<PAGE>
======================================================================
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 September 30, 1995
Commission file number 1-3605
KAISER ALUMINUM & CHEMICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-0928288
(State of incorporation) (I.R.S. Employer Identification No.)
6177 Sunol Boulevard, Pleasanton, CA 94566-7769
(Address of principal executive offices) (Zip Code)
(510) 462-1122
(Registrant's telephone number, including area code)
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 (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes x No
----- -----
At October 31, 1995, the registrant had 46,171,365 shares of
common stock outstanding.
======================================================================
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(In millions of dollars)
September 30, December 31,
1995 1994
--------------------------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 11.1 $ 12.0
Receivables 279.2 200.5
Inventories 530.6 468.0
Prepaid expenses and other current assets 73.9 158.0
----------------------------
Total current assets 894.8 838.5
Investments in and advances to unconsolidated affiliates 187.2 169.7
Property, plant, and equipment - net 1,099.3 1,133.2
Deferred income taxes 282.6 271.0
Other assets 324.7 281.2
----------------------------
Total $ 2,788.6 $ 2,693.6
============================
Liabilities & Stockholders' Equity
Current liabilities:
Accounts payable $ 147.0 $ 152.1
Accrued interest 14.4 32.6
Accrued salaries, wages, and related expenses 62.2 77.7
Accrued postretirement medical benefit obligation - current portion 47.0 47.0
Other accrued liabilities 140.4 171.7
Payable to affiliates 90.0 85.2
Long-term debt - current portion 12.1 11.5
Notes payable to parent 10.7 21.2
----------------------------
Total current liabilities 523.8 599.0
Long-term liabilities 573.4 495.5
Accrued postretirement medical benefit obligation 739.1 734.9
Long-term debt 798.5 751.1
Notes payable to parent 10.7 23.5
Minority interests 87.7 85.4
Redeemable preference stock 28.6 29.0
Stockholders' equity (deficit):
Preference stock 1.7 1.8
Common stock 15.4 15.4
Additional capital 1,707.1 1,626.3
Accumulated deficit (231.8) (271.5)
Additional minimum pension liability (9.1) (9.1)
Less: Note receivable from parent (1,456.5) (1,387.7)
----------------------------
Total stockholders' equity (deficit) 26.8 (24.8)
----------------------------
Total $ 2,788.6 $ 2,693.6
============================
</TABLE>
The accompanying notes to interim consolidated financial statements
are an integral part of these statements.
- 1 -
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED INCOME (LOSS)
(Unaudited)
(In millions of dollars)
Quarter Ended Nine Months Ended
September 30, September 30,
-----------------------------------------
1995 1994 1995 1994
-----------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 550.3 $ 461.1 $1,646.7 $1,335.7
Costs and expenses:
Cost of products sold 439.3 416.0 1,329.8 1,222.8
Depreciation 23.7 22.8 71.1 72.8
Selling, administrative, research and development, and general 33.9 29.1 96.0 86.6
-----------------------------------------
Total costs and expenses 496.9 467.9 1,496.9 1,382.2
-----------------------------------------
Operating income (loss) 53.4 (6.8) 149.8 (46.5)
Other income (expense):
Interest and other income (expense) - net (7.8) (.8) (9.8) 2.7
Interest expense (23.9) (22.3) (71.3) (65.9)
-----------------------------------------
Income (loss) before income taxes, minority interests, and
extraordinary loss 21.7 (29.9) 68.7 (109.7)
(Provision) credit for income taxes (7.8) 10.5 (24.6) 38.6
Minority interests (.1) (.1) (1.0) 1.4
-----------------------------------------
Income (loss) before extraordinary loss 13.8 (19.5) 43.1 (69.7)
Extraordinary loss on early extinguishment of debt, net of tax
benefit of $2.9 (5.4)
-----------------------------------------
Net income (loss) $ 13.8 $ (19.5) $ 43.1 $ (75.1)
=========================================
</TABLE>
The accompanying notes to interim consolidated financial statements
are an integral part of these statements.
- 2 -
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
(In millions of dollars)
Nine Months Ended
September 30,
-------------------
1995 1994
-------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 43.1 $ (75.1)
Adjustments to reconcile net income (loss) to net cash provided by (used for)
operating activities:
Depreciation 71.1 72.8
Non-cash postretirement medical benefit expenses 4.2 10.4
Amortization of excess investment over equity in net assets of unconsolidated
affiliates 8.7 8.7
Amortization of deferred financing costs and discount on long-term debt 4.1 4.8
Equity in (income) losses of unconsolidated affiliates (17.2) 3.2
Minority interests 1.0 (1.4)
Extraordinary loss on early extinguishment of debt - net 5.4
(Increase) decrease in receivables (86.7) 13.2
(Increase) decrease in inventories (62.6) 13.7
Decrease (increase) in prepaid expenses and other current assets 68.5 (13.2)
Incurrence of financing costs (.8) (19.1)
Decrease in accounts payable (5.2) (.3)
Decrease in accrued interest (18.0) (9.8)
Increase in payable to affiliates and accrued liabilities 8.1 6.1
Decrease in accrued and deferred income taxes (8.5) (46.3)
Other 10.2 (3.4)
-------------------
Net cash provided by (used for) operating activities 20.0 (30.3)
-------------------
Cash flows from investing activities:
Net proceeds from disposition of property and investments 6.9 4.2
Capital expenditures (53.2) (37.5)
Redemption fund for preference stock (.2) (1.2)
-------------------
Net cash used for investing activities (46.5) (34.5)
-------------------
Cash flows from financing activities:
Repayments of long-term debt, including revolving credit (431.4) (326.2)
Borrowings of long-term debt, including revolving credit 481.9 353.5
Repayment of note payable (3.4)
Net short-term debt repayments (.5)
Net (payments to) borrowings from parent (13.4) 18.5
Dividends paid (.5) (.5)
Redemption of preference stock (8.8) (8.5)
Capital contribution 1.2 67.2
-------------------
Net cash provided by financing activities 25.6 103.5
-------------------
Net (decrease) increase in cash and cash equivalents during the period (.9) 38.7
Cash and cash equivalents at beginning of period 12.0 14.2
-------------------
Cash and cash equivalents at end of period $ 11.1 $ 52.9
===================
Supplemental disclosure of cash flow information:
Interest paid, net of capitalized interest $ 85.2 $ 70.9
Income taxes paid 23.6 9.7
Tax allocation payments from MAXXAM Inc. (3.4)
Tax allocation payments to Kaiser Aluminum Corporation 3.0
</TABLE>
The accompanying notes to interim consolidated financial statements
are an integral part of these statements.
- 3 -
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(In millions of dollars)
1. General
- -----------
Kaiser Aluminum & Chemical Corporation (the "Company") is the
principal operating subsidiary of Kaiser Aluminum Corporation
("Kaiser"). Kaiser is a subsidiary of MAXXAM Inc. ("MAXXAM"). MAXXAM
owns approximately 62% of Kaiser's common stock, assuming the
conversion of each outstanding share of 8.255% PRIDES, Convertible
Preferred Stock (the "PRIDES"), into one share of Kaiser's common
stock, with the remaining approximately 38% publicly held.
