluding identified non-run-rate items for the quarter ended June 30, 2009 of $20.0 million was $22.0 million lower than the second quarter of 2008. Operating income excluding identified non-run-rate items for the six months ended June 30, 2009 of $48.4 million was $35.0 million lower than the first half of 2008. Operating income for the quarter and six months ended June 30, 2009 as compared to the same periods in 2008 reflects the following impacts:

	2Q09 vs. 2Q08			1H09 vs. 1H08
	Favorable			Favorable
	(unfavorable)			(unfavorable)
Sales impact	$	(29.6	)	$	(43.2	)
Manufacturing inefficiencies (1)		(1.7	)		(5.1	)
Energy costs		5.7			8.1
Freight		3.2			4.5
Currency exchange related		1.2			2.9
Planned major maintenance		1.0			1.2
Depreciation expense		(.6	)		(1.2	)
Other		(1.2	)		(2.2	)

(1) Manufacturing inefficiencies were primarily related to variable costs which had not fully adjusted to lower shipment levels.

     Segment operating results for the quarters ended June 30, 2009 and 2008 include gains (losses) on intercompany hedging activities with the Primary Aluminum segment totaling $(14.0) million and $13.5 million, respectively. Segment operating results for the six months ended June 30, 2009 and 2008 include gains on intercompany hedging activities with the Primary Aluminum segment totaling $(33.6) million and $23.4 million, respectively. These amounts eliminate in consolidation.

Primary Aluminum

     The table below provides selected operational and financial information (in millions of dollars except shipments and average sales prices) for our Primary Aluminum segment:

	Quarter				Six Months
	Ended June 30,				Ended June 30,
	2009		2008		2009		2008
Shipments (mm pounds)		36.5		36.8		72.7		73.8
Average realized third party sales price (per pound)	$	.75	$	1.48	$	.72	$	1.41
Net sales	$	27.3	$	54.3	$	52.4	$	104.1
Segment operating income	$	26.9	$	8.1	$	31.3	$	48.7

     During both the quarter and six months ended June 30, 2009, third party net sales of primary aluminum decreased by 50%, primarily due to a 49% decrease in average realized pricing. The net sales and average realized sales prices do not consider the impact of hedging transactions.

     The following table recaps the major components of segment operating results for the quarter and six month periods ended June 30, 2009 and 2008 (in millions of dollars) and the discussion following the table addresses the primary factors leading to the differences. Many of these factors indicated are subject to significant fluctuation from period to period. See Part I, Item 1A. “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2008.

	Quarter						Six Months
	Ended June 30,						Ended June 30,
	2009			2008			2009			2008
Profit on metal sales (net of alumina sales) (1)	$	2.8		$	7.0		$	2.8		$	17.1
Anglesey (2)		(1.0	)		6.0			—			12.3
Impairment of investment in Anglesey		(1.2	)		—			(1.8	)		—
Internal hedging with Fabricated Products (3)		14.0			(13.5	)		33.6			(23.4	)
Derivative settlements — Pounds Sterling (4)		(4.2	)		.4			(9.4	)		.6
Derivative settlements — External metal hedging (4)		(7.9	)		6.0			(13.5	)		8.8
Mark-to-market gains on derivative instruments (4)(5)		24.4			2.2			19.6			33.3
	$	26.9		$	8.1		$	31.3		$	48.7

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(1)	Operating income represents earnings on metal purchases from Anglesey and resold by us and on alumina purchases from third parties by us and sold to Anglesey. This is impacted by the market price for primary aluminum and alumina pricing, offset by the impact of foreign currency translation.
(2)	Represents our share of earnings from Anglesey and foreign currency transaction gains (losses) relating to our settlement of trade payables to Anglesey denominated in Pounds Sterling.
(3)	Eliminates in consolidation.
(4)	Impacted by positions and market prices.
(5)	We consider mark-to-market gains and losses on derivative instruments to be non-run-rate income items.

     Anglesey operates under a power agreement that provides sufficient power to sustain its aluminum reduction operations at full capacity through the end of September 2009, at which time we expect Anglesey to fully curtail its smelting operations. The nuclear plant that supplies power to Anglesey is currently slated for decommissioning in late 2010. Anglesey has worked intensively with government authorities and agencies to find a sustainable alternative to the power supply needs of the smelter. However, as of the filing date of this Report, no sources have been identified that would allow the uninterrupted continuation of smelting operations. Additionally, Anglesey continues to evaluate alternative operating activities in line with the needs of the local community and market opportunities, including the potential continuation of remelt and casting operations. Taking into account (i) Anglesey’s inability to obtain affordable power, (ii) the resulting expected curtailment of smelting operations, (iii) the growing uncertainty with respect to the future of Anglesey’s operations, and (iv) Anglesey’s expected cash requirements for redundancy and pension payments, we concluded that we should not expect to receive any dividends from Anglesey in the foreseeable future and, as a result, fully impaired the investment in Anglesey during the fourth quarter of 2008. For the quarter and six months ended June 30, 2009, we continued to believe that we should not expect to receive any dividends from Anglesey in the foreseeable future and, as such, continued to fully impair our investment in Anglesey. For the quarter and six months ended June 30, 2009, we recorded impairment charges of $1.2 million and $1.8 million, respectively, relating to our investment in Anglesey.

     On June 12, 2008, Anglesey suffered a significant failure in the rectifier yard that resulted in a localized fire in one of the power transformers. As a result of the fire, Anglesey operated below its production capacity during the latter half of 2008 until normal production resumed in December 2008 and incurred incremental costs, primarily associated with repair and maintenance costs, as well as loss of margin due to the outage. Anglesey has property damage and business interruption insurance that is expected to cover financial losses (net of applicable deductibles). Anglesey received a partial insurance settlement payment of $20.0 million in December 2008 of which $10.0 million was recorded as the Company’s equity income. During the first quarter of 2009, Anglesey received another partial insurance settlement of $8.2 million, 49% of which (or $4.0 million) was included in the Anglesey category listed above. Anglesey did not receive additional insurance settlements during the quarter ended June 30, 2009. The timing and amount of any remaining insurance recovery is uncertain. The value of the insurance proceeds received by Anglesey during the six months ended June 30, 2009 reflected in our equity income was fully impaired, as we do not expect to receive any such proceeds.

     Compared to the second quarter of 2009, we anticipate similar levels of third quarter shipments, with revenue varying from the second quarter primarily due to changes in LME. Excluding mark-to-market gains or losses and assuming we continue to impair our share of the earnings of Anglesey, we anticipate that the Primary Aluminum segment’s results should improve slightly in the third quarter as compared to the second quarter of 2009, partly due to hedging transactions that should minimize Pound Sterling exchange rate risk and metal price risk in the quarter. Assuming the full curtailment of smelting operations at September 30, 2009, we expect virtually no Primary Aluminum shipments or revenue in the fourth quarter and beyond. Additionally, metal price risk and currency exchange rate risk with respect to our income and cash flow related to the Primary Aluminum segment will be largely eliminated in the fourth quarter of 2009 and beyond.

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Corporate and Other

     Corporate operating expenses represent corporate general and administrative expenses that are not allocated to our business segments. Corporate operating expenses exclude Other operating charges, net discussed above.

     Corporate operating costs for the quarter ended June 30, 2009 were $1.5 million lower than such costs for the quarter ended June 30, 2008. This decrease in Corporate operating costs is primarily related to a $2.4 million decrease in administrative expenses, partially offset by restructuring costs and other charges of $.9 million incurred in the quarter ended June 30, 2009 (see Note 15 of Notes to Interim Consolidated Financial Statements included in Part I, Item 1. “Financial Statements” of this Report). The decrease in administrative expenses reflects: (i) a $1.3 million decrease in short term incentive compensation accrual, (ii) a $1.2 million reduction in professional fees, primarily audit fees, and (iii) $1.4 million of aggregate decreases in various other administrative costs, primarily personnel compensation. Such decreases were partially offset by an increase in voluntary employee beneficiary association (“VEBA”) net periodic benefit cost of $1.5 million.

     Corporate operating costs for the six months ended June 30, 2009 were $2.7 million lower than such costs the six months ended June 30, 2008. This decrease in Corporate operating costs is primarily related to a $3.6 million decrease in administrative expenses, partially offset by $.9 million of restructuring costs and other charges for the quarter ended June 30, 2009, as noted above. The decrease in administrative expenses reflects: (i) a $2.5 million decrease in short term incentive compensation accrual; (ii) a $2.4 million reduction in professional fees, primarily audit fees, and (iii) $1.7 million of aggregate decreases in various other administrative costs, primarily personnel compensation. Such decreases were partially offset by an increase in VEBA net periodic benefit cost of $3.0 million.

     We consider the restructuring costs and other charges and the VEBA net period benefit costs discussed above to be non-run-rate items.

Liquidity and Capital Resources

Summary

     Cash and cash equivalents were $14.6 million as of June 30, 2009, up from $0.2 million as of December 31, 2008. In addition to cash and cash equivalents, our revolving credit facility is a source of liquidity for operations. Borrowing on the revolving credit facility was zero at June 30, 2009, down from $36 million at December 31, 2008. A significant reduction of working capital during the six months ended June 30, 2009 contributed to the repayment of revolving credit borrowings and the increase in cash and cash equivalents. Working capital, the excess of current assets over current liabilities, was $175.9 million as of June 30, 2009, down from $193.7 million as of December 31, 2008. The decrease in working capital is primarily driven by decreases in accounts receivables, inventories and current derivative assets partially offset by a decrease in accounts payable, accrued liabilities and current derivative liabilities. The changes in derivative assets and liabilities did not affect cash.

