Employee Incentive Plans

Short-term Incentive Plans (“STI Plans”)

The Company has a short-term incentive compensation plan for senior management and certain other employees payable at the Company’s election in cash, shares of common stock, or a combination of cash and shares of common stock. Amounts earned under the plan are based primarily on EVA of the Company’s Fabricated Products business, adjusted for certain safety and performance factors. EVA, as defined by the Company's STI Plans, is a measure of the excess of the Company’s adjusted pre-tax operating income for a particular year over a pre-determined percentage of the adjusted net assets of the immediately preceding year, measured over a one-year period. Most of the Company’s production facilities have similar programs for both hourly and salaried employees.

Total costs relating to STI Plans were recorded as follows, for each period presented:



	Year Ended December 31,
	2013		2012		2011
Cost of products sold, excluding depreciation and amortization and other items	$	4.6	$	4.3	$	3.2
Selling, administrative, research and development, and general	11.1		10.1		5.2
Total costs recorded in connection with STI Plans	$	15.7	$	14.4	$	8.4

The following table presents the allocation of the charges detailed above, by segment:



	Year Ended December 31,
	2013		2012		2011
Fabricated Products	$	11.2	$	9.9	$	5.9
All Other	4.5		4.5		2.5
Total costs recorded in connection with STI Plans	$	15.7	$	14.4	$	8.4

Long- term Incentive Programs

General. Officers and other key employees of the Company or one or more of its subsidiaries, as well as directors of the Company, are eligible to participate in the Kaiser Aluminum Corporation Amended and Restated 2006 Equity and Performance Incentive Plan (as amended, 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, and no grants will be made thereunder after that date. 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, and all grants made on or prior to the date of termination will remain in effect thereafter subject to the terms of the applicable grant agreement and 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, a total of 2,722,222 common shares have been authorized for issuance under the Equity Incentive Plan. At December 31, 2013, 840,693 common shares were available for additional awards under the Equity Incentive Plan. Compensation charges relating to all awards under the Equity Incentive Plan are included in Selling, administrative, research and development and general expenses.

Non-vested Common Shares, Restricted Stock Units, and Performance Shares. The Company grants non-vested common shares to its non-employee directors, executive officers and other key employees. The Company also grants restricted stock units to certain employees. The restricted stock units have rights similar to the rights of non-vested common shares, and the employee will receive one common share for each restricted stock unit upon the vesting of the restricted stock unit. In addition to non-vested common shares and restricted stock units, the Company also grants performance shares to executive officers and other key employees. Such awards are subject to performance requirements pertaining to the Company’s EVA as set forth in each year’s LTI program, measured over a three-year performance period. EVA, as defined in the Company’s LTI programs, is the excess of the Company’s adjusted pre-tax operating income for a particular year over a pre-determined percentage of the adjusted net assets of the immediately preceding year. 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 period. During 2013, a portion of the performance shares granted under the 2010-2012 LTI program vested (see “Summary of Activity” below). The vesting of performance shares and resulting issuance and delivery of common shares, if any, under the 2011-2013 LTI program, 2012-2014 LTI program and 2013-2015 LTI program will occur in 2014, 2015 and 2016, respectively. Holders of performance shares do not receive voting rights through the ownership of such performance shares.

Non-cash Compensation Expense. Recorded non-cash compensation expense by type of award under LTI programs were as follows, for each period presented:



	Year Ended December 31,
	2013		2012		2011
Service-based non-vested common shares and restricted stock units	$	4.3	$	3.8	$	4.1
Performance shares	2.3		1.8		1.1
Total non-cash compensation expense	$	6.6	$	5.6	$	5.2

The following table presents the allocation of the charges detailed above, by segment:



	Year Ended December 31,
	2013		2012		2011
Fabricated Products	$	2.2	$	1.7	$	1.5
All Other	4.4		3.9		3.7
Total non-cash compensation expense	$	6.6	$	5.6	$	5.2

Recognized tax benefit relating to non-cash compensation expense were $2.4, $2.1 and $2.0 for 2013, 2012 and 2011, respectively.

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



	December 31, 2013
	Unrecognized gross compensation costs, by award type		Expected period (in years) over which the remaining gross compensation costs will be recognized, by award type
Service-based non-vested common shares and restricted stock units	$	3.8	1.5
Performance shares	$	4.8	1.9

Summary of Activity. A summary of the activity with respect to non-vested common shares, restricted stock units and performance shares for the year ended December 31, 2013 is as follows:



	Non-Vested Common Shares				Restricted Stock Units				Performance Shares
	Shares		Weighted-Average Grant-Date Fair Value per Share		Units		Weighted-Average Grant-Date Fair Value per Unit		Shares		Weighted-Average Grant-Date Fair Value per Share
Outstanding at December 31, 2012	158,684		$	42.47	5,183		$	43.99	583,950		$	41.78
Granted	76,336		58.65		2,600		57.70		175,317		57.75
Vested	(90,233	)	42.31		(2,311	)	42.74		(34,192	)	34.84
Forfeited	(820	)	53.00		—		—		—		—
Canceled	—		—		—		—		(162,521	)	34.58
Outstanding at December 31, 2013	143,967		$	51.09	5,472		$	51.03	562,554		$	49.26

The total grant-date fair value for shares granted during 2013, 2012 and 2011 was $14.8, $13.9 and $12.8, respectively. Total grant-date fair value for shares that vested during 2013, 2012 and 2011 was $5.1, $3.5 and $6.3.

Stock Options. As of both December 31, 2013 and December 31, 2012, there were 20,791 fully-vested options outstanding, in each case exercisable to purchase common shares at $80.01 per share and having a remaining contractual life of 3.25 and 4.25 years, respectively. The grant-date fair value of all options was $39.90 per share. No new options were granted and no existing options were forfeited, or exercised during 2013 or 2012. No options expired in 2013.

Vested Stock. From time to time, the Company issues common shares to non-employee directors electing to receive common shares in lieu of all or a portion of their annual retainer fees. The fair value of these common shares is based on the fair value of the shares at the date of issuance and is immediately recognized in earnings as a period expense. During 2013, 2012 and 2011, the Company recorded $0.2, $0.2 and $0.2, respectively, relating to common shares granted to non-employee directors in lieu of all or a portion of their annual retainer fees.

Under the Equity Incentive Plan, participants may elect to have the Company withhold common shares to satisfy minimum statutory tax withholding obligations arising in connection with the exercise of stock options and vesting of non-vested shares, restricted stock units and performance shares. Any such shares withheld are canceled by the Company on the applicable vesting dates, which correspond to the times at which income to the employee is recognized. When the Company withholds these common shares, the Company is required to remit to the appropriate taxing authorities the fair value of the shares withheld as of the vesting date. During 2013, 2012 and 2011, 40,075, 45,801 and 62,637 commons shares, respectively, were withheld and canceled for this purpose.