On September 19, 1995, Kaiser redeemed all 1,938,295 of its
Mandatory Conversion Premium Dividend Preferred Stock (the "Series A
Shares"), which resulted in the simultaneous redemption of all $.65
Depositary Shares in exchange for (i) 13,126,521 shares of Kaiser's
common stock and (ii) $2.8 in cash comprised of (a) an amount equal to
all accrued and unpaid dividends up to and including the day
immediately prior to redemption date and (b) cash in lieu of any
fractional shares of common stock that would otherwise be issuable.
The foregoing unaudited interim consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X as promulgated by the
Securities and Exchange Commission. Accordingly, these financial
statements do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
necessary for a fair statement of the results for the interim periods
presented have been included. Operating results for the first nine
months of 1995 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1995. These unaudited
interim consolidated financial statements should be read in
conjunction with the audited consolidated financial statements for the
year ended December 31, 1994. Certain reclassifications of prior-
period information were made to conform to the current presentation.
2. Inventories
- ---------------
The classification of inventories is as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
----------------------------
<S> <C> <C>
Finished fabricated aluminum products $ 70.1 $ 49.4
Primary aluminum and work in process 207.3 203.1
Bauxite and alumina 134.1 102.3
Operating supplies and repair and maintenance parts 119.1 113.2
----------------------------
Total $ 530.6 $ 468.0
============================
</TABLE>
Substantially all product inventories are stated at last-in,
first-out (LIFO) cost, not in excess of market. Replacement cost is
not in excess of LIFO cost.
3. Contingencies
- -----------------
Environmental Contingencies - The Company is subject to a wide
variety of environmental laws and regulations and to fines or
penalties assessed for alleged breaches of the environmental laws and
to claims and litigation based on such laws. The Company currently is
subject to a number of lawsuits under the Comprehensive Environmental
- 4 -
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
Response, Compensation and Liability Act of 1980, as amended by the
Superfund Amendments Reauthorization Act of 1986 ("CERCLA"), and,
along with certain other entities, has been named as a potentially
responsible party for remedial costs at certain third-party sites
listed on the National Priorities List under CERCLA.
Based on the Company's evaluation of these and other
environmental matters, the Company has established environmental
accruals primarily related to potential solid waste disposal and soil
and groundwater remediation matters. At September 30, 1995, the
balance of such accruals, which is primarily included in Long-term
liabilities, was $39.7. These environmental accruals represent the
Company's 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 annual expenditures to be charged to these
environmental accruals will be approximately $3.0 to $12.0 for the
years 1995 through 1999 and an aggregate of approximately $11.0
thereafter.
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 costs associated with these
environmental matters may exceed current accruals by amounts that
could range, in the aggregate, up to approximately $22.0. While
uncertainties are inherent in the final outcome of these environmental
matters, and it is presently impossible to determine the actual costs
that ultimately may be incurred, management currently believes that
the resolution of such uncertainties should not have a material
adverse effect on the Company's consolidated financial position or
results of operations.
Asbestos Contingencies - The Company is a defendant in a number
of lawsuits in which the plaintiffs allege that certain of their
injuries were caused by, among other things, exposure to asbestos
during, and as a result of, their employment or association with the
Company or exposure to products containing asbestos produced or sold
by the Company. The lawsuits generally relate to products the Company
has not manufactured for at least 15 years. At October 31, 1995, the
number of such lawsuits pending was approximately 58,200, as compared
to 31,700 at June 30, 1995. The Company has been advised by its
regional counsel that, although there can be no assurance, the recent
increase in pending lawsuits may be attributable in part to tort
reform legislation in Texas which was passed by the legislature in
March 1995 and which became effective on September 1, 1995. The
legislation, among other things, is designed to restrict, beginning
September 1, 1995, the filing of cases in Texas that do not have a
sufficient nexus to that jurisdiction, and to impose, generally as of
September 1, 1996, limitations relating to joint and several liability
in tort cases. A substantial portion of the asbestos-related lawsuits
that were filed and served on the Company between June 30, 1995, and
October 31, 1995, were filed in Texas prior to September 1, 1995.
Based on past experience and reasonably anticipated future
activity, the Company has established an accrual for estimated
asbestos-related costs for claims filed and estimated to be filed and
settled through 2008. The Company's accrual was calculated based on
the current and anticipated number of asbestos-related claims, the
prior timing and amounts of asbestos-related payments, the current
state of case law related to asbestos claims, and the advice of
counsel. Accordingly, an asbestos-related cost accrual of $155.3
($134.6 at June 30, 1995), before considerations for insurance
recoveries, is included primarily in Long-term liabilities at
September 30, 1995. The Company estimates that annual future cash
payments in connection with such litigation will be approximately
$11.0 to $19.0 for each of the years 1995 through 1999, and an
aggregate of approximately $90.8 thereafter through 2008. The Company
does not presently believe there is a reasonable basis for estimating
such costs beyond 2008 and, accordingly, no accrual has been recorded
for such costs which may be incurred beyond 2008.
The Company believes that it has insurance coverage available to
recover a substantial portion of its asbestos-related costs. While
claims for recovery from some of the Company's insurance carriers are
currently subject to
- 5 -
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
pending litigation and other carriers have raised certain defenses,
the Company believes, based on prior insurance-related recoveries in
respect of asbestos-related claims, existing insurance policies, and
the advice of counsel, that substantial recoveries from the insurance
carriers are probable. Accordingly, an estimated aggregate insurance
recovery of $134.7 ($120.6 at June 30, 1995), determined on the same
basis as the asbestos-related cost accrual, is recorded primarily in
Other assets at September 30, 1995.
While uncertainties are inherent in the final outcome of these
asbestos matters and it is presently impossible to determine the
actual costs that ultimately may be incurred and the insurance
recoveries that will be received, management currently believes that,
based on the factors discussed in the preceding paragraphs, the
resolution of the asbestos-related uncertainties and the incurrence of
asbestos-related costs net of related insurance recoveries should not
have a material adverse effect on the Company's consolidated financial
position or results of operations.
Other Contingencies - The Company is involved in various other
claims, lawsuits, and other proceedings relating to a wide variety of
matters. While uncertainties are inherent in the final outcome of
such matters, and it is presently impossible to determine the actual
costs that ultimately may be incurred, management currently believes
that the resolution of such uncertainties and the incurrence of such
costs should not have a material adverse effect on the Company's
consolidated financial position or results of operations.
4. Derivative Financial Instruments and Related Hedging Programs
- -----------------------------------------------------------------
The Company enters into primary metal hedging transactions with
off-balance sheet risk in the normal course of business. The prices
realized by the Company under certain sales contracts for alumina,
primary aluminum, and fabricated aluminum products as well as the
costs incurred by the Company on certain items, such as aluminum
scrap, rolling ingot, power, and bauxite, fluctuate with the market
price of primary aluminum, together resulting in a "net exposure" of
earnings. The primary metal hedging transactions are designed to
mitigate the net exposure of earnings to declines in the market price
of primary aluminum, while retaining the ability to participate in
favorable environments that may materialize. The Company has
developed strategies which include forward sales of primary aluminum
at fixed prices and the purchase or sale of options for primary
aluminum. In this regard, in respect of its remaining 1995
anticipated net exposure, at September 30, 1995, the Company had net
forward sales contracts for 53,875 tons* of primary aluminum at fixed
prices, had purchased call options in respect of 17,250 tons of primary
aluminum, had purchased put options to establish a minimum price for
48,375 tons of primary aluminum, and had entered into option contracts
that established a price range for 22,500 tons of primary aluminum.
