KAISER ALUMINUM CORP
10-Q, 2000-05-02
PRIMARY PRODUCTION OF ALUMINUM
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<PAGE>   1
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                       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, 2000

                          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 21, 2000, the registrant had 79,403,061 shares of Common Stock
outstanding.

- --------------------------------------------------------------------------------
<PAGE>   2
              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                           CONSOLIDATED BALANCE SHEETS

                            (In millions of dollars)

<TABLE>
<CAPTION>

                                                             March 31,       December 31,
                                                                  2000               1999
                                                         --------------------------------
                           ASSETS                           (Unaudited)
<S>                                                       <C>              <C>
Current assets:
   Cash and cash equivalents                              $       15.9     $         21.2
   Receivables                                                   290.4              261.0
   Inventories                                                   521.0              546.1
   Prepaid expenses and other current assets                     108.8              145.6
                                                          ------------     --------------
      Total current assets                                       936.1              973.9

Investments in and advances to
   unconsolidated affiliates                                      92.2               96.9
Property, plant, and equipment - net                           1,038.4            1,053.7
Deferred income taxes                                            439.7              440.0
Other assets                                                     643.7              634.3
                                                          ------------     --------------

      Total                                               $    3,150.1     $      3,198.8
                                                          ============     ==============

            LIABILITIES & STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                       $      204.5     $        231.7
   Accrued interest                                               25.1               37.7
   Accrued salaries, wages, and related expenses                  62.6               62.1
   Accrued postretirement medical benefit
      obligation - current portion                                51.4               51.5
   Other accrued liabilities                                     182.7              168.8
   Payable to affiliates                                          82.5               85.8
   Long-term debt - current portion                                1.6                 .3
                                                          ------------     --------------
      Total current liabilities                                  610.4              637.9

Long-term liabilities                                            690.1              727.1
Accrued postretirement medical benefit obligation                675.2              678.3
Long-term debt                                                   979.1              972.5
Minority interests                                               117.7              117.7
Commitments and contingencies
Stockholders' equity:
   Common stock                                                     .8                 .8
   Additional capital                                            537.4              536.8
   Accumulated deficit                                          (459.4)            (471.1)
   Accumulated other comprehensive income -
       additional minimum pension liability                       (1.2)              (1.2)
                                                          ------------     --------------
      Total stockholders' equity                                  77.6               65.3
                                                          ------------     --------------

        Total                                             $    3,150.1     $      3,198.8
                                                          ============     ==============

<FN>

   The accompanying notes to interim consolidated financial statements are an
                       integral part of these statements.

</FN>
</TABLE>

                                       -1-
<PAGE>   3

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

                    STATEMENTS OF CONSOLIDATED INCOME (LOSS)
                                   (Unaudited)
                 (In millions of dollars, except share amounts)

<TABLE>
<CAPTION>

                                                        Quarter Ended
                                                           March 31,
                                                -----------------------------
                                                         2000            1999
                                                -----------------------------
<S>                                             <C>              <C>
Net sales                                       $      565.7     $      479.4
                                                -----------------------------

Costs and expenses:
   Cost of products sold                               480.7            459.9
   Depreciation and amortization                        19.6             24.4
   Selling, administrative, research
       and development, and general                     28.5             28.1
                                                -----------------------------
        Total costs and expenses                       528.8            512.4
                                                -----------------------------

Operating income (loss)                                 36.9            (33.0)

Other income (expense):
   Interest expense                                    (28.4)           (27.7)
   Other - net                                          10.1              1.3
                                                -----------------------------
Income (loss) before income taxes
    and minority interests                              18.6            (59.4)

(Provision) benefit for income taxes                    (7.3)            20.2

Minority interests                                        .4              1.0
                                                -----------------------------

Net income (loss)                               $       11.7     $      (38.2)
                                                =============================

Earnings (loss) per share:
   Basic                                        $        .15     $       (.48)
   Diluted                                      $        .15     $       (.48)

Weighted average shares outstanding (000):

   Basic                                              79,407           79,154
   Diluted                                            79,407           79,154

<FN>

   The accompanying notes to interim consolidated financial statements are an
                       integral part of these statements.
</FN>
</TABLE>

                                      -2-

<PAGE>   4

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

                      STATEMENTS OF CONSOLIDATED CASH FLOWS
                                   (Unaudited)
                             (In millions of dollars)

<TABLE>
<CAPTION>
                                                                                                       Quarter Ended
                                                                                                         March 31,
                                                                                                 ----------------------
                                                                                                     2000          1999
                                                                                                 ----------------------
<S>                                                                                              <C>            <C>
Cash flows from operating activities:
   Net income (loss)                                                                             $  11.7        $ (38.2)
   Adjustments to reconcile net income (loss) to net cash (used) provided by
      operating activities:
      Depreciation and amortization (including deferred financing costs of
          $1.1 and $1.0)                                                                            20.7           25.4
      Equity in (income) loss of unconsolidated affiliates, net of distributions                     2.3           (4.4)
      Minority interests                                                                             (.4)          (1.1)
      (Increase) decrease in receivables                                                           (29.4)           6.9
      Decrease in inventories                                                                       25.1           14.8
      Decrease (increase) in prepaid expenses and other current assets                              31.0          (11.7)
      Decrease in accounts payable and accrued interest                                            (39.8)         (34.2)
      Increase in payable to affiliates and other accrued liabilities                               15.6           26.4
      Increase (decrease) in accrued and deferred income taxes                                       4.6          (20.5)
      Decrease in net long-term assets and liabilities                                             (53.4)         (31.0)
      Other                                                                                           .7             .1
                                                                                                 ----------------------
        Net cash used by operating activities                                                      (11.3)         (67.5)
                                                                                                 ----------------------
Cash flows from investing activities:
   Capital expenditures                                                                            (16.7)         (16.5)
   Net proceeds from disposition of property and investments                                        15.4             .5
   Other                                                                                             3.1           (3.2)
                                                                                                 ----------------------
        Net cash provided (used) by investing activities                                             1.8          (19.2)
                                                                                                 ----------------------
Cash flows from financing activities:
   Borrowings under revolving credit facility, net                                                  10.1              -
   Repayments of long-term debt                                                                     (4.2)           (.3)
   Decrease in restricted cash, net                                                                    -             .8
   Redemption of minority interests' preference stock                                               (1.7)          (1.3)
                                                                                                 ----------------------
        Net cash provided (used) by financing activities                                             4.2            (.8)
                                                                                                 ----------------------

Net decrease in cash and cash equivalents during the period                                         (5.3)         (87.5)
Cash and cash equivalents at beginning of period                                                    21.2           98.3
                                                                                                 ----------------------
Cash and cash equivalents at end of period                                                       $  15.9        $  10.8
                                                                                                 ======================
Supplemental disclosure of cash flow information:
   Interest paid, net of capitalized interest                                                    $  39.9        $  39.3
   Income taxes paid                                                                                 1.7             .5


<FN>

   The accompanying notes to interim consolidated financial statements are an
                       integral part of these statements.
</FN>
</TABLE>

                                       -3-
<PAGE>   5

              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 and one of its wholly owned subsidiaries together own
approximately 63% of the Company's Common Stock with the remaining approximately
37% publicly held. The Company operates through its 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 the rules and regulations of 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. These unaudited interim consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements for the year ended December 31, 1999. In the opinion of management,
the unaudited interim consolidated financial statements furnished herein include
all adjustments, all of which are of a normal recurring nature, necessary for a
fair statement of the results for the interim periods presented.

