<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 June 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 July 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>
CONSOLIDATED BALANCE SHEETS
(In millions of dollars)
<CAPTION>
June 30, December 31,
1995 1994
-------------------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 14.7 $ 12.0
Receivables 254.2 200.5
Inventories 516.8 468.0
Prepaid expenses and other current assets 87.0 158.0
-----------------------
Total current assets 872.7 838.5
Investments in and advances to unconsolidated affiliates 171.1 169.7
Property, plant, and equipment - net 1,112.5 1,133.2
Deferred income taxes 279.9 271.0
Other assets 312.3 281.2
-----------------------
Total $2,748.5 $2,693.6
=======================
Liabilities & Stockholders' Equity
Current liabilities:
Accounts payable $ 136.1 $ 152.1
Accrued interest 32.9 32.6
Accrued salaries, wages, and related expenses 68.0 77.7
Accrued postretirement medical benefit obligation - current portion 47.0 47.0
Other accrued liabilities 143.7 171.7
Payable to affiliates 84.6 85.2
Long-term debt - current portion 8.9 11.5
Notes payable to parent - current portion 21.2 21.2
-----------------------
Total current liabilities 542.4 599.0
Long-term liabilities 545.2 495.5
Accrued postretirement medical benefit obligation 738.8 734.9
Long-term debt 792.0 751.1
Notes payable to parent 12.9 23.5
Minority interests 86.6 85.4
Redeemable preference stock 27.7 29.0
Stockholders' equity (deficit):
Preference stock 1.7 1.8
Common stock 15.4 15.4
Additional capital 1,672.7 1,626.3
Accumulated deficit (244.5) (271.5)
Additional minimum pension liability (9.1) (9.1)
Less: Note receivable from parent (1,433.3) (1,387.7)
-----------------------
Total stockholders' equity (deficit) 2.9 (24.8)
-----------------------
Total $2,748.5 $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>
STATEMENTS OF CONSOLIDATED INCOME (LOSS)
(Unaudited)
(In millions of dollars)
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
--------------------------------------
1995 1994 1995 1994
--------------------------------------
<C> C> <C> <C>
Net sales $583.4 $459.5 $1,096.4 $874.6
--------------------------------------
Costs and expenses:
Cost of products sold 463.8 419.0 890.5 806.8
Depreciation 23.7 25.1 47.4 50.0
Selling, administrative, research and development, and general 32.2 29.5 62.1 57.5
--------------------------------------
Total costs and expenses 519.7 473.6 1,000.0 914.3
--------------------------------------
Operating income (loss) 63.7 (14.1) 96.4 (39.7)
Other income (expense):
Interest and other income (expense) - net (1.3) 1.5 (2.0) 3.5
Interest expense (23.8) (22.2) (47.4) (43.6)
--------------------------------------
Income (loss) before income taxes, minority interests, and
extraordinary loss 38.6 (34.8) 47.0 (79.8)
Credit (provision) for income taxes (13.9) 12.3 (16.8) 28.1
Minority interests (.2) .4 (.9) 1.5
--------------------------------------
Income (loss) before extraordinary loss 24.5 (22.1) 29.3 (50.2)
Extraordinary loss on early extinguishment of debt, net of tax
benefit of $2.9 (5.4)
--------------------------------------
Net income (loss) $ 24.5 $(22.1) $ 29.3 $(55.6)
======================================
</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>
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
(In millions of dollars)
<CAPTION>
Six Months Ended
June 30,
-------------------
1995 1994
-------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 29.3 $ (55.6)
Adjustments to reconcile net income (loss) to net cash provided by (used for)
operating activities:
Depreciation 47.4 50.0
Non-cash postretirement medical benefit expenses 3.9 6.9
Amortization of excess investment over equity in net assets of unconsolidated
affiliates 5.8 5.8
Amortization of deferred financing costs and discount on long-term debt 2.7 3.5
Equity in (income) losses of unconsolidated affiliates (7.1) 1.3
Minority interests .9 (1.5)
Extraordinary loss on early extinguishment of debt - net 5.4
(Increase) decrease in receivables (60.2) 6.4
(Increase) decrease in inventories (48.8) 32.4
Decrease (increase) in prepaid expenses and other current assets 57.8 (12.8)
Incurrence of financing costs (.8) (18.5)
Decrease in accounts payable (16.0) (15.7)
Increase in accrued interest .5 8.7
Decrease in payable to affiliates and accrued liabilities (6.6) (7.5)
Decrease in accrued and deferred income taxes (4.8) (33.6)
Other 7.1 (3.9)
-------------------
Net cash provided by (used for) operating activities 11.1 (28.7)
-------------------
Cash flows from investing activities:
Net proceeds from disposition of property and investments 1.2 2.8
Capital expenditures (27.1) (21.7)
Redemption fund for preference stock (.3) (1.3)
-------------------
Net cash used for investing activities (26.2) (20.2)
-------------------
Cash flows from financing activities:
Repayments of long-term debt, including revolving credit (299.9) (322.7)
Borrowings of long-term debt, including revolving credit 340.8 353.5
Repayment of note payable (3.4)
