UNITED STATES
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, 1996
Commission File Number 1-3924
MAXXAM INC.
(Exact name of Registrant as Specified in its Charter)
DELAWARE 95-2078752
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
5847 SAN FELIPE, SUITE 2600 77057
HOUSTON, TEXAS (Zip Code)
(Address of Principal Executive
Offices)
Registrant's telephone number, including area code: (713) 975-7600
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 / /
Number of shares of common stock outstanding at May 1, 1996: 8,707,847
MAXXAM INC.
INDEX
PART I. - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheet at March 31, 1996 and
December 31, 1995 3
Consolidated Statement of Operations for the three
months ended March 31, 1996 and 1995 4
Consolidated Statement of Cash Flows for the three
months ended March 31, 1996 and 1995 5
Condensed Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures S-1
MAXXAM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In millions of dollars, except share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 113.8 $ 104.2
Marketable securities 19.8 45.9
Receivables:
Trade, net of allowance for doubtful accounts of $5.7 and $5.5 at March 31,
1996 and December 31, 1996, respectively 232.9 246.2
Other 99.7 98.9
Inventories 646.6 606.8
Prepaid expenses and other current assets 146.2 129.7
------------ ------------
Total current assets 1,259.0 1,231.7
Property, plant and equipment, net of accumulated depreciation of $703.2 and $678.1 at
March 31, 1996 and December 31, 1995, respectively 1,227.5 1,231.9
Timber and timberlands, net of depletion of $142.0 and $139.6 at March 31, 1996 and
December 31, 1995, respectively 311.4 313.0
Investments in and advances to unconsolidated affiliates 193.4 189.1
Deferred income taxes 415.2 414.0
Long-term receivables and other assets 465.3 452.6
------------ ------------
$ 3,871.8 $ 3,832.3
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 175.8 $ 196.7
Accrued interest 25.4 58.0
Accrued compensation and related benefits 154.9 166.5
Other accrued liabilities 151.5 148.4
Payable to affiliates 93.6 90.2
Long-term debt, current maturities 27.4 25.1
------------ ------------
Total current liabilities 628.6 684.9
Long-term debt, less current maturities 1,670.9 1,585.1
Accrued postretirement benefits 740.6 742.6
Other noncurrent liabilities 687.3 680.3
------------ ------------
Total liabilities 3,727.4 3,692.9
------------ ------------
Commitments and contingencies
Minority interests 222.2 223.2
Stockholders' deficit:
Preferred stock, $.50 par value; 12,500,000 shares authorized; Class A $.05 Non-
Cumulative Participating Convertible Preferred Stock; shares issued: 669,701 .3 .3
Common stock, $.50 par value; 28,000,000 shares authorized; shares issued:
10,063,359 5.0 5.0
Additional capital 155.2 155.0
Accumulated deficit (202.7) (208.5)
Pension liability adjustment (16.1) (16.1)
Treasury stock, at cost (shares held: preferred - 845; common: 1,355,512) (19.5) (19.5)
------------ ------------
Total stockholders' deficit (77.8) (83.8)
------------ ------------
$ 3,871.8 $ 3,832.3
============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
MAXXAM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In millions of dollars, except share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1996 1995
---------- ----------
(Unaudited)
<S> <C> <C>
Net sales:
Aluminum operations $ 531.1 $ 513.0
Forest products operations 59.8 52.0
Real estate and other operations 21.3 16.3
---------- ----------
612.2 581.3
---------- ----------
Costs and expenses:
Costs of sales and operations (exclusive of depreciation and depletion):
Aluminum operations 433.7 426.7
Forest products operations 33.1 29.5
Real estate and other operations 16.9 12.1
Selling, general and administrative expenses 44.7 42.6
Depreciation and depletion 30.6 29.8
---------- ----------
559.0 540.7
---------- ----------
Operating income 53.2 40.6
Other income (expense):
Investment, interest and other income 5.3 3.6
Interest expense (45.1) (45.4)
---------- ----------
Income (loss) before income taxes and minority interests 13.4 (1.2)
Credit (provision) for income taxes (5.0) 7.2
Minority interests (2.6) (7.0)
---------- ----------
Net income (loss) $ 5.8 $ (1.0)
========== ==========
Net income (loss) per common and common equivalent share $ .61 $ (.11)
========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
MAXXAM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions of dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1996 1995
---------- ----------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 5.8 $ (1.0)
Adjustments to reconcile net (income) loss to net cash used for
operating activities:
Depreciation and depletion 30.6 29.8
Net sales (purchases) of marketable securities 28.2 (17.3)
Minority interests 2.6 7.0
Amortization of deferred financing costs and discounts on long-term debt 5.1 4.7
Equity in income of unconsolidated affiliates (7.0) (1.8)
Decrease (increase) in receivables 11.3 (55.6)
Increase (decrease) in payable to affiliates and other liabilities 1.3 (11.1)
Increase in inventories (41.7) (32.1)
Decrease in accrued interest (32.6) (33.5)
Decrease (increase) in prepaid expenses and other assets (23.5) 45.3
Decrease in accounts payable (20.9) (5.3)
Increase in accrued and deferred income taxes (5.1) (5.9)
Other 1.2 1.8
---------- ----------
Net cash used for operating activities (44.7) (75.0)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from disposition of property and investments .4 2.8
Capital expenditures (24.3) (16.7)
Other (3.3) (1.2)
---------- ----------
Net cash used for investing activities (27.2) (15.1)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) under revolving credit agreements 90.9 76.3
Proceeds from issuance of long-term debt 4.2 1.7
Principal payments on long-term debt (10.5) (18.2)
Dividends paid to Kaiser's minority preferred stockholders (2.1) (10.3)
Redemption of preference stock (2.0) (3.1)
Other 1.0 1.3
---------- ----------
Net cash provided by financing activities 81.5 47.7
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9.6 (42.4)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 104.2 84.6
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 113.8 $ 42.2
========== ==========
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Net margin borrowings (payments) for marketable securities $ - $ (5.6)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid, net of capitalized interest $ 72.6 $ 74.1
Income taxes paid 8.8 4.3
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
MAXXAM INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In millions of dollars, except share amounts)
1. GENERAL
The information contained in the following notes to the
consolidated financial statements is condensed from that which would appear
in the annual consolidated financial statements; accordingly, the
consolidated financial statements included herein should be reviewed in
conjunction with the consolidated financial statements and related notes
thereto contained in the Annual Report on Form 10-K filed by MAXXAM Inc.
with the Securities and Exchange Commission for the fiscal year ended
December 31, 1995 (the "Form 10-K"). All references to the "Company"
include MAXXAM Inc. and its subsidiary companies unless otherwise indicated
or the context indicates otherwise. Accounting measurements at interim
dates inherently involve greater reliance on estimates than at year end.