     Cash equivalents consist primarily of money market accounts and other highly liquid investments with an original maturity of three months or less when purchased. Our liquidity is affected by restricted cash that is pledged as collateral for derivative contracts with our counterparties and for certain letters of credit or restricted to use for workers’ compensation requirements and certain agreements. Short term restricted cash, included in Prepaid expenses and other current assets, totaled $.9 million and $1.4 million as of June 30, 2009 and December 31, 2008, respectively. Long term restricted cash, which was included in Other Assets, was $24.7 million and $35.4 million as of June 30, 2009 and December 31, 2008, respectively. Included in long term restricted cash at June 30, 2009 and December 31, 2008 were $7.0 million and $17.2 million, respectively, of margin call deposits with our counterparties relating to our derivative positions.

Cash Flows

     The following table summarizes our cash flows from operating, investing and financing activities for the six months ended June 30, 2009 and 2008 (in millions of dollars):

	Six Months
	Ended June 30,
	2009			2008
Total cash provided by (used in):
Operating activities:
Fabricated Products	$	89.2		$	34.6
Primary Aluminum		21.9			6.1
Corporate and Other		(24.5	)		(35.9	)
	$	86.6		$	4.8
Investing activities:
Fabricated Products		(36.6	)		(38.3	)
Primary Aluminum		10.2			(.1	)
Corporate and Other		1.0			—
	$	(25.4	)	$	(38.4	)
Financing activities:
Corporate and Other		(46.9	)		(7.7	)
	$	(46.9	)	$	(7.7	)

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Operating Activities

     Fabricated Products — During the six months ended June 30, 2009, Fabricated Products operating activities provided $89.2 million of cash compared to the six months ended June 30, 2008 when Fabricated Products operating activities provided $34.6 million of cash. Cash provided in the six months ended June 30, 2009 was related primarily to decreased working capital and secondarily to operating income. Cash provided in the six months ended June 30, 2008 was primarily related to operating income largely offset by increased working capital.

     Primary Aluminum — During the six months ended June 30, 2009, Primary Aluminum operating activities provided approximately $21.9 million in cash compared to the six months ended June 30, 2008, when Primary Aluminum operating activities provided approximately $6.1 million of cash. Cash provided in the six months ended June 30, 2009 was primarily due to operating income and a decrease in working capital. Cash provided in the six months ended June 30, 2008 was primarily due to operating income.

     Corporate and Other — Corporate and Other operating activities used $24.5 million of cash during the six months ended June 30, 2009 compared to the six months ended June 30, 2008, when Corporate and Other operating activities used $35.9 million of cash. Cash outflows from Corporate and Other operating activities in the six months ended June 30, 2009 include $4.9 million of payments to the VEBAs, payments of $5.1 million in relation to our short term incentive program, and payments in respect of general and administrative costs. Cash outflows from Corporate and Other operating activities in the six months ended June 30, 2008 primarily included $8.4 million of payments to the VEBAs, payments of $8.0 million in relation to our short term incentive program and payments in respect of general and administrative costs.

Investing Activities

     Fabricated Products -— Cash used in investing activities for Fabricated Products was $36.6 million in the six months ended June 30, 2009. This compares to the six months ended June 30, 2008 when Fabricated Products investing activities used $38.3 million in cash. See “Capital Expenditures” below for additional information.

     Primary Aluminum — Investing activities in the Primary Aluminum segment is related to margin deposits required as cash collateral with our derivative counterparties. We received $10.2 million of margin deposits back from the counterparties during the six months ended June 30, 2009 as a result of an increase in our aggregate derivative fair value from December 31, 2008.

     Corporate and Other — Investing activities in the Corporate and Other segment for the six months ended June 30, 2009 is primarily related to a decrease in restricted cash.

Financing Activities

     Corporate and Other — Cash used in the six months ended June 30, 2009 was $46.9 million. The cash outflow was primarily related to the repayment of net borrowings under our revolving credit facility of $36.0 million and $9.7 million in cash dividends paid to stockholders. Cash used in the six months ended June 30, 2008 was primarily related to cash dividends paid to stockholders.

Sources of Liquidity

     Our most significant sources of liquidity are funds generated by operating activities, available cash and cash equivalents, and borrowing availability under our revolving credit facility. We believe funds generated from the expected results of operations, together with available cash and cash equivalents and borrowing availability under our revolving credit facility will be sufficient to finance expansion plans and strategic initiatives, which could include acquisitions, for at least the next 12 months.. There can be no assurance, however, that we will continue to

43

generate cash flows at or above current levels or that we will be able to maintain our ability to borrow under our revolving credit facility.

     Under the revolving credit facility, we are able to borrow (or obtain letters of credit) from time to time in an aggregate amount equal to the lesser of $265.0 million or a borrowing base comprised of eligible accounts receivable, eligible inventory and certain eligible machinery, equipment and real estate, reduced by certain reserves, all as specified in the revolving credit facility. Of the aggregate amount available under the revolving credit facility, a maximum of $60.0 million may be utilized for letters of credit. The revolving credit facility matures in July 2011, at which time all principal amounts outstanding thereunder will be due and payable. Borrowings under the revolving credit facility bear interest at a rate equal to either a base prime rate or LIBOR, at our option, plus a specified variable percentage determined by reference to the then remaining borrowing availability under the revolving credit facility. The revolving credit facility may, subject to certain conditions and the agreement of lenders thereunder, be increased up to $275.0 million. At June 30, 2009, based on the borrowing base determination in effect as of that date, the Company had $163.4 million available for borrowing and letters of credit under the revolving credit facility, of which $10.0 million was reserved for letters of credit, leaving $153.4 million for additional borrowing and letters of credit.

     As of July 15, 2009, the date of the most recent borrowing base determination as of the filing of this report, we had $162.2 million available for borrowings and letters of credit under the revolving credit facility, of which $10.0 million was reserved for letters of credit, leaving $152.2 million for additional borrowing and letters of credit. No borrowing were outstanding as of July 15, 2009 under the revolving credit facility.

     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. The revolving credit facility is secured by a first priority lien on substantially all of our assets and the assets of our domestic operating subsidiaries that are also borrowers thereunder. The revolving credit facility, as amended, places restrictions on our ability and certain of our subsidiaries to, among other things, incur debt, create liens, make investments, pay dividends, repurchase stock, sell assets, undertake transactions with affiliates and enter into unrelated lines of business.

Capital Expenditures

A component of our long-term strategy is our capital expenditure program including our organic growth initiatives. The following table presents our capital expenditures for the six months ended June 30, 2009 and 2008 (in millions of dollars):

	Six Months
	Ended June 30,
	2009		2008
Kalamazoo, Michigan facility (1)	$	28.1	$	5.9
Spokane, Washington facility (2)		2.4		16.7
Other (3)		5.0		15.1
Capital expenditures in accounts payable		1.1		.6
Total capital expenditures, net of change in accounts payable	$	36.6	$	38.3

(1)

The Kalamazoo, Michigan facility is planned to be equipped with two extrusion presses and a remelt operation. We expect it will significantly improve the capabilities and efficiencies of our rod and bar operations, enhance the market position of such products, and be a platform to enable further extruded products growth for automotive applications. Completion of this investment program is expected to occur by early 2010. We estimate that an additional $35 million to $45 million will be incurred in connection with this investment program in the remainder of 2009 and that $15 million to $20 million will be incurred in 2010.

(2)

We substantially completed the $139 million heat treat plate expansion project at our Trentwood facility in Spokane, Washington, in October 2008. This project significantly increased our heat treat plate production capacity and augmented our product offerings by increasing the thickness of heat treat stretched plate we can produce for aerospace, defense and general engineering applications.

44

(3) Other capital spending was spread among most of our manufacturing locations on projects expected to reduce operating costs, improve product quality, increase capacity or enhance operational security.

     Total capital expenditures for Fabricated Products are currently expected to be in the $75 million to $85 million range for all of 2009 and are expected to be funded using cash from operations or borrowings under our revolving credit facility or other third party financing arrangements.

     The level of anticipated capital expenditures for future periods may be adjusted from time to time depending on our business plans, price outlook for fabricated aluminum products, our ability to maintain adequate liquidity and other factors. No assurance can be provided as to the timing or success of any such expenditures.

Dividends

     During the first six months of 2009, we paid a total of $9.7 million, or $.48 per common share, in cash dividends to our stockholders and dividend equivalents to the holders of restricted stock, the holders of restricted stock units and the holders of performance shares with respect to half of the performance shares.

     On July 15, 2009, our Board of Directors approved the declaration of a quarterly cash dividend of $.24 per common share to stockholders of record at the close of business on July 27, 2009, payable on August 17, 2009.

     Future declaration and payment of dividends, if any, will be at the discretion of the Board of Directors and will be dependent upon our results of operations, financial condition, cash requirements, future prospects and other factors. We can give no assurance that any dividends will be declared or paid in the future. Our revolving credit facility, as amended on January 9, 2009, restricts our ability to pay dividends. We may pay cash dividends only if we maintain $100 million in borrowing availability thereunder and are not in default or would not be in default as a result of the dividend payment, and such dividends can not exceed $25 million during any fiscal year.

Stock Repurchase Plan

     During the second quarter of 2008, our Board of Directors authorized the repurchase of up to $75 million of our common shares, with repurchase transactions to occur in open-market or privately negotiated transactions at such times and prices as management deemed appropriate and to be funded with our excess liquidity after giving consideration to internal and external growth opportunities and future cash flows. The program may be modified, extended or terminated by our Board of Directors at any time. We did not repurchase any of our common shares under this program during the six months ended June 30, 2009. As of June 30, 2009, $46.9 million remained available for repurchases under the existing repurchase authorization.

     Our revolving credit facility, as amended on January 9, 2009, prohibits us from making further share repurchases. As a result, we can no longer repurchase our common shares under our stock repurchase plan or otherwise, or withhold common shares to satisfy employee minimum statutory withholding obligations in connection with the vesting of equity awards under our compensation programs, without lender approval.