Net short-term debt repayments (.5)
Net (payments to) borrowings from parent (10.6) 23.8
Dividends paid (.4) (.4)
Redemption of preference stock (8.7) (8.4)
Capital contribution 67.2
-------------------
Net cash provided by financing activities 17.8 112.5
-------------------
Net (decrease) increase in cash and cash equivalents during the period 2.7 63.6
Cash and cash equivalents at beginning of period 12.0 14.2
-------------------
Cash and cash equivalents at end of period $ 14.7 $ 77.8
===================
Supplemental disclosure of cash flow information:
Interest paid, net of capitalized interest $ 44.2 $ 31.4
Income taxes paid 16.8 5.4
</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, except prices and share amounts)
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, after giving effect
to the conversion of each outstanding $.65 Depositary Share (the
"Depositary Shares"), each representing ownership of one-tenth of a
share of Series A Mandatory Conversion Premium Dividend Preferred
Stock (the "Series A Shares") (see Note 5), and 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.
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 half 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>
June 30, December 31,
1995 1994
-------------------------
<S> <C> <C>
Finished fabricated aluminum products $ 62.4 $ 49.4
Primary aluminum and work in process 218.4 203.1
Bauxite and alumina 115.9 102.3
Operating supplies and repair and maintenance parts 120.1 113.2
-------------------------
Total $516.8 $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
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.
- 4 -
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
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 June 30, 1995, the balance of such accruals,
which is primarily included in Long-term liabilities, was $41.3.
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
$11.0 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 $21.0. 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 June 30, 1995, the number
of such lawsuits pending was approximately 31,700.
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 $134.6,
before considerations for insurance recoveries, is included primarily
in Long-term liabilities at June 30, 1995. The Company estimates that
annual future cash payments in connection with such litigation will be
approximately $11.0 to $13.0 for each of the years 1995 through 1999,
and an aggregate of approximately $74.0 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 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 $120.6, determined on the
same basis as the asbestos-related cost accrual, is recorded primarily
in Other assets at June 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.
- 5 -
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
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 June 30, 1995, the Company had net
forward sales contracts for 157,725 tons* of primary aluminum at fixed
prices, purchased call options in respect of 34,500 tons of primary
aluminum, purchased put options to establish a minimum price for
96,750 tons of primary aluminum, and entered into option contracts
that established a price range for 45,000 tons of primary aluminum.
In respect of its 1996 anticipated net exposure, at June 30, 1995, the
Company had sold forward 15,000 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 June 30, 1995, the Company
had net forward foreign exchange contracts totaling approximately
$149.9 for the purchase of 207.0 Australian dollars through April
1997.
At June 30, 1995, the net unrealized loss on the Company's position
in aluminum forward sales and option contracts (based on a market
price of $1,808 per ton of primary aluminum) and forward foreign
exchange contracts was $3.8.
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. At June 30, 1995, the Company had $4.0, compared with
$50.5 at December 31, 1994, on deposit with various counterparties in
respect of such unrealized losses. 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.
5. Subsequent Event
----------------
On July 21, 1995, Kaiser announced that it is calling for
redemption of all 1,938,295 of its Series A Shares on September 19,
1995. Redemption of the Series A Shares will result in the
simultaneous redemption of all 19,382,950 Depositary Shares in
exchange for (i) 13,126,521 shares of Kaiser's common stock determined
by dividing the Call Price (as defined) in effect on the redemption
date ($110.218 per Series A Share) by the Current
----------------------------------
* 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
Market Price (as defined) per share of common stock ($16.275)
determined as of July 19, 1995, pursuant to the Certificate of
Designations of the Series A Shares, (ii) an amount in cash equal to
all accrued and unpaid dividends to and including the day immediately
prior to redemption date, and (iii) cash in lieu of any fractional
shares of common stock that would otherwise be issuable.