In respect of its 1996 anticipated net exposure, at September 30,
1995, the Company had sold forward 11,100 tons of primary aluminum at
fixed prices.
The Company also enters into hedging transactions in the normal
course of business that are designed to reduce its exposure to
fluctuations in foreign exchange rates. At September 30, 1995, the
Company had net forward foreign exchange contracts totaling
approximately $125.9 for the purchase of 174.0 Australian dollars
through April 1997.
At September 30, 1995, the net unrealized gain on the Company's
position in aluminum forward sales and option contracts (based on a
market price of $1,773 per ton of primary aluminum) and forward
foreign exchange contracts was $9.1.
The Company has established margin accounts with its
counterparties related to aluminum forward sales and option contracts.
The Company is entitled to receive advances from counterparties
related to unrealized gains and, in turn, is required to make margin
deposits with counterparties to cover unrealized losses related to
these contracts.
- -------------------------------
* All references to tons in this report refer to metric tons of
2,204.6 pounds.
- 6 -
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
At September 30, 1995, the Company had $2.5 compared with $50.5
at December 31, 1994, on deposit with a counterparty in respect of
such contracts. These amounts are recorded in Prepaid expenses and
other current assets.
See Note 11 of the Notes to Consolidated Financial Statements for
the year ended December 31, 1994.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- --------------------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
(In millions of dollars, except shipments and prices)
The following should be read in conjunction with the response to
Item 1, Part I, of this Report.
Results of Operations
- ---------------------
The Company's operating results are sensitive to changes in
prices of alumina, primary aluminum, and fabricated aluminum products,
and also depend to a significant degree on the volume and mix of all
products sold and on the Company's hedging strategies. See Note 4 of
Notes to Interim Consolidated Financial Statements for an explanation
of the Company's hedging strategies. The table on the following page
provides selected operational and financial information on a
consolidated basis with respect to the Company for the quarter and
nine months ended September 30, 1995 and 1994. As an integrated
aluminum producer, the Company uses a portion of its bauxite, alumina,
and primary aluminum production for additional processing at certain
of its other facilities. Intracompany shipments and sales are
excluded from the information set forth on the following page.
- 7 -
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
SELECTED OPERATIONAL AND FINANCIAL INFORMATION
Quarter Ended Nine Months Ended
September 30, September 30,
-------------------------------------------
1995 1994 1995 1994
-------------------------------------------
<S> <C> <C> <C> <C>
Shipments:(1)
Alumina 471.5 534.9 1,494.6 1,577.3
Aluminum products:
Primary aluminum 73.0 48.4 184.5 175.8
Fabricated aluminum products 90.4 105.4 284.3 307.1
-------------------------------------------
Total aluminum products 163.4 153.8 468.8 482.9
===========================================
Average realized sales price:
Alumina (per ton) $ 206 $ 171 $ 203 $ 162
Primary aluminum (per pound) .83 .60 .82 .56
Net sales:
Bauxite and alumina:
Alumina $ 97.2 $ 91.5 $ 303.8 $ 255.3
Other(2)(3) 22.3 19.8 65.3 60.6
-------------------------------------------
Total bauxite and alumina 119.5 111.3 369.1 315.9
-------------------------------------------
Aluminum processing:
Primary aluminum 133.4 64.1 335.0 218.2
Fabricated aluminum products 293.0 281.9 929.0 790.8
Other(3) 4.4 3.8 13.6 10.8
-------------------------------------------
Total aluminum processing 430.8 349.8 1,277.6 1,019.8
-------------------------------------------
Total net sales $550.3 $461.1 $1,646.7 $1,335.7
===========================================
Operating income (loss):
Bauxite and alumina $ 14.8 $ 7.8 $ 36.4 $ 5.3
Aluminum processing 58.9 3.3 170.9 1.4
Corporate (20.3) (17.9) (57.5) (53.2)
-------------------------------------------
Total operating income (loss) $ 53.4 $ (6.8) $ 149.8 $ (46.5)
===========================================
Income (loss) before extraordinary loss $ 13.8 $(19.5) $ 43.1 $ (69.7)
Extraordinary loss on early extinguishment of debt, net of
tax benefit of $2.9 (5.4)
-------------------------------------------
Net income (loss) $ 13.8 $(19.5) $ 43.1 $ (75.1)
===========================================
Capital expenditures $ 26.1 $ 15.8 $ 53.2 $ 37.5
===========================================
</TABLE>
[FN]
- -------------------------------------
(1) In thousands of tons.
(2) Includes net sales of bauxite.
(3) Includes the portion of net sales attributable to minority
interests in consolidated subsidiaries.
- 8 -
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
Net Sales
Bauxite and Alumina - Revenue from net sales to third parties for
the bauxite and alumina segment was 7% higher in the third quarter of
1995 than in the third quarter of 1994, and was 17% higher in the
first nine months of 1995 than in the first nine months of 1994.
Revenue from alumina increased 6% in the third quarter of 1995 from
the third quarter of 1994, and increased 19% in the first nine months
of 1995 from the first nine months of 1994, due to higher average
realized prices partially offset by lower shipments.
Aluminum Processing - Revenue from net sales to third parties for
the aluminum processing segment was 23% higher in the third quarter of
1995 than in the third quarter of 1994, and was 25% higher in the
first nine months of 1995 than in the first nine months of 1994.
Revenue from primary aluminum increased 108% in the third quarter of
1995 from the third quarter of 1994, and increased 54% in the first
nine months of 1995 from the first nine months of 1994, due primarily
to higher average realized prices and higher shipments. The increase
in revenue for the first nine months of 1995 was partially offset by
decreased shipments caused by the strike by the United Steelworkers of
America ("USWA") discussed below. Shipments of primary aluminum to
third parties were approximately 45% and 39% of total aluminum
products shipments in the third quarter and first nine months of 1995,
respectively, compared with approximately 31% and 36% in the third
quarter and first nine months of 1994, respectively. Revenue from
fabricated aluminum products increased 4% in the third quarter of 1995
from the third quarter of 1994, and increased 17% in the first nine
months of 1995 from the first nine months of 1994, due to higher
average realized prices partially offset by lower shipments for most
of these products.
Operating Income (Loss)
Improved operating results in the third quarter of 1995 were
partially offset by expenditures related to the Company's joint
venture in China (see Liquidity and Capital Resources, Financing
Activities), accelerated expenditures on the Company's micromill
technology, maintenance expenses as a result of an electrical
lightning strike at the Company's Trentwood, Washington, facility, and
a work slowdown at the Company's 49%-owned Kaiser Jamaica Bauxite
Company prior to signing a new labor contract. The combined impact of
these expenditures on the results for the third quarter of 1995 was
approximately $6.0 (on a pre-tax basis).
Improved operating results in the first nine months of 1995 were
partially offset by (i) an eight-day strike at five major domestic locations
by the USWA, (ii) a six-day strike by the National Workers Union at the
Company's 65%-owned Alpart alumina refinery in Jamaica, and (iii) a four-day
disruption of alumina production at Alpart caused by a boiler failure.
The combined impact of these events on results for the first nine
months of 1995 was approximately $17.0 in the aggregate (on a pre-tax
basis) principally from lower production volume and other related
costs.