     The preparation of financial statements in accordance with generally
accepted accounting principles requires the use of estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities known to exist as of the date the financial
statements are published, and the reported amounts of revenues and expenses
during the reporting period. Uncertainties with respect to such estimates and
assumptions are inherent in the preparation of the Company's consolidated
financial statements; accordingly, it is possible that the actual results could
differ from these estimates and assumptions, which could have a material effect
on the reported amounts of the Company's consolidated financial position and
results of operations.

     Operating results for the quarter ended March 31, 2000, are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000.

LABOR RELATED COSTS
     The Company is currently operating five of its U.S. facilities with
salaried employees and other workers as a result of the September 30, 1998,
strike by the United Steelworkers of America ("USWA") and the subsequent "lock-
out" by the Company in January 1999. However, the Company has continued to
accrue certain benefits (such as pension and other postretirement benefit
costs/liabilities) for the USWA members during the period of the strike and
subsequent lock-out. For purposes of computing the benefit-related costs and
liabilities to be reflected in the accompanying interim consolidated financial
statements, the Company based its accruals on the terms of the previously
existing (expired) USWA contract. Any differences between the amounts accrued
and the amounts ultimately agreed to during the collective bargaining process
will be reflected in future results during the term of any new contract.

RECENT ACCOUNTING PRONOUNCEMENTS
     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133 requires companies
to recognize all derivative instruments as assets or liabilities in the balance
sheet and to measure those instruments at fair value. Under SFAS No. 133, the
Company will be required to "mark-to-market" its hedging positions at each
period-end in advance of recording the physical transactions to which the hedges
relate. Changes in the fair value of the Company's open hedging positions will
be reflected as an increase or reduction in stockholders' equity through
comprehensive income. The impact of the changes in fair value of the Company's
hedging positions will reverse out of comprehensive income (net of any
fluctuations in other "open" positions) and will be reflected in traditional net
income when the subsequent physical transactions occur. Currently, the dollar
amount of the Company's comprehensive income adjustments is not significant so
there is not a significant difference between "traditional" net income and
comprehensive income. However, differences between comprehensive income and
traditional net income may become significant in future periods as SFAS No. 133
will result in fluctuations in comprehensive income and stockholders' equity in
periods of price volatility, despite the fact that the Company's cash

                                       -4-
<PAGE>   6

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

flow and earnings will be "fixed" to the extent hedged. This result is contrary
to the intent of the Company's hedging program, which is to "lock-in" a price
(or range of prices) for products sold/used so that earnings and cash flows are
subject to reduced risk of volatility.

     Adoption of SFAS No. 133 is required on or before January 1, 2001. The
Company will likely implement SFAS No. 133 as of January 1, 2001.

EARNINGS (LOSS) PER SHARE
Basic - Basic earnings (loss) per share is computed by dividing net income
(loss) by the weighted average number of shares of Common Stock outstanding
during the period including the weighted average impact of the shares of Common
Stock issued during the year from the date(s) of issuance.

Diluted - The impact of outstanding stock options was excluded from the
computation of diluted earnings (loss) per share for the quarters ended March
31, 2000 and 1999, as its effect would have been antidilutive.

2.   INCIDENT AT GRAMERCY FACILITY

     In July 1999, KACC's Gramercy, Louisiana alumina refinery was extensively
damaged by an explosion in the digestion area of the plant. Twenty-four
employees were injured in the incident, several of them severely. As a result of
the incident, alumina production at the facility was completely curtailed.
Construction on the damaged part of the facility began during the first quarter
of 2000. Initial production at the plant is currently expected to commence
during the third quarter of 2000. Based on current estimates, full production is
expected to be achieved during the first quarter of 2001. KACC has received the
regulatory permit required to operate the plant once the facility is ready to
resume production.

     The cause of the incident is under investigation by KACC and governmental
agencies. In January 2000, the U.S. Mine Safety and Health Administration
("MSHA") issued 21 citations and in March 2000 proposed that KACC be assessed a
penalty of $.5 in connection with its investigation of the incident. The
citations allege, among other things, that certain aspects of the plant's
operations were unsafe and that such mode of operation contributed to the
explosion. KACC disagrees with the substance of the citations and has challenged
them and the associated penalty. It is possible that other civil or criminal
fines or penalties could be levied against KACC. However, as more fully
explained below, based on what is known to date and discussions with the
Company's advisors, the Company believes that the financial impact of this
incident (in excess of insurance deductibles and self-retention provisions) will
be largely offset by insurance coverage. Deductibles and self-retention
provisions under the insurance coverage for the incident total $5.0, which
amounts were charged to Cost of products sold in the third quarter of 1999.

     KACC has significant amounts of insurance coverage related to the Gramercy
incident. KACC's insurance coverage has five separate components: property
damage, clean-up and site preparation, business interruption, liability and
workers' compensation. The insurance coverage components are discussed below.

     Property Damage. KACC's insurance policies provide that KACC will be
reimbursed for the costs of repairing or rebuilding the damaged portion of the
facility using new materials of like kind and quality with no deduction for
depreciation. In 1999, based on discussions with the insurance carriers and
their representatives and third party engineering reports, KACC recorded the
minimum expected property damage reimbursement amount. The amount ($100) was
classified as a receivable in Other assets as such proceeds will be invested in
property, plant and equipment. Such amount is expected to be received during
2000.

     Clean-up and Site Preparation. The Gramercy facility incurred incremental
costs for clean-up and other activities during 1999 and will continue to incur
such costs during 2000. These clean-up and site preparation activities have been
offset by accruals of approximately $18.3, of which $4.3 was accrued in the
first quarter of 2000, for estimated insurance recoveries.

     Business Interruption. KACC's insurance policies provide for the
reimbursement of specified continuing expenses incurred during the interruption
period plus lost profits (or less expected losses) plus other expenses incurred
as a

                                       -5-
<PAGE>   7

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

result of the incident. Operations at the Gramercy facility and a sister
facility in Jamaica, which supplies bauxite to Gramercy, will continue to incur
operating expenses until production at the Gramercy facility is restored. KACC
will also incur increased costs as a result of agreements to supply certain of
Gramercy's major customers with alumina, despite the fact that KACC had declared
force majeure with respect to the contracts shortly after the incident. KACC is
purchasing alumina from third parties, in excess of the amounts of alumina
available from other KACC-owned facilities, to supply these customers' needs as
well as to meet intersegment requirements. The excess cost of such open market
purchases is expected to be substantially offset by insurance recoveries.
However, if delays in the rebuilding of the Gramercy facility were to occur and
certain sublimits within KACC's insurance coverage were deemed to apply, the
Company's and KACC's results could be negatively affected. In consideration of
the foregoing items, as of March 31, 2000, KACC had recorded expected business
interruption insurance recoveries totaling $66.3, of which $25.3 were recorded
in first quarter of 2000, as a reduction of Cost of products sold. These amounts
substantially offset actual expenses incurred during the period. Such business
interruption insurance amounts represent estimates of KACC's business
interruption coverage based on discussions with the insurance carriers and their
representatives and are therefore subject to change.