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 six
months ended June 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>
SELECTED OPERATIONAL AND FINANCIAL INFORMATION
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
----------------------------------------
1995 1994 1995 1994
----------------------------------------
<S> <C> <C> <C> <C>
Shipments:<F1>
Alumina 576.6 574.2 1,023.1 1,042.4
Aluminum products:
Primary aluminum 63.8 63.1 111.5 127.4
Fabricated aluminum products 99.4 104.9 193.9 201.7
----------------------------------------
Total aluminum products 163.2 168.0 305.4 329.1
========================================
Average realized sales price:
Alumina (per ton) $ 206 $ 159 $ 202 $ 157
Primary aluminum (per pound) .83 .55 .82 .55
Net sales:
Bauxite and alumina:
Alumina $118.7 $ 91.3 $ 206.6 $ 163.8
Other <F2><F3> 23.9 20.4 43.0 40.8
----------------------------------------
Total bauxite and alumina 142.6 111.7 249.6 204.6
----------------------------------------
Aluminum processing:
Primary aluminum 116.6 76.8 201.6 154.1
Fabricated aluminum products 319.8 267.4 636.0 508.9
Other <F3> 4.4 3.6 9.2 7.0
----------------------------------------
Total aluminum processing 440.8 347.8 846.8 670.0
----------------------------------------
Total net sales $583.4 $459.5 $1,096.4 $ 874.6
========================================
Operating income (loss):
Bauxite and alumina $ 20.2 $ (.1) $ 21.6 $ (2.5)
Aluminum processing 62.7 4.1 112.0 (1.9)
Corporate (19.2) (18.1) (37.2) (35.3)
----------------------------------------
Total operating income (loss) $ 63.7 $(14.1) $ 96.4 $ (39.7)
========================================
Income (loss) before income taxes, minority interests, and
extraordinary loss $ 38.6 $(34.8) $ 47.0 $ (79.8)
========================================
Income (loss) before extraordinary loss $ 24.5 $(22.1) $ 29.3 $ (50.2)
Extraordinary loss on early extinguishment of debt, net of
tax benefit of $2.9 (5.4)
----------------------------------------
Net income (loss) $ 24.5 $(22.1) $ 29.3 $ (55.6)
========================================
Capital expenditures $ 13.4 $ 12.1 $ 27.1 $ 21.7
========================================
<FN>
------------------------------------
<F1> In thousands of tons.
<F2> Includes net sales of bauxite.
<F3> Includes the portion of net sales attributable to minority
interests in consolidated subsidiaries.
</FN>
</TABLE>
- 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 28% higher in the second quarter
of 1995 than in the second quarter of 1994, and was 22% higher in the
first half of 1995 than in the first half of 1994. Revenue from
alumina increased 30% in the second quarter of 1995 from the second
quarter of 1994, and increased 26% in the first half of 1995 from the
first half of 1994, due to higher average realized prices.
Aluminum Processing - Revenue from net sales to third parties for
the aluminum processing segment was 27% higher in the second quarter
of 1995 than in the second quarter of 1994, and was 26% higher in the
first half of 1995 than in the first half of 1994. Revenue from
primary aluminum increased 52% in the second quarter of 1995 from the
second quarter of 1994, due to higher average realized prices, and
increased 31% in the first half of 1995 from the first half of 1994,
due to higher average realized prices 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 39% and 37% of total aluminum products
shipments in the second quarter and first half of 1995, respectively,
compared with approximately 38% and 39% in the second quarter and
first half of 1994, respectively. Revenue from fabricated aluminum
products increased 20% in the second quarter of 1995 from the second
quarter of 1994, and increased 25% in the first half of 1995 from the
first half 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 first half 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 the first
half results 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 had operating income in the
second quarter and the first half of 1995, compared with an operating
loss in the second quarter and the first half of 1994, principally due
to higher revenue. First half results were partially offset by the
effect of the strikes and boiler failure.
Aluminum Processing - This segment had significantly higher
operating income in the second quarter of 1995 than in the second
quarter of 1994, and had operating income in the first half of 1995,
compared with an operating loss in the first half of 1994, principally
due to higher revenue. First half results 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.
Net Income (Loss)
The Company had net income for the second quarter and the first
half of 1995, compared with a net loss for the second quarter and
first half of 1994. The principal reason for these changes was the
improvement in operating income previously described.
- 9 -
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
Liquidity and Capital Resources
-------------------------------
Operating Activities
At June 30, 1995, the Company had working capital of $330.3,
compared with working capital of $239.5 at December 31, 1994. The
increase in working capital was due to an increase in Receivables (as
a result of an increase in net sales) and Inventories (as a result of
lower shipments) and a decrease in Accounts payable and Other accrued
liabilities. The increase in working capital is partially offset by a
decrease in Prepaid expenses and other current assets (due to lower
margin deposits). See Note 4 of the Notes to Interim Consolidated
Financial Statements.