The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the entire year.
The consolidated financial statements included herein are
unaudited; however, they include all adjustments of a normal recurring
nature which, in the opinion of management, are necessary to present fairly
the consolidated financial position of the Company at March 31, 1996 and
the consolidated results of operations and cash flows for the three months
ended March 31, 1996 and 1995. Certain reclassifications of prior period
information have been made to conform to the current presentation.
2. RESTRICTED CASH
Long-term receivables and other assets, as reflected on the
accompanying consolidated balance sheet, includes restricted cash in the
amount of $31.1 and $31.4 at March 31, 1996 and December 31, 1995,
respectively. Such restricted cash represents the amount deposited into an
account held by the Trustee under the indenture governing the Timber Notes
of the Company's indirect wholly owned subsidiary, Scotia Pacific Holding
Company ("Scotia Pacific").
At March 31, 1996 and December 31, 1995, cash and cash
equivalents also includes $4.6 and $19.7, respectively, which is restricted
for debt service payments on the succeeding Note Payment date for the
Timber Notes.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Aluminum Operations:
Finished fabricated products $ 105.6 $ 91.5
Primary aluminum and work in process 219.8 195.9
Bauxite and alumina 129.9 119.6
Operating supplies and repair and maintenance parts 114.9 118.7
------------ ------------
570.2 525.7
------------ ------------
Forest Products Operations:
Lumber 65.1 65.5
Logs 11.3 15.6
------------ ------------
76.4 81.1
------------ ------------
$ 646.6 $ 606.8
============ ============
</TABLE>
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Corporate:
14% MAXXAM Senior Subordinated Reset Notes due May 20, 2000 $ 25.0 $ 25.0
12-1/2% MAXXAM Subordinated Debentures due December 15, 1999, net of
discount 16.5 16.5
Other - .1
Aluminum Operations:
1994 KACC Credit Agreement 104.7 13.1
9-7/8% KACC Senior Notes due February 15, 2002, net of discount 223.9 223.8
Alpart CARIFA Loan 60.0 60.0
12-3/4% KACC Senior Subordinated Notes due February 1, 2003 400.0 400.0
Other 59.9 61.2
Forest Products Operations:
7.95% Scotia Pacific Timber Collateralized Notes due July 20, 2015 341.7 350.2
11-1/4% MGI Senior Secured Notes due August 1, 2003 100.0 100.0
12-1/4% MGI Senior Secured Discount Notes due August 1, 2003, net of
discount 95.3 92.5
10-1/2% Pacific Lumber Senior Notes due March 1, 2003 235.0 235.0
Other .8 .8
Real Estate and Other Operations:
11% SHRP, Ltd. Senior Secured Extendible Notes due September 1, 2001,
net of discount 14.0 13.3
RTC Portfolio secured notes due December 31, 1999, interest at prime
plus 3% 12.0 8.0
MCOP Credit Agreement - .7
Other notes and contracts, secured by receivables, buildings, real 9.5 10.0
estate and equipment ------------ ------------
1,698.3 1,610.2
Less: current maturities (27.4) (25.1)
------------ ------------
$ 1,670.9 $ 1,585.1
============ ============
</TABLE>
On April 24, 1996, the Securities and Exchange Commission ("SEC")
declared effective a shelf registration statement which the Company had
filed with respect to up to $200.0 aggregate principal amount of debt
securities. The Company has not determined the amount, interest rates,
maturity, collateral (if any) or other terms of such debt securities or
the timing of any offering of such debt securities. The debt securities
could be secured by, or convertible into, shares of common stock of Kaiser
Aluminum Corporation ("Kaiser," a majority-owned subsidiary of the Company)
owned by the Company. In that regard, Kaiser also filed a shelf
registration statement with the SEC, which was also declared effective on
April 24, 1996, covering 10 million shares of its common stock owned by the
Company. The Company would use the net proceeds (or portions thereof) from
the sale of such debt securities to retire outstanding debt, for working
capital and general corporate purposes.
5. PER SHARE INFORMATION
Per share calculations are based on the weighted average number
of common shares outstanding in each period and, if dilutive, weighted
average common equivalent shares assumed to be issued from the exercise of
common stock options based upon the average price of the Company's common
stock during the period.
6. CONTINGENCIES
Environmental Contingencies
Kaiser and its principal operating subsidiary, Kaiser Aluminum &
Chemical Corporation ("KACC"), are subject to a number of environmental
laws and regulations, to fines or penalties assessed for alleged breaches
of the environmental laws, and to claims and litigation based on such laws.
KACC is currently 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.
Based on Kaiser's evaluation of these and other environmental
matters, Kaiser has established environmental accruals primarily related to
potential solid waste disposal and soil and groundwater remediation
matters. At March 31, 1996, the balance of such accruals, which is
primarily included in other noncurrent liabilities, was $37.6. These
environmental accruals represent Kaiser's estimate of costs reasonably
expected to be incurred based on presently enacted laws and regulations,
currently available facts, existing technology, and Kaiser's assessment of
the likely remediation action to be taken. Kaiser 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 $10.0 for the years 1996 through 2000 and an
aggregate of approximately $10.0 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. Kaiser 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 an estimated
$22.0 and that the factors upon which a substantial portion of this
estimate is based are expected to be resolved over the next twelve months.