     Since production has been completely curtailed at the Gramercy facility,
KACC has, for the time being, suspended depreciation of the facility.
Depreciation expense for the first three months of 1999 was approximately $3.0.
Depreciation expense will increase in future years once production is restored.

     Liability. The incident has also resulted in more than thirty-five class
action lawsuits being filed against KACC alleging, among other things, property
damage and personal injury. In addition, a claim for alleged business
interruption losses has been made by a neighboring business. The aggregate
amount of damages sought in the lawsuits and other claims cannot be determined
at this time; however, KACC does not currently believe the damages will exceed
the amount of coverage under its liability policies.

     Workers' Compensation. Claims relating to all of the injured employees are
expected to be covered under KACC's workers' compensation or liability policies.
However, the aggregate amount of workers' compensation claims cannot be
determined at this time and it is possible that such claims could exceed KACC's
coverage limitations. While it is presently impossible to determine the
aggregate amount of claims that may be incurred, or whether they will exceed
KACC's coverage limitations, KACC currently believes that any amount in excess
of the coverage limitations will not have a material effect on the Company's
consolidated financial position or liquidity. However, it is possible that as
additional facts become available, additional charges may be required and such
charges could be material to the period in which they are recorded.

     Timing of Insurance Recoveries. As of March 31, 2000, the Company had
recorded estimated recoveries for clean-up, site preparation and business
interruption costs incurred of approximately $84.6, of which $29.6 was recorded
in the first quarter of 2000. As of March 31, 2000, approximately $79.6 of
insurance recoveries had been received, of which $29.6 was received in the first
quarter of 2000. KACC continues to work with the insurance carriers to maximize
the amount of recoveries and to minimize, to the extent possible, the period of
time between when KACC expends funds and when it is reimbursed. However, KACC
will likely have to fund an average of 30 - 60 days of property damage and
business interruption activity, unless some other arrangement is agreed with the
insurance carriers, and such amounts will be significant. The Company believes
it has sufficient financial resources to fund the construction and business
interruption costs on an interim basis. However, no assurances can be given in
this regard. If insurance recoveries were to be delayed or if there were to be
other significant uses of KACC's existing Credit Agreement capacity, delays in
the rebuilding at the Gramercy facility could occur and could have a material
adverse impact on the Company's and KACC's liquidity and operating results.

                                       -6-
<PAGE>   8

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

3.   INVENTORIES

     The classification of inventories is as follows:

<TABLE>
<CAPTION>

                                                             March 31,     December 31,
                                                                  2000             1999
                                                        -------------------------------
<S>                                                     <C>              <C>
Finished fabricated aluminum products                   $         98.0   $        118.5
Primary aluminum and work in process                             184.3            189.4
Bauxite and alumina                                              117.5            124.1
Operating supplies and repair and maintenance parts              121.2            114.1
                                                        -------------------------------
     Total                                              $        521.0   $        546.1
                                                        ===============================

</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.

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 such environmental laws, and
to claims and litigation based upon such laws. KACC currently is subject to a
number of claims 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 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, 2000, the balance of such accruals, which are primarily included in
Long-term liabilities, was $48.2. 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 actions 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 $9.0 for the years 2000
through 2004 and an aggregate of approximately $22.0 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 $37.0. As the resolution of these matters
is subject to further regulatory review and approval, no specific assurance can
be given as to when the factors upon which a substantial portion of this
estimate is based can be expected to be resolved. However, the Company is
currently working to resolve certain of these matters.

     The Company believes that KACC has insurance coverage available to recover
certain incurred and future environmental costs and is actively pursuing claims
in this regard. No assurances can be given that the Company will be successful
in attempts to recover incurred or future costs from insurers or that the amount
of recoveries received will ultimately be adequate to cover costs incurred.

     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.

                                       -7-
<PAGE>   9

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

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 sold for at least 20 years. At March 31, 2000, the number
of such claims pending was approximately 105,300, as compared with 100,000 at
December 31, 1999. In 1999, approximately 29,300 of such claims were received
and 15,700 were settled or dismissed. During the quarter ended March 31, 2000,
approximately 6,400 of such claims were received and 1,100 of such claims were
settled or dismissed. The foregoing claim and settlement figures as of and for
the quarter ended March 31, 2000, do not reflect the fact that as of March 31,
2000, KACC had reached agreements under which it expects to settle approximately
62,000 of the pending asbestos-related claims over an extended period.

     The Company maintains a liability for estimated asbestos-related costs for
claims filed to date and an estimate of claims to be filed over a 10 year period
(i.e., through 2009). The Company's estimate is based on the Company's view, at
each balance sheet date, of the current and anticipated number of
asbestos-related claims, the timing and amounts of asbestos-related payments,
the status of ongoing litigation and settlement initiatives, and the advice of
Wharton Levin Ehrmantraut Klein & Nash, P.A., with respect to the current state
of the law related to asbestos claims. However, there are inherent uncertainties
involved in estimating asbestos-related costs and the Company's actual costs
could exceed the Company's estimates due to changes in facts and circumstances
after the date of each estimate. Further, while the Company does not presently
believe there is a reasonable basis for estimating asbestos-related costs beyond
2009 and, accordingly, no accrual has been recorded for any costs which may be
incurred beyond 2009, the Company expects that such costs may continue beyond
2009, and that such costs could be substantial. As of March 31, 2000, an
estimated asbestos-related cost accrual of $386.1, before consideration of
insurance recoveries, has been reflected in the accompanying interim
consolidated financial statements primarily in Long-term liabilities. The
Company estimates that annual future cash payments for asbestos-related costs
will range from approximately $80.0 to $95.0 in the years 2000 to 2002,
approximately $35.0 to $55.0 for each of the years 2003 and 2004, and an
aggregate of approximately $50.0 thereafter.

     The Company believes that KACC has insurance coverage available to recover
a substantial portion of its asbestos-related costs. Although the Company has
settled asbestos-related coverage matters with certain of its insurance
carriers, other carriers have not yet agreed to settlements. KACC has reached
preliminary agreements with certain insurance carriers under which it expects to
collect a substantial portion of its 2000 asbestos-related payments. The timing
and amount of future recoveries from these and other insurance carriers will
depend on the pace of claims review and processing by such carriers and on the
resolution of any disputes regarding coverage under such policies. The Company
believes that substantial recoveries from the insurance carriers are probable.
The Company reached this conclusion after considering its prior
insurance-related recoveries in respect of asbestos-related claims, existing
insurance policies, and the advice of Heller Ehrman White & McAuliffe LLP with
respect to applicable insurance coverage law relating to the terms and
conditions of those policies. Accordingly, an estimated aggregate insurance
recovery of $320.4, determined on the same basis as the asbestos-related cost
accrual, is recorded primarily in Other assets at March 31, 2000. However, no
assurance can be given that KACC will be able to project similar recovery
percentages for future asbestos-related claims or that the amounts related to
future asbestos-related claims will not exceed KACC's aggregate insurance
coverage.