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Environmental Commitments and Contingencies

     We are subject to a number of environmental laws and regulations, to fines or penalties assessed for alleged breaches of the environmental laws and regulations, and to claims and litigation based upon such laws and regulations. Based on our evaluation of these and other environmental matters, we have established environmental accruals of $8.7 million at June 30, 2009. However, we believe that it is reasonably possible that changes in various factors could cause costs associated with these environmental matters to exceed current accruals by amounts that could be, in the aggregate, up to an estimated $16.8 million, primarily in connection with our ongoing efforts to address the historical use of oils containing polychlorinated biphenyls, or PCBs, at the Trentwood facility in Spokane, Washington where we are working with regulatory authorities and performing studies and remediation pursuant to several consent orders with the State of Washington.

Contractual Obligations, Commercial Commitments, and Off-Balance Sheet and Other Arrangements

     During the six months ended June 30, 2009, we granted additional stock-based awards to certain members of management under our stock-based long term incentive plan (see Note 10 of Notes to Interim Consolidated Financial Statements included in Part I, Item 1. “Financial Statements” of this Report). Additional awards are expected to be made in future years.

     With the exception of the stock-based awards granted in the six months ended June 30, 2009, there has been no other material change in our contractual obligations other than in the ordinary course of business since the end of fiscal 2008. See Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, for additional information regarding our contractual obligations, commercial commitments, and off-balance-sheet and other arrangements.

Critical Accounting Estimates and Policies

     Our consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (“US GAAP”). In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with US GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

     Our significant accounting policies are discussed in Note 1 of Notes to Consolidated Financial Statements included in Part II, Item 8. “Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2008. We discuss our critical accounting estimates in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2008. There has been no material change in our critical accounting estimates since the end of fiscal 2008. Changes to our significant accounting policies since the end of fiscal 2008 are discussed in Note 1 of Notes to Interim Consolidated Financial Statements included in Part I, Item 1. “Financial Statements” of this Report.

New Accounting Pronouncements

     For a discussion of all recently adopted and recently issued but not yet adopted accounting pronouncements, see “New Accounting Pronouncements” in Note 1 of Notes to Interim Consolidated Financial Statements included in Part I, Item 1. “Financial Statements” of this Report.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Our operating results are sensitive to changes in the prices of primary aluminum and fabricated aluminum products, and also depend to a significant degree upon the volume and mix of all products sold. As discussed more fully in Note 12 of Notes to Interim Consolidated Financial Statements included in Part I, Item 1. “Financial Statements” of this Report, we historically have utilized hedging transactions to lock-in a specified price or range of prices for certain products which we sell or consume in our production process and to mitigate our exposure to changes in foreign currency exchange rates and energy prices.

     Primary Aluminum. As a result of the expected curtailment of Anglesey’s smelting operations discussed in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (see “Results of Operations — Segment Information — Primary Aluminum”) of this Report, we believe our exposure to alumina and primary aluminum price risk with respect to our income and cash flow related to our share of Anglesey production, is expected to decrease in the third quarter of 2009 and will largely be eliminated in the fourth quarter of 2009 and beyond.

     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 metal price risk on to customers. However, in certain instances, we do enter into firm price arrangements. In such instances, we do have price risk on anticipated primary aluminum purchases in respect of the customer orders. We currently use third party hedging instruments to limit exposure to primary aluminum price risks related to substantially all fabricated products firm price arrangements, which may have an adverse effect on our financial position, results of operations and cash flows.

     Total fabricated products shipments during the six months ended June 30, 2009 and 2008 for which we had price risk were (in millions of pounds) 91.3 and 127.7, respectively. At June 30, 2009, sales contracts for the delivery of fabricated aluminum products that have the effect of creating price risk on anticipated primary aluminum purchases for the last six months of 2009 and for the period 2010 through 2012 totaling approximately (in millions of pounds): 2009 — 82.1, 2010 — 90.3, 2011 — 76.6, and 2012 — 13.4.

     Foreign Currency. We, from time to time, will enter into forward exchange contracts to hedge material exposures for foreign currencies. Our primary foreign exchange exposure is our operating costs of our London, Ontario facility and for cash commitments for equipment purchases.

     Because we anticipate that Anglesey will fully curtail its smelting operations in September 2009 and that we will continue to fully impair our share of Anglesey’s earnings, the Pound Sterling exchange exposure on Anglesey’s earnings is effectively eliminated. As of June 30, 2009, we had forward purchase agreements for a total of 17.1 million Pounds Sterling for the months of July 2009 through September 2009. These agreements were entered into before it became evident that Anglesey expected to fully curtail its operations and that we would fully impair our share of earnings from Anglesey.

     Energy. We are exposed to energy price risk from fluctuating prices for natural gas. We estimate that, before consideration of any hedging activities and the potential to pass through higher natural gas prices to customers, each $1.00 change in natural gas prices (per mmbtu) impacts our annual operating costs by approximately $3.3 million.

     We from time to time in the ordinary course of business enter into hedging transactions with major suppliers of energy and energy-related financial investments. As of June 30, 2009, the Company’s exposure to increases and decreases in natural gas prices had been substantially limited for approximately 66% of natural gas purchases for July 2009 through September 2009 and approximately 53% of the natural gas purchases for October 2009 through December 2009.

Item 4. Controls and Procedures

     We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934 is processed, recorded, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to management, including the principal executive officer and

47

principal financial officer, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

     Evaluation of Disclosure Controls and Procedures. An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures was performed as of the end of the period covered by this Report under the supervision of and with the participation of our management, including the principal executive officer and principal financial officer. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report at the reasonable assurance level.

     Changes in Internal Control Over Financial Reporting. We had no changes in our internal control over financial reporting during the period covered by this Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

     Reference is made to Part I, Item 3. “Legal Proceedings” included in our Annual Report on Form 10-K for the year ended December 31, 2008 for information concerning material legal proceedings with respect to the Company. There have been no material developments since December 31, 2008.

Item 1A. Risk Factors.

     Reference is made to Part I, Item 1A. “Risk Factor” included in our Annual Report on Form 10-K for the year ended December 31, 2008 for information concerning risk factors. There have been no material changes in the risk factors since December 31, 2008.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

     None.

Item 3. Defaults Upon Senior Securities.

     None.

Item 4. Submission of Matters to a Vote of Security Holders.

     Our 2009 Annual Meeting of Stockholders was held on June 2, 2009. The matters that were voted upon at the meeting, and the voting results as to each such matter, are set forth below:

(1) Election of Directors — The stockholders elected three Class III directors, each for a term expiring at the Company’s 2012 Annual Meeting of Stockholders.

Nominee Name	Votes For		Votes Withheld
David A. Foster		16,289,412		816,222
Teresa A. Hopp		16,337,756		767,878
William F. Murdy		16,226,041		879,593

     The other directors, whose term continued after the 2009 Annual Meeting of Stockholders, are Carolyn Bartholomew, Jack A. Hockema, Alfred E. Osborne, Jack Quinn, Thomas M. Van Leeuwen, and Brett E. Wilcox. In addition, there is one vacancy on the board.

(2) Ratification of the Selection of Independent Registered Public Accounting Firm — The stockholders ratified the appointment of Deloitte & Touche LLP as independent registered public accounting firm for the Company for 2009. There were 17,056,169 shares voted for ratification, 11,970 shares voted against, and 37,495 shares abstaining.

Item 5. Other Information.

     None.

Item 6. Exhibits.

*10.1	Kaiser Aluminum Corporation Amended and Restated 2006 Equity and Performance Incentive Plan dated June 2, 2009.
*31.1	Certification of Jack A. Hockema pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certification of Daniel J. Rinkenberger pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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*32.1	Certification of Jack A. Hockema pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2	Certification of Daniel J. Rinkenberger pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

KAISER ALUMINUM CORPORATION
 

/s/ Daniel J. Rinkenberger  

Daniel J. Rinkenberger 

Senior Vice President and
Chief Financial Officer
(Principal Financial Officer) 

/s/ Neal West  

Neal West 

Vice President and Chief Accounting Officer (Principal Accounting Officer) 

Date: July 29, 2009

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INDEX TO EXHIBITS

Exhibit
Number	Description
*10.1	Kaiser Aluminum Corporation Amended and Restated 2006 Equity and Performance Incentive Plan dated June 2, 2009.
*31.1	Certification of Jack A. Hockema pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2	Certification of Daniel J. Rinkenberger pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1	Certification of Jack A. Hockema pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2	Certification of Daniel J. Rinkenberger pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith.

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EX-10.1

Exhibit 10.1

KAISER ALUMINUM CORPORATION

Amended and Restated
2006 Equity and Performance Incentive Plan

     1. Purpose. The purpose of the 2006 Equity and Performance Incentive Plan is to attract and retain directors, officers and other employees of Kaiser Aluminum Corporation, a Delaware corporation, and its Subsidiaries and to provide to such persons incentives and rewards for superior performance.

     2. Definitions. As used in this Plan,

          (a) “Appreciation Right” means a right granted pursuant to Section 6 or Section 10 of this Plan, and will include both Tandem Appreciation Rights and Free-Standing Appreciation Rights.

          (b) “Award” means any award granted pursuant to the Plan.

          (c) “Base Price” means the price to be used as the basis for determining the Spread upon the exercise of a Free-Standing Appreciation Right and a Tandem Appreciation Right.

          (d) “Board” means the Board of Directors of the Company.

          (e) “Change in Control” has the meaning provided in an Evidence of Award.

          (f) “Code” means the Internal Revenue Code of 1986, as amended from time to time.