Bauxite and Alumina - This segment's operating income was $14.8
in the third quarter of 1995, compared with $7.8 in the third quarter
of 1994, and $36.4 in the first nine months of 1995, compared with
$5.3 in the first nine months of 1994, principally due to higher
revenue. Improved results for the first nine months of 1995 were
partially offset by the effect of the strikes and boiler failure.
Aluminum Processing - This segment's operating income was $58.9
in the third quarter of 1995, compared with $3.3 in the third quarter
of 1994, and was $170.9 in the first nine months of 1995, compared
with $1.4 in the first nine months of 1994, principally due to higher
revenue. Improved results for the first nine months of 1995 were
partially offset by the effect of the strike by the USWA.
Corporate - Corporate operating expenses represented corporate
general and administrative expenses which are not allocated to the
Company's segments.
- 9 -
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
Net Income (Loss)
The Company had net income of $13.8 and $43.1 for the third
quarter and the first nine months of 1995, respectively, compared with
a net loss of $19.5 and $75.1 for the third quarter and first nine
months of 1994, respectively. The principal reason for these changes
was the improvement in operating income previously described,
partially offset by other charges in the third quarter of 1995,
principally related to the establishment of additional litigation
reserves.
Liquidity and Capital Resources
- -------------------------------
Operating Activities
At September 30, 1995, the Company had working capital of $371.0,
compared with working capital of $239.5 at December 31, 1994. The
increase in working capital was due primarily to an increase in
Receivables and Inventories and a decrease in Accrued interest and
Other accrued liabilities, partially offset by a decrease in Prepaid
expenses and other current assets (principally due to lower margin
deposits related to hedging activities).
Investing Activities
Cash used for investing activities in the third quarter and the
first nine months of 1995 consisted primarily of capital expenditures
to improve production efficiency, reduce operating costs, expand
capacity at existing facilities, and invest in a joint venture in
China.
Financing Activities
At September 30, 1995, the Company had long-term debt of $798.5,
compared with $751.1 at December 31, 1994. In March 1995, the 1994
Credit Agreement (see Note 5 of the Notes to Consolidated Financial
Statements for the year ended December 31, 1994) was amended by the
Second Amendment to Credit Agreement (the "Second Amendment"). The
Second Amendment provided, among other things, for an increase in the
revolving line of credit from $275.0 to $325.0 (of which $125.0 could
be used for letters of credit). At September 30, 1995, $210.0 (of
which $72.4 could have been used for letters of credit) was available
to the Company under the 1994 Credit Agreement. As of July 20, 1995,
the 1994 Credit Agreement was amended by the Third Amendment to Credit
Agreement in connection with the investment by Kaiser Yellow River
Investment Limited, a subsidiary of the Company, in Yellow River
Aluminum Industry Company Limited, an aluminum smelter joint venture
in the People's Republic of China.
Loans under the 1994 Credit Agreement bear interest at a rate per
annum, at the Company's election, equal to a Reference Rate (as
defined) plus 1-1/2% or LIBO Rate (Reserve Adjusted) (as defined) plus
3-1/4%. After June 30, 1995, the interest rate margins applicable to
borrowings under the 1994 Credit Agreement may be reduced by up to 1-
1/2% (non-cumulatively), based on a financial test, determined
quarterly. As of September 30, 1995, the financial test permitted a
reduction of 1% per annum in margins effective October 1, 1995.
Trends
- ------
Hedging Programs
In respect of its remaining 1995 anticipated net exposure, at
October 31, 1995, the Company had net forward sales contracts for
25,950 tons of primary aluminum at fixed prices, had purchased call
options in respect of 11,500 tons
- 10 -
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
of primary aluminum, had purchased put options to establish a minimum
price for 32,250 tons of primary aluminum, and had entered into option
contracts that established a price range for 15,000 tons of primary
aluminum. In respect of its 1996 anticipated net exposure, at October
31, 1995, the Company had sold forward 6,100 tons of primary aluminum
at fixed prices (see Note 4 of Notes to Interim Consolidated Financial
Statements).
Pacific Northwest
On November 6, 1995, the Company announced that it had signed new
agreements with each of the Bonneville Power Administration
("BPA") and The Washington Water Power Company ("WWP"), each ending
September 30, 2001, with respect to its electric power requirements in
the Pacific Northwest. The agreement with BPA is for the purchase
of electric power, and the agreement with WWP is for power
management services. These new arrangements contemplate a reduction
in the amount of power which the Company will purchase from BPA in the
future and the replacement of such power with power purchased from
other suppliers under a variety of terms. Contemporaneously with
entering into these agreements, the Company entered into a one-year
power supply contract with BPA, ending September 30, 1996, in
connection with the restart of idled capacity at its Mead smelter in
Spokane, Washington. The restart began in late October 1995 and the
Company expects to return the Mead smelter to full production by early
1996.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
Catellus Development Corporation v. Kaiser Aluminum & Chemical
Corporation and James L. Ferry & Sons, Inc.
As previously and more fully stated in "Item 3. LEGAL PROCEEDINGS
- - Catellus Development Corporation v. Kaiser Aluminum & Chemical
Corporation and James L. Ferry & Sons, Inc." in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 (the
"10-K"), and as supplemented in the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995, on June 2, 1995, the United
States District Court for the Northern District of California (the
"District Court") issued an Order stating its preliminary findings on
the remaining claims in that action. On October 12, 1995, the
District Court issued final Findings of Fact and Conclusions of Law on
those claims concluding that the Company is liable for various costs
and interest through August 30, 1995, aggregating approximately $2.2
million, fifty percent (50%) of future costs of cleaning up certain
parts of the Property (as defined in the 10-K), and certain fees and
costs associated specifically with the claim by Catellus against the
Company. Entry of judgment is pending.
United States of America v. Kaiser Aluminum & Chemical Corporation
As previously and more fully stated in "Item 3. LEGAL PROCEEDINGS
- - United States of America v. Kaiser Aluminum & Chemical Corporation"
in the 10-K, the Company and the Environmental Protection Agency (the
"EPA") have been involved in negotiations to resolve claims arising
from alleged emissions from certain stacks at the Company's Trentwood
facility in Spokane, Washington. The Company and the EPA, without
adjudication of any issue of fact or law, and without any admission of
the violations alleged in the underlying complaint, have entered into
a Consent Decree, which on October 31, 1995, was lodged in United
States District Court for the Eastern District of Washington for
approval. If approved, the Consent Decree will settle the underlying
disputes and require the Company to (i) pay a $.5 million civil
penalty, (ii) complete a program of plant improvements and operational
changes that began in 1990 at its Trentwood facility, including the
installation of an emission control system to capture particulate
emissions from certain furnaces, and (iii) achieve and maintain
furnace compliance with
- 11 -
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
the opacity standard in the SIP (as defined in the 10-K) by no later
than February 28, 1997. The Company anticipates that capital
expenditures for the environmental upgrade of the furnace operation at
its Trentwood facility, including the improvements and changes
required by the Consent Decree, will be approximately $20.0 million.