     Management continues to monitor claims activity, the status of lawsuits
(including settlement initiatives), legislative developments, and costs incurred
in order to ascertain whether an adjustment to the existing accruals should be
made to the extent that historical experience may differ significantly from the
Company's underlying assumptions. 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 asbestos-related
uncertainties and the incurrence of asbestos-related costs net of related
insurance recoveries should not have a material adverse effect on the Company's
consolidated financial position or liquidity. However, as the Company's
estimates are periodically reevaluated, additional charges may be necessary and
such charges could be material to the results of the period in which they are
recorded.

                                       -8-
<PAGE>   10

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

LABOR MATTERS
     In connection with the USWA strike and subsequent lock-out by KACC, certain
allegations of unfair labor practices ("ULPs") have been filed with the National
Labor Relations Board ("NLRB") by the USWA. As previously disclosed, KACC
responded to all such allegations and believes that they were without merit. In
July 1999, the Oakland, California, regional office of the NLRB dismissed all
material charges filed against KACC. In September 1999, the union filed an
appeal of this ruling with the NLRB general counsel's office in Washington, D.C.
In April 2000, KACC was notified by the general counsel of the NLRB of the
dismissal of twenty-two of twenty-four allegations of ULPs previously brought
against it by the USWA. The general counsel of the NLRB indicated that he would
refer two allegations for trial before an administrative law judge. A trial date
has not been set. Any outcome from the trial before the administrative law judge
would be subject to an additional appeal either by the USWA or KACC. This
process could take months or years. If these proceedings eventually resulted in
a definitive ruling against KACC, it could be obligated to provide back pay to
USWA members at the five plants and such amount could be significant. However,
while uncertainties are inherent in the final outcome of such matters, the
Company believes that the resolution of the alleged ULPs should not result in a
material adverse effect on the Company's consolidated financial position,
results of operations, or liquidity.

OTHER CONTINGENCIES
     The Company or KACC is involved in various other claims, lawsuits, and
other proceedings relating to a wide variety of matters. While uncertainties are
inherent in the final outcome of such matters, and it is presently impossible to
determine the actual costs that ultimately may be incurred, management currently
believes that the resolution of such uncertainties and the incurrence of such
costs should not have a material adverse effect on the Company's consolidated
financial position, results of operations, or liquidity.

     See Note 10 of Notes to Consolidated Financial Statements for the year
ended December 31, 1999.

5.   DERIVATIVE FINANCIAL INSTRUMENTS AND RELATED HEDGING PROGRAMS

     At March 31, 2000, the net unrealized loss on KACC's position in aluminum
forward sales and option contracts, (excluding the impact of those contracts
discussed below which have been marked to market), energy forward purchase and
option contracts, and forward foreign exchange contracts, was approximately
$25.2 (based on applicable quarter-end published market prices). As KACC's
hedging activities are generally designed to lock-in a specified price or range
of prices, gains or losses on the derivative contracts utilized in these hedging
activities will be offset by losses or gains, respectively, on the transactions
being hedged.

ALUMINA AND ALUMINUM
     The Company's earnings are sensitive to changes in the 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. Primary
aluminum prices have historically been subject to significant cyclical price
fluctuations. Alumina prices as well as fabricated aluminum product prices
(which vary considerably among products) are significantly influenced by changes
in the price of primary aluminum but generally lag behind primary aluminum price
changes by up to three months. Since 1993, the Average Midwest United States
transaction price for primary aluminum has ranged from approximately $.50 to
$1.00 per pound.

     From time to time in the ordinary course of business, KACC enters into
hedging transactions to provide price risk management in respect of the net
exposure of earnings and cash flows resulting from (i) anticipated sales of
alumina, primary aluminum and fabricated aluminum products, less (ii) expected
purchases of certain items, such as aluminum scrap, rolling ingot, and bauxite,
whose prices fluctuate with the price of primary aluminum. Forward sales
contracts are used by KACC to effectively fix the price that KACC will receive
for its shipments. KACC also uses option contracts (i) to establish a minimum
price for its product shipments, (ii) to establish a "collar" or range of prices
for KACC's anticipated sales, and/or (iii) to permit KACC to realize possible
upside price movements. As of March 31,

                                       -9-
<PAGE>   11

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

2000, KACC had entered into option contracts that established a price range for
239,000, 317,000 and 91,000 tons* of primary aluminum with respect to 2000, 2001
and 2002, respectively.

[FN]

- --------
* All references to tons in this report refer to metric tons of 2,204.6 pounds.

</FN>

     Additionally, through March 31, 2000, KACC had also entered a series of
transactions with a counterparty that will provide KACC with a premium over the
forward market prices at the date of the transaction for 2,000 tons of primary
aluminum per month during the period April 2000 through June 2001. KACC also
contracted with the counterparty to receive certain fixed prices (also above the
forward market prices at the date of the transaction) on 4,000 tons of primary
aluminum per month over a three year period commencing October 2001, unless
market prices during certain periods decline below a stipulated "floor" price,
in which case, the fixed price sales portion of the transactions terminate. The
price at which the October 2001 and later transactions terminate is well below
current market prices. While the Company believes that the October 2001 and
later transactions are consistent with its stated hedging objectives, these
positions do not qualify for treatment as a "hedge" under current accounting
guidelines. Accordingly, these positions will be "marked-to-market" each period.
For the quarter ended March 31, 2000, the Company recorded mark-to-market gains
of $14.4 in Other income (expense) associated with the transactions described in
this paragraph.

     As of March 31, 2000, KACC had sold forward virtually all of the alumina
available to it in excess of its projected internal smelting requirements for
2000 and 2001 at prices indexed to future prices of primary aluminum.

ENERGY
     KACC is exposed to energy price risk from fluctuating prices for fuel oil
and diesel oil consumed in the production process. KACC from time to time in the
ordinary course of business enters into hedging transactions with major
suppliers of energy and energy related financial instruments. As of March 31,
2000, KACC held a combination of fixed price purchase and option contracts for
an average of 232,000 barrels per month of fuel oil for the remainder of 2000.

FOREIGN CURRENCY
     KACC enters into forward exchange contracts to hedge material cash
commitments to foreign subsidiaries or affiliates. At March 31, 2000, KACC had
net forward foreign exchange contracts totaling approximately $76.9 for the
purchase of 116.5 Australian dollars from April 2000 through July 2001, in
respect of its Australian dollar denominated commitments from April 2000 through
July 2001. In addition, KACC has entered into option contracts that establish a
price range for the purchase of 36.0 Australian dollars for the period April
2000 through June 2001.

     See Note 11 of the Notes to Consolidated Financial Statements for the year
ended December 31, 1999.

