<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 March 31, 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 April 30, 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)
March 31, December 31,
1995 1994
------------------------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 7.3 $ 12.0
Receivables 267.9 200.5
Inventories 503.1 468.0
Prepaid expenses and other current assets 105.0 158.0
---------------------------
Total current assets 883.3 838.5
Investments in and advances to unconsolidated affiliates 168.6 169.7
Property, plant, and equipment - net 1,123.0 1,133.2
Deferred income taxes 279.8 271.0
Other assets 319.2 281.2
---------------------------
Total $2,773.9 $2,693.6
===========================
Liabilities & Stockholders' Equity
Current liabilities:
Accounts payable $ 145.1 $ 152.1
Accrued interest 13.8 32.6
Accrued salaries, wages, and related expenses 71.3 77.7
Accrued postretirement medical benefit obligation - current portion 47.0 47.0
Other accrued liabilities 156.4 171.7
Payable to affiliates 87.1 85.2
Long-term debt - current portion 12.2 11.5
Notes payable to parent - current portion 21.2 21.2
---------------------------
Total current liabilities 554.1 599.0
Long-term liabilities 539.5 495.5
Accrued postretirement medical benefit obligation 738.1 734.9
Long-term debt 824.3 751.1
Notes payable to parent 18.2 23.5
Minority interests 88.3 85.4
Redeemable preference stock 32.3 29.0
Stockholders' deficit:
Preferred stock 1.7 1.8
Common stock 15.4 15.4
Additional capital 1,649.4 1,626.3
Accumulated deficit (267.9) (271.5)
Additional minimum pension liability (9.1) (9.1)
Less: Note receivable from parent (1,410.4) (1,387.7)
---------------------------
Total stockholders' deficit (20.9) (24.8)
---------------------------
Total $2,773.9 $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
March 31,
-------------------
1995 1994
--------------------
<S> <C> <C>
Net sales $513.0 $415.1
--------------------
Costs and expenses:
Cost of products sold 426.7 387.8
Depreciation 23.7 24.9
Selling, administrative, research and development, and general 29.9 28.0
--------------------
Total costs and expenses 480.3 440.7
--------------------
Operating income (loss) 32.7 (25.6)
Other income (expense):
Interest and other income (expense) - net (.7) 2.0
Interest expense (23.6) (21.4)
--------------------
Income (loss) before income taxes, minority interests, and extraordinary loss 8.4 (45.0)
Credit (provision) for income taxes (2.9) 15.8
Minority interests (.7) 1.1
-------------------
Income (loss) before extraordinary loss 4.8 (28.1)
Extraordinary loss on early extinguishment of debt, net of tax benefit of $2.9 (5.4)
--------------------
Net income (loss) $ 4.8 $(33.5)
====================
</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)
Quarter Ended
March 31,
-----------------
1995 1994
-----------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 4.8 $(33.5)
Adjustments to reconcile net income (loss) to net cash used for operating activities:
Depreciation 23.7 24.9
Non-cash postretirement medical benefit expenses 3.2 3.4
Amortization of excess investment over equity in net assets of unconsolidated
affiliates 2.9 2.9
Amortization of deferred financing costs and discount on long-term debt 1.3 2.2
Equity in (income) losses of unconsolidated affiliates (1.8) 1.3
Minority interests .7 (1.1)
Extraordinary loss on early extinguishment of debt - net 5.4
Increase in receivables (69.6) (6.8)
(Increase) decrease in inventories (35.1) 14.5
Decrease (increase) in prepaid expenses and other current assets 43.8 (7.3)
Incurrence of financing costs (.7) (17.1)
Decrease in accounts payable (7.0) (12.8)
Decrease in accrued interest (18.6) (10.7)
Decrease in payable to affiliates and accrued liabilities (3.9) (8.8)
Decrease in accrued and deferred income taxes (3.5) (17.7)
Other 3.8 (7.0)
-----------------
Net cash used for operating activities (56.0) (68.2)
-----------------
Cash flows from investing activities:
Net proceeds from disposition of property and investments 1.1 2.3
Capital expenditures (13.7) (9.6)
Redemption fund for minority interest preference stock (1.2) (2.3)
-----------------
Net cash used for investing activities (13.8) (9.6)
-----------------
Cash flows from financing activities:
Repayments of long-term debt, including revolving credit (237.5) (321.4)
Borrowings of long-term debt, including revolving credit 311.2 353.5
Net short-term debt repayments (.5)
Net (payments to) borrowings from parent (5.3) 29.1
Dividends paid (.2) (.2)
Redemption of preference stock (3.1) (7.4)
Capital contribution 67.2
-----------------
Net cash provided by financing activities 65.1 120.3
-----------------
Net (decrease) increase in cash and cash equivalents during the period (4.7) 42.5
Cash and cash equivalents at beginning of period 12.0 14.2
-----------------
Cash and cash equivalents at end of period $ 7.3 $ 56.7
=================
Supplemental disclosure of cash flow information:
Interest paid, net of capitalized interest $ 40.9 $ 29.9
Income taxes paid 3.8 2.4
</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)
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 58% of Kaiser's common stock, assuming the
conversion of each outstanding $.65 Depositary Share, each
representing ownership of one-tenth of a share of Series A Mandatory
Conversion Premium Dividend Preferred Stock (the "Series A Shares"),
and each outstanding share of 8.255% PRIDES, Convertible Preferred
Stock (the "PRIDES"), into one share of Kaiser's common stock, with
the remaining 42% 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 quarter
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>
March 31, December 31,
1995 1994
------------------------
<S> <C> <C>
Finished fabricated aluminum products $ 55.8 $ 49.4
Primary aluminum and work in process 222.8 203.1
Bauxite and alumina 110.3 102.3
Operating supplies and repair and maintenance parts 114.2 113.2
------------------------
Total $503.1 $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 March 31, 1995, the balance
of such accruals, which is primarily included in Long-term
liabilities, was $40.8. 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 $20.0. 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 March 31, 1995, the
number of such lawsuits pending was approximately 29,200.
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 2007. 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 $135.1,
before considerations for insurance recoveries, is included primarily
in Long-term liabilities at March 31, 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 2007. The Company does not presently believe there is a
reasonable basis for estimating such costs beyond 2007 and,
accordingly, no accrual has been recorded for such costs which may be
incurred beyond 2007.
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 $119.5, determined on the
same basis as the asbestos-related cost accrual, is recorded primarily
in Other assets at March 31, 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 March 31, 1995, the Company had net
forward sales contracts for 235,800 tons* of primary aluminum at fixed
prices, purchased call options in respect of 47,250 tons of primary
aluminum, purchased put options to establish a minimum price for
160,250 tons of primary aluminum, and entered into option contracts
that established a price range for 71,000 tons of primary aluminum.
In respect of its 1996 anticipated net exposure, at March 31, 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 March 31, 1995, the
Company had net forward foreign exchange contracts totaling
approximately $139.5 for the purchase of 192.0 Australian dollars
through March 1997.
At March 31, 1995, the net unrealized loss on the Company's
position in aluminum forward sales and option contracts (based on a
market price of $1,859 per ton of primary aluminum) and forward
foreign exchange contracts was $16.3.
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 March 31, 1995, the Company had $7.5, 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.