Investing Activities
Cash used for investing activities in the second quarter and the
first half of 1995 primarily consisted of capital expenditures to
improve production efficiency, reduce operating costs, and expand
capacity at existing facilities.
Financing Activities
At June 30, 1995, the Company had long-term debt of $792.0,
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. At June 30, 1995,
$204.8 (of which $57.2 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, an aluminum smelter joint venture in the
People's Republic of China.
Trends
------
On June 15, 1995, the Company announced that it had signed an
agreement with The Washington Water Power Company (the "WWP") to
purchase up to 50 megawatts of electrical energy to supply its
Northwest facilities. The agreement is for a five-year term beginning
October 1, 1995. Such power would displace a portion of the Company's
interruptible power supply from the Bonneville Power Administration
(the "BPA"), and could save the Company in excess of $7.0 over the
term of the agreement compared to current BPA rates, assuming that the
Company would purchase 50 megawatts for the entire term of the
agreement. The Company also announced that it had signed an electric
power services agreement with the WWP for the WWP to represent the
Company in discussions and solicitations with energy suppliers other
than the BPA.
The BPA has formally announced its proposed rate of 22.6 mills for
power to be sold to its direct service industrial customers (the
"DSIs"), which includes the Company, beginning October 1, 1996, for a
term of either two years or five years, at the election of each of the
DSIs. Such a rate, if implemented, would represent a rate reduction
of approximately 15% from the BPA rates currently in effect, and would
reduce production costs at the Company's Mead and Tacoma, Washington,
smelters by approximately $12.0 per year based on the current
operating rate of those smelters. However, final adoption of the BPA
rate for the period beginning October 1, 1996, is subject to
completion of the public rate setting process, and there is no
certainty that the proposed rate decrease, or any rate decrease, will
become effective as of October 1, 1996, or at any other time.
- 10 -
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
As reported and more fully described in "Item 3. LEGAL PROCEEDINGS
- Catellus Development Corporation v. Kaiser Aluminum & Chemical
Corporation and James L. Ferry & Son, Inc." in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 (the
"10-K"), the trial involving this case commenced in March 1995.
During the trial, Plaintiffs (as defined in the 10-K) settled their
claims against Catellus Development Corporation ("Catellus") in
exchange for payment of approximately $3.25 million. Subsequently, on
June 2, 1995, the United States District Court for the Northern
District of California issued an Order on the remaining claims
finding, among other things, that the Company is liable for various
costs aggregating approximately $1.34 million, as well as interest,
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. The Company has estimated the aggregate interest payable to
be approximately $.53 million. Entry of judgment is pending.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The annual meeting of stockholders of the Company was held on June
7, 1995, at which meeting the stockholders voted to elect management's
slate of nominees as directors of the Company, and voted upon a
proposal to approve the Kaiser 1995 Executive Incentive Compensation
Program.
Nominees for Director
---------------------
The nominees for election as directors of the Company are listed
below, together with the number of votes cast for, against, and
withheld with respect to each such nominee, as well as the number of
abstentions and broker nonvotes with respect to each such nominee:
Robert J. Cruikshank
Votes For: 46,795,238
Votes Against:
Votes Withheld: 113,421
Abstentions:
Broker Nonvotes:
George T. Haymaker, Jr.
Votes For: 46,785,033
Votes Against:
Votes Withheld: 123,626
Abstentions:
Broker Nonvotes:
Charles E. Hurwitz
Votes For: 46,758,516
Votes Against:
Votes Withheld: 150,143
Abstentions:
Broker Nonvotes:
- 11 -
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
Ezra G. Levin
Votes For: 46,794,059
Votes Against:
Votes Withheld: 114,600
Abstentions:
Broker Nonvotes:
Robert Marcus
Votes For: 46,896,053
Votes Against:
Votes Withheld: 12,606
Abstentions:
Broker Nonvotes:
Robert J. Petris
Votes For: 46,622,691
Votes Against:
Votes Withheld: 285,968
Abstentions:
Broker Nonvotes:
Kaiser 1995 Executive Compensation Program
------------------------------------------
The vote with respect to the proposal to approve the Kaiser 1995
Executive Incentive Compensation Program was as follows:
Votes For: 46,514,323
Votes Against: 328,979
Votes Withheld:
Abstentions: 63,668
Broker Nonvotes:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits.
Exhibit No. Exhibit
----------- -------
4.1 Third Amendment to Credit Agreement, dated as of July 20,
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 June 30, 1995.