Asbestos-related Litigation
As previously and more fully stated in "Item 3. LEGAL PROCEEDINGS
- - Asbestos-related Litigation" in the 10-K, the Company is a defendant
in a number of lawsuits in which the plaintiffs allege that certain of
their injuries were caused by exposure to asbestos during, and as a
result of, their employment or association with the Company or
exposure to products containing asbestos produced or sold by the
Company. The portion of Note 3 of the Notes to Interim Consolidated
Financial Statements contained in this report under the heading
"Asbestos Contingencies" is incorporated herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits.
Exhibit No. Exhibit
----------- -------
4.1 Fourth Amendment to Credit Agreement, dated as of October
17, 1995, amending the Credit Agreement, dated as of
February 17, 1994, as amended, among the Company, Kaiser,
the financial institutions a party thereto, and
BankAmerica Business Credit, Inc., as Agent.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
No report on Form 8-K was filed by the Company during the quarter
ended September 30, 1995.
SIGNATURE
---------
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, who has signed
this report on behalf of the registrant and as the principal financial
officer of the registrant.
KAISER ALUMINUM & CHEMICAL CORPORATION
/s/ John T. La Duc
By:-----------------------------
John T. La Duc
Vice President and
Chief Financial Officer
Dated: November 13, 1995
- 12 -
EXHIBIT 4.1
<PAGE>
E x e c u t i o n C o p y
FOURTH AMENDMENT TO CREDIT AGREEMENT
-------------------------------------
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this
"Amendment"), dated as of October 17, 1995, is by and between
---------
KAISER ALUMINUM & CHEMICAL CORPORATION, a Delaware corporation
(the "Company"), KAISER ALUMINUM CORPORATION, a Delaware
-------
corporation (the "Parent Guarantor"), the various financial
----------------
institutions that are or may from time to time become parties to
the Credit Agreement referred to below (collectively, the
"Lenders" and, individually, a "Lender"), and BANKAMERICA
------- ------
BUSINESS CREDIT, INC., a Delaware corporation, as agent (in such
capacity, together with its successors and assigns in such
capacity, the "Agent") for the Lenders. Capitalized terms used,
-----
but not defined, herein shall have the meanings given to such
terms in the Credit Agreement, as amended hereby.
W I T N E S S E T H:
WHEREAS, the Company, the Parent Guarantor, the Lenders
and the Agent are parties to the Credit Agreement, dated as of
February 15, 1994, as amended by the First Amendment to Credit
Agreement, dated as of July 21, 1994, the Second Amendment to
Credit Agreement, dated as of March 10, 1995 and the Third
Amendment to Credit Agreement and Acknowledgement, dated as of
July 20, 1995 (the "Credit Agreement"); and
----------------
WHEREAS, the parties hereto have agreed to amend the
Credit Agreement as herein provided;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Amendments to Credit Agreement.
------------------------------
1.1 Amendment to Article I: Definitions.
----------------------- -----------
A. The definition of "Joint Venture Affiliate"
contained in Section 1.1 of the Credit Agreement is hereby
-----------
amended by inserting the phrase "Alwis (but only at such time as
Alwis is not a Subsidiary of the Company and is an Affiliate of
the Company), Alwis Acquisition (but only at such time as Alwis
Acquisition is not a Subsidiary of the Company and is an
Affiliate of the Company)," after the term "Furukawa," in the
second line thereof.
B. The following definitions are hereby added to
Section 1.1 of the Credit Agreement in the appropriate
- -----------
alphabetical order:
1<PAGE>
<PAGE>
"'Alwis' means Alwis Leasing Corp., a Delaware
-----
corporation."
"'Alwis Acquisition' means Kaiser Center Leasing, Inc.,
-----------------
a Delaware corporation formed by the Company for the purpose of
acquiring he capital stock of Alwis."
1.2 Amendments to Article IX: Covenants.
------------------------------------
A. Clause (b)(ii) of Section 9.2.2 of the Credit
-------------- -------------
Agreement is hereby amended by (i) adding the phrase ", Alwis,
Alwis Acquisition" after the term "KAAC" in the first
parenthetical contained in clause (A) thereof; (ii) adding the
----------
phrase ", Alwis or Alwis Acquisition" after the phrase "Yellow
River Investment Company" in the first parenthetical contained in
clause (B) thereof; and (iii) adding the phrase ", Alwis or Alwis
- ----------
Acquisition" after the phrase "Yellow River Investment Company"
in the first parenthetical contained in clause (C) thereof.
----------
B. Section 9.2.2 of the Credit Agreement is hereby
-------------
amended by adding the following at the end of clause (b)(xvii)
----------------
thereof:
"; provided, however, that no Indebtedness incurred by
-------- -------
Alwis or Alwis Acquisition pursuant to this Section
-------
9.2.2(b)(xvii) may be guaranteed by the Company or any of its
Subsidiaries."
C. Section 9.2.2 of the Credit Agreement is hereby
-------------
amended by (i) deleting the word "and" at the end of clause
------
(b)(xvii) thereof; and (ii) adding the following as new clause
- --------- ------
(b)(xix) thereof:
- --------
"(xix) Indebtedness of Alwis and Alwis Acquisition to
the Company and its Subsidiaries; provided that the aggregate
--------
principal amount of such Indebtedness plus the aggregate amount
of Investments in Alwis and Alwis Acquisition (without
duplication) under Section 9.2.5(n) does not exceed $250,000 in
----------------
the aggregate at any one time outstanding; and"
D. Clause (e) of Section 9.2.5 of the Credit
---------- -------------
Agreement is hereby amended by adding the phrase ", Alwis or
Alwis Acquisition" at the end of the first parenthetical
contained therein.
E. Clause (n) of Section 9.2.5 of the Credit
---------- -------------
Agreement is hereby amended to read in its entirety as follows:
"(n) Investments in Alwis and Alwis Acquisition and
Investments (other than Investments in MAXXAM, any Affiliate of
MAXXAM (other than the Company, its Subsidiaries which are not
Restricted Subsidiaries, or any Joint Venture Affiliate), Yellow
2
<PAGE>
<PAGE>
River Investment Company or Yellow River Aluminum) not otherwise
permissible hereunder; provided that the aggregate amount of all
--------
Investments (without duplication) under this Section 9.2.5(n)
----------------
does not exceed $20,000,000 at any one time outstanding and
provided further that the aggregate amount of Investments under
- ----------------
this Section 9.2.5(n) in Alwis and Alwis Acquisition (without
----------------
duplication) plus the aggregate principal amount of Indebtedness
under Section 9.2.2(b)(xix) does not exceed $250,000 in the
---------------------
aggregate at any one time outstanding;"
F. Clause (o) of Section 9.2.5 of the Credit
---------- -------------
Agreement is hereby amended by adding the phrase "Alwis, Alwis
Acquisition," after the phrase "other than" in the first
parenthetical contained in clause (ii) thereof.
-----------
G. Section 9.2.5 of the Credit Agreement is hereby
-------------
amended by (i) deleting the period at the end of clause (q)
----------
thereof and substituting the phrase "; and" therefor; and (ii)
amending clause (r) thereof to read in its entirety as follows:
----------
"(r) Indebtedness which is an Investment permitted by
clause (b)(xviii) or clause (b)(xix) of Section 9.2.2."