- --------------------------
* 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
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 its 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 quarters ended
March 31, 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
SELECTED OPERATIONAL AND FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Quarter Ended
March 31,
-----------------
1995 1994
-----------------
<S> <C> <C>
Shipments:<F1>
Alumina 446.5 468.2
Aluminum products:
Primary aluminum 47.7 64.3
Fabricated aluminum products 94.5 96.8
-----------------
Total aluminum products 142.2 161.1
=================
Average realized sales price:
Alumina (per ton) $ 197 $ 155
Primary aluminum (per pound) .81 .55
Net sales:
Bauxite and alumina:
Alumina $ 87.9 $ 72.5
Other<F2><F3> 19.1 20.4
-----------------
Total bauxite and alumina 107.0 92.9
-----------------
Aluminum processing:
Primary aluminum 85.0 77.3
Fabricated aluminum products 316.2 241.5
Other<F3> 4.8 3.4
-----------------
Total aluminum processing 406.0 322.2
-----------------
Total net sales $513.0 $415.1
=================
Operating income (loss):
Bauxite and alumina $ 1.4 $ (2.4)
Aluminum processing 49.3 (6.0)
Corporate (18.0) (17.2)
-----------------
Total operating income (loss) $ 32.7 $(25.6)
=================
Income (loss) before income taxes, minority interests, and extraordinary loss $ 8.4 $(45.0)
=================
Income (loss) before extraordinary loss $ 4.8 $(28.1)
Extraordinary loss on early extinguishment of debt, net of tax benefit of $2.9 (5.4)
-----------------
Net income (loss) $ 4.8 $(33.5)
=================
Capital expenditures $ 13.7 $ 9.6
=================
<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 in the first quarter of 1995 was 15%
higher than the first quarter of 1994. Revenue from alumina
increased 21% in the first quarter of 1995 from the first quarter of
1994, principally due to increased average realized prices, partially
offset by lower shipments.
Aluminum Processing - Revenue from net sales to third parties for
the aluminum processing segment in the first quarter of 1995 was 26%
higher than the first quarter of 1994. Revenue from primary aluminum
increased 10% in the first quarter of 1995 from the first quarter of
1994, principally due to higher average realized prices, significantly
offset by decreased shipments caused by the strike by the United
Steelworkers of America ("USWA") discussed below and by a mid-1994
partial curtailment of production at the Company's 90%-owned Valco
smelter. Shipments of primary aluminum to third parties were
approximately 34% of total aluminum products shipments in the first
quarter, compared with approximately 40% in the first quarter of 1994.
Revenue from fabricated aluminum products increased 31% in the first
quarter of 1995 from the first quarter of 1994, due to higher average
realized prices, partially offset by lower shipments for most of these
products.
Operating Income (Loss)
First quarter results were adversely affected 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 quarter 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
first quarter of 1995, compared with an operating loss in the first
quarter of 1994, principally due to higher revenue, partially offset
by the effect of the strikes and boiler failure.
Aluminum Processing - This segment had operating income in the
first quarter of 1995, compared with an operating loss in the first
quarter of 1994, principally due to higher revenue, 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 a net income for the first quarter of 1995,
compared with a net loss for the first quarter of 1994. The principal
reason for this change was the improvement in operating income
previously described.
Liquidity and Capital Resources
- -------------------------------
Operating Activities
At March 31, 1995, the Company had working capital of $329.2,
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 Accrued interest and Other
- 9 -
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
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 first quarter of 1995
primarily consisted of capital expenditures to improve production
efficiency, reduce operating costs, and expand capacity at existing
facilities.
Financing Activities
At March 31, 1995, the Company had long-term debt of $824.3,
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 March 31, 1995,
$173.4 (of which $57.5 could have been used for letters of credit) was
available to the Company under the 1994 Credit Agreement.
Trends
- ------
In March 1995, the Bonneville Power Administration (the "BPA")
offered to its industrial customers, including the Company, surplus
firm power at a discounted rate for the period April 1, 1995, through
July 31, 1995, to enable such customers to restart idle industrial
loads. In April 1995, the Company and the BPA entered into a contract
for an amount of such power, and the Company expects to restart one-
half of an idle potline (approximately 9,000 tons of annual capacity)
at its Tacoma, Washington, smelter in the near future.
In February 1995, the BPA issued an initial rate increase
announcement which proposed a 5.4% increase to its direct service
industry customers (the "DSIs") to apply during a two-year period
beginning October 1, 1995. In April 1995, the DSIs, including the
Company, entered into agreements with the BPA pursuant to which (i)
the proposed 5.4% rate increase was replaced by an agreed 4% rate
increase to be in effect for the one-year period October 1, 1995,
through September 30, 1996, which will increase production costs at
the Company's Mead and Tacoma smelters by an aggregate of approximately
$4.0 per year, based on the operating rate of those smelters after the
restart of one-half of a potline at the Tacoma smelter, discussed above,
(ii) the variable rate structure currently in effect was extended through
September 30, 1996, (iii) the BPA rate proceedings were deferred, (iv) the
DSIs waived their rights to assert certain claims in respect of past
interruptible service by the BPA, and (v) the BPA agreed to allow each DSI
to supply a portion of its requirement for electric power from sources
other than the BPA, up to 50% of its top quartile (interruptible) service
beginning October 1, 1995, and up to 100% of its top quartile service
beginning October 1, 1996, which will help to assure the supply of power and
encourage more competitive power rates.
Separately, the BPA has offered to contract with each of the DSIs to
provide transmission services for power purchased from sources other than the
BPA to replace all or any portion of the power now purchased from the BPA
under its existing power contract. The amount of power available from the BPA
under such an existing power contract would be permanently redued by the amount
of power purchased from such other sources. KACC has entered into a
transmission services contract with the BPA, but has not now elected to replace
any portion of the power which it purchased from the BPA with power from another
source. These new arrangements may help to assue the supply of power and
encourage more competitive power rates.
- 10 -
<PAGE>
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
-----------------
On March 27, 1995, the United States Department of Justice issued
Civil Investigative Demand No. 12503 (the "CID"), as part of an
industry-wide investigation, requesting information from the Company
regarding (i) any actual or contemplated changes in its method of
pricing can stock from January 1, 1994, through March 31, 1995, (ii) the
percentage of aluminum scrap and primary aluminum ingot used by the
Company to produce can stock and the manner in which the Company's cost
of acquiring aluminum scrap is factored into its can stock prices, and
(iii) any communications with others regarding any actual or contemplated
changes in its method of pricing can stock from January 1, 1994, through
March 31, 1995. The Company is gathering documents and preparing
interrogatory answers in order to comply with the CID.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits.