6.   SIGNIFICANT ACQUISITIONS AND DISPOSITIONS

     In February 2000, KACC completed the previously announced sale of its
Micromill assets and technology to a third party for a nominal payment at
closing and future payments based on subsequent performance and profitability of
the Micromill technology. The sale did not have a material impact on the
Company's first quarter 2000 operating results.

     During the quarter ended March 31, 2000, KACC, in the ordinary course of
business, sold certain non-operating properties for total proceeds of
approximately $12.0. The sale did not have a material impact on the Company's
first quarter 2000 operating results.

7.   INTERIM OPERATING SEGMENT INFORMATION

     The Company uses a portion of its bauxite, alumina and primary aluminum
production for additional processing at its downstream facilities. Transfers
between business units are made at estimated market prices. The accounting
policies of the segments are the same as those described in Note 1 of Notes to
Consolidated Financial Statements for

                                      -10-
<PAGE>   12

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

the year ended December 31, 1999. Business unit results are evaluated internally
by management before any allocation of corporate overhead and without any charge
for income taxes or interest expense. See Note 12 of Notes to Consolidated
Financial Statements for the year ended December 31, 1999.

     Financial information by operating segment for the quarters ended March 31,
2000 and 1999 is as follows:

<TABLE>
<CAPTION>

                                                             2000           1999
- ----------------------------------------------------------------------------------
<S>                                                     <C>              <C>
Net Sales:
     Bauxite and Alumina:
       Net sales to unaffiliated customers              $   100.8 (1)    $    89.7
       Intersegment sales                                    56.8 (1)         23.0
                                                        ---------        ---------
                                                            157.6            112.7
                                                        ---------        ---------
     Primary Aluminum:
       Net sales to unaffiliated customers                  127.1             89.1
       Intersegment sales                                    82.1             49.1
                                                        ---------        ---------
                                                            209.2            138.2
                                                        ---------        ---------
     Flat-Rolled Products                                   153.7            148.3
     Engineered Products                                    159.5            133.5
     Minority interests                                      24.6             18.8
     Eliminations                                          (138.9)           (72.1)
                                                        ---------        ---------
                                                        $   565.7        $   479.4
                                                        =========        =========
Operating income (loss):
     Bauxite and Alumina                                $    16.4 (2)    $    (7.8)
     Primary Aluminum                                        25.5            (22.1)(3)
     Flat-Rolled Products                                     3.1              7.4
     Engineered Products                                     13.3              6.9
     Micromill (4)                                            (.6)            (3.3)
     Eliminations                                            (4.1)             3.6
     Corporate and Other                                    (16.7)(5)        (17.7)
                                                        ---------        ---------
                                                        $    36.9        $   (33.0)
                                                        =========        =========
Depreciation and amortization:
     Bauxite and Alumina                                $     6.0 (6)    $     8.9
     Primary Aluminum                                         6.2              7.3
     Flat-Rolled Products                                     4.1              4.1
     Engineered Products                                      2.8              2.7
     Micromill (4)                                             .2               .7
     Corporate and Other                                       .3               .7
                                                        ---------        ---------
                                                        $    19.6        $    24.4
                                                        =========        =========

<FN>

(1)  Net sales for the three months ended March 31, 2000, included approximately
     77,000 tons of alumina purchased from third parties and resold to certain
     unaffiliated customers of the Gramercy facility and 39,000 tons of alumina
     purchased from third parties and transferred to the Company's primary
     alumina business unit.
(2)  Operating income (loss) for the three months ended March 31, 2000, included
     estimated business interruption insurance recoveries totaling $25.3.
(3)  Operating income (loss) for the three months ended March 31, 1999, included
     potline restart costs of $7.1.
(4)  KACC's Micromill assets and technology were sold to a third party in
     February 2000.
(5)  Operating income (loss) for the three months ended March 31, 2000, included
     approximately $2.0 of non-recurring expenses related to Corporate staff
     cost reduction and efficiency initiatives.
(6)  Depreciation was suspended for the Gramercy facility for the last six
     months of 1999 and the first three months of 2000, as a result of the July
     5, 1999, incident. Depreciation expense for the Gramercy facility for the
     three months ended March 31, 1999, was approximately $3.0.

</FN>
</TABLE>

                                      -11-
<PAGE>   13

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

     Capital expenditures made during the first quarter of 2000 (other than the
Gramercy facility construction) were incurred on a relatively ratable basis
among KACC's four primary operating business segments.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

     This section should be read in conjunction with the response to Item 1,
Part I, of this Report.

     This section contains statements which constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements appear in a number of places in this section (see, for
example, "Recent Events and Developments," "Results of Operations," and
"Liquidity and Capital Resources"). Such statements can be identified by the use
of forward-looking terminology such as "believes," "expects," "may,"
"estimates," "will," "should," "plans" or "anticipates" or the negative thereof
or other variations thereon or comparable terminology, or by discussions of
strategy. Readers are cautioned that any such forward-looking statements are not
guarantees of future performance and involve significant risks and
uncertainties, and that actual results may vary materially from those in the
forward-looking statements as a result of various factors. These factors include
the effectiveness of management's strategies and decisions, general economic and
business conditions, developments in technology, new or modified statutory or
regulatory requirements, and changing prices and market conditions. This section
and Part I, Item 1. "Business - Factors Affecting Future Performance" in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999, each
identify other factors that could cause actual results to vary. No assurance can
be given that these are all of the factors that could cause actual results to
vary materially from the forward-looking statements.

RECENT EVENTS AND DEVELOPMENTS

INCIDENT AT GRAMERCY FACILITY
     In July 1999, KACC's Gramercy, Louisiana alumina refinery was extensively
damaged by an explosion in the digestion area of the plant. See Note 2 of Notes
to Interim Consolidated Financial Statements for a full discussion regarding the
incident at the Gramercy facility.

     Construction on the damaged part of the facility began during the first
quarter of 2000. Initial production at the plant is currently expected to
commence during the third quarter of 2000. Based on current estimates, full
production is expected to be achieved during the first quarter of 2001. KACC has
received the regulatory permit required to operate the plant once the facility
is ready to resume production.

     In March 2000, the U.S. Mine Safety and Health Administration ("MSHA")
proposed that KACC be assessed a penalty of $.5 million in connection with the
citations issued from its investigation of the incident. KACC disagrees with the
substance of the previously issued MSHA citations and has challenged them and
the associated penalty. However, it is possible that other civil or criminal
fines or penalties could be levied against KACC.

     During the three months ended March 31, 2000, estimated insurance
recoveries for clean-up and site preparation costs of $4.3 million and business
interruption costs of $25.3 million were accrued. During the three months ended
March 31, 2000, insurance recoveries totaling $29.6 million were received. At
March 31, 2000, the Company had recorded estimated recoveries for clean-up, site
preparation and business interruption costs incurred of approximately $84.6
million, of which $79.6 million of insurance recoveries had been received.