- ----------------- -------- -------------
H. Section 9.2.20 of the Credit Agreement is hereby
--------------
amended by adding the following at the end thereof:
"; provided, however, the Company and its Subsidiaries
-------- -------
shall be permitted to transfer to the Company's Gramercy alumina
refinery, at any time after the Initial Borrowing Date, equipment
with a book value not to exceed $100,000 in the aggregate owned
on the Initial Borrowing Date and located at the Company's Baton
Rouge facility on the Initial Borrowing Date"
Section 2. Conditions to Effectiveness.
---------------------------
This Amendment shall become effective as of the date
hereof (the "Fourth Amendment Effective Date") only when the
-------------------------------
following conditions shall have been met and notice thereof shall
have been given by the Agent to the Parent Guarantor, the
Company, the Agent and each Lender:
A. The Agent shall have received for each Lender
counterparts hereof duly executed on behalf of the Parent
Guarantor, the Company, the Agent and the Required Lenders (or
notice of the approval of this Amendment by the Required Lenders
satisfactory to the Agent shall have been received by the Agent).
B. The Agent shall have received:
(1) Resolutions of the Board of Directors or of
the Executive Committee of the Company and the Parent Guarantor
approving and authorizing the execution, delivery and performance
3
<PAGE>
<PAGE>
of this Amendment, certified by its corporate secretary or an
assistant secretary as being in full force and effect without
modification or amendment as of the date of execution hereof by
the Company or the Parent Guarantor, as the case may be;
(2) A signature and incumbency certificate of the
officers of the Company and the Parent Guarantor executing this
Amendment;
(3) Certified copies of Alwis Acquisition's
Articles of Incorporation;
(4) Copies of Alwis Acquisition's Bylaws,
certified as of the date of delivery to Agent by its corporate
secretary or an assistant secretary;
(5) For each Lender an opinion, addressed to the
Agent and each Lender, from Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel, in substantially the form of Exhibit A attached
hereto, with such changes therein as shall be satisfactory to the
Agent; and
(6) Such other information approvals, opinions,
documents, or instruments as the Agent may reasonably request.
Section 3. Company's Representations and Warranties.
----------------------------------------
In order to induce the Lenders and the Agent to enter
into this Amendment and to amend the Credit Agreement in the
manner provided herein, the Parent Guarantor and the Company
represent and warrant to each Lender and the Agent that, as of
the Fourth Amendment Effective Date after giving effect to the
effectiveness of this Amendment, the following statements are
true and correct in all material respects:
A. Authorization of Agreements. The execution and
---------------------------
delivery of this Amendment by the Company and the Parent
Guarantor and the performance of the Credit Agreement as amended
by this Amendment (the "Amended Agreement") by the Company and
-----------------
the Parent Guarantor are within such Obligor's corporate powers
and have been duly authorized by all necessary corporate action
on the part of the Company and the Parent Guarantor, as the case
may be.
B. No Conflict. The execution and delivery by the
-----------
Company and the Parent Guarantor of this Amendment and the
performance by the Company and the Parent Guarantor of the
Amended Agreement do not:
4
<PAGE>
<PAGE>
(1) contravene such Obligor's Organic Documents;
(2) contravene the Indenture dated as of
February 1, 1993, as amended by the First Supplemental Indenture
dated May 1, 1993, between the Company, and Kaiser Finance
Corporation, Kaiser Alumina Australia Corporation, Alpart Jamaica
Inc. and Kaiser Jamaica Corporation, as Subsidiary Guarantors,
and The First National Bank of Boston, as Trustee, or the
Indenture dated as of February 17, 1994, between the Company, and
Kaiser Finance Corporation, Kaiser Alumina Australia Corporation,
Alpart Jamaica Inc. and Kaiser Jamaica Corporation, as Subsidiary
Guarantors, and First Trust National Association, as Trustee, or
contravene any other contractual restriction where such a
contravention has a reasonable possibility of having a Materially
Adverse Effect or contravene any law or governmental regulation
or court decree or order binding on or affecting such Obligor or
any of its Subsidiaries; or
(3) result in, or require the creation or
imposition of, any Lien on any of such Obligor's properties or
any of the properties of any Subsidiary of such Obligor, other
than pursuant to the Loan Documents.
C. Binding Obligation. This Amendment has been duly
------------------
executed and delivered by the Company and the Parent Guarantor
and this Amendment and the Amended Agreement constitute the
legal, valid and binding obligations of the Company and the
Parent Guarantor, enforceable against the Company and the Parent
Guarantor in accordance with their respective terms, except as
may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors'
rights generally and by general principles of equity.
D. Governmental Approval, Regulation, etc. No
---------------------------------------
authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or any
other Person is required for the due execution, delivery or
performance of this Amendment by the Company or the Parent
Guarantor.
E. Incorporation of Representations and Warranties
-----------------------------------------------
from Credit Agreement. Each of the statements set forth in
- ---------------------
Section 7.2.1 of the Credit Agreement is true and correct.
- -------------
Section 4. Conditions Subsequent.
---------------------
On or prior to the date on which Alwis Acquisition
acquires any of the capital stock of Alwis, the Agent shall have
received:
A. Stock certificates evidencing at least 50% of the
issued and outstanding shares of capital stock of Alwis
5
<PAGE>
<PAGE>
Acquisition, accompanied by undated stock powers duly executed in
blank; and
B. A Pledge Amendment to the Company Pledge Agreement
with respect to at least 50% of the issued and outstanding shares
of capital stock of Alwis Acquisition duly executed on behalf of
the Company.
Section 5. Acknowledgement and Consent.
---------------------------
The Company is a party to the Company Collateral
Documents, in each case as amended through the Fourth Amendment
Effective Date, pursuant to which the Company has created Liens
in favor of the Agent on certain Collateral to secure the
Obligations. The Parent Guarantor is a party to the Parent
Collateral Documents, in each case as amended through the Fourth
Amendment Effective Date, pursuant to which the Parent Guarantor
has created Liens in favor of the Agent on certain Collateral and
pledged certain Collateral to the Agent to secure the Obligations
of the Parent Guarantor. Certain Subsidiaries of the Company are
parties to the Subsidiary Guaranty and/or one or more of the
Subsidiary Collateral Documents, in each case as amended through
the Fourth Amendment Effective Date, pursuant to which such
Subsidiaries have (i) guarantied the Obligations and/or (ii)
created Liens in favor of the Agent on certain Collateral. The
Company, the Parent Guarantor and such Subsidiaries are
collectively referred to herein as the "Credit Support Parties",
----------------------
and the Company Collateral Documents, the Parent Collateral
Documents, the Subsidiary Guaranty and the Subsidiary Collateral
Documents are collectively referred to herein as the "Credit
------
Support Documents".
- -----------------
Each Credit Support Party hereby acknowledges that it
has reviewed the terms and provisions of the Credit Agreement as
amended by this Amendment and consents to the amendment of the
Credit Agreement effected as of the date hereof pursuant to this
Amendment.
Each Credit Support Party acknowledges and agrees that
any of the Credit Support Documents to which it is a party or
otherwise bound shall continue in full force and effect. Each
Credit Support Party hereby confirms that each Credit Support
Document to which it is a party or otherwise bound and all
Collateral encumbered thereby will continue to guaranty or
secure, as the case may be, the payment and performance of all
obligations guaranteed or secured thereby, as the case may be.