Exhibit No. Exhibit
----------- -------
10.1 Kaiser 1995 Employee Incentive Compensation Program
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 March 31, 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: May 12, 1995
- 11 -
<PAGE>
Kaiser 1995 Employee Incentive Compensation Program<PAGE>
<PAGE>
Kaiser 1995 Employee Incentive Compensation Program
TABLE OF CONTENTS
-----------------
Section Page
------------
Section 1. Purpose of Program and Its Parts
- -------------------------------------------
1.1 Purpose 1
1.2 Program as Part of the Plan 1
Section 2. Definitions
- -----------------------
2.1 Definitions 2
Section 3. Eligibility
- -----------------------
3.1 Eligibility for Long-Term Awards 9
3.2 Eligibility for Annual Awards 9
3.3 No Right to Participate 10
Section 4. Administration
- --------------------------
4.1 Administration 10
Section 5. Stock Subject to Program; Type and Nature
- -----------------------------------------------------
of Awards
---------
5.1 Stock Subject to the Long Term Component 11
5.2 Type and Nature of Awards 12
Section 6. Effective Date and Long Term Component Life
- -------------------------------------------------------
6.1 Effective Date and Long Term Component Life 12
Section 7. Determination and Payment of Awards
- -----------------------------------------------
7.1 General Principles 12
7.2 Determining Target Incentives and
Granting Performance Units 13
7.3 Performance Goals and Valuation 14
7.4 Payment of Actual Awards 20
7.5 Form and Timing of Payment 20
7.6 Termination of Employment Due To Death,
Disability, or Retirement 21
7.7 Termination of Employment for Other Reasons 22
7.8 Nontransferability 22
Section 8. Beneficiary Designation
- -----------------------------------
8.1 Beneficiary Designation 22<PAGE>
<PAGE>
Kaiser 1995 Employee Incentive Compensation Program
TABLE OF CONTENTS
-----------------
Section Page
------------
Section 9. Rights of Participants
- ----------------------------------
9.1 Employment 23
Section 10. Amendment, Modification, and Termination of
- --------------------------------------------------------
Program
-------
10.1 Amendment, Modification, and Termination of
Program 23
Section 11. Tax Withholding
- ----------------------------
11.1 Tax Withholding 24
Section 12. Indemnification
- ----------------------------
12.1 Indemnification 24
Section 13. Requirements of Law; Consents
------------------------------------------
13.1 Requirements of Law 25
13.2 Consents to Program Actions 25
13.3 Governing Law 26
APPENDIX A
APPENDIX B
APPENDIX C
<PAGE>
<PAGE>
Section 1. Purpose of Program and Its Parts
-------------------------------------------
1.1 Purpose
-------
. The Kaiser 1995 Employee Incentive Compensation Program (the
"Program") is intended to increase the value of the shareholder's
investment in Kaiser Aluminum Corporation by providing key
Employees with incentives to achieve positive Economic Value
Added, as defined in Section 2 below, with emphasis in those
areas of the business that such Employees can influence.
The Program is designed to provide the opportunity to earn levels
of total annual compensation that, at levels of profitability
equal to the cost of capital, are competitive with the
compensation provided by other employers with whom the Company
competes for management, at similar profitability levels, and to
allow the Participants to earn higher total compensation if
economic value (profit above that required to return the cost of
capital) is added. These opportunities are provided through a
combination of Annual and Long-Term (as both such terms are
defined below) incentives.
1.2 Program as Part of the Plan
---------------------------
. The long-term incentive part of the Program (the "Long Term
Component") is consequently intended to further the purposes of
the Kaiser 1993 Omnibus Stock Incentive Plan (the "Plan") by
supplementing and implementing the provisions of Section 9 of the
Plan and is made a part of the Plan effective as of January 1,
1994. It includes provisions for the payment of incentives in
part in Kaiser Aluminum Corporation ("KAC") common stock and is
included in the Program along with Annual incentives so as to
coordinate the payment of base salary, Annual and Long Term
incentive compensation. The provisions of the Long Term
Component as
- 1-
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<PAGE>
they relate to KAC common stock grants and awards are subject to
and limited by those of the Plan, and they shall be interpreted
and administered so that they are consistent with the provisions
of the Plan.
The description of provisions for determination and payment of
Annual incentives are included in this Program for information
and disclosure, but these provisions are not subject to the
provisions of the Plan. Thus, this Program repeats or summarizes
various Plan definitions and other provisions insofar as they are
applicable to the Long Term Component. In the event of any
conflict or ambiguity, the definitions and rules of the Plan are
overriding and controlling when interpreting provisions of the
Long Term Component. Because the Long Term Component supplements
and implements a portion of the Plan without changing any basic
rules of the Plan, the Program does not constitute an amendment
of the Plan.
For purposes of summary communication documents provided to
Participants, certain other terminology will be used; refer to
definitions in Section 2 below, of "Long Term Component" and
"Program" for identification of such different terminology.
Section 2. Definitions
-----------------------
2.1 Definitions
-----------
. Subject to Section 1, any capitalized term that is defined in
this document shall have the meaning set forth in the appropriate
definition in this Section or elsewhere herein when such term is
used in connection with the Program. Moreover, any term that
describes an accounting measure shall be determined for each
Long-Term Performance Period in accordance with the definition of
such term, applied on a consistent basis, using the amounts
recorded in
2
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<PAGE>
the Company's books of accounts and generally accepted accounting
principles as in effect at the beginning of the applicable
Performance Period, with such modifications and such
computational methodology as the Committee may deem appropriate
and approve in order to carry out the purpose of the Program.
Definitions relating to the Annual incentive part of the Program
shall also be determined in accordance with the rules and
terminology of this Section 2.1 except as they may be modified in
the case of Annual incentive arrangements for particular Business
Units or Participant groups that incorporate modifications
approved by the CEO with the consent of the Committee in
following the principles described in this document.
(a)"Actual Award" means the amount, if any, of a Participant's
------------
Target Incentive that, assuming continued participation for the
full Performance Period for which the Target Incentive was
granted, has been earned and will become payable at the times and
in the manner determined under the Long Term Component or the
Annual incentive part of the Program, as applicable, provided
payment shall be contingent upon meeting or exceeding the
threshold level of performance (minimum Company-wide EVA of 5
percent or minimum Business Unit EVA of 7-1/2 percent). Pursuant
to Section 7.3(l), 7.6, or 10.1, a Participant's Actual Award may
be prorated in the case of participation for less than the full
Performance Period.
(b)"Annual" means of or pertaining to the short-term part of the
------
Program, which provides for the possibility of Awards which may
be made each year and for results to be measured for the one-year
Performance Period for which the Award was made.
(c)"Award" means
-----
(1)with respect to the Long Term Component, the Performance
Units granted to a Participant at the beginning of the Long
Term Performance Period, and
(2)with respect to the Annual incentive part of the Program,
the total cash incentive under the Annual incentive part of
the Program,
3
<PAGE>
where (1) and (2) collectively constitute the Participant's
total Target Incentive under the Program when granted and
either (1) or (2) or both may result in payment of an Actual
Award after the end of the applicable Performance Period.
(d)"Board" unless otherwise specified means the Board of
-----
Directors of KACC. The term "Boards" shall refer collectively to
the Boards of Directors of KAC and KACC.
(e)"Business Plan" for any fiscal year beginning on or after
-------------
January 1, 1995, means the Business Units and KACC consolidated
business plan for such fiscal year, as approved by the Board.
For 1994, the second quarter updated business plan will be used.
(f)"Business Unit" means a separate operating unit of the
-------------
Company, as determined for purposes of the Company's internal
organization and reflected in its Business Plan.
(g)"Capital Employed" means the net assets of the Company or
----------------
Business Unit, as applicable. Net assets are determined as total
assets minus liabilities adjusted for the following exclusions.