LABOR MATTERS
     Substantially all of KACC's hourly workforce at its Gramercy, Louisiana,
alumina refinery, Mead and Tacoma, Washington, aluminum smelters, Trentwood,
Washington, rolling mill, and Newark, Ohio, extrusion facility were covered by a
master labor agreement with the United Steelworkers of America (the "USWA")
which expired on September 30, 1998. The parties did not reach an agreement
prior to the expiration of the master agreement and the USWA chose to strike. In
January 1999, KACC declined an offer by the USWA to have the striking workers
return to work at the five plants without a new agreement. KACC imposed a
lock-out to support its bargaining position and continues to operate the plants
with salaried employees and other workers as it has since the strike began.

                                      -12-
<PAGE>   14

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

     KACC and the USWA continue to communicate. The objective of KACC has been,
and continues to be, to negotiate a fair labor contract that is consistent with
its business strategy and the commercial realities of the marketplace.

     In connection with the USWA strike and subsequent lock-out by KACC, certain
allegations of unfair labor practices ("ULPs") have been filed with the National
Labor Relations Board ("NLRB") by the USWA. As previously disclosed, KACC
responded to all such allegations and believes that they were without merit. In
July 1999, the Oakland, California, regional office of the NLRB dismissed all
material charges filed against KACC. In September 1999, the union filed an
appeal of this ruling with the NLRB general counsel's office in Washington, D.C.
In April 2000, KACC was notified by the general counsel of the NLRB of the
dismissal of twenty-two of twenty-four allegations of ULPs previously brought
against it by the USWA. The general counsel of the NLRB indicated that he would
refer two allegations for trial before an administrative law judge. A trial date
has not been set. Any outcome from the trial before the administrative law judge
would be subject to an additional appeal either by the USWA or KACC. This
process could take months or years. If these proceedings eventually resulted in
a definitive ruling against KACC, it could be obligated to provide back pay to
USWA members at the five plants and such amount could be significant. However,
while uncertainties are inherent in the final outcome of such matters, the
Company believes that the resolution of the alleged ULPs should not result in a
material adverse effect on the Company's consolidated financial position,
results of operations, or liquidity.

STRATEGIC INITIATIVES
     KACC's strategy is to improve its financial results by: increasing the
competitiveness of its existing plants; continuing its cost reduction
initiatives; adding assets to businesses it expects to grow; pursuing
divestitures of its non-core businesses; and strengthening its financial
position.

     In addition to working to improve the performance of the Company's existing
assets, the Company has devoted significant efforts analyzing its existing asset
portfolio with the intent of focusing its efforts and capital in sectors of the
industry that are considered most attractive and in which the Company believes
it is well positioned to capture value. This process has continued in 2000. In
the first quarter of 2000, KACC, in the ordinary course of business, sold
certain non-operating properties and completed the sale of its Micromill assets
and technology.

     Another area of emphasis has been a continuing focus on managing the
Company's legacy liabilities. The Company believes that KACC has insurance
coverage available to recover certain incurred and future environmental costs
and a substantial portion of its asbestos-related costs and is actively pursuing
claims in this regard. The timing and amount of future recoveries of
asbestos-related claims from insurance carriers remain a major priority of the
Company, but will depend on the pace of claims review and processing by such
carriers and the resolution of any disputes regarding coverage under the
insurance policies. However, during 1999, KACC reached preliminary agreements
under which it expects to collect a substantial portion of its expected 2000
asbestos-related payments from certain insurance carriers.

     Additional portfolio analysis and initiatives are continuing.

FLAT-ROLLED PRODUCTS
     In December 1999, the Company announced that its flat-rolled products
business unit expects to accelerate its product mix shift toward higher value
added product lines such as heat-treat, beverage can lid and tab stock,
automotive and other niche businesses, and away from beverage can body stock.
The initial steps of this process should be completed during the second quarter
of 2000, at which point the Company will assess related issues such as
employment levels at the Trentwood facility. Although the shift in product mix
is expected to have a favorable impact on the Company's results and financial
position over the long term, it is possible that such a product mix shift may
result in certain non-recurring charges that would have an adverse impact on the
Company's near term results.

RESULTS OF OPERATIONS

     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 downstream facilities. Intersegment transfers are valued at

                                      -13-
<PAGE>   15

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

estimated market prices. The following table provides selected operational and
financial information on a consolidated basis with respect to the Company for
the quarters ended March 31, 2000 and 1999. The following data should be read in
conjunction with the Company's interim consolidated financial statements and the
notes thereto, contained elsewhere herein. See Note 12 of Notes to Consolidated
Financial Statements for the year ended December 31, 1999, for further
information regarding segments.

     Interim results are not necessarily indicative of those for a full year.

                                      -14-
<PAGE>   16

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

                 SELECTED OPERATIONAL AND FINANCIAL INFORMATION
                                   (Unaudited)
              (In millions of dollars, except shipments and prices)


<TABLE>
<CAPTION>
                                                               Quarter Ended
                                                                 March 31,
                                                         ---------------------------
                                                               2000             1999
- ------------------------------------------------------------------------------------
<S>                                                     <C>               <C>
Shipments: (000 tons)
   Alumina
      Third Party                                             437.5 (1)        487.0
      Intersegment                                            277.6 (1)        150.3
                                                        -----------       ----------
        Total Alumina                                         715.1            637.3
                                                        -----------       ----------
   Primary Aluminum
      Third Party                                              79.4             62.9
      Intersegment                                             47.9             39.5
                                                        -----------       ----------
        Total Primary Aluminum                                127.3            102.4
                                                        -----------       ----------
   Flat-Rolled Products                                        51.8             52.5
                                                        -----------       ----------
   Engineered Products                                         47.3             41.4
                                                        -----------       ----------
Average Realized Third Party Sales Price: (2)
   Alumina (per ton)                                    $       203       $      172
   Primary Aluminum (per pound)                         $       .72       $      .64
Net Sales:
   Bauxite and Alumina
      Third Party (includes net sales of bauxite)       $     100.8 (1)   $     89.7
      Intersegment                                             56.8 (1)         23.0
                                                        -----------       ----------
        Total Bauxite and Alumina                             157.6            112.7
                                                        -----------       ----------
   Primary Aluminum
      Third Party                                             127.1             89.1
      Intersegment                                             82.1             49.1
                                                        -----------       ----------
        Total Primary Aluminum                                209.2            138.2
                                                        -----------       ----------
   Flat-Rolled Products                                       153.7            148.3
   Engineered Products                                        159.5            133.5
   Minority Interests                                          24.6             18.8
   Eliminations                                              (138.9)           (72.1)
                                                        -----------       ----------
        Total Net Sales                                 $     565.7       $    479.4
                                                        ===========       ==========
Operating Income (Loss):
   Bauxite and Alumina                                  $      16.4 (3)   $     (7.8)
   Primary Aluminum                                            25.5            (22.1)(4)
   Flat-Rolled Products                                         3.1              7.4
   Engineered Products                                         13.3              6.9
   Micromill (5)                                                (.6)            (3.3)
   Eliminations                                                (4.1)             3.6
   Corporate and Other                                        (16.7)(6)        (17.7)
                                                        -----------       ----------
        Total Operating Income (Loss)                   $      36.9       $    (33.0)
                                                        ===========       ==========
Net Income (Loss)                                       $      11.7       $    (38.2)
                                                        ===========       ==========
Capital Expenditures                                    $      16.7       $     16.5
                                                        ===========       ==========

<FN>

(1)  Net sales for the three months ended March 31, 2000, included approximately
     77 tons of alumina purchased from third parties and resold to certain
     unaffiliated customers and 39 tons of alumina purchased from third parties
     and transferred to the Company's primary aluminum business unit.
(2)  Average realized prices for the Company's Flat-rolled products and
     Engineered products segments are not presented as such prices are subject
     to fluctuations due to changes in product mix. Average realized third party
     sales prices for alumina and primary aluminum include the impact of hedging
     activities.