Each Credit Support Party (other than the Company and
the Parent Guarantor) acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this
Amendment, such Credit Support Party is not required by the terms
of the Credit Agreement or any other Loan Document to consent to
the amendments to the Credit Agreement effected pursuant to this
6
<PAGE>
<PAGE>
Amendment and (ii) nothing in the Credit Agreement, this
Amendment or any other Loan Document shall be deemed to require
the consent of such Credit Support Party to any future amendments
to the Credit Agreement.
Section 6. Miscellaneous.
-------------
A. Reference to and Effect on the Credit Agreement
-----------------------------------------------
and the Other Loan Documents.
- ----------------------------
(1) On and after the Fourth Amendment Effective
Date, each reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import referring
to the Credit Agreement, and each reference in the other Loan
Documents to the "Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement shall mean
and be a reference to the Amended Agreement.
(2) Except as specifically amended by this
Amendment, the Credit Agreement and the other Loan Documents
shall remain in full force and effect and are hereby ratified and
confirmed.
B. Applicable Law. THIS AMENDMENT SHALL BE DEEMED TO
--------------
BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO SUCH LAWS RELATING TO
CONFLICTS OF LAWS.
C. Headings. The various headings of this Amendment
--------
are inserted for convenience only and shall not affect the
meaning or interpretation of this Amendment or any provision
hereof.
D. Counterparts. This Amendment may be executed by
------------
the parties hereto in several counterparts and by the different
parties on separate counterparts, each of which shall be deemed
to be an original and all of which shall constitute together but
one and the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached
to the same document.
E. Severability. Any provision of this Amendment
------------
which is prohibited or unenforceable in any jurisdiction shall,
as to such provision and such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Amendment or
affecting the validity or enforceability of such provisions in
any other jurisdiction.
7
<PAGE>
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly
executed and delivered as of the day and year first above
written.
KAISER ALUMINUM CORPORATION KAISER ALUMINUM & CHEMICAL
CORPORATION
By: _______________________ By:________________________
Name Printed: John T. La Duc Name Printed: John T. La Duc
Its: Vice President, Chief Its: Vice President, Chief
Financial Officer & Financial Officer &
Treasurer Treasurer
BANKAMERICA BUSINESS CREDIT, BANKAMERICA BUSINESS CREDIT,
INC., as Agent INC.
By: _______________________ By:________________________
Name: Michael J. Jasaitis Name: Michael J. Jasaitis
Its: Vice President Its: Vice President
BANK OF AMERICA NATIONAL TRUST THE CIT GROUP/BUSINESS CREDIT,
AND SAVINGS ASSOCIATION INC.
By: _______________________ By:________________________
Name Printed:______________ Name Printed:______________
Its:_______________________ Its:_______________________
CONGRESS FINANCIAL CORPORATION HELLER FINANCIAL, INC.
(WESTERN)
By: _______________________ By:________________________
Name Printed:______________ Name Printed:______________
Its:_______________________ Its:_______________________
LA SALLE NATIONAL BANK NATIONAL WESTMINSTER BANK PLC
By: _______________________ By:________________________
Name Printed:______________ Name Printed:______________
Its:_______________________ Its:_______________________
TRANSAMERICA BUSINESS CREDIT ABN AMRO BANK N.V.
CORPORATION
By: _______________________ By:________________________
Name Printed:______________ Name Printed:______________
Its:_______________________ Its:_______________________
8
<PAGE>
<PAGE>
ACKNOWLEDGED AND AGREED TO:
AKRON HOLDING CORPORATION KAISER ALUMINUM & CHEMICAL
INVESTMENT, INC.
By: _______________________ By:________________________
Name Printed: John T. La Duc Name Printed: John T. La Duc
Its: Vice President, Chief Its: Vice President, Chief
Financial Officer & Financial Officer &
Treasurer Treasurer
KAISER ALUMINUM PROPERTIES, KAISER ALUMINUM TECHNICAL
INC. SERVICES, INC.
By: _______________________ By:________________________
Name Printed: John T. La Duc Name Printed: John T. La Duc
Its: Vice President, Chief Its: Vice President, Chief
Financial Officer & Financial Officer &
Treasurer Treasurer
OXNARD FORGE DIE COMPANY, INC. KAISER ALUMINIUM
INTERNATIONAL, INC.
By: _______________________ By:________________________
Name Printed: John T. La Duc Name Printed: John T. La Duc
Its: Vice President, Chief Its: Vice President, Chief
Financial Officer & Financial Officer &
Treasurer Treasurer
KAISER ALUMINA AUSTRALIA KAISER FINANCE CORPORATION
CORPORATION
By: _______________________ By:________________________
Name Printed: John T. La Duc Name Printed: John T. La Duc
Its: Vice President, Chief Its: Vice President, Chief
Financial Officer & Financial Officer &
Treasurer Treasurer
ALPART JAMAICA INC. KAISER JAMAICA CORPORATION
By: _______________________ By:________________________
Name Printed: John T. La Duc Name Printed: John T. La Duc
Its: Vice President, Chief Its: Vice President, Chief
Financial Officer & Financial Officer &
Treasurer Treasurer
KAISER BAUXITE COMPANY KAISER EXPORT COMPANY
By: _______________________ By:________________________
Name Printed: John T. La Duc Name Printed: John T. La Duc
Its: Vice President, Chief Its: Vice President, Chief
Financial Officer & Financial Officer &
9
<PAGE>
<PAGE>
Treasurer Treasurer
10
<PAGE>
<PAGE>
EXHIBIT A
October __,1995
BankAmerica Business Credit, Inc.,
as Agent
Two North Lake Avenue, Suite 400
Pasadena, California 91101
and
The Lenders Listed on Schedule A Hereto
Re: Fourth Amendment to Credit Agreement (the "Fourth
Amendment"), dated as of October 17, 1995, among
Kaiser Aluminum & Chemical Corporation, Kaiser
Aluminum Corporation, certain financial institutions,
and BankAmerica Business Credit, Inc., as Agent (the
"Agent")
---------------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to Kaiser Aluminum &
Chemical Corporation, a Delaware corporation (the "Company"), and
Kaiser Aluminum Corporation, a Delaware corporation (the "Parent
Guarantor"), in connection with the Fourth Amendment. Capitalized
terms used but not defined herein have the meanings assigned thereto
in the Credit Agreement, as amended by the Fourth Amendment. As used
herein, "Credit Agreement" has the meaning ascribed thereto in the
first recital of the Fourth Amendment.
In rendering the opinion set forth herein, we have reviewed
the Credit Agreement, the Fourth Amendment and have examined originals
or copies, certified, or otherwise identified to our satisfaction, of
(a) the Certificate of Incorporation and By-laws of the Company and
the Parent Guarantor as in effect on the date hereof, and (b) such
other documents, records, certificates and instruments (collectively,
"Documents") as in our judgment are necessary or appropriate as the
basis for the opinion expressed below.
In our examination we have assumed the genuineness of all
signatures, the authenticity of all Documents submitted to us as
originals, the conformity to original documents of all Documents
submitted to us as certified or photostatic copies, and the
authenticity of the originals of such copies. As to any facts
material to this opinion which we did not independently establish or
verify, we have relied upon statements and representations of officers
and other representatives of the Company and the Parent Guarantor and
certificates of public officials. We also have assumed (i) the valid
authorization, execution, and delivery of the Fourth Amendment by the
parties thereto (other than the Company and the Parent Guarantor),
A-1
<PAGE>
<PAGE>
BankAmerica Business Credit, Inc., October ____, 1995
Agent Page 2
and
The Lenders Listed on Schedule A Hereto
(ii) that each such other party has been duly organized and is validly
existing and in good standing under the laws of the jurisdiction of
its organization with the corporate or other organizational power to
perform its obligations thereunder, and (iii) that the Fourth
Amendment constitutes the legal, valid and binding obligations of each
such other party enforceable against each such other party in
accordance with its terms (subject to qualifications and limitations
similar to those set forth in clauses (a) and (b) on pages __ and __
of this opinion).
