<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, 1996
Commission file number 1-9447
KAISER ALUMINUM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-3030279
(State of incorporation) (I.R.S. Employer Identification No.)
5847 San Felipe, Suite 2600, Houston, Texas 77057-3010
(Address of principal executive offices) (Zip Code)
(713) 267-3777
(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, 1996, the registrant had 71,645,189 shares of common
stock outstanding.
===========================================================================
<PAGE>
KAISER ALUMINUM 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,
1996 1995
---------------------------
<S> (Unaudited)
<C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 14.1 $ 21.9
Receivables 300.7 308.6
Inventories 570.2 525.7
Prepaid expenses and other current assets 93.8 76.6
------------------------
Total current assets 978.8 932.8
Investments in and advances to unconsolidated affiliates 181.9 178.2
Property, plant, and equipment - net 1,104.3 1,109.6
Deferred income taxes 268.9 269.1
Other assets 340.0 323.5
------------------------
Total $2,873.9 $2,813.2
========================
Liabilities & Stockholders' Equity
----------------------------------
Current liabilities:
Accounts payable $ 163.7 $ 184.5
Accrued interest 14.0 32.0
Accrued salaries, wages, and related expenses 95.3 105.3
Accrued postretirement medical benefit obligation - current portion 46.8 46.8
Other accrued liabilities 136.4 129.4
Payable to affiliates 94.8 94.2
Long-term debt - current portion 12.0 8.9
------------------------
Total current liabilities 563.0 601.1
Long-term liabilities 554.8 548.5
Accrued postretirement medical benefit obligation 731.9 734.0
Long-term debt 836.5 749.2
Minority interests 122.0 122.7
Stockholders' equity:
Preferred stock .4 .4
Common stock .7 .7
Additional capital 530.6 530.3
Accumulated deficit (452.2) (459.9)
Additional minimum pension liability (13.8) (13.8)
------------------------
Total stockholders' equity 65.7 57.7
------------------------
Total $2,873.9 $2,813.2
========================
</TABLE>
The accompanying notes to interim consolidated financial statements are
an integral part of these statements.
- 1 -
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
(In millions of dollars, except per share amounts)
Quarter Ended
March 31,
----------------
1996 1995
----------------
<S> <C> <C>
Net sales $531.1 $513.0
----------------
Costs and expenses:
Cost of products sold 433.7 426.7
Depreciation 24.0 23.7
Selling, administrative, research and development, and general 33.1 30.0
----------------
Total costs and expenses 490.8 480.4
----------------
Operating income 40.3 32.6
Other expense:
Interest expense (22.7) (23.6)
Other - net (.3) (.8)
----------------
Income before income taxes and minority interests 17.3 8.2
Provision for income taxes (6.6) (2.9)
Minority interests (.8) (1.8)
----------------
Net income 9.9 3.5
Dividends on preferred stock (2.1) (5.3)
----------------
Net income (loss) available to common shareholders $ 7.8 $ (1.8)
================
Earnings (loss) per common and common equivalent share $ .11 $ (.03)
================
Weighted average common and common equivalent shares outstanding (000) 71,895 58,205
================
</TABLE>
The accompanying notes to interim consolidated financial statements are
an integral part of these statements.