- 12 -
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
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: August 9, 1995
- 13 -
<PAGE>
EXHIBIT 4.1
EXECUTION COPY
THIRD AMENDMENT TO CREDIT AGREEMENT AND ACKNOWLEDGEMENT
-------------------------------------------------------
THIS THIRD AMENDMENT TO CREDIT AGREEMENT AND
ACKNOWLEDGEMENT (this "Amendment"), dated as of July 20, 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, and the Second Amendment to
Credit Agreement, dated as of March 10, 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 "Yellow River Aluminum, Yellow
River Investment Company (but only at such time as Yellow River
Investment Company 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:
"Yellow River Aluminum" means Yellow River Aluminum
---------------------
Industry Company, a corporation organized under the laws of the
People's Republic of China.
1
<PAGE>
<PAGE>
"Yellow River Investment Company" means Kaiser Yellow
-------------------------------
River Investment Limited, a corporation organized under the laws
of Bermuda.
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 "or Yellow
River Investment Company" after the term "KAAC" in the first
parenthetical contained in clause (A) thereof; (ii) adding the
----------
phrase "(other than Yellow River Investment Company)" after the
phrase "Subsidiary of the Company" contained in clause (B)
----------
thereof; and (iii) adding the phrase "(other than Yellow River
Investment Company)" after the phrase "Subsidiary of the Company"
the first time it appears in clause (C) thereof.
----------
B. Section 9.2.2 of the Credit Agreement is hereby
-------------
amended by adding the phrase "Yellow River Investment Company,"
after the term "AJI," in the parenthetical contained in clause
------
(b)(xvii) thereof.
---------
C. Section 9.2.2 of the Credit Agreement is hereby
-------------
further amended by (i) deleting the word "and" at the end of
clause (b)(xvi) thereof; and (ii) adding the following as new
---------------
clause (b)(xviii) thereof:
-----------------
"(xviii) Indebtedness of Yellow River Investment
Company to the Company in an aggregate principal amount not to
exceed $2,000,000 outstanding at any one time; and"
D. Clause (e) of Section 9.2.5 of the Credit
----------- -------------
Agreement is hereby amended by adding the phrase "and other than
Investments in Yellow River Investment Company" at the end of the
parenthetical contained therein.
E. Clause (n) of Section 9.2.5 of the Credit
---------- -------------
Agreement is hereby amended by adding the phrase ", Yellow River
Investment Company or Yellow River Aluminum" after the term
"MAXXAM" at the end of the parenthetical contained therein.
F. Clause (o) of Section 9.2.5 of the Credit
---------- -------------
Agreement is hereby amended by adding the phrase "(other than
Yellow River Investment Company and Yellow River Aluminum)" after
the term "Joint Venture Affiliates" the first time it appears
therein.
G. Section 9.2.5 of the Credit Agreement is hereby
-------------
amended by (i) deleting the word "and" at the end of clause (o)
----------
thereof; (ii) deleting the period at the end of clause (p)
----------
thereof and substituting the phrase "; and" therefor; and (iii)
adding the following as new clauses (q) and (r) thereof:
----------- ---
2
<PAGE>
<PAGE>
"(q) Investments by Company in Yellow River Investment
Company in an amount not to exceed $32,000,000 (less any
Indebtedness outstanding under Section 9.2.2(b)(xviii)) in the
------------------------
aggregate at any time outstanding and Investments by Yellow River
Investment Company in Yellow River Aluminum in an amount not to
exceed $32,000,000 in the aggregate at any time outstanding.
"(r) Indebtedness which is an Investment permitted by
clause (b)(xviii) of Section 9.2.2."
---------- -------------
H. Section 9.2.18 of the Credit Agreement is hereby
--------------
amended by amending clause (vi) thereof to read in its entirety
-----------
as follows:
"(vi) Investments permitted by Sections 9.2.5(f),
-----------------
9.2.5(n), 9.2.5(o), 9.2.5(q) and 9.2.5(r); and"
-------- -------- -------- --------
Section 2. Amendments to Collateral Documents.
----------------------------------
The parties agree that, as of the Third Amendment
Effective Date, the Company Pledge Agreement shall be amended as
set forth in Exhibit B hereto.
Section 3. Acknowledgement.
---------------
Subject to the terms and conditions set forth herein
and in reliance on the representations and warranties of Company
herein contained, Lenders hereby acknowledge that the agreement
by the Company and Yellow River Investment Company to invest up
to approximately $61,000,000 in Yellow River Aluminum by making
installment payments in the form of (i) one or more cash payments
of up to approximately $10,000,000 on or about July 21, 1995 and
(ii) one or more cash payments of up to approximately $51,000,000
due on or about January 21, 1996 does not constitute
"Indebtedness" for purposes of the Credit Agreement.