          (g) “Committee” means the committee of Non-Employee Directors appointed by the Board to administer the Plan and, to the extent of any delegation by the Committee to a subcommittee pursuant to Section 18 of this Plan, such subcommittee.

          (h) “Common Shares” means the shares of common stock, par value $0.01 per share, of the Company or any security into which such Common Shares may be changed by reason of any transaction or event of the type referred to in Section 13 of this Plan.

          (i) “Company” means Kaiser Aluminum Corporation, a Delaware corporation.

          (j) “Covered Employee” means a Participant who is, or is determined by the Committee to be likely to become, a “covered employee” within the meaning of Section 162(m) of the Code (or any successor provision).

          (k) “Date of Grant” means the date specified by the Committee on which a grant of Option Rights, Appreciation Rights, Performance Shares, Performance Units or other Awards contemplated by Section 11 of this Plan, or a grant or sale of Restricted Stock, Restricted Stock Units or other Awards contemplated by Section 11 of this Plan, will become effective (which date will not be earlier than the date on which the Committee takes action with respect thereto).

          (l) “Detrimental Activity” means any conduct or act determined by the Committee to be injurious, detrimental or prejudicial to any significant interest of the Company or any Subsidiary, including, without limitation, any one or more of the following types of activity:

(i)	Conduct resulting in an accounting restatement due to material noncompliance with any financial reporting requirement under the U.S. federal securities laws.
(ii)	Engaging in any activity, as an employee, principal, agent, or consultant for another entity that competes with the Company in any actual, researched, or prospective product, service, system, or business activity for which the Participant has had any direct responsibility during the last two years of his or her employment with the Company or a Subsidiary, in any territory in which the Company or a Subsidiary manufactures, sells, markets, services, or installs such product, service, or system, or engages in such business activity.
(iii)	Soliciting any employee of the Company or a Subsidiary to terminate his or her employment with the Company or a Subsidiary.
(iv)	The disclosure to anyone outside the Company or a Subsidiary, or the use in other than the Company’s or a Subsidiary’s business, without prior written authorization from the Company, of any confidential, proprietary or trade secret information or material relating to the business of the Company and its Subsidiaries acquired by the Participant during his or her employment with the Company or its Subsidiaries or while acting as a consultant for the Company or its Subsidiaries.
(v)	The failure or refusal to disclose promptly and to assign to the Company upon request all right, title and interest in any invention or idea, patentable or not, made or conceived by the Participant during employment by the Company or any Subsidiary, relating in any manner to the actual or anticipated business, research or development work of the Company or any Subsidiary or the failure or refusal to do anything reasonably necessary to enable the Company or any Subsidiary to secure a patent where appropriate in the United States and in other countries.
(vi)	Activity that results in Termination for Cause.

          (m) “Director” means a member of the Board of Directors of the Company.

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          (n) “Evidence of Award” means an agreement, certificate, resolution or other type or form of writing or other evidence approved by the Committee that sets forth the terms and conditions of the Awards granted. An Evidence of Award may be in an electronic medium, may be limited to notation on the books and records of the Company and, with the approval of the Committee, need not be signed by a representative of the Company or a Participant.

          (o) “Exchange Act” means the Securities Exchange Act of 1934 and the rules and regulations thereunder, as such law, rules and regulations may be amended from time to time.

          (p) “Free-Standing Appreciation Right” means an Appreciation Right granted pursuant to Section 6 or Section 10 of this Plan that is not granted in tandem with an Option Right.

          (q) “Incentive Stock Option” means an Option Right that is intended to qualify as an “incentive stock option” under Section 422 of the Code or any successor provision.

          (r) “Management Objectives” means the measurable performance objective or objectives established pursuant to this Plan for Participants who have received grants of Performance Shares or Performance Units or, when so determined by the Committee, Option Rights, Appreciation Rights, Restricted Stock, Restricted Stock Units and other Awards pursuant to this Plan. Management Objectives may be described in terms of Company-wide objectives or objectives that are related to the performance of the individual Participant or of the Subsidiary, division, department, region or function within the Company or Subsidiary in which the Participant is employed. The Management Objectives may be made relative to the performance of other companies. The Management Objectives applicable to any Award to a Covered Employee will be based on specified levels of or growth in one or more of the following criteria:

(i)	Earnings per share;
(ii)	Net income (before or after taxes);
(iii)	Cash flow;
(iv)	Return measures (including, but not limited to, return on assets, revenue, equity or sales);
(v)	Cash flow return on investments;
(vi)	Earnings before or after taxes, interest, depreciation and amortization;
(vii)	Growth in sales or revenues;
(viii)	Share price (including, but not limited to, growth measures and total shareholder return);
(ix)	Operating measures (including, but not limited to, operating margin and operating costs); and

-3-

(x) Any of the above criteria as compared to the performance of a published or a special index deemed applicable by the Committee, including, but not limited to, the Standard & Poor’s 500 Stock Index.

          If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which it conducts its business, or other events or circumstances render the Management Objectives unsuitable, the Committee may in its discretion modify such Management Objectives or the related minimum acceptable level of achievement, in whole or in part, as the Committee deems appropriate and equitable, except in the case of a Covered Employee where such action would result in the loss of the otherwise available exemption of the Award under Section 162(m) of the Code. In such case, the Committee will not make any modification of the Management Objectives or minimum acceptable level of achievement with respect to such Covered Employee.

          (s) “Market Value per Share” means, as of any particular date, (i) the closing sale price per Common Share as reported on the principal securities exchange, association or quotation system on which Common Shares are then trading, or if there are no sales on such day, on the next preceding trading day during which a sale occurred, or (ii) if clause (i) does not apply, the fair market value of the Common Shares as determined by the Board.

          (t) “Non-Employee Director” means a Person who is a “non-employee director” of the Company within the meaning of Rule 16b-3 of the Securities and Exchange Commission promulgated under the Exchange Act.

          (u) “Non-Qualified Stock Option” means an Option Right that is not an Incentive Stock Option.

          (v) “Option” means an Incentive Stock Option or a Non-Qualified Stock Option.

          (w) “Optionee” means the optionee named in an Evidence of Award evidencing an outstanding Option Right.

          (x) “Option Price” means the purchase price payable on exercise of an Option Right.

          (y) “Option Right” means the right to purchase Common Shares upon exercise of an Option granted pursuant to Section 5 or Section 10 of this Plan.

          (z) “Participant” means a person who is selected by the Committee to receive benefits under this Plan and who is at the time an officer other key employee of the Company or any one or more of its Subsidiaries, or who has agreed to commence serving in any of such capacities within 90 days of the Date of Grant, and will also include each Non-Employee Director who receives Common Shares or an award of Option Rights, Appreciation Rights, Restricted Stock, Restricted Stock Units or other Awards under this Plan. The term “Participant” shall also include director emeritus and any person who provides services to the Company or a Subsidiary that are equivalent to those typically provided by an employee and who is selected by the Committee to receive benefits under the Plan.

-4-

          (aa) “Performance Period” means, in respect of a Performance Share or Performance Unit, a period of time established pursuant to Section 9 of this Plan within which the Management Objectives relating to such Performance Share or Performance Unit are to be achieved.

          (bb) “Performance Share” means a bookkeeping entry that records the equivalent of one Common Share awarded pursuant to Section 9 of this Plan.

          (cc) “Performance Unit” means a bookkeeping entry awarded pursuant to Section 9 of this Plan that records a unit equivalent to $1.00 or such other value as is determined by the Committee.

          (dd) “Person” means any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act).

          (ee) “Plan” means this Kaiser Aluminum Corporation Amended and Restated 2006 Equity and Performance Incentive Plan.

          (ff) “Restricted Stock” means Common Shares granted or sold pursuant to Section 7 or Section 10 of this Plan as to which neither the substantial risk of forfeiture nor the prohibition on transfers has expired.

          (gg) “Restriction Period” means the period of time during which Restricted Stock Units are subject to a substantial risk of forfeiture (based on the passage of time, the achievement of Management Objectives, or upon the occurrence of other events as determined by the Committee, in its discretion), as provided in Section 8 or Section 10 of this Plan.

          (hh) “Restricted Stock Unit” means an Award made pursuant to Section 8 or Section 10 of this Plan of the right to receive Common Shares or cash at the end of a specified period.

          (ii) “Spread” means the excess of the Market Value per Share on the date when an Appreciation Right is exercised, or on the date when Option Rights are surrendered in payment of the Option Price of other Option Rights, over the Option Price or Base Price provided for in the related Option Right or Free-Standing Appreciation Right, respectively.

          (jj) “Subsidiary” means a corporation, company or other entity (i) more than 50 percent of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture or unincorporated association), but more than 50 percent of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company, except that for purposes of determining whether any person may be a Participant for purposes of any grant of Incentive Stock Options, “Subsidiary” means any corporation in which at the time the Company owns or controls, directly or indirectly, more than 50 percent of the total combined voting power represented by all classes of stock issued by such corporation.

-5-

          (kk) “Tandem Appreciation Right” means an Appreciation Right granted pursuant to Section 6 or Section 10 of this Plan that is granted in tandem with an Option Right.

     3. Effective Date.

          The Plan is originally effective as of July 6, 2006 (the “Effective Date”) which is the effective date for the Second Amended Joint Plan of Reorganization of Kaiser Aluminum Corporation, Kaiser Aluminum & Chemical Corporation and Certain of Their Debtor Affiliates, as modified. The Plan is amended and restated in its entirety effective as of June 2, 2009.