                                      -15-
<PAGE>   17

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

(3)  Operating income (loss) for the three months ended March 31, 2000, included
     estimated business interruption insurance recoveries totaling $25.3.
     Additionally, depreciation was suspended for the Gramercy facility for the
     last six months of 1999 and the first three months of 2000, as a result of
     the July 5, 1999, incident. Depreciation expense for the Gramercy facility
     for the three months ended March 31, 1999, was approximately $3.0.
(4)  Operating income (loss) for the three months ended March 31, 1999, included
     potline restart costs of $7.1.
(5)  KACC's Micromill assets and technology were sold to a third party in
     February 2000.
(6)  Operating income (loss) for the three months ended March 31, 2000, included
     approximately $2.0 of non-recurring expenses related to Corporate staff
     cost reduction and efficiency initiatives.

</FN>
</TABLE>

OVERVIEW
     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. Primary aluminum prices have historically been subject to
significant cyclical price fluctuations. See Note 5 of Notes to Interim
Consolidated Financial Statements for a discussion of KACC's hedging activities.

     Changes in global, regional, or country-specific economic conditions can
have a significant impact on overall demand for aluminum-intensive fabricated
products in the transportation, distribution, and packaging markets. Such
changes in demand can directly affect the Company's earnings by impacting the
overall volume and mix of such products sold. To the extent that these end-use
markets weaken, demand can also diminish for what the Company sometimes refers
to as the "upstream" products: alumina and primary aluminum.

     During 1999, the Average Midwest United States transaction price ("AMT
price") per pound of primary aluminum declined from the low $.60 range at the
beginning of the year to a low of approximately $.57 per pound in February and
then began a steady increase ending 1999 at $.79 per pound. During the first
quarter of 2000, the AMT price increased to a high of approximately $.84 in
January and then began a decline ending the quarter at $.74 per pound. The AMT
price for primary aluminum for the week ended April 14, 2000, was approximately
$.70 per pound.

QUARTER ENDED MARCH 31, 2000, COMPARED TO QUARTER ENDED MARCH 31, 1999

SUMMARY
     The Company reported net income of $11.7 million, or $.15 of basic income
per common share, for the first quarter of 2000, compared to a net loss of $38.2
million, or $.48 of basic loss per common share, for the same period of 1999.
Net sales in the first quarter of 2000 totaled $565.7 million compared to $479.4
million in the first quarter of 1999.

     Net income for the quarter ended March 31, 2000, included pretax gains of
$14.4 million, $.11 per common share, to reflect mark-to-market adjustments on
certain primary aluminum hedging transactions.

BAUXITE AND ALUMINA
     Third party net sales of alumina increased 12% for the quarter ended March
31, 2000, as compared to the same period in 1999 as an 18% increase in third
party average realized prices was partially offset by a 10% decrease in third
party shipments. The increase in the average realized prices was due to an
increase in market prices related to the Company's primary aluminum-linked
customers sales contracts. Such increase was partially offset by allocated net
losses from the Company's hedging activities. The decrease in
quarter-over-quarter shipments resulted primarily from differences in the timing
of shipments and, to a lesser extent, the net effect of the Gramercy incident,
after considering the 77,000 tons of alumina purchased by KACC in 2000 from
third parties to fulfill third party sales contracts.

     Intersegment net sales of alumina were up 147% for the quarter ended March
31, 2000, as compared to the same period in 1999. The increase was due to a 34%
increase in the intersegment average realized price and an 85% increase in
intersegment shipments. The increase in shipments was due to the favorable
impact of operating three more potlines at the Company's 90% owned Volta
Aluminium Company Limited ("Valco") smelter in Ghana and two and one-half more
potlines at the Company's Washington smelters in 2000 than in 1999. Intersegment
net sales

                                      -16-
<PAGE>   18

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

included approximately 39,000 tons of alumina purchased from third-parties and
transferred to the primary aluminum business unit.

     Segment operating income increased between years primarily due to the
increase in the average realized prices and net shipments discussed above.

PRIMARY ALUMINUM
     First quarter 2000 third party net sales of primary aluminum were up 43% as
compared to the same period in 1999 as a result of a 13% increase in third party
averaged realized prices and a 26% increase in third party shipments. The
increase in the average realized prices was partially offset by allocated net
losses from the Company's hedging activities. The increase in shipments was
primarily due to the favorable impact of the increased operating rate at Valco
and at the Company's Washington smelters as discussed above.

     Intersegment net sales were up approximately 67% between the first quarter
of 2000 and first quarter 1999. Intersegment shipments were up 21% from the
prior year, primarily reflecting increased demand from the fabricated products
segments, and average realized prices increased 39% reflecting higher market
prices for primary aluminum.

     Segment operating income in first quarter 2000 was up from first quarter
1999. The primary reasons for the increase were the improvements in shipments
and average realized prices discussed above. However, first quarter 1999 results
included costs of approximately $7.1 million associated with preparing and
restarting potlines at Valco and the Washington smelters.

FLAT-ROLLED PRODUCTS
     Net sales of flat-rolled products increased by 4% during first quarter 2000
as compared to 1999 primarily as a result of a 5% increase in average realized
prices. Third party shipments were essentially flat. The increase in average
realized prices primarily reflects the pass through to customers of increased
market prices for primary aluminum.

     Segment operating income decreased in the first quarter 2000 compared to
the same period in 1999. While average realized prices increased year over year,
year 2000 results reflect a reduced margin spread contribution from heat treat
aerospace products. While heat treat product shipments in 2000 improved over
late 1999 levels, they did not reach the robust levels experienced in 1998 and
early 1999.

ENGINEERED PRODUCTS
     Net sales of engineered products increased approximately 19% year over
year, reflecting a 14% increase in product shipments and 5% increase in average
realized prices. The increase in shipments was due to a strong increase in the
demand in the distribution and ground transportation markets. The change in
average realized prices primarily reflects the pass through to customers of
increased market prices for primary aluminum.

     Segment operating income increased substantially in the first quarter of
2000 as compared to the first quarter of 1999. The year over year increase
primarily reflects the impact of the strong demand in the distribution and
ground transportation markets on shipments and margins. Segment operating income
for the three months ended March 31, 1999, included equity in earnings of $2.5
million from the Company's 50% interest in AKW L.P., which was sold in April
1999.