Section 4. Conditions to Effectiveness.
---------------------------
This Amendment shall become effective as of the date
hereof (the "Third 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),
together with counterparts of the Second Amendment to Company
Pledge Agreement, dated as of July 20, 1995, between Company and
Agent and a Pledge Amendment to the Company Pledge Agreement with
3
<PAGE>
<PAGE>
respect to a portion of the stock of Yellow River Investment
Company (collectively, the "Pledge Amendments") duly executed on
-----------------
behalf of the Company and 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
of this Amendment and the Pledge Amendments, 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 and the Pledge Amendments;
(3) Certified copies of Yellow River Investment
Company's Articles of Incorporation;
(4) Copies of Yellow River Investment Company'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 5. Conditions Subsequent.
---------------------
On or prior to August 17, 1995, the Agent shall have
received:
A. Stock certificates evidencing 65% of the issued
and outstanding shares of capital stock of Yellow River
Investment Company, accompanied by undated stock powers duly
executed in blank, together with any other documents required to
create an enforceable pledge of 65% of the shares of Yellow River
Investment Company under the laws of Bermuda; and
B. For each Lender an opinion, addressed to the Agent
and each Lender, from the Company's counsel in Bermuda, in form
and substance satisfactory to Agent, with respect to the
perfection of Lenders' security interest in 65% of the shares of
Yellow River Investment Company.
4
<PAGE>
<PAGE>
Section 6. 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 and the
other Loan Documents in the manner provided herein, the Parent
Guarantor and the Company represent and warrant to each Lender
and the Agent that, as of the Third 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:
(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
5
<PAGE>
<PAGE>
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 other than such actions as may be required under the
laws of Bermuda.
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 7. Acknowledgement and Consent.
---------------------------
The Company is a party to the Company Collateral
Documents, in each case as amended through the Third 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 Third
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 Third 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 and the amendment of the other Loan Documents effected
as of the date hereof.
Each Credit Support Party acknowledges and agrees that
any of the Credit Support Documents to which it is a party or
6
<PAGE>
<PAGE>
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
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 8. Miscellaneous.
-------------
A. Reference to and Effect on the Credit Agreement
-----------------------------------------------
and the Other Loan Documents.
----------------------------
(1) On and after the Third 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) The acknowledgement set forth above shall be
limited precisely as written and relates solely to the
interpretation of the definition of "Indebtedness" contained in
the Credit Agreement in connection with the proposed Investment
by Company and shall not be deemed to:
(a) constitute a waiver of compliance by
Company with respect to (i) any Section of the Credit
Agreement in this or in any other instance or (ii) any
other term, provision or condition of the Credit
Agreement or any other instrument or agreement referred
to therein (whether in connection with the proposed
Investment or otherwise); or
(b) prejudice any right or remedy that Agent
or any Lender may now have or may have in the future
under or in connection with the Credit Agreement or any
other instrument or agreement referred to therein.
(3) Except as specifically amended by this
Amendment and the amendments to the other Loan Documents executed
as of the date hereof, the Credit Agreement and the other Loan
7
<PAGE>
<PAGE>
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.
F. Approval of Amendments to Loan Documents. The
----------------------------------------
Required Lenders hereby approve the form of the amendment
attached as an Exhibit to this Amendment and hereby authorize the
Agent on their behalf to accept from the Company, and authorize
the Agent to execute and deliver as Agent, the amendment to the
Company Pledge Agreement in substantially the form of such
Exhibit, with such changes, additions or deletions as the Agent,
in its sole and absolute discretion, may approve.
8
<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:_______________________
S-1
<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 & Treasurer
Treasurer
S-2
<PAGE>
<PAGE>
EXHIBIT A
July 20, 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: Third Amendment to Credit Agreement (the "Third
Amendment"), dated as of July 20, 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 Third Amendment and in connection
with the Second Amendment to Company Pledge Agreement, dated as of
July 20, 1995 (the "Second Pledge Amendment"), between the Company and
the Agent and the Pledge Amendment, dated as of July 20, 1995, by the
Company (the "Pledge Amendment" and, together with the Second Pledge
Amendment, the "Pledge Amendments"). Capitalized terms used but not
defined herein have the meanings assigned thereto in the Credit
Agreement, as amended by the Third Amendment. As used herein, "Credit
Agreement" has the meaning ascribed thereto in the first recital of
the Third Amendment.