While uncertainties are inherent in the final outcome of these
environmental matters, and it is impossible to determine the actual costs
that ultimately may be incurred, management believes that the resolution of
such uncertainties should not have a material adverse effect on the
Company's consolidated financial position, results of operations or
liquidity.
Asbestos Contingencies
KACC is a defendant in a substantial number of lawsuits, some of
which involve claims of multiple persons, 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 KACC or exposure to products containing asbestos produced or sold by
KACC. The lawsuits generally relate to products KACC has not manufactured
for at least 15 years. At March 31, 1996, the number of such lawsuits
pending was approximately 66,200, as compared to 59,700 at December 31,
1995. In 1995, approximately 41,700 of such claims were received and
approximately 7,200 were settled or dismissed and, during the first quarter
of 1996, approximately 8,800 of such claims were received and approximately
2,300 were settled or dismissed. KACC believes that, although there can be
no assurance, the increase in pending claims during 1995 may have been
attributable, in part, to tort reform legislation in Texas which was passed
by the legislature in March 1995 and which became effective on September 1,
1995. The legislation, among other things, was designed to restrict,
beginning September 1, 1995, the filing of cases in Texas that do not have
a sufficient nexus to that jurisdiction, and to impose, generally as of
September 1, 1996, limitations relating to joint and several liability in
tort cases. A substantial portion of the asbestos-related claims that were
filed and served on KACC between June 30, 1995, and November 30, 1995 were
filed in Texas prior to September 1, 1995.
Based on past experience and reasonably anticipated future
activity, Kaiser has established an accrual for estimated asbestos-related
costs for claims filed and estimated to be filed and settled through 2008.
There are inherent uncertainties involved in estimating asbestos-related
costs, and Kaiser's actual costs could exceed these estimates. Kaiser's
accrual was calculated based on the current and anticipated number of
asbestos-related claims, the prior timing and amounts of asbestos-related
payments, and the advice of Wharton Levin Ehrmantraut Klein & Nash, P.A.
with respect to the current state of the law related to asbestos claims.
Accordingly, an asbestos-related cost accrual of $160.9, before
consideration of insurance recoveries, is included primarily in other
noncurrent liabilities at March 31, 1996. Kaiser estimates that annual
future cash payments in connection with such litigation will be
approximately $13.0 to $20.0 for each of the years 1996 through 2000, and
an aggregate of approximately $78.0 thereafter through 2008. While Kaiser
does not believe there is a reasonable basis for estimating such costs
beyond 2008, and, accordingly, did not accrue such costs, there is a
reasonable possibility that such costs may continue beyond 2008, and that
such costs may be substantial.
Kaiser believes that KACC has insurance coverage available to
recover a substantial portion of its asbestos-related costs. Claims for
recovery from some of KACC's insurance carriers are currently subject to
pending litigation and other carriers have raised certain defenses, which
have resulted in delays in recovering costs from the insurance carriers.
The timing and amount of ultimate recoveries from these insurance carriers
are dependent upon the resolution of these disputes. KACC believes, based
on prior insurance-related recoveries with respect to asbestos-related
claims, existing insurance policies, and the advice of Thelen, Marrin,
Johnson & Bridges with respect to applicable insurance coverage law
relating to the terms and conditions of those policies, that substantial
recoveries from the insurance carriers are probable. Accordingly, an
estimated aggregate insurance recovery of $138.8, determined on the same
basis as the asbestos-related cost accrual, is recorded primarily in long-
term receivables and other assets at March 31, 1996.
While uncertainties are inherent in the final outcome of these
asbestos matters and it is 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, results of operations or
liquidity.
OTS Contingency and Related Matters
On December 26, 1995, the United States Department of Treasury's
Office of Thrift Supervision ("OTS") initiated formal administrative
proceedings against the Company and others by filing a Notice of Charges
(the "Notice"). The Notice alleges misconduct by the Company, Federated
Development Company ("Federated," a New York business trust wholly owned by
Mr. Charles E. Hurwitz, members of his immediate family and trusts for the
benefit thereof), Mr. Hurwitz and others (the "respondents") with respect
to the failure of United Savings Association of Texas ("USAT"), a wholly
owned subsidiary of United Financial Group Inc. ("UFG"). The Notice claims
that the Company was a savings and loan holding company, that with others
it controlled USAT, and that it was therefore obligated to maintain the net
worth of USAT. The Notice makes numerous other allegations against the
Company and the other respondents, including, among other things,
allegations that through USAT it was involved in prohibited transactions
with Drexel, Burnham, Lambert Inc. The OTS, among other things, seeks
unspecified damages in excess of $138.0 from the Company, civil money
penalties and a removal from, and prohibition against the Company and the
other respondents engaging in, the banking industry. The Company has
concluded that it is unable to determine a reasonable estimate of the loss
(or range of loss), if any, that could result from this contingency.
Accordingly, it is impossible to assess the ultimate impact, if any, of the
outcome this matter may have on the Company's consolidated financial
position, results of operations or liquidity.
On August 2, 1995, the Federal Deposit Insurance Corporation
("FDIC") filed a civil action entitled Federal Deposit Insurance
Corporation, as manager of the FSLIC Resolution Fund v. Charles E. Hurwitz
(No. H-95-3936) (the "FDIC action") in the U.S. District Court for the
Southern District of Texas (the "Court"). The FDIC action did not name the
Company as a defendant. The suit against Mr. Hurwitz seeks damages in
excess of $250.0 based on the allegation that Mr. Hurwitz was a controlling
shareholder, de facto senior officer and director of USAT, and was involved
in certain decisions which contributed to the insolvency of USAT. The FDIC
further alleges, among other things, that Mr. Hurwitz was obligated to
ensure that UFG, Federated and the Company maintained the net worth of
USAT. On November 14, 1995, Mr. Hurwitz filed a motion to join the OTS to
this action. On December 8, 1995, the Company filed a motion to intervene
in this action and conditioned it on the Court joining the OTS to this
action. The Company filed with its motion to intervene a proposed
complaint which alleges that the OTS violated the Administrative Procedures
Act by rejecting the Company's bid for USAT. The Company's bylaws provide
for indemnification of its officers and directors to the fullest extent
permitted by Delaware law. The Company is obligated to advance defense
costs to its officers and directors, subject to the individual's obligation
to repay such amount if it is ultimately determined that the individual was
not entitled to indemnification. In addition, the Company's indemnity
obligation can, under certain circumstances, include amounts other than
defense costs, including judgments and settlements. The Company has
concluded that it is unable to determine a reasonable estimate of the loss
(or range of loss), if any, that could result from this contingency. It is
impossible to assess the ultimate outcome of the foregoing matter or its
potential impact on the Company's consolidated financial position, results
of operations or liquidity.