Total assets shall exclude deferred financing recorded in the
other assets category, and total liabilities shall exclude debt,
accrued and deferred income taxes, and accrued interest, all net
of minority interests in these items.
(h)"Capital Spending" means KAC's or the Business Unit's share of
----------------
expenditures constituting capital spending as defined by Policy
160 in the KAC Controller's Policy Manual, including 100 percent
of such spending for consolidated entities and KAC's
proportionate share of such spending for non-consolidated
entities whose results are reflected in KAC's financial
reporting.
(i)"CEO" or "Chief Executive Officer" means the chief executive
--- -----------------------
officer of KAC.
(j)"Committee" means the Compensation Committees of the Boards,
---------
acting jointly, as provided in Section 2.1(d) of the Plan.
(k)"Company" means KAC and KACC collectively.
-------
(l)"Cost of Capital" means
---------------
4
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<PAGE>
(1)for the Company on a consolidated basis, 15 percent,
which is deemed to be the actual cost for the Company based
on a 50 percent debt and 50 percent equity ratio and
assuming that the cost of debt is 10 percent and the cost of
equity is 20 percent, and
(2)for a Business Unit, 20 percent, which is deemed to be
the actual cost for each Business Unit since certain
Corporate level costs are not allocated against the earnings
of Business Units.
(m)"Disability" means disability as defined in the Kaiser
----------
Aluminum Self-Insured Welfare Plan for Employees.
(n)"EBDIT" or "Earnings Before Depreciation, Interest, and Taxes"
----- -------------------------------------------------
means EBIT plus depreciation, where depreciation includes
purchase accounting investment amortization and depreciation
recorded in the cost of goods sold, and does not include
depreciation in minority interest.
(o)"EBIT" or "Earnings Before Interest and Taxes" means net
---- ----------------------------------
income plus the Company share of interest expense (including
interest recorded in the cost of goods sold), amortization of
deferred financing, capital charges, income taxes, and
extraordinary items.
(p)"Employee" means an officer, director, or regular full-time
--------
salaried employee (including any officer or director who is also
an employee, other than a director who serves on the Committee)
of the Company or its subsidiaries or any branch, unit or
division thereof. For purposes of this Program, Employee does
not include the Chief Executive Officer, the Chief Financial
Officer or the Chief Administrative Officer.
(q)"EVA" or "Economic Value Added" means the return on Company or
--- --------------------
Business Unit assets, expressed as a percent and determined for
the applicable Performance Period with respect to either Annual
EVA or Long-Term EVA as described below.
(1)Annual EVA, in most cases, is determined for the Annual
Performance Period as the EBIT divided by the average
Capital Employed. For certain Business Units Annual EVA will
be defined the same as
5
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<PAGE>
Long Term EVA, with the exception that only the first two
steps are used in determination of such Annual EVA. For
purposes of the foregoing, the average Capital Employed
shall be the simple average of annual, quarterly or monthly
figures, as available.
(2)Long-Term EVA is determined as follows. First, for each
year in the Long-Term Performance Period, determine (c) as
the EBDIT minus the Capital Spending, and (d) as the average
Capital Employed. Second, divide (c) by (d). Third,
determine the EVA for the Long-Term Performance Period as
the simple average of the three annual percentages
determined in the second step above. For purposes of the
foregoing, the average Capital Employed shall be the simple
average of annual, quarterly or monthly figures, as
available.
(r)"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended and in effect from time to time.
(s)"KAC" means Kaiser Aluminum Corporation, a Delaware
---
corporation.
(t)"KACC" means Kaiser Aluminum & Chemical Corporation, a
----
Delaware corporation.
(u)"Long-Term" means of or pertaining to the Long Term Component,
---------
which provides for Awards to be made each year near the beginning
of a new three-year Performance Period and for results to be
measured for such three-year Performance Period.
(v)"Long Term Component" means the long-term incentive
-------------------
compensation Program described in this document that is part of
the Program and is governed by the Plan, as described in Section
1 hereof. For purposes of describing the Long Term Component of
the Program to Participants in summary communication materials,
the title "Kaiser Aluminum Long Term Incentive Program",
short-titled "LTI Program" will be used.
(w)"Participant" means any Employee designated by the CEO or the
-----------
Committee to participate pursuant to Section 3.
6
<PAGE>
<PAGE>
(x)"Performance Goal" means, as applicable,
----------------
(1)the Annual EVA planned for achievement on average over
the Annual Performance Period, or
(2)the Long-Term EVA planned for achievement on average over
the Long-Term Performance Period.
(y)"Performance Period" means a period commencing on the date
------------------
that the Program is first effective or on any subsequent
anniversary of such date for which an Award has been made and
will be measured in accordance with the rules of the Program, as
follows:
(1) with respect to the Annual part of the Program, the
period shall be the calendar year, and each calendar year
shall constitute a Performance Period.
(2)with respect to the Long Term Component, the period shall
consist of three consecutive calendar years, and a new
Long-Term Performance Period shall begin each year and shall
partially overlap the two immediately preceding Long-Term
Performance Periods, if any.
(z)"Performance Unit" means a unit with an initial value of $1.00
----------------
that is granted to a Participant as part of a Target Incentive
and applies only to the Long Term Component.
(aa)"Plan" means the Kaiser 1993 Omnibus Stock Incentive Plan, as
----
amended and in effect from time to time.
(bb)"Program" means the Kaiser 1995 Employee Incentive
-------
Compensation Program that includes Annual incentive and Long Term
incentive amounts which, when combined with base salary, comprise
the total compensation for a Participant. For purposes of
describing the Program to Participants in summary communication
materials, the title "Kaiser Aluminum Total Compensation System",
short titled "System" shall be used.
(cc)"Retirement" means termination of employment on or after
----------
attaining eligibility for a full early or normal retirement
benefit under the Kaiser Aluminum Salaried Employees Retirement
Plan.
7
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<PAGE>
(dd)"Section 16 Reporting Persons" means Employees who are KAC
----------------------------
executive officers, directors, or 10 percent beneficial owners
for purposes of required reporting and potential liability under
Section 16 of the Exchange Act, as to whom the Committee shall
have sole discretion in making determinations hereunder.
(ee)"Stock" means the common stock, par value $0.01 per share, of
-----
KAC.
(ff)"Stock Closing Price" means the average of the closing prices
-------------------
of Stock on trading dates in the final month of the Performance
Period, as listed in the New York Stock Exchange Composite
Transactions of the Wall Street Journal or such other generally
available, published listing as may be designated by the
Committee for this purpose.
(gg)"Target Incentive" means
----------------
(1)with respect to the Long Term Component, the sum of
Performance Units awarded to a Participant for the Long-Term
Performance Period, and
(2)with respect to the Annual incentive part of the Program,
the initial targeted cash amount for the Actual Award,
where the Target Incentives in both (1) and (2) plus the
Participant's base salary at the beginning of the
Performance Period are designed to provide the desired total
compensation target for the Participant.
(hh)"Tentative Award" means the amount of the Actual Award
---------------
before any adjustment to reflect Business Unit safety and before
any other adjustments permitted on a discretionary basis under
rules set forth in Section 7 below.