     4. Shares Available Under the Plan.

          (a) Subject to adjustment as provided in Section 13 of this Plan, the number of Common Shares that may be issued or transferred (i) upon the exercise of Option Rights or Appreciation Rights, (ii) as Restricted Stock and released from substantial risks of forfeiture thereof, (iii) as Restricted Stock Units, (iv) in payment of Performance Shares or Performance Units that have been earned, (v) as Awards to Non-Employee Directors, or (vi) as Awards contemplated by Section 11 of this Plan will not exceed in the aggregate 2,222,222 shares. Any shares relating to Awards that expire or are forfeited or are cancelled shall again be available for issuance under the Plan. Common Shares covered by an Award granted under the Plan shall not be counted as used unless and until they are actually issued and delivered to a Participant. Without limiting the generality of the foregoing, upon payment in cash of the benefit provided by any Award granted under the Plan, any Common Shares that were covered by that Award will be available for issue or transfer hereunder. Notwithstanding anything to the contrary contained herein: (a) shares tendered in payment of the Option Price of an Option Right shall not be added to the aggregate plan limit described above; (b) shares withheld by the Company to satisfy the tax withholding obligation shall not be added to the aggregate plan limit described above; (c) shares that are repurchased by the Company with Option Right proceeds shall not be added to the aggregate plan limit described above; and (d) all shares covered by an Appreciation Right, to the extent that it is exercised and whether or not shares are actually issued to the Participant upon exercise of the right, shall be considered issued or transferred pursuant to the Plan. Such shares may be shares of original issuance or treasury shares or a combination of the foregoing.

          (b) If, under this Plan, a Participant has given up the right to receive compensation in exchange for Common Shares based on fair market value, such Common Shares will count against the number of shares available in Section 4(a) above.

          (c) Notwithstanding anything in this Section 4 or elsewhere in this Plan to the contrary and subject to adjustment as provided in Section 13 of this Plan, (i) the aggregate number of Common Shares actually issued or transferred by the Company upon the exercise of Incentive Stock Options will not exceed 2,222,222 Common Shares; (ii) no Participant will be granted Option Rights, Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units or other Awards under Section 11 of this Plan, in the aggregate, for more than 500,000 Common Shares during any calendar year; (iii) the number of shares issued as Restricted Stock, Restricted Stock Units, Performance Shares and Performance Units and other Awards under Section 11 of this Plan (after taking into account any forfeitures and cancellations) will not in the aggregate exceed 2,222,222 Common Shares.

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          (d) Notwithstanding any other provision of this Plan to the contrary, in no event will any Participant in any calendar year receive an Award of Performance Shares, Performance Units or other Awards under Section 11 of this Plan having an aggregate maximum value, determined as of their respective Dates of Grant, in excess of $5 million.

     5. Option Rights. The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting to Participants of options to purchase Common Shares. Each such grant may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:

          (a) Each grant will specify the number of Common Shares to which it pertains, subject to the limitations set forth in Section 4 of this Plan.

          (b) Each grant will specify an Option Price per share, which may not be less than the Market Value per Share on the Date of Grant; provided, however, in the case of Incentive Stock Options granted to an employee owning stock possessing more than 10% of the total combined voting power of all classes of shares of the Company or one of its Subsidiaries (a “10% Shareholder”) the Option Price per share shall not be less than 110% of the Market Value per Share on the Date of Grant. Notwithstanding any other provision of this Plan to the contrary, no grant of an Option will specify an Option Price per share that is less than the par value of the Common Shares for which such Option is exercisable.

          (c) Each grant will specify whether the Option Price will be payable (i) in cash or by check acceptable to the Company or by wire transfer of immediately available funds, (ii) by the actual or constructive transfer to the Company of Common Shares owned by the Optionee for at least 6 months (or other consideration authorized pursuant to Section 5(d)) having a value at the time of exercise equal to the total Option Price, (iii) by a combination of such methods of payment, or (iv) by such other methods as may be approved by the Committee; provided, however, that the payment method described in clause (ii) will not be available at any time that the Company is prohibited from purchasing or otherwise acquiring Common Shares.

          (d) The Committee may determine, at or after the Date of Grant, that payment of the Option Price of any Option Right (other than an Incentive Stock Option) may also be made in whole or in part in the form of Restricted Stock or other Common Shares that are forfeitable or subject to restrictions on transfer, or in the form of Restricted Stock Units; provided, however, that this payment method will not be available at any time that the Company is prohibited from purchasing or otherwise acquiring Common Shares. Unless otherwise determined by the Committee at or after the Date of Grant, whenever any Option Price is paid in whole or in part by means of any of the forms of consideration specified in this Section 5(d), the Common Shares received upon the exercise of the Option Rights will be subject to such risks of forfeiture or restrictions on transfer as may correspond to any that apply to the consideration surrendered, but only to the extent, determined with respect to the consideration surrendered, of (i) the number of shares or Performance Shares, (ii) the Spread of any unexercisable portion of Option Rights, or (iii) the stated value of Performance Units.

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          (e) To the extent permitted by law, any grant may provide for deferred payment of the Option Price from the proceeds of sale through a bank or broker on a date satisfactory to the Company of some or all of the shares to which such exercise relates.

          (f) Successive grants may be made to the same Participant whether or not any Option Rights previously granted to such Participant remain unexercised.

          (g) Each grant will specify the period or periods of continuous service by the Optionee with the Company or any Subsidiary that is necessary before the Option Rights or installments thereof will become exercisable and may provide for the earlier exercise of such Option Rights in the event of termination of employment of the Participant, whether by retirement, death, disability or otherwise, or a Change in Control.

          (h) Any grant of Option Rights may specify Management Objectives that must be achieved as a condition to the exercise of such rights.

          (i) Option Rights granted under this Plan may be (i) options, including, without limitation, Incentive Stock Options that are intended to qualify under particular provisions of the Code, (ii) options that are not intended to so qualify, or (iii) combinations of the foregoing. Incentive Stock Options may only be granted to Participants who meet the definition of “employees” under Section 3401(c) of the Code.

          (j) The Committee may, at or after the Date of Grant of any Option Rights (other than Incentive Stock Options), provide for the payment of dividend equivalents to the Optionee on either a current or deferred or contingent basis or may provide that such equivalents will be credited against the Option Price.

          (k) The exercise of an Option Right will result in the cancellation on a share- for-share basis of any Tandem Appreciation Right authorized under Section 6 of this Plan.

          (l) No Option Right will be exercisable more than 10 years from the Date of Grant; provided that, in the case of Incentive Stock Options granted to 10% Shareholders, no such Option Right shall be exercisable more than 5 years from the Date of Grant.

          (m) The Committee reserves the discretion at or after the Date of Grant to provide for (i) the payment of a cash bonus at the time of exercise; and (ii) the right to tender in satisfaction of the Option Price nonforfeitable, unrestricted Common Shares, which are already owned by the Optionee for a period of at least 6 months and have a value at the time of exercise that is equal to the Option Price.

          (n) The Committee may substitute, without receiving Participant permission, Appreciation Rights paid only in Common Shares (or Appreciation Rights paid in Common Shares or cash at the Committee’s discretion) for outstanding Options; provided, however, that the terms of the substituted Appreciation Rights are the same as the terms for the Options and the difference between the Market Value per Share of the underlying Common Shares and the Base Price of the Appreciation Rights is equivalent to the difference between the Market Value per Share of the underlying Common Shares and the Option Price of the Options.

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          (o) Each grant of Option Rights will be evidenced by an Evidence of Award. Each Evidence of Award shall be subject to the Plan and will contain such terms and provisions, consistent with this Plan, as the Committee may approve.

     6. Appreciation Rights.

          (a) The Committee may authorize the granting (i) to any Optionee, of Tandem Appreciation Rights in respect of Option Rights granted hereunder, and (ii) to any Participant, of Free-Standing Appreciation Rights. A Tandem Appreciation Right will be a right of the Optionee, exercisable by surrender of the related Option Right, to receive from the Company an amount determined by the Committee, which will be expressed as a percentage of the Spread (not exceeding 100 percent) at the time of exercise. Tandem Appreciation Rights may be granted at any time prior to the exercise or termination of the related Option Rights; provided, however, that a Tandem Appreciation Right awarded in relation to an Incentive Stock Option must be granted concurrently with such Incentive Stock Option. A Free-Standing Appreciation Right will be a right of the Participant to receive from the Company an amount determined by the Committee, which will be expressed as a percentage of the Spread (not exceeding 100 percent) at the time of exercise.

          (b) Each grant of Appreciation Rights may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:

(i)	Any grant may specify that the amount payable on exercise of an Appreciation Right may be paid by the Company in cash, in Common Shares or in any combination thereof and may either grant to the Participant or retain in the Committee the right to elect among those alternatives.
(ii)	Any grant may specify that the amount payable on exercise of an Appreciation Right may not exceed a maximum specified by the Committee at the Date of Grant.
(iii)	Any grant may specify waiting periods before exercise and permissible exercise dates or periods.
(iv)	Any grant may specify that such Appreciation Right may be exercised only in the event of, or earlier in the event of, termination of employment of the Participant, whether by retirement, death, disability or otherwise, or a Change in Control.
(v)	Any grant may provide for the payment to the Participant of dividend equivalents thereon in cash or Common Shares on a current, deferred or contingent basis.
(vi)	Any grant of Appreciation Rights may specify Management Objectives that must be achieved as a condition of the exercise of such Appreciation Rights.

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(vii) Each grant of Appreciation Rights will be evidenced by an Evidence of Award, which Evidence of Award will describe such Appreciation Rights, identify the related Option Rights (if applicable), and contain such other terms and provisions, consistent with this Plan, as the Committee may approve.

          (c) Any grant of Tandem Appreciation Rights will provide that such Tandem Appreciation Rights may be exercised only (i) at a time when the related Option Right is also exercisable and the Spread is positive and (ii) by surrender of the related Option Right for cancellation.