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
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, results of operations or
liquidity.
7. DERIVATIVE FINANCIAL INSTRUMENTS AND RELATED HEDGING PROGRAMS
KACC enters into primary aluminum hedging transactions in the
normal course of business. The prices realized by KACC under certain sales
contracts for alumina, primary aluminum and fabricated aluminum products as
well as the costs incurred by KACC 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 aluminum 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. KACC has employed strategies which include forward sales
and purchases of primary aluminum at fixed prices and the purchase or sale
of options for primary aluminum. With respect to its 1996, 1997 and 1998
anticipated net exposure, at March 31, 1996, KACC had sold forward 105,750
tons (all references to tons in this report refer to metric tons of 2,204.6
pounds) of primary aluminum at fixed prices, had purchased 53,025 tons of
primary aluminum under forward purchase contracts at fixed prices, and had
purchased put options to establish a minimum price for 96,000 tons of
primary aluminum.
In addition, as of March 31, 1996, KACC had sold approximately
80% and 57% of the alumina available to it in excess of its projected
internal smelting requirements for 1996 and 1997, respectively.
Approximately 53% of such alumina sold for 1996 and all of such alumina
sold for 1997 has been sold at prices linked to the future prices of
primary aluminum as a percentage of the price of primary aluminum
("Variable Price Contracts"), and approximately 47% of such alumina sold
for 1996 has been sold at fixed prices ("Fixed Price Contracts"). The
average realized prices of alumina sold under Variable Price Contracts will
depend on future prices of primary aluminum, and the average realized
prices of alumina sold under Fixed Price Contracts will substantially
exceed Kaiser's manufacturing cost of alumina.
KACC 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, 1996, KACC had net forward foreign
exchange contracts totaling approximately $93.7 for the purchase of 130.5
Australian dollars from April 1996 through December 1997, with respect to
its commitments for 1996 and 1997 expenditures denominated in Australian
dollars.
At March 31, 1996, the net unrealized gain on KACC's position in
aluminum forward sales and option contracts, based on an average price of
$1,717 per ton ($.78 per pound) of primary aluminum, and forward foreign
exchange contracts was $13.1.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following should be read in conjunction with the response to
Part I, Item 1 of this Report and Items 7 and 8 of the Form 10-K. Any
capitalized terms used but not defined in this Item have the same meaning
given to them in the Form 10-K.
RESULTS OF OPERATIONS
The Company operates in three principal industries: aluminum,
through its majority owned subsidiary Kaiser, a fully integrated aluminum
producer; forest products, through MAXXAM Group Inc. ("MGI") and its wholly
owned subsidiaries, principally The Pacific Lumber Company ("Pacific
Lumber") and Britt Lumber Co., Inc.; real estate investment and
development, managed through MAXXAM Property Company; and other commercial
operations through various other wholly owned subsidiaries.
ALUMINUM OPERATIONS
Aluminum operations account for a substantial portion of the
Company's revenues and operating results. Kaiser's operating results are
sensitive to changes in prices of alumina, primary aluminum and fabricated
aluminum products, and also depend to a significant degree upon the volume
and mix of all products sold and on hedging strategies. Kaiser, through
its principal subsidiary KACC, operates in two business segments: bauxite
and alumina, and aluminum processing. The following table presents
selected operational and financial information for the three months ended
March 31, 1996 and 1995. The information presented in the table is in
millions of dollars except shipments and prices.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1996 1995
---------- ----------
<S> <C> <C>
Shipments: (1)
Alumina 476.2 446.5
Aluminum products:
Primary aluminum 74.8 47.7
Fabricated aluminum products 77.2 94.5
---------- ----------
Total aluminum products 152.0 142.2
========== ==========
Average realized sales price:
Alumina (per ton) $ 208 $ 197
Primary aluminum (per pound) .72 .81
Net sales:
Bauxite and alumina:
Alumina $ 99.0 $ 87.9
Other (2) (3) 24.4 19.1
---------- ----------
Total bauxite and alumina 123.4 107.0
---------- ----------
Aluminum processing:
Primary aluminum 119.1 85.0
Fabricated aluminum products 284.9 316.2
Other (3) 3.7 4.8
---------- ----------
Total aluminum processing 407.7 406.0
---------- ----------
Total net sales $ 531.1 $ 513.0
========== ==========
Operating income $ 41.8 $ 34.1
========== ==========
Income before income taxes and minority interests $ 18.8 $ 9.8
========== ==========
Capital expenditures $ 19.8 $ 13.7
========== ==========
- ---------------
<FN>
(1) Shipments are expressed in thousands of metric tons. A metric ton is equivalent to
2,204.6 pounds.
(2) Includes net sales of bauxite.
(3) Includes the portion of net sales attributable to minority interests in consolidated
subsidiaries.
</TABLE>
Net sales
Bauxite and alumina. Net sales to third parties for the bauxite
and alumina segment increased 15% in the three months ended March 31, 1996
from the three months ended March 31, 1995. Net sales from alumina
increased 13% in the three months ended March 31, 1996 from the three
months ended March 31, 1995, principally due to higher average realized
prices and higher shipments.