8
<PAGE>
<PAGE>
Section 3. Eligibility
-----------------------
3.1 Eligibility for Long-Term Awards
--------------------------------
As provided in Section 3.1 of the Plan, Employees are
selected to participate and receive Awards under the Long
Term Component, as determined by the Committee in its
sole discretion. Except as otherwise determined by the
Committee, the Employees selected for the Long Term
Component shall include (a) the Employees who report
directly to the CEO (excluding the Chief Financial
Officer and the Chief Administrative Officer), (b)
Employees recommended by the CEO who are managers who
report directly to the CEO's direct reports and have a
direct impact on Corporate and/or Business Unit financial
results, and (c) other Employees recommended by the CEO
who are not described in (a) or (b), but who, because of
the nature of their employment, have a direct impact on
Corporate and/or Business Unit financial results.
For a new hire or a promoted Employee who was not
initially selected to participate at the beginning of an
applicable Long-Term Performance Period, or in other
appropriate circumstances, the Committee may approve the
selection of an Employee to commence participation as of
an appropriate date during the Long-Term Performance
Period, subject to the rules in Section 7.3(l) regarding
the proration of any resulting Actual Award to reflect
the shortened period of participation during the
remainder of such Performance Period.
3.2 Eligibility for Annual Awards
-----------------------------
Eligibility for Annual Awards under the Program shall
follow analogous rules to those in Section 3.1 above,
subject to such modifications and delegation of
decision-making authority as is deemed appropriate by the
CEO.
9
<PAGE>
<PAGE>
3.3 No Right to Participate
-----------------------
As provided in Section 3.2 of the Plan, no Participant,
regardless of position or responsibility, shall have any
entitlement or right to cause any Award to be made under
the Long Term Component without the approval of the
Committee. Except as otherwise required by the Plan or
determined by the Committee pursuant to the Plan, the
making of a Long-Term Award shall not entitle a
Participant to any subsequent or additional Award.
Similar rules shall apply to the Annual incentive part of
the Program, subject to the appropriate approval level.
Section 4. Administration
--------------------------
4.1 Administration
--------------
. Consistent with Section 4 of the Plan, the Committee shall
have broad administrative responsibility for the Long Term
Component. As required by Sections 2.1(d) and 4.1 of the
Plan, each Committee member shall be a "disinterested person"
for purposes of Rule 16b-3 under the Exchange Act with respect
to the right to acquire Stock or any other interest in equity
securities of KAC pursuant to the Long Term Component. In
administering the Long Term Component, the Committee shall
have all the powers and responsibilities assigned to it in
Section 4 and other provisions of the Plan that are applicable
to the Long Term Component and the type of Awards it
describes, including, without limitation, the power to
interpret the Long Term Component, to prescribe, amend, and
rescind rules and regulations relating to it, to provide for
conditions and assurances deemed necessary or advisable to
protect the interests of the Company, and to make all other
determinations necessary or advisable for the administration
of the Long Term Component, but only to the extent not
contrary to express provisions of the Plan except
10
<PAGE>
<PAGE>
that the Committee may correct any defect, supply any omission
and reconcile any inconsistency in the Plan. Committee
actions with respect to the Long Term Component shall be taken
in accordance with procedures described in Section 4 of the
Plan, and the Committee shall have the authority to make
non-uniform determinations and to issue Stock with respect to
the Long Term Component, as provided in Sections 4.2 and 4.3
of the Plan. The Committee may obtain and rely on
recommendations of the CEO and such other persons as it deems
appropriate in making determinations with respect to the Long
Term Component participation and Awards for Participants who
are not Section 16 Reporting Persons, provided that the
Committee shall retain final approval authority for all such
determinations as well as any other determinations that it has
the responsibility and authority to make with respect to the
Long Term Component hereunder and the Plan.
Section 5. Stock Subject to Program; Type and Nature of Awards
- ---------------------------------------------------------------
5.1 Stock Subject to the Long Term Component
----------------------------------------
. Stock that is issued to Participants in payment of
Actual Awards under the Long Term Component is provided
from the authorized shares of Stock described in Section
5 of the Plan and is subject to all applicable rules of
the Plan relating to the issuance of Stock with respect
to such Awards, including the rules in Sections 5 and 9
of the Plan.
11
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<PAGE>
5.2 Type and Nature of Awards
-------------------------
(a)Annual Awards that become payable shall be paid
entirely in cash as provided herein.
(b)Long-Term Awards under the Program shall consist of
Performance Units that may become payable in Stock and cash as
permitted in Sections 5.5 and 9 of the Plan and as described more
specifically herein. Each Long-Term Award shall be evidenced in
writing in the form of an appropriate agreement or Notice of
Award approved by the Committee in accordance with Section 5.6 of
the Plan and the provisions of the Long Term Component.
Section 6. Effective Date and Long Term Component Life
- -------------------------------------------------------
6.1 Effective Date and Long Term Component Life
-------------------------------------------
. As provided in Section 1.1 herein, the Long Term
Component is effective as of January 1, 1994.
Thereafter, subject to the rules set forth in this
Program and in the Plan, including the rules of Section
6.2 of the Plan and the continuing availability of Stock under
Section 5 of the Plan, the Long Term Component as may be
amended from time to time, shall continue during such time as
the Plan remains in effect.
Section 7. Determination and Payment of Awards
- -----------------------------------------------
7.1 General Principles
------------------
. All of the following principles in this Section 7 are
applicable to Participants in the Long Term Component, to
12
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<PAGE>
executive management (the CEO's direct reports) for both the
Long Term Component and the Annual incentive portion of the
Program, except to the extent that some Participants'
short-term or other Annual incentive plan, as approved by the
CEO, may be somewhat different. Any short-term incentive plan
that varies from the principles herein, however, will be
consistent with the overall intent of the Program.
7.2 Determining Target Incentives and Granting Performance
------------------------------------------------------
Units
- -----
. Subject to Sections 3, 4, and 5 of the Plan and this Program,
Performance Units for the Long Term Component may be granted to
Participants at any time and from time to time as shall be
determined by the Committee. In practice, except as otherwise
determined by the Committee, consideration shall be given to the
following general principles in granting Performance Units for
the Long Term Component. Performance Units shall be granted as
of the beginning of each Long Term Performance Period in amounts
that the Committee deems necessary to provide the desired
Long-Term Target Incentive for the Participants. In determining
a Participant's Target Incentive, the Committee, along with the
CEO and his designees, shall focus on a total compensation
concept with the following elements:
(a)Using an agreed list of comparator companies
approved by the Committee and such supplemental
third-party compensation surveys as deemed appropriate,
the position of a Participant will be matched with
similar positions in the comparator group and the
supplemental survey data (taking into account differences
in the Company structure of responsibilities from the
comparator group and differences in the performance of
the comparator group in comparator periods) to determine
the total market value of the position and the market
breakdown of such value into base salary and incentive
compensation.
13
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<PAGE>
(b)Then, considering the objective of setting base salary at
the 45th percentile level and incentive compensation (the sum of
both Annual and Long-Term incentives) at the 55th percentile
level, the Committee, taking into account the recommendations of
the CEO and his designees, shall determine an appropriate target
level for the Participant's Target Incentive in light of these
factors and individual circumstances.