Based upon the foregoing, and subject to the qualifications
set forth herein, we are of the opinion that:
1. The execution, delivery, and performance by each of the
Company and the Parent Guarantor of the Fourth Amendment, and the
performance by the Company and the Parent Guarantor of the Credit
Agreement as amended by the Fourth Amendment are within their
respective corporate powers, have been duly authorized by all
necessary corporation action on the part of the Company and the Parent
Guarantor, and do not:
(a) violate the Organic Documents of the Company or the
Parent Guarantor; or
(b) violate any court decree or order of any governmental
authority which, after our due inquiry, has been
specifically disclosed to us by the Company or the Parent
Guarantor.
2. The Fourth Amendment has been duly executed and
delivered by each of the Company and the Parent Guarantor.
3. The Fourth Amendment constitutes the legal, valid, and
binding obligation of each of the Company and the Parent Guarantor,
enforceable against each of the Company and the Parent Guarantor in
accordance with its terms.
The opinion set forth in paragraph 3 above is subject to the
following qualifications and limitations and the other opinions set
forth above are subject to the following qualifications and
limitations, other than those set forth in clauses (a), (b) and (c)
below:
A-2
<PAGE>
<PAGE>
BankAmerica Business Credit, Inc., October ____, 1995
Agent Page 3
and
The Lenders Listed on Schedule A Hereto
(a) The enforceability of the Fourth Amendment may be
subject to or limited by bankruptcy, insolvency, reorganization,
arrangement, fraudulent conveyance or transfer, moratorium, or other
laws and court decisions now or hereafter in effect relating to or
affecting the rights of creditors generally;
(b) The enforceability of the Fourth Amendment is subject
to the application of and may be limited by general principles of
equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing (regardless of whether
considered in a proceeding in equity or at law). Such principles of
equity are of general application and in applying such principles a
court, among other things, might not allow a creditor to accelerate
the maturity of a debt under certain circumstances, including, without
limitation, upon the occurrence of a default deemed immaterial or
might decline to order an obligor to perform covenants. Such
principles applied by a court might include a requirement that a
creditor act with reasonableness and in good faith. Thus, we express
no opinion as to the validity or enforceability of (i) provisions
restricting access to legal or equitable remedies, such as the
specific performance of executory covenants, (ii) provisions that
purport to establish evidentiary standards, (iii) provisions relating
to waivers, severability, indemnity, submissions to jurisdiction, set
off, delay or omission of enforcement of rights or remedies, and (iv)
provisions purporting to convey rights to persons other than parties
to the Credit Agreement. In addition, we express no opinion as to the
enforceability of any provision purporting to provide indemnification
or contribution relating to matters arising under Federal or State
securities laws;
(c) The remedy of specific performance and injunctive and
other forms of equitable relief are subject to equitable defenses and
to the discretion of the court before which any proceeding therefor
may be brought;
(d) We have not been requested to render, and with your
permission we do not express, any opinion as to the applicability to
any Loan Document or security interests of Section 548 of the Federal
Bankruptcy code, Article 10 of the New York Debtor & Creditor Law, or
any other fraudulent conveyance, insolvency or transfer laws or any
court decisions with respect to any of the foregoing;
A-3<PAGE>
<PAGE>
BankAmerica Business Credit, Inc., October ____, 1995
Agent Page 4
and
The Lenders Listed on Schedule A Hereto
(e) Our opinion expressed herein is limited to the laws of
the State of New York, the General Corporation Law of the State of
Delaware, and the Federal laws of the United States of America, and we
do not express any opinion herein concerning any other laws. We
express no opinion as to the effects (if any) of any laws of any
jurisdiction (except the State of New York) in which any Lender is
located which limits the rate of interest that such Lender may charge
or collect.
The opinion expressed herein is based upon the laws in
effect on the date hereof, and we assume no obligation to review or
supplement this opinion should any such law be changed by legislative
action, judicial decision or otherwise.
Ezra G. Levin, a partner of our firm, is a director of the
Company and the Parent Guarantor.
This opinion is being furnished only to the addressees named
above pursuant to Section 2.B.(5) of the Fourth Amendment and is
solely for the benefit of such Persons in connection with the
execution, delivery and effectiveness of the Fourth Amendment.
Accordingly, this opinion may not be used, quoted, or relied upon by
any other person or entity or for any other purpose without, in each
instance, our express prior written consent.
Very truly yours,
A-4
<PAGE>
<PAGE>
SCHEDULE A
BankAmerica Business Credit, Inc.
Bank of America National Trust
and Savings Association
The CIT Group/Business Credit, Inc.
Congress Financial Corporation (Western)
Heller Financial, Inc.
La Salle National Bank
National Westminster Bank PLC
Transamerica Business Credit Corporation
ABN Amro Bank N.V.
A-5
<PAGE>
<PAGE>
PLEDGE AMENDMENT
This Pledge Amendment, dated October , 1995, is delivered
pursuant to Section 4.2(b) of the Company Pledge Agreement referred to
--------------
below. The undersigned hereby agrees that this Pledge Amendment may
be attached to the Company Pledge Agreement dated as of February 15,
1994, as amended through the date hereof, between the undersigned and
BankAmerica Business Credit, Inc., as the Agent (the "Pledge
Agreement," capitalized terms defined therein being used herein as
therein defined), and that the Pledged Shares listed on this Pledge
Amendment shall be deemed to be part of the Pledged Shares and shall
become part of the Collateral and shall secure all Secured
Obligations.
KAISER ALUMINUM & CHEMICAL CORPORATION
By:
Name Printed: John T. La Duc
Its: Vice President, Chief Financial
Officer & Treasurer
Jurisdiction Certificate Number of % of
Issuer of Incorporation No.(s) Shares Class
- ------ ---------------- ----------- --------- -----
Kaiser Delaware 50%
Center
Leasing,
Inc.
Debt Issuer Amount of Indebtedness
- ----------- ----------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
interim consolidated financial statements of the Company for the nine months
ended September 30, 1995, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000054291
<NAME> KAISER ALUMINUM & CHEMICAL CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 11
<SECURITIES> 0
<RECEIVABLES> 279
<ALLOWANCES> 0
<INVENTORY> 531
<CURRENT-ASSETS> 895
<PP&E> 1,099
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,789
<CURRENT-LIABILITIES> 524
<BONDS> 0
<COMMON> 15
2
0
<OTHER-SE> 10
<TOTAL-LIABILITY-AND-EQUITY> 2,789
<SALES> 1,647
<TOTAL-REVENUES> 1,647
<CGS> 1,330
<TOTAL-COSTS> 1,330
<OTHER-EXPENSES> 167
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 71
<INCOME-PRETAX> 69
<INCOME-TAX> 25
<INCOME-CONTINUING> 43
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