Aluminum processing. Net sales to third parties for the aluminum
processing segment for the three months ended March 31, 1996 were
essentially unchanged from the three months ended March 31, 1995. Net
sales from primary aluminum increased 40% in the three months ended March
31, 1996 from the three months ended March 31, 1995, principally due to
higher shipments, partially offset by lower average realized prices. Net
sales for the three months ended March 31, 1995 were adversely affected 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 49% of total aluminum products shipments in the
three months ended March 31, 1996, compared to approximately 34% in the
three months ended March 31, 1995. Net sales from fabricated aluminum
products decreased 10% in the three months ended March 31, 1996 from the
three months ended March 31, 1995, due to lower shipments for most of these
products, partially offset by higher average realized prices for most of
these products.
Operating income (loss)
Kaiser's corporate general and administrative expenses of $18.0
million and $18.1 million for the three months ended March 31, 1996 and
1995, respectively, were allocated by the Company to the bauxite and
alumina and aluminum processing segments based on those segments' ratio of
sales to unaffiliated customers.
Operating results for the three months ended March 31, 1995 were
negatively impacted 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 Kaiser'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 results for the three months
ended March 31, 1995 was approximately $17.0 million in the aggregate (on a
pre-tax basis) principally from lower production volume and other related
costs.
Bauxite and alumina. Operating income for the bauxite and
alumina segment in the three months ended March 31, 1996 was $6.1 million,
compared to an operating loss of $1.8 million in the three months ended
March 31, 1995, principally due to higher revenues. Operating results for
the three months ended March 31, 1995 were negatively impacted by the
effect of the strikes and boiler failure.
Aluminum processing. Operating income for the aluminum
processing segment in the three months ended March 31, 1996 was $35.7
million, compared to $35.9 million in the three months ended March 31,
1995, as revenues were essentially unchanged in the respective periods.
Operating results for the three months ended March 31, 1995 were negatively
impacted by the effect of the USWA strike.
Income before income taxes and minority interests
Income before income taxes and minority interests for the three
months ended March 31, 1996 increased from the three months ended March 31,
1995, principally due to the improvement in the bauxite and alumina
segments' operating income previously described.
FOREST PRODUCTS OPERATIONS
The Company's forest products operations are conducted by MGI
through its principal operating subsidiaries. MGI's business is seasonal
in that the forest products business generally experiences lower first
quarter sales due largely to the general decline in construction-related
activity during the winter months. Accordingly, MGI's results for any one
quarter are not necessarily indicative of results to be expected for the
full year. The following table presents selected operational and financial
information for the three months ended March 31, 1996 and 1995. The
information presented in the table is in millions of dollars except
shipments and prices.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1996 1995
---------- ----------
<S> <C> <C>
Shipments:
Lumber: (1)
Redwood upper grades 10.4 10.6
Redwood common grades 57.3 51.1
Douglas-fir upper grades 2.2 1.8
Douglas-fir common grades and other 21.2 16.5
---------- ----------
Total lumber 91.1 80.0
========== ==========
Logs (2) 5.9 .5
========== ==========
Wood chips (3) 49.0 46.9
========== ==========
Average sales price:
Lumber: (4)
Redwood upper grades $ 1,386 $ 1,544
Redwood common grades 482 427
Douglas-fir upper grades 1,153 1,368
Douglas-fir common grades 378 379
Logs (4) 469 227
Wood chips (5) 87 89
Net sales:
Lumber, net of discount $ 51.9 $ 46.9
Logs 2.8 .1
Wood chips 4.3 4.2
Cogeneration power .4 .5
Other .4 .3
---------- ----------
Total net sales $ 59.8 $ 52.0
========== ==========
Operating income $ 16.6 $ 12.6
========== ==========
Operating cash flow (6) $ 23.1 $ 18.4
========== ==========
Income (loss) before income taxes and minority interests $ .6 $ (5.1)
========== ==========
Capital expenditures $ 2.8 $ 1.9
========== ==========
- ---------------
<FN>
(1) Lumber shipments are expressed in millions of board feet.
(2) Log shipments are expressed in millions of feet, net Scribner scale.
(3) Wood chip shipments are expressed in thousands of bone dry units of 2,400 pounds.
(4) Dollars per thousand board feet.
(5) Dollars per bone dry unit.
(6) Operating income before depletion and depreciation, also referred to as "EBITDA."
</TABLE>
Shipments
Lumber shipments to third parties for the three months ended
March 31, 1996 increased by 14% from the three months ended March 31, 1995,
principally due to increased shipments of redwood common lumber and common
and upper grade Douglas-fir lumber. Log shipments for the same periods were
5.9 million feet (net Scribner scale) and .5 million feet, respectively.
Net sales
Net sales for the three months ended March 31, 1996 increased
from the three months ended March 31, 1995, principally due to higher
average realized prices and increased shipments of redwood common lumber,
higher average realized prices and increased shipments of logs, and
increased shipments of Douglas-fir common lumber, offset by lower average
realized prices for upper grade redwood and Douglas-fir lumber. Shipments
of fencing and other value-added common lumber products from Pacific
Lumber's new remanufacturing facility were a contributing factor in the
improved redwood common lumber realizations.
Operating income
Operating income for the three months ended March 31, 1996, which
increased from the three months ended March 31, 1995, reflects the
improvement in net sales as discussed above.
Income (loss) before income taxes and minority interests
Income before income taxes and minority interests for the three
months ended March 31, 1996, compared to the loss for the three months
ended March 31, 1995, resulted principally from the increase in operating
income as discussed above.
REAL ESTATE AND OTHER OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1996 1995
------------ ------------
(In millions of dollars)
<S> <C> <C>
Net sales $ 21.3 $ 16.3
Operating loss (1.7) (3.3)
Loss before income taxes and minority interests (.8) (2.7)
</TABLE>
Net sales
Net sales for the three months ended March 31, 1996 increased
from the three months ended March 31, 1995, principally due to $4.6 million
of revenues attributable to Sam Houston Race Park, Ltd. ("SHRP, Ltd.").
Operating results with respect to SHRP, Ltd. were not consolidated prior to
October 6, 1995.