(c)Of the total amount of targeted incentive compensation, the
Long-Term Target Incentive as a general rule shall represent 75
percent for Participants in executive managerial roles and 60
percent for non-executive Participants. The Annual Target
Incentive shall represent the remainder of the targeted incentive
compensation that is not provided as a Long-Term Target
Incentive. When deemed appropriate, there may be some variation
from these ratios.
7.3 Performance Goals and Valuation
-------------------------------
. For each Performance Period the Committee, along with the CEO
and his designees, shall approve Performance Goals that,
depending on the actual results achieved, will allow Annual and
Long-Term Target Incentives to be valued at from zero to three
times their initial value for purposes of determining and paying
Actual Awards. To accomplish this, a planned EVA shall be
determined for the Company and for each Business Unit for the
applicable Performance Period. This step shall be part of a
normal process of developing the Business Plan at the time the
determination is made, and it shall be completed before March 31
of the each year or as early as practicable during the
Performance Period. This process shall also be subject to the
final review and approval of the Committee, along with the CEO
and his designees. After the completion of this planning step
and as soon as practicable after the end of the Performance
Period, the actual EVA results for the Company and for each
Business Unit shall be determined and compared to the planned
results for the purpose of calculating Actual Awards. Except as
otherwise determined by the Committee, which may take into
account the recommendations of the CEO and his
14
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<PAGE>
designees, Performance Goals shall be determined and used to
value Target Incentives as follows:
(a)A matrix with multipliers from zero to three shall be
established for the entire Company to measure the effect of
achieving different levels of actual Company EVA results relative
to different planned Company EVA levels. The Company-wide
matrix, as approved by the Committee, shall be identified as
Appendix C and attached hereto so that it can be recognized as
part of this document. The initial version of Appendix C shall
set the 1.00 multiplier level at the point where both planned and
actual EVA equal 15 percent, which is deemed to be the Company's
cost of capital. The initial version of Appendix C shall be
effective at the same time as this document and shall continue in
effect indefinitely unless it is superseded by a revised Appendix
C. Any revised Appendix C that may be approved by the Committee
or the CEO for the Annual incentive part of the Program, shall
indicate the Performance Periods for which it is effective.
(b)A matrix with multipliers from zero to three shall be
established for Business Units to measure the effect of achieving
different levels of actual Business Unit EVA results relative to
different planned Business Unit EVA levels. The matrix, as
approved by the Committee, which may take into account the
recommendations of the CEO and his designees, shall be identified
as Appendix A and attached hereto so that it can be recognized as
part of this document. The initial version of Appendix A shall
set the 1.00 multiplier level at the point where both planned and
actual EVA equal 20 percent, which is the required rate of return
from the Business Units to cover the Cost of Capital. This is 5
percent higher than the similar EVA target level for Company-wide
results due to the fact that certain general costs of the
Company, not related to the active Business Units, are not
allocated to Business Units. The initial version of Appendix A
shall be effective at the same time as this document and shall
continue in effect indefinitely unless it is superseded by a
revised Appendix A. Any revised Appendix A that may be approved
by the Committee, or the CEO for the Annual
15
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<PAGE>
incentive part of the Program, shall indicate the Performance
Periods for which it is effective.
(c)A special matrix shall be established as Appendix B for the
Alumina and Primary Products Business Units and for any other
Business Unit for which a special matrix is appropriate.
Appendix B shall be similar to Appendix A except that it shall
indicate multipliers based on actual Business Unit EVA only
instead of actual versus planned Business Unit EVA. The rules
for continuing or revising Appendix B shall parallel those for
Appendix A.
(d)At the end of the Performance Period, the actual EVA shall
be determined for the Company and for each Business Unit, and
these EVA results shall be used to determine Actual Awards as
described in the steps below. Verification of Actual Award
calculations shall be provided as deemed appropriate by the CEO
and the Committee.
(e)The Tentative Award for Business Unit Participants in a
Performance Period shall be determined by giving a weighting of
80 percent (or other approved weighting factor) to the multiplier
that reflects the Business Unit EVA and 20 percent to the
multiplier that reflects the Company-wide EVA. For certain
Participants who report to a Business Unit Manager or his or her
direct reports, a different weighting that reduces the importance
of the Company-wide EVA may be used where appropriate. In the
case of the Alumina and Primary Products Business Units or any
other Business Unit for which the following treatment is
appropriate, the 80 percent (or other approved weighting factor)
Business Unit EVA component shall be broken down into two
components so that the multiplier determined from Appendix A
shall be given a weighting of 24 percent (30 percent of the
Business Unit weighting of 80 percent), and the multiplier
determined from Appendix B shall be given a weighting of 56
percent (70 percent of the Business Unit weighting of 80
percent). In the case of other Business Units not described in
the preceding sentence, the entire Business Unit weighting of 80
percent (or other approved weighting factor) shall apply to
16
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<PAGE>
Appendix A multiplier for the Business Unit. In all cases, the
Business Unit multiplier(s), as adjusted for the appropriate
percentage weighting, plus the Company-wide multiplier, as
similarly adjusted, shall equal the total multiplier to be
applied to the Participant's Target Incentive to determine the
Participant's Tentative Award.
(f)The Tentative Award for Business Unit Participants
described in Section 7.3(e) is subject to two possible
adjustments in computing the Actual Award amount, provided that
the first such adjustment shall not apply to Business Unit staff
Participants who are instead subject to the first adjustment
described in Section 7.3(h).
(1)First, the Tentative Award may be increased or
decreased (but not below zero) by an amount equal to up
to plus or minus 10 percent of the Participant's Target
Incentive to reflect an evaluation of safety results
achieved at the Business Unit in the Performance
Period. The determination of the factor will include a
combination of objective measurement of safety results
appropriate to the Business Unit against aluminum and
other industry standards, and qualitative assessment of
the safety programs and progress against them.
(2)Second, the Tentative Award may be increased or
decreased (but not below zero) by an amount up to plus
or minus 20 percent of the Participant's Target
Incentive to reflect an adjustment for circumstances
not already reflected in the determination of the
amount being adjusted. This addition or subtraction
will be based on such factors as exceptional
achievement or failure to achieve agreed objectives
which are not reflected in the results of the Business
Plan but are important to the longer term success of
the business and/or events (either positive or
negative) deemed beyond the control of the Participant.
Except in the case of Participants who are Section 16
Reporting Persons, the determinations and adjustments
described in this paragraph may be made by the CEO or
17
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<PAGE>
his designate based upon such background information
and recommendations as he deems appropriate, and shall
be subject, for the Long Term Component, to any final
review and approval or modification that the Committee
wishes to make. In the case of Participants who are
Section 16 Reporting Persons, the adjustments shall be
made by the Committee, taking into account the
recommendations of the CEO where appropriate.
(g)The Tentative Award for corporate staff Participants in a
Performance Period shall be determined in a manner similar to
that described in Section 7.3(e) above, but giving a weighting of
50 percent to the simple average of all Business Unit multipliers
determined under Appendix A for the Performance Period, and 50
percent to the multiplier in Appendix C that reflects the
Company-wide EVA. The corporate staff multiplier from Appendix
A, as adjusted for the 50 percent weighting, plus the
Company-wide multiplier from Appendix C, as similarly adjusted,
shall equal the total multiplier to be applied to the
Participant's Target Incentive in order to determine the
Participant's Tentative Award.