          (d) Regarding Free-Standing Appreciation Rights only:

(i)	Each grant will specify in respect of each Free-Standing Appreciation Right a Base Price, which will be equal to or greater than the Market Value per Share on the Date of Grant;
(ii)	Successive grants may be made to the same Participant regardless of whether any Free-Standing Appreciation Rights previously granted to the Participant remain unexercised; and
(iii)	No Free-Standing Appreciation Right granted under this Plan may be exercised more than 10 years from the Date of Grant.

     7. Restricted Stock. The Committee may also authorize the grant or sale of Restricted Stock to Participants. Each such grant or sale may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:

          (a) Each such grant or sale will constitute an immediate transfer of the ownership of Common Shares to the Participant in consideration of the performance of services, entitling such Participant to voting, dividend and other ownership rights, but subject to the substantial risk of forfeiture and restrictions on transfer hereinafter referred to.

          (b) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share at the Date of Grant. Notwithstanding any other provision of this Plan to the contrary, each grant or sale of Restricted Stock to a Participant will be made for such consideration as is required by applicable law in order to ensure that such Restricted Stock is validly issued, fully paid and nonassessable upon such grant or sale.

          (c) Except as provided in Section 10, each such grant or sale will provide that the Restricted Stock covered by such grant or sale will be subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the Code for a period of not less than one year to be determined by the Committee at the Date of Grant and may provide for the earlier lapse of such substantial risk of forfeiture in the event of termination of employment of the Participant, whether by retirement, death, disability or otherwise, or a Change in Control.

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          (d) Each such grant or sale will provide that during the period for which such substantial risk of forfeiture is to continue, the transferability of the Restricted Stock will be prohibited or restricted in the manner and to the extent prescribed by the Committee at the Date of Grant (which restrictions may include, without limitation, rights of repurchase or first refusal in the Company or provisions subjecting the Restricted Stock to a continuing substantial risk of forfeiture in the hands of any transferee).

          (e) Subject to Section 7(c) of this Plan, any grant of Restricted Stock may specify Management Objectives that, if achieved, will result in termination or early termination of the restrictions applicable to such Restricted Stock. Each grant may specify in respect of such Management Objectives a minimum acceptable level of achievement and may set forth a formula for determining the number of shares of Restricted Stock on which restrictions will terminate if performance is at or above the minimum level, but falls short of full achievement of the specified Management Objectives.

          (f) Any such grant or sale of Restricted Stock may require that any or all dividends or other distributions paid thereon during the period of such restrictions be automatically reinvested in additional shares of Restricted Stock, which may be subject to the same restrictions as the underlying Award.

          (g) Each grant or sale of Restricted Stock will be evidenced by an Evidence of Award and will contain such terms and provisions, consistent with this Plan, as the Committee may approve. Unless otherwise directed by the Committee, all certificates representing shares of Restricted Stock will be held in custody by the Company until all restrictions thereon have lapsed, together with a stock power or powers executed by the Participant in whose name such certificates are registered, endorsed in blank and covering such shares.

     8. Restricted Stock Units. The Committee may also authorize the granting or sale of Restricted Stock Units to Participants. Each such grant or sale may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:

          (a) Each such grant or sale will constitute the agreement by the Company to deliver Common Shares or cash to the Participant in the future in consideration of the performance of services, but subject to the fulfillment of such conditions (which may include the achievement of Management Objectives) during the Restriction Period as the Committee may specify. Each grant may specify in respect of such Management Objectives a minimum acceptable level of achievement and may set forth a formula for determining the number of Restricted Stock Units on which restrictions will terminate if performance is at or above the minimum level, but falls short of full achievement of the specified Management Objectives.

          (b) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share at the Date of Grant. Notwithstanding any other provision of this Plan to the contrary, each grant or sale of Restricted Stock Units to a Participant will be made for such consideration as is required by applicable law in order to ensure that any Common Shares delivered by the Company pursuant thereto are validly issued, fully paid and nonassessable when so delivered.

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          (c) Except as provided in Section 10, each such grant or sale will be subject to a Restriction Period of not less than one year, as determined by the Committee at the Date of Grant, and may provide for the earlier lapse or other modification of such Restriction Period in the event of termination of employment of the Participant, whether by retirement, death, disability or otherwise, or a Change in Control.

          (d) During the Restriction Period, the Participant will have no right to transfer any rights under his or her Award and will have no rights of ownership in the Restricted Stock Units and will have no right to vote them, but the Committee may, at or after the Date of Grant, authorize the payment of dividend equivalents on such Restricted Stock Units on either a current or deferred or contingent basis, either in cash or in additional Common Shares.

          (e) Each grant or sale of Restricted Stock Units will be evidenced by an Evidence of Award and will contain such terms and provisions, consistent with this Plan, as the Committee may approve.

     9. Performance Shares and Performance Units. The Committee may also authorize the granting of Performance Shares and Performance Units that will become payable to a Participant upon achievement of specified Management Objectives during the Performance Period. Each such grant may utilize any or all of the authorizations, and will be subject to all of the requirements, contained in the following provisions:

          (a) Each grant will specify the number of Performance Shares or Performance Units to which it pertains which number may be subject to adjustment to reflect changes in compensation or other factors, provided, however, that no such adjustment will be made in the case of a Covered Employee where such action would result in the loss of the otherwise available exemption of the Award under Section 162(m) of the Code.

          (b) The Performance Period with respect to each Performance Share or Performance Unit will be such period of time (not less than one year), commencing with the Date of Grant as will be determined by the Committee at the time of grant which may be subject to earlier lapse or other modification in the event of termination of employment of the Participant, whether by retirement, death, disability or otherwise, or a Change in Control.

          (c) Any grant of Performance Shares or Performance Units will specify Management Objectives which, if achieved, will result in payment or early payment of the Award, and each grant may specify in respect of such specified Management Objectives a minimum acceptable level of achievement and will set forth a formula for determining the number of Performance Shares or Performance Units that will be earned if performance is at or above the minimum level, but falls short of full achievement of the specified Management Objectives. The grant of Performance Shares or Performance Units will specify that, before the Performance Shares or Performance Units will be earned and paid, the Committee must certify that the Management Objectives have been satisfied.

          (d) Each grant will specify the time and manner of payment of Performance Shares or Performance Units that have been earned. Any grant may specify that the amount payable with respect thereto may be paid by the Company in cash, in Common Shares or in any

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combination thereof and may either grant to the Participant or retain in the Committee the right to elect among those alternatives.

          (e) Any grant of Performance Shares may specify that the amount payable with respect thereto may not exceed a maximum specified by the Committee at the Date of Grant. Any grant of Performance Units may specify that the amount payable or the number of Common Shares issued with respect thereto may not exceed maximums specified by the Committee at the Date of Grant.

          (f) The Committee may, at or after the Date of Grant of Performance Shares, provide for the payment of dividend equivalents to the holder thereof on either a current or deferred or contingent basis, either in cash or in additional Common Shares.

          (g) Each grant of Performance Shares or Performance Units will be evidenced by an Evidence of Award and will contain such terms and provisions, consistent with this Plan, as the Committee may approve.

     10. Awards to Non-Employee Directors. The Board may, from time to time and upon such terms and conditions as it may determine, authorize the granting to Non-Employee Directors of Option Rights, Appreciation Rights or other Awards contemplated by Section 11 of this Plan and may also authorize the grant or sale of Common Shares, Restricted Stock or Restricted Stock Units to Non-Employee Directors.

          (a) Each grant of Option Rights awarded pursuant to this Section 10 will be upon terms and conditions consistent with Section 5 of this Plan and will be evidenced by an Evidence of Award in such form as will be approved by the Board. Each grant will specify an Option Price per share, which will not be less than the Market Value per Share on the Date of Grant. Each such Option Right granted under the Plan will expire not more than 10 years from the Date of Grant and will be subject to earlier termination as hereinafter provided. Unless otherwise determined by the Board, such Option Rights will be subject to the following additional terms and conditions:

(i)	Each grant will specify the number of Common Shares to which it pertains, subject to the limitations set forth in Section 4 of this Plan.
(ii)	If a Non-Employee Director subsequently becomes an employee of the Company or a Subsidiary while remaining a member of the Board, any Option Rights held under the Plan by such individual at the time of such commencement of employment will not be affected thereby.
(iii)	Option Rights may be exercised by a Non-Employee Director only upon payment to the Company in full of the Option Price of the Common Shares to be delivered. Such payment will be made in cash or in Common Shares then owned by the Optionee for at least 6 months, or in a combination of cash and such Common Shares.

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          (b) Non-Employee Directors, pursuant to this Section 10, may be awarded, or may be permitted to elect to receive, pursuant to procedures established by the Board, all or any portion of their annual retainer, meeting fees or other fees in Common Shares in lieu of cash.

          (c) Each grant or sale of Appreciation Rights pursuant to this Section 10 will be upon terms and conditions consistent with Section 6 of this Plan.

          (d) Each grant or sale of Restricted Stock pursuant to this Section 10 will be upon terms and conditions consistent with Section 7 (other than in Section 7(c) thereof) of this Plan.

          (e) Each grant or sale of Restricted Stock Units pursuant to this Section 10 will be upon terms and conditions consistent with Section 8 (other than Section 8(c) thereof) of this Plan.

          (f) Non-Employee Directors may be granted, sold, or awarded other Awards as contemplated by Section 11 of this Plan; provided that such other Awards are granted by the Board.

     11. Other Awards.

          (a) The Committee may, subject to limitations under applicable law, grant to any Participant such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Common Shares or factors that may influence the value of such shares, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Common Shares, purchase rights for Common Shares, Awards with value and payment contingent upon performance of the Company or specified Subsidiaries, affiliates or other business units thereof or any other factors designated by the Committee, and Awards valued by reference to the book value of Common Shares or the value of securities of, or the performance of specified Subsidiaries or affiliates or other business units of the Company. The Committee shall determine the terms and conditions of such Awards. Common Shares delivered pursuant to an Award in the nature of a purchase right granted under this Section 11 shall be purchased for such consideration, paid for at such time, by such methods, and in such forms, including, without limitation, cash, Common Shares, other Awards, notes or other property, as the Committee shall determine.