Operating loss
The operating loss for the three months ended March 31, 1996
decreased from the three months ended March 31, 1995, principally due to a
decrease in general and administrative costs.
Loss before income taxes and minority interests
Loss before income taxes and minority interests for the three
months ended March 31, 1996 decreased from the three months ended March 31,
1995, principally due to the decrease in operating loss as discussed above
and an increase in investment income, partially offset by an increase in
interest expense. The increase in investment income was principally
attributable to increased lot sales at SunRidge Canyon, the Company's 50%-
owned joint venture in Arizona. Interest expense for the three months
ended March 31, 1996 includes interest on SHRP Ltd.'s Senior Secured
Extendible Notes (see Note 4 to the Consolidated Financial Statements).
OTHER ITEMS NOT DIRECTLY RELATED TO INDUSTRY SEGMENTS
Three Months Ended
March 31,
---------------------------
1996 1995
------------ ------------
(In millions of dollars)
Operating loss $ (3.5) $ (2.8)
Loss before income taxes and
minority interests (5.2) (3.2)
Operating loss
The operating losses represent corporate general and
administrative expenses that are not allocated to the Company's industry
segments. The operating loss for the three months ended March 31, 1996
increased from the three months ended March 31, 1995, principally due to a
$.6 million charge for the cost of certain litigation.
Loss before income taxes and minority interests
The loss before income taxes and minority interests includes
operating losses, investment, interest and other income (expense) and
interest expense, including amortization of deferred financing costs, that
are not attributable to the Company's industry segments. The loss for the
three months ended March 31, 1996 increased from the three months ended
March 31, 1995, principally due to unrealized losses in marketable
securities and other noncash expenses.
Minority interests
Minority interests represent the minority stockholders' interest
in the Company's aluminum operations and, with respect to periods after
October 6, 1995, minority partners' interest in SHRP, Ltd.
FINANCIAL CONDITION AND INVESTING AND FINANCING ACTIVITIES
THE COMPANY
Certain of the Company's subsidiaries, principally Kaiser and
MGI, are restricted by their various debt agreements as to the amount of
funds that can be paid in the form of dividends or loaned to the Company.
The 1994 KACC Credit Agreement and the indentures governing the KACC Senior
Notes and the KACC Senior Subordinated Notes contain covenants which, among
other things, limit Kaiser's ability to pay cash dividends and restrict
transactions between Kaiser and its affiliates. Pursuant to the terms of
the 1994 KACC Credit Agreement, Kaiser is precluded from paying any
dividends with respect to its common stock. The indenture governing the
MGI Senior Notes and the MGI Discount Notes contains various covenants
which, among other things, limit the payment of dividends and restrict
transactions between MGI and its affiliates. In January 1996, MGI paid
dividends of $1.6 million. As of March 31, 1996, an additional $.4 million
of dividends could be paid by MGI. The most restrictive covenants
governing debt of the Company's real estate and other subsidiaries would
not restrict payment to the Company of all available cash and unused
borrowing availability for such subsidiaries (approximately $12.3 million
could be paid as of March 31, 1996).
As of March 31, 1996, the Company (excluding its subsidiaries)
had cash and marketable securities of approximately $34.7 million and
available borrowings under its demand loan and pledge agreement of $25.0
million. The Company believes that its existing cash, cash equivalents and
marketable securities (excluding such items owned by its subsidiaries),
together with available sources of financing, will be sufficient to fund
its working capital requirements for the next year. With respect to its
long-term liquidity, the Company believes that its existing cash and cash
resources, together with the cash proceeds from the sale of assets,
distributions from its subsidiaries, and the proceeds from the sale of debt
securities should be sufficient to meet its working capital requirements.
See Note 6 to the Consolidated Financial Statements for a discussion of the
Company's material contingencies.
On April 24, 1996, the SEC declared effective a shelf
registration statement which the Company had filed with respect to up to
$200.0 million aggregate principal amount of debt securities. The Company
has not determined the amount, interest rates, maturity, collateral (if
any) or other terms of such debt securities or the timing of any
offering of such debt securities. The debt securities could be secured by,
or convertible into, shares of common stock of Kaiser owned by the Company.
In that regard, Kaiser also filed a shelf registration statement with the
SEC, which was also declared effective on April 24, 1996, covering 10
million shares of its common stock owned by the Company. The Company would
use the net proceeds (or portions thereof) from the sale of such debt
securities to retire outstanding debt, for working capital and general
corporate purposes.
ALUMINUM OPERATIONS
Kaiser's Board of Directors has approved a proposed
recapitalization (the "Proposed Recapitalization"). The Proposed
Recapitalization would, among other things: (i) provide for two classes of
common stock: Class A Common Shares, $.01 par value, with one vote per
share ("Class A Common Shares") and a new, lesser-voting class designated
as Common Stock, $.01 par value, with 1/10 vote per share ("New Common
Stock"), (ii) redesignate as Class A Common Shares the 100 million
currently authorized shares of Kaiser's existing common stock and authorize
an additional 250 million shares of New Common Stock, and (iii) reclassify
each issued share of Kaiser's existing common stock into (a) .33 of a
Class A Common Share and (b) .67 of a share of New Common Stock. Kaiser
would pay cash in lieu of fractional shares. Kaiser anticipates that both
the Class A Common Shares and the New Common Stock would be approved for
trading on the New York Stock Exchange.
Upon the effective date of the Proposed Recapitalization,
approximately 23.6 million Class A Common Shares and 48.0 million shares of
New Common Stock would be issued and outstanding. The proportionate
voting power of the holders of the PRIDES would increase immediately after
the effectiveness of the Proposed Recapitalization until such shares are
redeemed or converted, which will occur on or before December 31, 1997. As
of March 31, 1996, holders of Kaiser's existing common stock and the PRIDES
had 91.2% and 8.8%, respectively, of the total voting power of all
stockholders. Immediately after the effectiveness of the Proposed
Recapitalization, the voting power of such holders of the PRIDES would
increase to 19.6% in the aggregate, with a corresponding reduction in the
voting power of such holders of the existing common stock. At such time as
the PRIDES are redeemed or converted, the relative voting power of the
holders of the PRIDES would decrease and the relative voting power for both
such holders of the PRIDES and the holders of the existing common stock
would be approximately the same as it would have been had the Proposed
Recapitalization not occurred.