- 2 -
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
(In millions of dollars)
Quarter Ended
March 31,
------------------
1996 1995
------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9.9 $ 3.5
Adjustments to reconcile net income to net cash used for operating activities:
Depreciation 24.0 23.7
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 1.4 1.3
Equity in income of unconsolidated affiliates (7.0) (1.8)
Minority interests .8 1.8
Decrease (increase) in receivables 3.9 (69.6)
Increase in inventories (44.5) (35.1)
(Increase) decrease in prepaid expenses and other assets (24.4) 45.5
Decrease in accounts payable (20.8) (7.0)
Decrease in accrued interest (18.0) (18.6)
Increase (decrease) in payable to affiliates and accrued liabilities 1.8 (.6)
Decrease in accrued and deferred income taxes (3.6) (3.7)
Other 1.2 2.0
------------------
Net cash used for operating activities (72.4) (55.7)
Cash flows from investing activities:
Net proceeds from disposition of property and investments .4 1.1
Capital expenditures (19.8) (13.7)
Redemption fund for minority interests' preference stock (2.3) (1.2)
------------------
Net cash used for investing activities (21.7) (13.8)
Cash flows from financing activities:
Repayments of long-term debt, including revolving credit (89.4) (126.5)
Borrowings of long-term debt, including revolving credit 179.8 200.2
Incurrence of financing costs (.7)
Dividends paid (2.1) (10.6)
Redemption of minority interests' preference stock (2.0) (3.1)
------------------
Net cash provided by financing activities 86.3 59.3
Net decrease in cash and cash equivalents during the period (7.8) (10.2)
Cash and cash equivalents at beginning of period 21.9 17.6
------------------
Cash and cash equivalents at end of period $ 14.1 $ 7.4
==================
Supplemental disclosure of cash flow information:
Interest paid, net of capitalized interest $ 39.2 $ 40.9
Income taxes paid 8.8 4.0
</TABLE>
The accompanying notes to interim consolidated financial statements are
an integral part of these statements.
- 3 -
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(In millions of dollars, except prices and per share amounts)
1. General
- ------------
Kaiser Aluminum Corporation (the "Company") is a subsidiary of MAXXAM
Inc. ("MAXXAM"). MAXXAM owns approximately 62% of the Company's Common
Stock, assuming the conversion of each outstanding share of 8.255% PRIDES,
Convertible Preferred Stock (the "PRIDES"), into one share of the Company's
Common Stock, with the remaining approximately 38% publicly held. The
Company operates through its direct subsidiary, Kaiser Aluminum & Chemical
Corporation ("KACC").
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 disclosures required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, the consolidated financial statements furnished herein include
adjustments, all of which are of a normal recurring nature, necessary for a
fair statement of the results for the interim periods presented. Operating
results for the first quarter of 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996. These
unaudited interim consolidated financial statements should be read in
conjunction with the audited consolidated financial statements for the year
ended December 31, 1995. 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,
1996 1995
------------------------
<S> <C> <C>
Finished fabricated aluminum 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
--------------------
Total $570.2 $525.7
====================
</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. Earnings (Loss) per Common and Common Equivalent Share
- ------------------------------------------------------------
Earnings (loss) per common and common equivalent share are computed by
dividing net income (loss) available to common shareholders by the weighted
average number of common and common equivalent shares outstanding during
the period. See Exhibit 11 for the computation of earnings (loss) per
common and common equivalent share.
- 4 -
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
4. Contingencies
- ------------------
Environmental Contingencies - The Company and KACC are subject to a
number of environmental laws, to fines or penalties assessed for alleged
breaches of the environmental laws, and to claims and litigation based upon
such laws. KACC 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.
Based upon 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, 1996, the balance of such accruals,
which is primarily included in Long-term liabilities, was $37.6. 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 $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. 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 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 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, results of
operations, or liquidity.
Asbestos Contingencies - KACC is a defendant in a 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 7,200 settled or dismissed and, during the first quarter of
1996, approximately 8,800 of such claims were received and 2,300 settled or
dismissed. KACC has been advised by its regional counsel 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.
- 5 -
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
Based on past experience and reasonably anticipated future activity,
the Company has established an accrual for estimated asbestos-related costs
for claims filed and estimated to be filed and settled through 2008. There
are inherent uncertainties involved in estimating asbestos-related costs,
and the Company's actual costs could exceed these estimates. 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, 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 Long-term
liabilities at March 31, 1996. The Company 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 the Company does not
presently believe there is a reasonable basis for estimating such costs
beyond 2008 and, accordingly, no accrual has been recorded for such costs
which may be incurred beyond 2008, there is a reasonable possibility that
such costs may continue beyond 2008, and such costs may be substantial.