<PAGE>
<PAGE>
BankAmerica Business Credit, Inc., Page 2
as Agent
and
The Lenders Listed on Schedule A Hereto
In rendering the opinion set forth herein, we have reviewed
the Credit Agreement, the Third Amendment and the Pledge Amendments,
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 Third Amendment and the
Pledge Amendments by the parties thereto (other than the Company and
the Parent Guarantor), (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 Third Amendment and the Pledge Amendments constitute the
legal, valid and binding obligations of each such other party,
enforceable against each such other party in accordance with their
respective terms (subject to qualifications and limitations similar to
those set forth in clauses (a) and (b) on pages 3 and 4 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 Third Amendment and by the
Company of the Pledge Amendments, and the performance by the Company
and the Parent Guarantor of the Credit Agreement, as amended by the
Third Amendment, and the performance by the Company of the Company
Pledge Agreement (as such term is defined
<PAGE>
<PAGE>
BankAmerica Business Credit, Inc., Page 3
as Agent
and
The Lenders Listed on Schedule A Hereto
in the third recital of the Second Pledge Amendment), as amended by
the Pledge Amendments, 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 Third Amendment has been duly executed and
delivered by each of the Company and the Parent Guarantor and the
Pledge Amendments have been duly executed and delivered by the
Company.
3. The Third 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 Pledge Amendments constitute the
legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms.
The opinions set forth in paragraph 3 above are 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), (c) and
(d) below:
(a) The enforceability of the Third Amendment and the
Pledge Amendments 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 Third Amendment and the
Pledge Amendments is subject to the application of and may be
<PAGE>
<PAGE>
BankAmerica Business Credit, Inc., Page 4
as Agent
and
The Lenders Listed on Schedule A Hereto
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) We express no opinion as to the enforceability of the
Pledge Amendments to the extent that such enforceability may be
affected by the fact that, as of the date hereof, the Company (with
the consent of the Required Lenders and the Agent) has not delivered
to the Agent certificates for the shares referred to in the Pledge
Amendment or as to the enforceability or perfection of any security
interest granted pursuant to the Pledge Amendments;
(d) 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;
(e) 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
<PAGE>
<PAGE>
BankAmerica Business Credit, Inc., Page 5
as Agent
and
The Lenders Listed on Schedule A Hereto
or transfer laws or any court decisions with respect to any of the
foregoing;
(f) 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 4.B.(5) of the Third Amendment and is solely
for the benefit of such Persons in connection with the execution,
delivery and effectiveness of the Third Amendment and the Pledge
Amendments. 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,
<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 N.V.
<PAGE>
<PAGE>
EXHIBIT B
SECOND AMENDMENT TO COMPANY PLEDGE AGREEMENT
--------------------------------------------
THIS SECOND AMENDMENT TO COMPANY PLEDGE AGREEMENT (this
"Amendment"), dated as of July 20, 1995, is by and between Kaiser
---------
Aluminum & Chemical Corporation, a Delaware corporation (the
"Pledgor"), and BankAmerica Business Credit, Inc., a Delaware
-------
corporation, as agent for the Secured Lenders (as defined in the
Credit Agreement referred to below) (in such capacity, together with
its successors and assigns in such capacity, the "Agent").
-----
Capitalized terms used, but not defined, herein shall have the
meanings given to such terms in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Pledgor, Kaiser Aluminum Corporation, the
various financial institutions that are or may from time to time
become parties to the Credit Agreement (collectively, the "Lenders"
-------
and, individually, a "Lender"), 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 and the
Second Amendment to Credit Agreement dated as of March 10, 1995 (the
"Credit Agreement"); and
----------------
WHEREAS, as of the date hereof the Pledgor, the Parent
Guarantor, the Lenders and the Agent are entering into a Third
Amendment to Credit Agreement (the "Third Amendment"); and
---------------
WHEREAS, the Pledgor and the Agent are parties to the
Company Pledge Agreement, dated as of February 15, 1994, as amended by
the First Amendment to Company Pledge Agreement dated as of July 21,
1994 (the "Company Pledge Agreement"), and have agreed to amend the
------------------------
Company Pledge Agreement as herein provided; and
WHEREAS, the Required Lenders have consented to the
execution and delivery of this Amendment by the Agent;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Amendment to Company Pledge Agreement.
-------------------------------------
A. Section 2.1(b) of the Company Pledge Agreement is
--------------
hereby amended by adding the phrase "or, in the case of Yellow River
Investment Company, the lesser of (i) 65% of the issued and
outstanding shares of Yellow River Investment Company or (ii) the
percentage of the shares of Yellow River Investment Company owned
beneficially or of record by Pledgor" after the phrase "Schedule I to
----------
the Credit Agreement" contained in the ninth line thereof.