A special stockholders' meeting to consider the Proposed
Recapitalization was scheduled for April 10, 1996. On March 19, 1996, a
lawsuit was filed in the Delaware Court of Chancery which, among other
things, sought to enjoin the Proposed Recapitalization. On April 8, 1996,
the Delaware Court of Chancery issued a ruling which preliminarily enjoins
Kaiser from implementing the Proposed Recapitalization. On April 10, 1996,
the meeting was adjourned to May 1, 1996, without taking a vote on the
Proposed Recapitalization. On April 19, 1996, the Delaware Supreme Court
granted defendants' motion to consider, on an expedited basis, defendants'
appeal of the preliminary injunction, and has scheduled oral argument on
the appeal for May 21, 1996. On May 1, 1996, Kaiser's stockholders
approved the Proposed Recapitalization; however, it will not be implemented
pending the outcome of defendants' appeal.
Kaiser has developed a unique micromill for the production of can
sheet from molten metal based on a proprietary thin-strip, high-speed,
continuous-belt casting technique linked directly to hot rolling and cold
rolling mills. The first micromill is being constructed in Nevada as a
demonstration production facility. KACC currently is financing the cost of
the construction of the Nevada micromill, estimated to be $45.0 million,
from general corporate funds, including possible borrowings under the 1994
KACC Credit Agreement, although KACC is in discussions with third parties
which might provide some or all of such funding.
Loans under the 1994 KACC Credit Agreement bear interest at a
rate per annum, at KACC's election, equal to a Reference Rate (as defined)
plus 1-1/2% or LIBO Rate (Reserve Adjusted) (as defined) plus 3-1/4%.
After June 30, 1995, the interest rate margins applicable to borrowings
under the 1994 KACC Credit Agreement may be reduced by up to 1-1/2% (non-
cumulatively), based on a financial test, determined quarterly. As of
December 31, 1995, the financial test permitted a reduction of 1-1/2% per
annum in margins effective January 1, 1996, which reduction is continuing.
At March 31, 1996, $166.8 million (of which $71.5 million could have been
used for letters of credit) was available to KACC under the 1994 KACC
Credit Agreement.
Kaiser believes that its existing cash resources, together with
cash flow from operations and borrowings under the 1994 KACC Credit
Agreement, will be sufficient to satisfy its working capital and capital
expenditure requirements for the next year. With respect to its long-term
liquidity, Kaiser believes that its history of prior operating cash flow,
together with its ability to obtain both short and long-term financing,
should provide sufficient funds to meet its long-term working capital and
capital expenditure requirements.
FOREST PRODUCTS OPERATIONS
As of March 31, 1996, $46.9 million of borrowings was available
under Pacific Lumber's Revolving Credit Agreement, of which $3.4 million
was available for letters of credit and $30.0 million for timberland
acquisitions. No borrowings were outstanding as of March 31, 1996, and
letters of credit outstanding amounted to $11.6 million.
MGI and its subsidiaries anticipate that cash flow from
operations, together with existing cash, cash equivalents, marketable
securities and available sources of financing, will be sufficient to fund
their working capital and capital expenditure requirements for the next
year. With respect to their long-term liquidity, MGI and its subsidiaries
believe that their existing cash and cash equivalents, together with their
ability to generate sufficient cash flow from operations and obtain both
short and long-term financing, should provide sufficient funds to meet
their working capital and capital expenditure requirements. However, due
to their highly leveraged condition, MGI and its subsidiaries are more
sensitive than less-leveraged companies to factors affecting their
operations, including governmental regulation affecting their timber
harvesting practices, increased competition from other lumber producers or
alternative building products and general economic conditions.
REAL ESTATE AND OTHER OPERATIONS
As of March 31, 1996, the Company's real estate and other
subsidiaries had approximately $11.7 million available for use under the
MCOP Credit Agreement. The Company believes that the existing cash and
credit facilities of its real estate and other subsidiaries are sufficient
to fund the working capital and capital expenditure requirements of such
subsidiaries for the next year. With respect to the long-term liquidity of
such subsidiaries, the Company believes that their ability to generate cash
from the sale of their existing real estate, together with their ability to
obtain financing should provide sufficient funds to meet their working
capital and capital expenditure requirements.
TRENDS
FOREST PRODUCTS OPERATIONS
The Company's forest products operations are primarily conducted
by Pacific Lumber and are subject to a variety of California and federal
laws and regulations dealing with timber harvesting, endangered species and
critical habitat, and air and water quality. While the Company does not
expect that Pacific Lumber's compliance with such existing laws and
regulations will have a material adverse effect on the Company's
consolidated financial position, results of operations or liquidity,
Pacific Lumber is subject to certain pending matters, including the pending
final designation of critical habitat for the marbled murrelet (see Item 1.
"Business--Forest Products Operations--Regulatory and Environmental
Factors" in the Form 10-K), which could have a material adverse effect on
the Company's consolidated financial position, results of operations or
liquidity. Moreover, the laws and regulations relating to the Company's
forest products operations are modified from time to time and are subject
to judicial and administrative interpretation. There can be no assurance
that certain pending or future governmental regulations, legislation or
judicial or administrative decisions would not materially and adversely
affect Pacific Lumber or its ability to sell lumber, logs or timber.
Judicial or regulatory actions adverse to Pacific Lumber,
increased regulatory delays and inclement weather in northern California,
independently or collectively, could impair Pacific Lumber's ability to
maintain adequate log inventories and force Pacific Lumber to temporarily
idle or curtail operations at certain of its lumber mills from time to
time.
See also Part II, Item 1. "Legal Proceedings--Pacific Lumber
Litigation" regarding a government takings action recently filed by a
subsidiary of Pacific Lumber and additional takings claims which could
be filed by Pacific Lumber and its subsidiaries.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to Item 3 of the Form 10-K for information
concerning material legal proceedings with respect to the Company. The
following material developments have occurred with respect to such legal
proceedings. Any capitalized or italicized terms used but not defined in
this Item have the same meaning given to them in the Form 10-K.