The Company 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 insurance carriers. The
timing and amount of ultimate recoveries from these insurance carriers are
dependent upon the resolution of these disputes. The Company believes,
based on prior insurance-related recoveries in respect of 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 Other
assets at March 31, 1996.
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 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.
Other Contingencies - The Company and KACC are 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, results of operations, or liquidity.
5. 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
- 6 -
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
forward sales and purchases of primary aluminum at fixed prices and the
purchase or sale of options for primary aluminum. In respect of its 1996,
1997, and 1998 anticipated net exposure, at March 31, 1996, KACC had sold
forward 105,750 tons* 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 the Company'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, in respect of 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.
See Note 9 of the Notes to Consolidated Financial Statements for the
year ended December 31, 1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS (In millions of dollars, except shipments,
--------------------- prices, and per share amounts)
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 KACC's hedging strategies. See Note 5 of the Notes to Interim
Consolidated Financial Statements for an explanation of KACC'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, 1996 and 1995. 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.
- ---------------------------------------
* All references to tons in this report refer to metric tons of 2,204.6
pounds.
- 7 -
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
SELECTED OPERATIONAL AND FINANCIAL INFORMATION
Quarter 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 (loss):
Bauxite and alumina $ 9.8 $ 1.4
Aluminum processing 48.5 49.3
Corporate (18.0) (18.1)
----------------
Total operating income $ 40.3 $ 32.6
================
Net income $ 9.9 $ 3.5
================
Capital expenditures $ 19.8 $ 13.7
================
</TABLE>
- ------------------------------------
(1) In thousands of tons.
(2) Includes net sales of bauxite.
(3) Includes the portion of net sales attributable to minority interests
in consolidated subsidiaries.
- 8 -
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
Net Sales
Bauxite and Alumina - Net sales to third parties for the bauxite and
alumina segment was 15% higher in the first quarter of 1996 than in the
first quarter of 1995. Net sales from alumina increased 13% in the first
quarter of 1996 from the first quarter of 1995, due to higher average
realized prices and higher shipments.
Aluminum Processing - Net sales to third parties for the aluminum
processing segment in the first quarter of 1996 was approximately the same
as the first quarter of 1995. Net sales from primary aluminum increased
40% in the first quarter of 1996 from the first quarter of 1995, due
primarily to higher shipments, partially offset by lower average realized
prices. Net sales for the first quarter of 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
first quarter of 1996, compared with approximately 34% in the first quarter
of 1995. Net sales from fabricated aluminum products decreased 10% in the
first quarter of 1996 from the first quarter of 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)
Operating results for the first quarter of 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 the Company's
65%-owned Alpart alumina refinery in Jamaica ("Alpart"), and (iii) a
four-day disruption of alumina production at Alpart caused by a boiler
failure. The combined impact of these events on results for the first
quarter of 1995 was approximately $17.0 in the aggregate (on a pre-tax
basis) principally from lower production volume and other related costs.
Bauxite and Alumina - This segment's operating income was $9.8 in the
first quarter of 1996, compared with $1.4 in the first quarter of 1995,
principally due to higher revenue. Operating results for the first quarter
of 1995 were negatively impacted by the effect of the strikes and boiler
failure.
Aluminum Processing - This segment's operating income was $48.5 in the
first quarter of 1996, compared with $49.3 in the first quarter of 1995, as
revenue remained approximately the same in the respective periods.
Operating results for the first quarter of 1995 were negatively impacted 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 reported net income of $9.9, or $.11 per common and common
equivalent share, for the first quarter of 1996, compared with net income
of $3.5, or a net loss of $.03 per common and common equivalent share (as
net income was more than offset by dividends on preferred stock), for the
first quarter of 1995. The principal reason for this change was the
improvement in operating income previously described.
- 9 -
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
Liquidity and Capital Resources
- -------------------------------
Management believes that the Company's existing cash resources,
together with cash flows from operations and borrowings under KACC's 1994
Credit Agreement, will be sufficient to satisfy its working capital and
capital expenditure requirements for the next year. With respect to long-
term liquidity, management believes that operating cash flows, together
with the ability to obtain both short and long-term financing, should
provide sufficient funds to meet the Company's working capital and capital
expenditure requirements.
