Employee Incentive Plans

Short-Term Incentive Plans ("STI Plans")

We have annual short-term incentive compensation plans for senior management and certain other employees payable at our election in cash, shares of common stock or a combination of cash and shares of common stock. Amounts earned under STI Plans are based on our adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), modified for certain safety, quality, delivery, cost and individual performance factors. The Adjusted EBITDA targets are determined based on the return on adjusted net assets of our Fabricated Products business. Most of our production facilities have similar programs for both hourly and salaried employees. As of December 31, 2017, we had a liability of $17.4 million recorded within Accrued salaries, wages and related expenses for estimated probable future payments relating to the 12-month performance period of our 2017 STI Plans.

Long-Term Incentive Programs ("LTI Programs")

General. Executive officers and other key employees of the Company, as well as non-employee directors of the Company, are eligible to participate in the Kaiser Aluminum Corporation 2016 Equity and Incentive Compensation Plan ("2016 Plan"). The 2016 Plan was approved by stockholders on May 26, 2016 and replaced and succeeded in its entirety the Kaiser Aluminum Corporation Amended and Restated 2006 Equity and Performance Incentive Plan. At December 31, 2017, 737,954 shares were available for awards under the 2016 Plan. We issue new shares of our common stock upon vesting under the 2016 Plan.

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

Performance Shares. In addition to non-vested common shares and restricted stock units, we grant performance shares to executive officers and other key employees. Each performance share that becomes vested and earned entitles the recipient to receive one common share or a cash amount equaling the value of one common share. During the first quarter of 2017, performance shares granted in 2014 under the 2014-2016 LTI Program vested (see "Summary of Activity" below). The number of performance shares that vested resulted in the issuance of common shares was determined based on our total shareholder return ("TSR") compared to the TSR of a specified group of peer companies over a three-year performance period.

Performance shares granted in 2015 are subject to performance conditions pertaining to our TSR relative to the TSR of a specified group of peer companies over a three-year performance period ("TSR-Based Performance Shares").

Performance shares granted in 2016 consist of TSR-Based Performance Shares and performance shares subject to performance requirements pertaining to our total controllable cost performance over a three-year performance period ("CP-Based Performance Shares").

Performance shares granted in 2017 consist of TSR-Based Performance Shares, CP-Based Performance Shares and performance shares subject to performance conditions pertaining to our economic value added ("EVA") performance, determined based on our adjusted pre-tax operating income in excess of a capital charge, over a three-year performance period ("EVA-Based Performance Shares").

The number of performance shares under the 2015-2017, 2016-2018 and 2017-2019 LTI Programs that may be earned and result in the issuance of common shares ranges between 0% to 200% of the target number of underlying common shares, which is approximately one-half of the maximum payout. The performance shares granted under the 2015-2017, 2016-2018 and 2017-2019 LTI Programs will vest in 2018, 2019 and 2020, respectively.

Inputs and assumptions used in the Monte Carlo simulations to calculate the fair value at grant date of our TSR-Based Performance Shares were as follows:



	Year Ended December 31,
	2017			2016			2015
Grant date fair value	$	97.88		$	93.02		$	95.68
Grant date stock price	$	79.69		$	80.46		$	75.41
Expected volatility of Kaiser Aluminum¹	22.74		%	17.81		%	19.03		%
Expected volatility of peer companies¹	44.19		%	41.22		%	33.73		%
Risk-free interest rate	1.54		%	1.01		%	0.98		%
Dividend yield	2.50		%	2.24		%	2.12		%

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^1.	Expected volatility based on 2.8 years of daily closing share prices from the valuation date to the end of the performance period.

Non-Cash Compensation Expense. Non-cash compensation expense relating to all awards is included in SG&A and R&D. Non-cash compensation expense by type of award under LTI Programs was as follows for each period presented (in millions of dollars):



	Year Ended December 31,
	2017		2016		2015
Non-vested common shares and restricted stock units	$	5.4	$	4.7	$	4.4
TSR-Based Performance Shares	4.8		5.4		4.0
CP-Based Performance Shares	2.7		1.3		—
EVA-Based Performance Shares	0.2		0.3		0.9
Total non-cash compensation expense	$	13.1	$	11.7	$	9.3

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



	Year Ended December 31,
	2017		2016		2015
Fabricated Products	$	5.0	$	4.2	$	3.5
All Other	8.1		7.5		5.8
Total non-cash compensation expense	$	13.1	$	11.7	$	9.3

Recognized tax benefits relating to non-cash compensation expense were $4.9 million, $4.4 million and $3.5 million for 2017, 2016 and 2015, respectively.