(h)The Tentative Award for corporate staff Participants
described in Section 7.3(g) is subject to two possible
adjustments in computing the Actual Award amount, the first of
which is also applicable to Business Unit staff Participants in
lieu of the safety adjustment described in Section 7.3(f).
(1)First, the Tentative Award may be increased or
decreased (but not below zero) by an amount up to plus
or minus 10 percent of the Participant's Target
Incentive to reflect an evaluation of departmental
results or other specific objectives achieved by the
Participant's staff group in the Performance period.
(2)Second, the Tentative Award may be increased or
decreased (but not below zero) by an amount up to plus
or minus 20 percent of the Participant's Target
Incentive to reflect an adjustment for circumstances
not already reflected in the determination of the
18
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<PAGE>
amount being adjusted. This addition or subtraction
will be based on such factors as exceptional
achievement or failure to achieve agreed objectives
which are not reflected in the results of the Business
Plan but are important to the longer term success of
the business and/or events (either positive or
negative) deemed beyond the control of the Participant.
Except in the case of Participants who are Section 16
Reporting Persons, the adjustments described in this
paragraph shall be made by the CEO or his designee
based upon such background information and
recommendations as he deems appropriate, and shall be
subject to any final review and approval or
modification that the Committee wishes to make. In the
case of Participants who are Section 16 Reporting
Persons, any such adjustments shall be made by the
Committee, taking into account the recommendations of
the CEO where appropriate.
(i)If a Participant transfers between groups during the
Performance Period, calculations under this Section 7.3 shall be
made, using the rules for each group separately and applying them
on a pro rata basis to reflect the portion of the Performance
Period during which the Participant was employed in that group.
In the event of a major change during the Performance Period,
such as the sale of a Business Unit or some other significant,
unforeseen transaction or circumstance that, in the judgment of
the Committee, would make it inappropriate to measure actual
financial results against the performance criteria on which
Target Incentives were based or use them to determine Actual
Awards, the Committee may in its discretion approve appropriate
adjustments for the purpose of making determinations for the
Performance Period as uniform and as near as possible to what
they would have been, absent the change.
(j)If an Employee was selected to commence participation in
the Long Term Component as of a date after the beginning of a
Performance Period, such Participant's Actual Award, if any, for
19
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<PAGE>
the Performance Period shall be prorated by multiplying it by a
fraction equal to (i) the number of months in the Performance
Period in which the Employee was a Participant, divided by (ii)
the total number of months in the Performance Period.
(k)In certain circumstances the weighting of factors, as
described in this Section 7.3 above, may not be appropriate to
provide the proper motivation. For example, a Participant (or
department of Participants) engaged in international business
development or research center functions may require modified
weightings to achieve the purposes of the Program. In those
instances, the weightings may be different, but they shall in
total be consistent with the principles of the Program.
7.4 Payment of Actual Awards
------------------------
. After the Performance Period has ended, if a Participant's
Actual Award has been determined to be greater than zero, payment
of the amount earned shall be made in accordance with and subject
to the rules and limitations in Sections 7.5 through 7.8 below.
No payment shall be made in the case of any amount that is
forfeited due to a termination of employment.
7.5 Form and Timing of Payment
--------------------------
. The amount, if any, of the Annual Actual Award determined
under Section 7.3 above that is not forfeited pursuant to Section
7.6 or 7.7 below (determined after applying the proration rule of
such Section 7.6, if applicable) shall be paid in full in cash
during the first calendar quarter immediately following the end
of the Annual Performance Period to which such Actual Award
relates.
The amount, if any, of the Long-Term Actual Award determined
under Section 7.3 above that is not forfeited pursuant to Section
7.6 or 7.7 below (determined after applying the proration rule of
20
<PAGE>
<PAGE>
such Section 7.6, if applicable) shall be divided into two equal
installments. The first installment shall be paid during the
first calendar quarter immediately following the end of the
Long-Term Performance Period. The second installment shall be
paid during the first calendar quarter of the next year following
the first installment.
Each installment payment that is due shall automatically consist
of the number of whole shares of Stock that most nearly equals,
without exceeding, 57 percent (or such other percentage as may be
specified by the Committee in the future due to changing tax
rates) of the total value of the installment payment. For this
purpose, the Stock Closing Price shall be used to determine the
number of shares of Stock and their total value. The remaining
portion of the installment payment, determined after subtracting
such Stock value, shall be paid in cash. Notwithstanding the
foregoing, however, if the Stock is not publicly traded at the
time any payment is due, the payment will be made entirely in
cash.
7.6 Termination of Employment Due to Death, Disability, or
------------------------------------------------------
Retirement
- ----------
. Except to the extent otherwise determined by the Committee, in
the event that a Participant terminates employment with the
Company during a Performance Period due to death, Disability, or
Retirement, the Participant (or the Participant's beneficiary)
shall receive pro rata payment of the Participant's Actual Award,
if any, for such Performance Period, and any remaining amount of
the Actual Award shall be forfeited. The portion of the Actual
Award to be paid in this case is the amount of the Participant's
Actual Award, if any, for the Performance Period that results
from multiplying the total Actual Award by a fraction equal to
(i) the number of months in the Performance Period in which the
Employee was a Participant, divided by (ii) the total number of
months in the Performance Period. Payment shall be made at the
times and in the manner prescribed by Section 7.5. above for
Participants who did not terminate their employment during the
Performance Period.
21
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<PAGE>
7.7 Termination of Employment for Other Reasons
-------------------------------------------
. Except to the extent otherwise determined by the Committee, in
the event that a Participant voluntarily terminates employment
with the Company during the Performance Period for any reason
other than death, Disability, or Retirement, all rights of the
Participant with respect to Performance Units granted to him/her
for the Performance Period shall be forfeited, and no amount of
the Participant's Actual Award, if any, for such Performance
Period shall be paid. In the event that the termination is by
mutual agreement, there may be a partial payment in accordance
with Section 7.6 above.
7.8 Nontransferability
------------------
. As provided in Section 9.7 of the Plan, no Performance Units
granted may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will or by the laws of
descent and distribution until the termination of the applicable
Performance Period. All rights with respect to Performance Units
granted to a Participant shall be exercisable during his/her
lifetime only by such Participant. These rules apply to Target
Incentives and Actual Awards that have become vested and are in
the process of being paid in accordance with the terms hereof.
Section 8. Beneficiary Designation
-----------------------------------
8.1 Beneficiary Designation
-----------------------
. As provided in Section 13 of the Plan, each
Participant may designate a beneficiary or beneficiaries
to receive any payments that may be due under the Program
(of either the Annual incentive or the Long Term
Component thereof) in the event of his/her death. Each
designation will revoke all
22
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<PAGE>
prior designations by the same Participant, shall be in a form
prescribed by the Committee or its designated administrator, and
will be effective only when filed by the Participant in writing
with the Committee or its designated administrator during his/her
lifetime. In the absence of any such designation, benefits
remaining unpaid at the Participant's death shall be paid to
his/her surviving spouse or to the deceased Participant's estate.