Capital Structure
On April 23, 1996, the Company filed a registration statement with the
Securities and Exchange Commission (the "SEC") covering the sale by MAXXAM
of up to 10 million shares of the Company's Common Stock that are owned by
MAXXAM. The registration has been declared effective by the SEC.
The Company'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 the Company's existing Common Stock and
authorize an additional 250 million shares of New Common Stock; and (iii)
reclassify each issued share of the Company's existing Common Stock, into
(a) .33 of a Class A Common Share and (b) .67 of a share of New Common
Stock. The Company would pay cash in lieu of fractional shares. The Company
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 the Company's existing Common Stock and the
PRIDES had 91.2% and 8.8%, respectively, of the total voting power of all
stockholders. Immediately after 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 enjoined
the Company 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, defendants'
stockholders approved the Proposed Recapitalization; however, it will not
be implemented pending the outcome of defendants' appeal.
- 10 -
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
Operating Activities
At March 31, 1996, the Company had working capital of $415.8, compared
with working capital of $331.7 at December 31, 1995. The increase in
working capital was due primarily to an increase in Inventories and Prepaid
expenses and other current assets and a decrease in Accounts payable,
Accrued interest, and Accrued salaries, wages, and related benefits,
partially offset by an increase in Other accrued liabilities.
Investing Activities
Cash used for investing activities in the first quarter of 1996
consisted primarily of capital expenditures to improve production
efficiency, reduce operating costs, expand capacity at existing facilities,
and construct new facilities.
Financing Activities
At March 31, 1996, the Company had long-term debt of $836.5, compared
with $749.2 at December 31, 1995. At March 31, 1996, $166.8 (of which
$71.5 could have been used for letters of credit) was available to KACC
under KACC's 1994 Credit Agreement.
Loans under KACC's 1994 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 KACC's
1994 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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ---------------------------
Catellus Development Corporation v. Kaiser Aluminum & Chemical Corporation
and James L. Ferry & Sons Inc.
As previously and more fully stated in Item 3. "LEGAL PROCEEDINGS -
Catellus Development Corporation v. Kaiser Aluminum & Chemical Corporation
and James L. Ferry & Sons Inc." in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 (the "Form 10-K"), on December
7, 1995, the United States District Court for the Northern District of
California issued the Final Judgment on the remaining claims in that action
concluding that KACC is liable for various costs and interest, aggregating
approximately $2.2 million, fifty percent (50%) of future costs of cleaning
up certain parts of the Property (as defined in the Form 10-K), and certain
fees and costs associated specifically with the claim by Catellus against
KACC. KACC has now paid the City of Richmond $1.8 million in partial
satisfaction of such judgment.
Hammons v. Alcan Aluminium Corp. et al
As previously stated in Item 3. "LEGAL PROCEEDINGS - Hammons v. Alcan
Aluminium Corp. et al" in the Form 10-K, on March 5, 1996, a class action
complaint was filed against the Company, Alcan
- 11 -
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
Aluminium Corp., Aluminum Company of America, Alumax, Inc., Reynolds Metals
Company and the Aluminum Association in the Superior Court of California
for the County of Los Angeles, Case No. BC145612. The complaint claims
that the defendants conspired, in violation of the California Cartwright
Act (Bus. & Prof. Code Sections 16720 & 16750), in conjunction with a
Memorandum of Understanding ("MOU") entered into by representatives of
Australia, Canada, the European Union, Norway, the Russian Federation and
the United States in 1994, to restrict the production of primary aluminum
causing consequent rises in prices for primary aluminum and aluminum products.
The complaint seeks certification of a class consisting of persons who at
any time between January 1, 1994, and the date of the complaint purchased
aluminum or aluminum products manufactured by one or more of the defendants
and estimates damages sustained by the class to be $4.4 billion during the
year 1994, before trebling. Plaintiff's counsel has estimated damages to be
$4.4 billion per year for each of the two years the MOU was active, which
when trebled equals $26.4 billion.