Unrecognized Gross Compensation Cost Data. The following table presents unrecognized gross compensation cost data by type of award as of December 31, 2017:



	Unrecognized Gross Compensation Costs (in millions of dollars)		Expected Period (in years) Over Which the Remaining Gross Compensation Costs Will Be Recognized
Non-vested common shares and restricted stock units	$	8.1	2.5
TSR-Based Performance Shares	$	4.3	1.6
CP-Based Performance Shares	$	5.2	1.9
EVA-Based Performance Shares	$	0.5	2.2

Summary of Activity. A summary of the activity with respect to non-vested common shares, restricted stock units, TSR-Based Performance Shares, CP-Based Performance Shares and EVA-Based Performance Shares for the year ended December 31, 2017 is as follows:



	Non-Vested Common Shares				Restricted Stock Units				TSR-Based Performance Shares				CP-Based Performance Shares				EVA-Based Performance Shares
	Shares		Weighted-Average Grant-Date Fair Value per Share		Units		Weighted-Average Grant-Date Fair Value per Unit		Shares		Weighted-Average Grant-Date Fair Value per Share		Shares		Weighted-Average Grant-Date Fair Value per Share		Shares		Weighted-Average Grant-Date Fair Value per Share
Outstanding at December 31, 2016	114,658		$	69.51	61,800		$	74.94	394,525		$	90.30	63,678		$	80.46	—		$	—
Granted ¹	11,817		86.92		92,275		76.13		65,044		97.88		65,044		79.69		32,504		79.69
Vested	(46,689	)	71.46		(9,570	)	76.19		(94,082	)	83.18		—		—		—		—
Forfeited ¹	(451	)	69.83		(6,887	)	77.44		(6,383	)	95.85		(3,999	)	79.93		(1,374	)	79.69
Canceled ¹	—		—		—		—		(55,288	)	83.18		—		—		—		—
Outstanding at December 31, 2017	79,335		$	70.96	137,618		$	75.81	303,816		$	95.31	124,723		$	80.08	31,130		$	79.69

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^1.	For performance shares, the number of shares granted and forfeited are presented at their maximum payout; and the number of shares canceled includes the number of shares that did not vest due to performance results falling below those required for maximum payout.

The weighted-average grant-date fair value per share for shares granted by type of award was as follows for each period presented:



	Year Ended December 31,
	2017		2016		2015
Non-vested common shares	$	86.92	$	86.11	$	72.09
Restricted stock units	$	76.13	$	75.29	$	69.83
TSR-Based Performance Shares	$	97.88	$	93.02	$	95.68
CP-Based Performance Shares	$	79.69	$	80.46	$	—
EVA-Based Performance Shares	$	79.69	$	—	$	—

Stock Options. As of December 31, 2016, we had 1,543 fully-vested outstanding stock options exercisable to purchase common shares at $80.01 per share, all of which subsequently expired on April 2, 2017. No options were granted during the year ended December 31, 2017, and no options were outstanding as of December 31, 2017.

Participants may elect to have us withhold common shares to satisfy minimum statutory tax withholding obligations arising in connection with the exercise of stock options and vesting of non-vested shares, restricted stock units and performance shares. We cancel any such shares withheld on the applicable vesting dates or earlier dates when service requirements are satisfied, which correspond to the times at which income to the employee is recognized. When we withhold these common shares, we are required to remit to the appropriate taxing authorities the fair value of the shares withheld as of the vesting date. During 2017, 2016 and 2015, 56,495, 36,055 and 37,009 common shares, respectively, were withheld and canceled for this purpose. The withholding of common shares by us could be deemed a purchase of the common shares.