B-1
<PAGE>
<PAGE>
B. Section 4.1(b) of the Company Pledge Agreement is
--------------
hereby amended by (i) adding the phrase "(other than Yellow River
Investment Company)" after the phrase "Issuer of Pledged Shares" in
the first line of clause (i) thereof and (ii) adding the phrase
----------
"; provided, however, that the Pledgor shall only be obligated to
-------- --------
pledge the lesser of (A) 65% of the issued and outstanding shares of
capital stock of Yellow River Investment Company or (B) the percentage
of the shares of capital stock of Yellow River Investment Company
owned beneficially or of record by the Pledgor" at the end of clause
------
(iii) thereof.
-----
Section 2. Pledgor's Representations and Warranties.
-----------------------------------------
In order to induce the Agent to enter into this Amendment
and to amend the Company Pledge Agreement in the manner provided
herein, and to induce the Required Lenders to consent to such action
by the Agent, the Pledgor represents and warrants to each Lender and
the Agent that, as of the Third Amendment Effective Date (as defined
in the Third Amendment) 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 Pledgor and the performance of the
Company Pledge Agreement as amended by this Amendment (the "Amended
-------
Agreement") by the Pledgor are within the Pledgor's corporate powers
---------
and have been duly authorized by all necessary corporate action on the
part of the Pledgor.
B. No Conflict. The execution and delivery by the Pledgor
-----------
of this Amendment and the performance by the Pledgor of the Amended
Agreement do not:
(1) contravene the Pledgor'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 Pledgor, 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 Pledgor, 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 the Pledgor or any of its Subsidiaries; or
B-2
<PAGE>
<PAGE>
(3) result in, or require the creation or imposition
of, any Lien on any of the Pledgor's properties, other than pursuant
to the Loan Documents.
C. Binding Obligation. This Amendment has been duly
------------------
executed and delivered by the Pledgor and this Amendment and the
Amended Agreement constitute the legal, valid and binding obligations
of the Pledgor, enforceable against the Pledgor 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 other
Person is required for the due execution, delivery or performance of
this Amendment by the Pledgor other than such actions as may be
required under the laws of Bermuda.
Section 3. Miscellaneous.
-------------
A. Reference to and Effect on the Company Pledge Agreement
-------------------------------------------------------
and the Other Loan Documents.
----------------------------
(1) On and after the Third Amendment Effective Date,
each reference in the Company Pledge Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import referring to
the Company Pledge Agreement, and each reference in the other Loan
Documents to the "Company Pledge Agreement", "thereunder", "thereof"
or words of like import referring to the Company Pledge Agreement
shall mean and be a reference to the Amended Agreement.
(2) Except as specifically amended by this Amendment,
the Company Pledge Agreement shall remain in full force and effect and
is hereby ratified and confirmed.
(3) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein, constitute a
waiver of any provision of, or operate as a waiver of any right, power
or remedy of the Agent or any Lender under, the Company Pledge
Agreement.
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.
B-3
<PAGE>
<PAGE>
D. Counterparts. This Agreement 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.
IN WITNESS WHEREOF, this Amendment has been duly executed
and delivered as of the day and year first above written.
KAISER ALUMINUM & CHEMICAL BANKAMERICA BUSINESS CREDIT,
CORPORATION INC., as Agent
By:__________________________ By:______________________________
Name Printed: John T. La Duc Name Printed: Michael J. Jasaitis
Its: Vice President, Chief Its: Vice President
Financial Officer &
Treasurer
B-4
<PAGE>
<PAGE>
PLEDGE AMENDMENT
This Pledge Amendment, dated July 20, 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 Bermuda 1 780,000 65%
Yellow River
Investment
Limited
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 six months ended
June 30, 1995, and is qualified in its enirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000054291
<NAME> KAISER ALUMINUM & CHEMICAL CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 15
<SECURITIES> 0
<RECEIVABLES> 254
<ALLOWANCES> 0
<INVENTORY> 517
<CURRENT-ASSETS> 873
<PP&E> 1,113
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,749
<CURRENT-LIABILITIES> 542
<BONDS> 0
<COMMON> 15
2
0
<OTHER-SE> (14)
<TOTAL-LIABILITY-AND-EQUITY> 2,749
<SALES> 1,096
<TOTAL-REVENUES> 1,096
<CGS> 891
<TOTAL-COSTS> 891
<OTHER-EXPENSES> 110
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47
<INCOME-PRETAX> 47
<INCOME-TAX> 17
<INCOME-CONTINUING> 29
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