On April 2, 1996 the case was removed to and is currently pending in
the United States District Court for the Central District of California.
The Court has granted defendants until May 9, 1996, to file contemplated
motions to dismiss.
Matheson et al v. Kaiser Aluminum Corporation et al
As previously and more fully stated in Item 3. "LEGAL PROCEEDINGS -
Matheson et al v. Kaiser Aluminum Corporation et al" in the Form 10-K, on
March 19, 1996, a lawsuit was filed against MAXXAM, the Company and the
Company's directors challenging and seeking to enjoin the Proposed
Recapitalization and the April 10, 1996, special stockholders' meeting at
which the Proposed Recapitalization was to be considered. On April 8,
1996, the Delaware Court of Chancery issued a ruling which preliminarily
enjoined the Company 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 the defendants' motion to consider, on an
expedited basis, the defendants' appeal of the preliminary injunction, and
has scheduled oral argument on the appeal for May 21, 1996. On May 1,
1996, the Company's stockholders approved the Proposed Recapitalization;
however, it will not be implemented pending the outcome of defendants'
appeal.
Asbestos-related Litigation
As previously and more fully stated in Item 3. "LEGAL PROCEEDINGS -
Asbestos-related Litigation" in the Form 10-K, KACC is a defendant in a
number of lawsuits, some of which involve claims of multiple persons, in
which the plaintiffs allege that certain of their injuries were caused by
exposure to asbestos during, and as a result of, their employment or
association with KACC or exposure to products containing asbestos produced
or sold by KACC. The portion of Note 4 of the Notes to Interim
Consolidated Financial Statements contained in this report under the
heading "Asbestos Contingencies" is incorporated herein by reference.
- 12 -
<PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits.
Exhibit No. Exhibit
----------- -------
11 Computation of Earnings (Loss) Per Common and Common Equivalent
Share
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, 1996.
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 CORPORATION
/s/ John T. La Duc
By:-------------------------
John T. La Duc
Vice President and
Chief Financial Officer
Dated: May 6, 1996
- 13 -
<PAGE>
EXHIBIT 11
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
COMPUTATION OF EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE(1)
(In millions of dollars, except per share amounts)
Quarter Ended
March 31,
---------------
1996 1995
----------------
<S> <C> <C>
Earnings:
Net income $ 9.9 $ 3.5
Dividends on preferred stock:
Series A Mandatory Conversion Premium Dividend Preferred Stock (3.2)
PRIDES (2.1) (2.1)
----------------
Net income (loss) available to common shareholders $ 7.8 $ (1.8)
================
Shares (000):
Weighted average common shares outstanding 71,641 58,205
Assuming exercise of nonqualified stock options 254
----------------
Weighted average common and common equivalent shares 71,895 58,205
================
Earnings (loss) per common and common equivalent share $ .11 $ (.03)
================
</TABLE>
(1) See Note 3 of Notes to Interim Consolidated Financial Statements.
- 14 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the interim
consolidated financial statements of the Company for the three months ended
March 31, 1996, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000811596
<NAME> KAISER ALUMINUM CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 14
<SECURITIES> 0
<RECEIVABLES> 301
<ALLOWANCES> 0
<INVENTORY> 570
<CURRENT-ASSETS> 979
<PP&E> 1,104
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,874
<CURRENT-LIABILITIES> 563
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 65
<TOTAL-LIABILITY-AND-EQUITY> 2,874
<SALES> 531
<TOTAL-REVENUES> 531
<CGS> 434
<TOTAL-COSTS> 434
<OTHER-EXPENSES> 57
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23
<INCOME-PRETAX> 17
<INCOME-TAX> 7
<INCOME-CONTINUING> 10
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10
<EPS-PRIMARY> .11
<EPS-DILUTED> 0
</TABLE>