USAT MATTERS
In connection with the MAXXAM v. FDIC action, because the FDIC
has now responded to the Company's request pursuant to the Freedom of
Information Act, on April 16, 1996 the Company agreed to dismiss this suit.
RANCHO MIRAGE LITIGATION
In connection with the In Re MAXXAM Inc./Federated Development
Shareholder's Litigation, the Court held a hearing on April 2, 1996 on
various trial-related matters, including defendants' motion to dismiss the
claims relating to the 1987 loan transactions; to date, no decision has
been issued. In addition, the Court has scheduled oral argument on the
merits of the case for July 24, 1996.
KAISER RECAPITALIZATION LITIGATION
In connection with Matheson et al. v. Kaiser Aluminum
Corporation, et al., on April 8, 1996, the Delaware Court of Chancery
issued a ruling which preliminarily enjoins Kaiser from implementing the
Proposed Recapitalization. On April 10, 1996, the scheduled Special
Meeting of Stockholders was adjourned to May 1, 1996, without taking a vote
on the Proposed Recapitalization. On April 19, 1996, the Delaware Supreme
Court granted defendants' motion to consider, on an expedited basis,
defendants' appeal of the preliminary injunction, and has scheduled oral
argument on the appeal for May 21, 1996. On May 1, 1996, Kaiser's
stockholders approved the Proposed Recapitalization; however, it will not
be implemented pending the outcome of defendants' appeal.
PACIFIC LUMBER LITIGATION
In connection with the Kayes/Miller actions and the DOL civil
action, a definitive agreement has been reached and approved by the Board
of Directors of Pacific Lumber and the Company. The principal terms of the
proposed settlement involve the payment to the class plaintiffs and their
counsel of $7.0 million in cash by Pacific Lumber in exchange for full
releases by the plaintiffs of defendants and dismissal of the Kayes/Miller
and DOl actions. In addition, the Court has scheduled a hearing for
preliminary approval of the settlement agreement on May 10, 1996, and a
final hearing on the settlement agreement on July 12, 1996.
In connection with the Marbled Murrelet action, on April 3, 1996,
the Court granted a preliminary injunction preventing harvesting on the
eight THPs to the extent each relies on the Owl Plan; Pacific Lumber is
appealing the preliminary injunction.
On April 22, 1996, Salmon Creek Corporation, a wholly owned
subsidiary of Pacific Lumber ("Salmon Creek"), filed a lawsuit entitled
Salmon Creek Corporation v. California State Board of Forestry, et al.
(No.96CS01057) in the Superior Court of Sacramento County. This action seeks
to overturn the BOF's decision denying approval of a THP for approximately
8 acres of virgin old growth timber in the area commonly known as the
Headwaters Forest. Salmon Creek seeks a court order requiring approval of
the THP so that it may harvest in accordance with the THP. Salmon Creek
also seeks constitutional "just compensation" damages to the extent that
its old growth timber within and surrounding the THP has been "taken" by
reason of this regulatory denial and previous actions of governmental
authorities. In addition, on May 7, 1996, Pacific Lumber, Scotia Pacific
and Salmon Creek filed a lawsuit entitled The Pacific Lumber Company, et.
al. v. The United States of America in the United States Court of Federal
Claims. The suit alleges that the federal government has "taken" over
3,800 acres of Pacific Lumber's old growth timberlands through its
application of the ESA (including the Headwaters Forest). Pacific
Lumber, Scotia Pacific and Salmon Creek seek constitutional "just
compensation" damages for the taking of these timberlands by the federal
government's actions. The Company is uncertain as to the timing or the
ultimate resolution of the foregoing actions. Pacific Lumber and its
subsidiaries intend to file additional takings claims with respect to any
of their timberlands which are finally designated as critical habitat for
the marbled murrelet.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS:
11 Computation of Net Income (Loss) Per Common and Common
Equivalent Share
27 Financial Data Schedule
B. REPORTS ON FORM 8-K:
None.
SIGNATURES
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 accounting officer of the
Registrant.
MAXXAM INC.
Date: May 7, 1996 By: /s/ TERRY L. FREEMAN
------------------------------
Terry L. Freeman
Assistant Controller
EXHIBIT 11
MAXXAM INC.
COMPUTATION OF NET INCOME (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE
(IN MILLIONS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
Three Months Ended
March 31,
--------------------------
1996 1995
------------ -----------
Weighted average common and common
equivalent shares outstanding during
each period 9,376,703 9,376,703
Common equivalent shares attributable to
stock options and convertible
securities 98,369 71,175
------------ -----------
Total common and common equivalent shares 9,475,072 9,447,878
============ ===========
Net income (loss) $ 5.8 $ (1.0)
============ ===========
Net income (loss) per common and common
equivalent share $ .61 $ (.11)
============ ============
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated balance sheet and consolidated statement of operations
and is qualified in its entirety by reference to such consolidated financial
statements together with the related footnotes thereto.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 113,800
<SECURITIES> 19,800
<RECEIVABLES> 238,600
<ALLOWANCES> 5,700
<INVENTORY> 646,600
<CURRENT-ASSETS> 1,259,000
<PP&E> 1,930,700
<DEPRECIATION> 703,200
<TOTAL-ASSETS> 3,871,800
<CURRENT-LIABILITIES> 628,600
<BONDS> 1,698,300
5,000
0
<COMMON> 300
<OTHER-SE> (83,100)
<TOTAL-LIABILITY-AND-EQUITY> 3,871,800
<SALES> 612,200
<TOTAL-REVENUES> 612,200
<CGS> 483,700
<TOTAL-COSTS> 483,700
<OTHER-EXPENSES> 75,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,100
<INCOME-PRETAX> 13,400
<INCOME-TAX> 5,000
<INCOME-CONTINUING> 5,800
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,800
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
</TABLE>