          (b) Cash awards, as an element of or supplement to any other Award granted under this Plan, may also be granted pursuant to this Section 11.

          (c) The Committee may grant Common Shares as a bonus, or may grant other Awards in lieu of obligations of the Company or a Subsidiary to pay cash or deliver other property under this Plan or under other plans or compensatory arrangements, subject to such terms as shall be determined by the Committee.

     12. Transferability.

     (a) Except as provided in Section 12(b) and 12(c) below, no Option Right, Appreciation Right or other derivative security or Award granted under the Plan shall be

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transferable by the Participant except by will or the laws of descent and distribution. Except as otherwise determined by the Committee, Option Rights and Appreciation Rights will be exercisable during the Participant’s lifetime only by him or her or, in the event of the Participant’s legal incapacity to do so, by his or her guardian or legal representative acting on behalf of the Participant in a fiduciary capacity under state law and/or court supervision.

          (b) Notwithstanding Section 12(a) above, to the extent authorized in an Evidence of Award, an Option Right (excluding Incentive Stock Options), Appreciation Right or other derivative security or Award granted under the Plan may be transferable upon the death of the Participant, without payment of consideration therefor, to any one or more family members (as defined in the General Instructions to Form S-8 under the Securities Act of 1933, as amended) of the Participant, as may have been designated in writing by the Participant by means of a form of beneficiary designation approved by the Company. Such beneficiary designation may be made at any time by the Participant and shall be effective when it is filed, prior to the death of the Participant, with the Company. Any beneficiary designation may be changed by the filing of a new beneficiary designation, which will cancel any beneficiary designation previously filed with the Company.

          (c) Notwithstanding Section 12(a) above, to the extent authorized in an Evidence of Award, an Option Right (excluding Incentive Stock Options), Appreciation Right or other derivative security or Award granted under the Plan may be transferable by the Participant without payment of consideration therefor, to any one or more family members (as defined in the General Instructions to Form S-8 under the Securities Act of 1933, as amended) of the Participant; provided, however, that such transfer will not be effective until notice of such transfer is delivered to the Company; and provided, further, however, that any such transferee is subject to the same terms and conditions hereunder as the Participant.

          (d) The Committee, or the Board in the case of Awards under or governed by Section 10 of this Plan, may specify at the Date of Grant that part or all of the Common Shares that are (i) to be issued or transferred by the Company upon the exercise of Option Rights or Appreciation Rights, upon the termination of the Restriction Period applicable to Restricted Stock Units or upon payment under any grant of Performance Shares or Performance Units or (ii) no longer subject to the substantial risk of forfeiture and restrictions on transfer referred to in Section 7 of this Plan, will be subject to further restrictions on transfer.

     13. Adjustments.

          (a) The Committee will make or provide for such adjustments in the numbers of Common Shares covered by outstanding Option Rights, Appreciation Rights, Restricted Stock Units, Performance Shares and Performance Units granted hereunder and, if applicable, in the number of Common Shares covered by other Awards granted pursuant to Section 11 hereof, in the Option Price and Base Price provided in outstanding Appreciation Rights, and in the kind of shares covered thereby, as the Committee, in its sole discretion, exercised in good faith, determines is equitably required to prevent dilution or enlargement of the rights of Participants or Optionees that otherwise would result from (a) any stock dividend, stock split, combination of shares, extraordinary cash dividend, recapitalization or other change in the capital structure of the Company, (b) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization,

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partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing (collectively, an “Event”). Moreover, in the case of such an Event, the Committee, in its discretion and without the consent of any Participant, may provide in substitution for any or all outstanding Awards under this Plan such alternative consideration (including cash) or take such other action as it, in good faith, may determine to be equitable in the circumstances, including, but not limited to, causing such Awards to become exercisable (whether or not vested) as to all shares covered thereby for at least ten (10) days prior to any such Event, and may require in connection with any such substitution the surrender of all replaced Awards. The Committee will also make or provide for such adjustments in the numbers of shares specified in Section 4 of this Plan as the Committee, in its sole discretion, exercised in good faith, determines is appropriate to reflect any Event described in this Section 13; provided, however, that any such adjustment will be made in accordance with Section 409A of the Code and, with respect to Incentive Stock Options, any such adjustment shall be made only if and to the extent that such adjustment would not cause any Option Right intended to qualify as an Incentive Stock Option to fail so to qualify.

          (b) The existence of the Plan, the Evidence of Award agreements and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company or the shareholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, any merger or consolidation of the Company, any issue of stock or of options, warrants or rights to purchase stock or of bonds, debentures, preferred or prior preference stocks whose rights are superior to or affect the Common Shares or the rights thereof or which are convertible into or exchangeable for Common Shares, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

     14. Change in Control. The Committee may prescribe in an Evidence of Award that (a) a “Change in Control” will result in acceleration of the time at which (b) an Option Right, Appreciation Right or other Award may be exercised, (c) the substantial risk of forfeiture or prohibition or restriction on transfer will lapse, (d) the Restriction Period will end, (e) Performance Shares or Performance Units will be deemed to have been fully earned, or (f) a transfer restriction will terminate.

     15. Fractional Shares. The Company will not be required to issue any fractional Common Shares pursuant to this Plan. The Committee may provide for the elimination of fractions or for the settlement of fractions in cash.

     16. Withholding Taxes. To the extent that the Company is required to withhold federal, state, local or foreign taxes in connection with any payment made or benefit realized by a Participant or other person under this Plan, and the amounts available to the Company for such withholding are insufficient, it will be a condition to the receipt of such payment or the realization of such benefit that the Participant or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld, which arrangements (in the discretion of the Committee) may include relinquishment of a portion of such benefit.

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     17. Foreign Employees. In order to facilitate the making of any grant or combination of grants under this Plan, the Committee may provide for such special terms for Awards to Participants who are foreign nationals or who are employed by the Company or any Subsidiary outside of the United States of America or who provide services to the Company under an agreement with a foreign nation or agency, as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Committee may approve such supplements to or amendments, restatements or alternative versions of this Plan as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of this Plan as in effect for any other purpose, and the Secretary or other appropriate officer of the Company may certify any such document as having been approved and adopted in the same manner as this Plan. No such special terms, supplements, amendments or restatements, however, will include any provisions that are inconsistent with the terms of this Plan as then in effect unless this Plan could have been amended to eliminate such inconsistency without further approval by the shareholders of the Company.

     18. Administration of the Plan.

          (a) This Plan will be administered by the Committee, which may from time to time delegate all or any part of its authority under this Plan to a subcommittee of the Committee, as constituted from time to time. To the extent of any such delegation, references in this Plan to the Committee will be deemed to be references to such subcommittee. A majority of the Committee (or subcommittee) will constitute a quorum, and the action of the members of the Committee (or subcommittee) present at any meeting at which a quorum is present, or acts unanimously approved in writing, will be the acts of the Committee (or subcommittee).

          (b) The interpretation and construction by the Committee of any provision of this Plan or of any agreement, notification or document evidencing the grant of Option Rights, Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units or other Awards pursuant to Section 11 of this Plan and any determination by the Committee pursuant to any provision of this Plan or of any such agreement, notification or document will be final and conclusive. Members of the Committee and any officer or employee of the Company or any Subsidiary acting at the direction of, or on behalf of, the Committee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan and shall, to the extent permitted by law, be fully indemnified by the Company with respect to any such action or determination.

          (c) The Committee or, to the extent of any delegation as provided in Section 18(a), a subcommittee, may delegate to one or more of its members or to one or more officers of the Company, or to one or more agents or advisors, such administrative duties or powers as it may deem advisable, and the Committee, the subcommittee, or any person to whom duties or powers have been delegated as aforesaid, may employ one or more persons to render advice with respect to any responsibility the Committee, the subcommittee or such person may have under the Plan. To the extent permitted by applicable law, the Committee or the subcommittee may, by resolution, authorize one or more officers of the Company to do one or both of the following on the same basis as the Committee or the subcommittee: (i) designate employees to be recipients of Awards under this Plan; and (ii) determine the size of any such Awards; provided, however, that (A) the Committee or the subcommittee shall not delegate such responsibilities to any such

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officer for Awards granted to an employee who is an officer, Director, or more than 10% beneficial owner of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the Board in accordance with Section 16 of the Exchange Act; (B) the resolution providing for such authorization sets forth the total number of Common Shares such officer(s) may grant; and (C) the officer(s) shall report periodically to the Committee or the subcommittee, as the case may be, regarding the nature and scope of the Awards granted pursuant to the authority delegated.

     19. Amendments, Etc.

          (a) The Board may at any time and from time to time amend the Plan in whole or in part; provided, however, that any amendment which must be approved by the shareholders of the Company in order to comply with applicable law or the rules of the principal securities exchange, association or quotation system upon which the Common Shares are traded or quoted will not be effective unless and until such approval has been obtained.

          (b) The Committee will not, without the further approval of the shareholders of the Company, authorize the amendment of any outstanding Option Right or Appreciation Right to reduce the Option Price or Base Price. Furthermore, no Option Right will be cancelled and replaced with Awards having a lower Option Price without further approval of the shareholders of the Company. This Section 19(b) is intended to prohibit the repricing of “underwater” Option Rights and will not be construed to prohibit the adjustments provided for in Section 13 of this Plan.

          (c) The Committee may condition the grant of any Award or combination of Awards authorized under this Plan on the surrender or deferral by the Participant of his or her right to receive a cash bonus or other compensation otherwise payable by the Company or a Subsidiary to the Participant.