Section 9. Rights of Employees
-------------------------------
9.1 Employment
----------
. Nothing in the Program shall interfere with or limit in any
way the right of the Company to terminate any Participant's
employment at any time, notwithstanding that as a result of such
termination the Employee may not receive any Actual Award, nor
confer upon any Participant any right to continue in the employ
of the Company.
Section 10. Amendment, Modification, and Termination of Program
- ----------------------------------------------------------------
10.1 Amendment, Modification, and Termination of Long
------------------------------------------------
Term Component
--------------
. The continuation of the Long Term Component as set forth
herein is subject to any amendment, modification, suspension, or
termination of the Plan that may occur pursuant to Section 15 of
the Plan, and is further subject to any similar action that may
be taken by the Committee, consistent with Sections 4, 9, and 15
of the Plan and the provisions herein, with respect to the Long
Term Component. If the Long Term Component is terminated during
any
23
<PAGE>
<PAGE>
Performance Period for which Awards have been made, the Actual
Awards will be determined as usual at the end of the Performance
Period and will then be prorated by multiplying them by a
fraction equal to (i) the number of months in the Performance
Period prior to the termination, divided by (ii) the total number
of months in a full Performance Period. As provided in Section
15 of the Plan, no amendment, revision, modification, suspension,
discontinuance or termination of the Plan shall in any manner
adversely affect any Award theretofore granted, without the
consent of the Grantee. Similar rules shall apply to the Annual
incentive part of the Program, subject to the appropriate
approval level.
Section 11. Tax Withholding
----------------------------
11.1 Tax Withholding
---------------
. The Company shall have the power to withhold, or require a
Participant to remit to the Company, an amount sufficient to
satisfy Federal, state, and local withholding tax requirements on
with respect to any Award under the Program.
Section 12. Indemnification
----------------------------
12.1 Indemnification
---------------
. The Long Term Component is subject to Section 18.1 of the
Plan, which provides that each person who is or shall have been a
member of the Committee or of the Boards shall be indemnified and
held harmless by KACC against and from any loss, cost, liability,
or expense that may be imposed upon
24
<PAGE>
<PAGE>
or reasonably incurred by him/her in connection with or resulting
from any claim, action, suit, or proceeding to which he/she may
be a party or in which he/she may be involved by reason of any
action taken or failure to act under the Plan and against and
from any and all amounts paid by him/her in settlement thereof,
with KACC's approval, or paid by him/her in satisfaction of any
judgment in any such action, suit, or proceeding against him/her,
provided he/she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he/she undertakes
to handle and defend it on his/her own behalf. The foregoing
right of indemnification shall not be exclusive of any other
rights of indemnification to which such persons may be entitled
under the Company's Articles of Incorporation or Bylaws, as a
matter of law, or otherwise, or any power that the Company may
have to indemnify them or hold them harmless.
Section 13. Requirements of Law; Consents
------------------------------------------
13.1 Requirements of Law
-------------------
. The granting of Awards and the issuance of Stock under the
Long Term Component shall be subject to all applicable laws,
rules, regulations, and such approvals by any governmental
agencies or national securities exchanges as may be required.
13.2 Consents to Program Actions
---------------------------
. As determined by the Committee in accordance with Sections
19.2 and 19.3 of the Plan, no action under the Long Term
Component shall be taken unless and until any "Consent" deemed
necessary or desirable in connection therewith shall have been
effected or obtained to the full satisfaction of
25
<PAGE>
<PAGE>
the Committee. For this purpose, "Consent" is defined in Section
19.3 of the Plan and includes any listings, registrations or
qualifications in respect of the Plan upon any securities
exchange or under any Federal, state or local law, rule or
regulation, and any written agreements and representations by a
Participant with respect to the disposition of shares of Stock or
any other matter which the Committee shall deem necessary or
desirable to comply with the terms of any such listing,
registration or qualification or to obtain an exemption
therefrom.
13.3 Governing Law
-------------
. As provided in Section 19.4 of the Plan, the Long Term
Component, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of Texas.
26
<PAGE>
<PAGE>
<TABLE>
APPENDIX A
KAISER 1995 EMPLOYEE INCENTIVE COMPENSATION PROGRAM
LONG AND SHORT TERM INCENTIVE PERFORMANCE AWARD SCHEDULE - BUSINESS UNIT
PLAN EVA
<S> <C> <C> <C> <C> <C> <C> <C>
35% 0.160 0.300 0.800 1.200 1.500 2.250 3.000
32% 0.180 0.450 0.850 1.300 1.850 2.500 2.750
29% 0.200 0.500 0.900 1.400 2.000 2.250 2.500
25% 0.220 0.550 0.950 1.500 1.750 2.000 2.250
20% 0.230 0.600 1.000 1.250 1.500 1.750 2.000
14% 0.240 0.700 0.850 1.000 1.250 1.500 1.850
7.5% 0.250 0.600 0.700 0.800 1.000 1.250 1.500
0.0% 0.260 0.500 0.550 0.600 0.750 1.000 1.300
----- ----- ----- ----- ----- ----- -----
7.5% 14% 20% 25% 29% 32% 35%
ACTUAL EVA
</TABLE>
<PAGE>
<PAGE>
<TABLE>
APPENDIX B
KAISER 1995 EMPLOYEE INCENTIVE COMPENSATION PROGRAM
LONG AND SHORT TERM INCENTIVE PERFORMANCE AWARD
SCHEDULE FOR SELECT BUSINESS UNITS
ACTUAL
EVA MULTIPLIER
<S> <C>
7.5% 0.25
14% 0.70
20% 1.00
25% 1.50
29% 2.00
32% 2.50
35% 3.00
</TABLE>
<PAGE>
<PAGE>
<TABLE>
APPENDIX C
KAISER 1995 EMPLOYEE INCENTIVE COMPENSATION PROGRAM
LONG AND SHORT TERM INCENTIVE PERFORMANCE AWARD SCHEDULE - CORPORATE
CONSOLIDATED
PLAN EVA
<S> <C> <C> <C> <C> <C> <C>
30% 0.180 0.450 0.850 1.550 2.150 3.000
25% 0.200 0.500 0.900 1.650 2.250 2.600
20% 0.210 0.550 0.950 1.750 2.050 2.250
15% 0.220 0.600 1.000 1.400 1.750 2.000
10% 0.230 0.650 0.850 1.100 1.450 1.750
5% 0.240 0.600 0.750 0.950 1.200 1.500
0% 0.250 0.500 0.650 0.800 1.000 1.250
----- ----- ----- ----- ----- -----
5% 10% 15% 20% 25% 30%
ACTUAL EVA
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the interim
consolidated financial statements of the Company for the quarter ended March
31, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 7
<SECURITIES> 0
<RECEIVABLES> 268
<ALLOWANCES> 0
<INVENTORY> 503
<CURRENT-ASSETS> 883
<PP&E> 1,122
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,774
<CURRENT-LIABILITIES> 554
<BONDS> 0
<COMMON> 15
2
0
<OTHER-SE> (38)
<TOTAL-LIABILITY-AND-EQUITY> 2,774
<SALES> 513
<TOTAL-REVENUES> 513
<CGS> 427
<TOTAL-COSTS> 427
<OTHER-EXPENSES> 54
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24
<INCOME-PRETAX> 8
<INCOME-TAX> 3
<INCOME-CONTINUING> 5
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