          (d) If permitted by Section 409A of the Code, in case of termination of employment by reason of death, disability or normal or early retirement, or in the case of unforeseeable emergency or other special circumstances, of a Participant who holds an Option Right or Appreciation Right not immediately exercisable in full, or any shares of Restricted Stock as to which the substantial risk of forfeiture or the prohibition or restriction on transfer has not lapsed, or any Restricted Stock Units as to which the Restriction Period has not been completed, or any Performance Shares or Performance Units which have not been fully earned, or any other Awards made pursuant to Section 11 subject to any vesting schedule or transfer restriction, or who holds Common Shares subject to any transfer restriction imposed pursuant to Section 12 of this Plan, the Committee may, in its sole discretion, accelerate the time at which such Option Right, Appreciation Right or other Award may be exercised or the time at which such substantial risk of forfeiture or prohibition or restriction on transfer will lapse or the time when such Restriction Period will end or the time at which such Performance Shares or Performance Units will be deemed to have been fully earned or the time when such transfer restriction will terminate or may waive any other limitation or requirement under any such Award.

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          (e) This Plan will not confer upon any Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor will it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate such Participant’s employment or other service at any time.

          (f) To the extent that any provision of this Plan would prevent any Option Right that was intended to qualify as an Incentive Stock Option from qualifying as such, that provision will be null and void with respect to such Option Right. Such provision, however, will remain in effect for other Option Rights, and there will be no further effect on any provision of this Plan.

          (g) Subject to Section 19(b) hereof, the Committee may amend the terms of any Award theretofore granted under this Plan prospectively or retroactively, but subject to Section 13 above no such amendment shall impair the rights of any Participant without his or her consent. The Board may, in its discretion, terminate this Plan at any time. Termination of this Plan will not affect the rights of Participants or their successors under any Awards outstanding hereunder and not exercised in full on the date of termination.

     20. Detrimental Activity. Any Evidence of Award may provide that if a Participant, either during employment by the Company or a Subsidiary or within a specified period after termination of such employment, shall engage in any Detrimental Activity, and the Committee shall so find, forthwith upon notice of such finding, the Participant shall:

          (a) Forfeit any Award granted under this Plan then held by the Participant;

          (b) Return to the Company, in exchange for payment by the Company of any cash amount actually paid therefor by the Participant (unless such payment is prohibited by law), all Common Shares that the Participant has not disposed of that were acquired pursuant to this Plan within a specified period prior to the date of the commencement of such Detrimental Activity; and

          (c) With respect to any Common Shares so acquired that the Participant has disposed of, pay to the Company in cash the difference between:

(i)	any amount actually paid therefor by the Participant pursuant to this Plan, and
(ii)	the Market Value per Share of the Common Shares on the date of such acquisition.

To the extent that such amounts are not paid to the Company, the Company may set off the amounts so payable to it against any amounts that may be owing from time to time by the Company or a Subsidiary to the Participant, whether as wages, deferred compensation or vacation pay or in the form of any other benefit or for any other reason. For purposes of this Section 20, Common Shares that are Restricted Stock will be deemed to be acquired pursuant to this Plan at such time as the prohibition on transfer thereof expires and Common Shares that are issued or delivered in respect of any other Award will be deemed to be acquired pursuant to this Plan at such time as they are actually issued or delivered to the Participant.

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     21. Compliance with Section 409A of the Code.

          (a) To the extent applicable, this Plan is intended to comply with Section 409A of the Code and shall be administered, construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A of the Code. To the extent that an Award, issuance and/or payment is subject to Section 409A of the Code, it shall be awarded and/or issued or paid in a manner that will comply with Section 409A of the Code, including proposed, temporary or final regulations or any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto.

          (b) Notwithstanding any provision of this Plan to the contrary, to the extent an award is subject to Section 409A of the Code and such award shall be deemed to be vested or restrictions lapse, expire or terminate, and payment made, upon the occurrence of a Change in Control and such Change in Control does not constitute a “change in the ownership or effective control” or a “change in the ownership or a substantial portion of the assets” of the Company within the meaning of Section 409A(a)(2)(A)(v) of the Code, then even though such award may be deemed to be vested or restrictions lapse, expire or terminate upon the occurrence of the Change in Control or any other provision of this Plan, payment will be made, to the extent necessary to comply with the provisions of Section 409A of the Code, to the Participant on the earliest of (i) the Participant’s “separation from service” with the Company (determined in accordance with Section 409A of the Code); provided, however, that if the Participant is a “specified employee” (within the meaning of Section 409A of the Code), the payment date shall be the first business day of the seventh month after the date of the Participant’s separation from service with the Company, (ii) the date payment otherwise would have been made in the absence of any provisions in the Plan to the contrary (provided such date is permissible under Section 409A of the Code), or (iii) the Participant’s death.

     22. Governing Law. The Plan and all grants and Awards and actions taken thereunder shall be governed by and construed in accordance with the internal substantive laws of the State of Delaware.

     23. Termination. No Award will be made under this Plan more than 10 years after the Effective Date (as defined in Section 3 of this Plan), but all Awards made on or prior to such date will continue in effect thereafter subject to the terms thereof and of this Plan.

     24. Section 16. It is the intent of the Company that the Plan satisfy, and be interpreted in a manner that satisfies, the applicable requirements of Rule 16b-3 as promulgated under Section 16 of the Exchange Act so that Participants will be entitled to the benefit of Rule 16b-3, or any other rule promulgated under Section 16 of the Exchange Act, and will not be subject to short-swing liability under Section 16 of the Exchange Act. Accordingly, if the operation of any provision of the Plan would conflict with the intent expressed in this Section 24, such provision to the extent possible shall be interpreted and/or deemed amended so as to avoid such conflict.

     25. Section 162(m). To the extent the Committee issues any Award which is intended to be exempt from the application of Section 162(m) of the Code, the Committee may, without shareholder or grantee approval, amend the Plan (subject to Section 19(a)) or the

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relevant Award agreement retroactively or prospectively to the extent it determines necessary in order to comply with any subsequent clarification of Section 162(m) of the Code required to preserve the Company’s federal income tax deduction for compensation paid pursuant to any such Award.

     26. General Provisions.

          (a) No Award under this Plan may be exercised by the holder thereof if such exercise, and the receipt of cash or stock thereunder, would be, in the opinion of counsel selected by the Committee, contrary to law or the regulations of any duly constituted authority having jurisdiction over this Plan. Notwithstanding any other provision of this Plan to the contrary, each issuance of Common Shares to a Participant pursuant to the provisions of Section 7, 8, 9, 10 or 11 of this Plan will be made for such consideration having a value that is not less than the par value of such Common Shares as is required by law in order to ensure that such Common Shares are validly issued, fully paid and nonassessable on such issuance.

          (b) Absence on leave approved by a duly constituted officer of the Company or any of its Subsidiaries shall not be considered interruption or termination of service of any employee for any purposes of this Plan or Awards granted hereunder, except that no Awards may be granted to an employee while he or she is absent on leave.

          (c) No Participant shall have any rights as a shareholder with respect to any shares subject to Awards granted to him or her under this Plan prior to the date as of which he or she is actually recorded as the holder of such shares upon the stock records of the Company.

          (d) If any provision of this Plan is or becomes invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provisions shall be construed or deemed amended or limited in scope to conform to applicable laws or, in the discretion of the Committee, it shall be stricken and the remainder of the Plan shall remain in full force and effect.

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Jack A. Hockema, certify that:

     1. I have reviewed this report on Form 10-Q of Kaiser Aluminum Corporation;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

     a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

     c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Jack A. Hockema  

Jack A. Hockema 

Chief Executive Officer 

Date: July 29, 2009

     A signed original of this written statement required by Section 302 has been provided to Kaiser Aluminum Corporation and will be retained by Kaiser Aluminum Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Daniel J. Rinkenberger, certify that:

     1. I have reviewed this report on Form 10-Q of Kaiser Aluminum Corporation;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

     a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

     c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Daniel J. Rinkenberger  

Daniel J. Rinkenberger 

Principal Financial Officer 

Date: July 29, 2009

     A signed original of this written statement required by Section 302 has been provided to Kaiser Aluminum Corporation and will be retained by Kaiser Aluminum Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. 1350
AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

July 29, 2009

     In connection with the Quarterly Report on Form 10-Q by Kaiser Aluminum Corporation, a Delaware corporation (the “Company”), for the quarter ended June 30, 2009 (the “Report”), as filed on the date hereof with the Securities and Exchange Commission, the undersigned, Jack A. Hockema, Chief Executive Officer of the Company, does hereby certify, pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to such officer’s knowledge:

     (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

IN WITNESS WHEREOF, the undersigned has executed this certification as of the date first above written.

/s/ Jack A. Hockema  

Jack A. Hockema 

Chief Executive Officer 

     A signed original of this written statement required by Section 906 has been provided to Kaiser Aluminum Corporation and will be retained by Kaiser Aluminum Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. 1350
AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

July 29, 2009

     In connection with the Quarterly Report on Form 10-Q by Kaiser Aluminum Corporation, a Delaware corporation (the “Company”), for the quarter ended June 30, 2009 (the “Report”), as filed on the date hereof with the Securities and Exchange Commission, the undersigned, Daniel J. Rinkenberger, Principal Financial Officer of the Company, does hereby certify, pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to such officer’s knowledge:

     (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report.

IN WITNESS WHEREOF, the undersigned has executed this certification as of the date first above written.

/s/ Daniel J. Rinkenberger  

Daniel J. Rinkenberger 

Principal Financial Officer 

     A signed original of this written statement required by Section 906 has been provided to Kaiser Aluminum Corporation and will be retained by Kaiser Aluminum Corporation and furnished to the Securities and Exchange Commission or its staff upon request.