ELIMINATIONS
     Eliminations of intersegment profit vary from period to period depending on
fluctuations in market prices as well as the amount and timing of the affected
segments' production and sales.

CORPORATE AND OTHER
     Corporate operating expenses represent corporate general and administrative
expenses which are not allocated to the Company's business segments. Corporate
operating expenses for 2000 included approximately $2.0 million of non-recurring
expenses related to ongoing Corporate staff cost reduction and efficiency
initiatives.

                                      -17-
<PAGE>   19

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

LIQUIDITY AND CAPITAL RESOURCES

     See Note 5 of Notes to Consolidated Financial Statements for the year ended
December 31, 1999, for a listing of the Company's indebtedness and information
concerning certain restrictive debt covenants.

OPERATING ACTIVITIES
     At March 31, 2000, the Company had working capital of $325.7 million,
compared with working capital of $336.0 million at December 31, 1999. The
decrease in working capital primarily resulted from decreases in inventories,
prepaid expenses and other current assets, offset by a decrease in accounts
payable and accrued interest and an increase in receivables. The decrease in
prepaid expenses and other current assets resulted primarily from receipts by
KACC of margin advances (deposits) resulting from reduced margin requirements
due to lower end of period primary aluminum market prices. The decrease in
accounts payable was primarily due to the timing of payments for third party
alumina purchases related to the Gramercy incident. The decrease in accrued
interest was primarily due to the timing of semi-annual interest payments on
KACC's public debt. Changes in receivables and inventories reflect the factors
described in "Results of Operations".

INVESTING ACTIVITIES
     Capital expenditures during the quarter ended March 31, 2000, were $16.7
million, including $6.5 million for the rebuilding of the Gramercy facility. The
remainder of the first quarter 2000 capital expenditures were used to improve
production efficiency and reduce operating costs. Total consolidated capital
expenditures, excluding the expenditures for the rebuilding of the Gramercy
facility which will be partially funded with insurance proceeds (see Note 2 of
Notes to Interim Consolidated Financial Statements), are expected to be between
$80.0 and $115.0 million per annum in each of 2000 through 2002 (of which
approximately 10% is expected to be funded by the Company's minority partners in
certain foreign joint ventures). See "--Financing Activities and Liquidity"
below for a discussion of Gramercy related capital spending. Management
continues to evaluate numerous projects all of which would require substantial
capital, both in the United States and overseas. The level of capital
expenditures may be adjusted from time to time depending on the Company's price
outlook for primary aluminum and other products, KACC's ability to assure future
cash flows through hedging or other means, the Company's financial position and
other factors.

FINANCING ACTIVITIES AND LIQUIDITY

     As of March 31, 2000, the Company's total consolidated indebtedness was
$980.7 million, including $20.5 million of borrowings under KACC's credit
agreement, as amended (the "Credit Agreement"), compared with $972.8 million at
December 31, 1999.

     At March 31, 2000, $235.1 million (of which $55.6 million could have been
used for letters of credit) was available to KACC under the Credit Agreement.
Loans under the Credit Agreement bear interest at a spread (which varies based
on the results of a financial test) over either a base rate or LIBOR at the
Company's option. During the quarter ended March 31, 2000, the average per annum
interest rate on loans outstanding under the Credit Agreement was approximately
9.65%.

     The Company's and KACC's near-term liquidity will be, as more fully
discussed below, affected by three significant items: the Gramercy incident,
aluminum hedging margin requirements and the amount of net payments for asbestos
liabilities.

     As of March 31, 2000, the Company had recorded estimated recoveries for
clean-up, site preparation and business interruption costs incurred relating to
the Gramercy incident of approximately $84.6 million, of which $29.6 million was
recorded in the first quarter of 2000. As of March 31, 2000, $79.6 million of
insurance recoveries related to these costs had been received, of which $29.6
million was received in the first quarter of 2000. During 2000, capital spending
related to rebuilding the Gramercy facility is expected to be approximately
$200.0 million of which a minimum of $100.0 million of such expenditures is
expected to be funded by proceeds from KACC's insurance contracts. The remainder
of the Gramercy-related capital expenditures will be funded by KACC using
existing cash resources, funds from operations and/or borrowings under KACC's
Credit Agreement. The amount of capital expenditures to be funded by KACC will
depend on, among other things, the ultimate cost and timing of the rebuild

                                      -18-
<PAGE>   20

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

and negotiations with the insurance carriers. In addition, KACC will incur
continuing expenses and experience lost profits in 2000 and 2001 as a result of
the Gramercy incident which amounts (based on current primary aluminum prices
and available facts and circumstances) are expected to total another $100.0
million, which amount is expected to be largely offset by insurance recoveries.

     KACC continues to work with the insurance carriers to maximize the amount
of recoveries and to minimize, to the extent possible, the period of time
between when KACC expends funds and when it is reimbursed. KACC will likely have
to fund an average of 30 - 60 days of property damage and business interruption
activity, unless some other arrangement is agreed with the insurance carriers,
and such amounts will be significant. The Company believes it has sufficient
financial resources to fund the construction and business interruption costs on
an interim basis. However, no assurances can be given in this regard. If
insurance recoveries were to be delayed or if there were other significant uses
of KACC's existing Credit Agreement capacity, delays in the rebuilding of the
Gramercy refinery could occur and could have a material adverse impact on the
Company's and KACC's liquidity and operating results.

     Hedging activities could also have an adverse impact on KACC's near-term
liquidity. At March 31, 2000, KACC had made margin advances of approximately
$10.0 million and had posted letters of credit totaling $20.0 million in lieu of
making margin advances. These amounts compare to December 31, 1999, outstanding
margin advances of $38.0 million and outstanding letters of credit of $40.0
million. This significant improvement resulted from a downward shift in the
forward market prices for primary aluminum during the first quarter of 2000.
Even though KACC's exposure to paying additional margin advances has improved,
increases in primary aluminum prices subsequent to March 31, 2000, could result
in KACC having to make additional margin advances or post additional letters of
credit and such amounts could be significant. KACC's exposure to margin advances
is expected to continue to improve throughout 2000 as its year 2000 positions,
which have a lower average maximum contract price than KACC's 2001 positions,
expire. However, KACC continues to consider various financing and hedging
strategies to limit its exposure to further margin advances in the event of
aluminum price increases. However, no assurance can be given that KACC will be
successful in this regard.

     KACC's estimated annual cash payments, prior to insurance recoveries, for
asbestos-related costs will be approximately $80.0 million to $95.0 million for
each of the years 2000 through 2002. The Company believes that KACC will recover
a substantial portion of these payments from insurance. Preliminary agreements
have been reached with certain insurance carriers under which it expects to
collect a substantial portion of its 2000 asbestos-related payments. However,
delays in receiving these or future insurance repayments would have an adverse
impact on KACC's liquidity.

     While no assurance can be given that existing cash sources will be
sufficient to meet the Company's short-term liquidity requirements, management
believes that the Company's existing cash resources, together with cash flows
from operations and borrowings under the Credit Agreement, will be sufficient to
satisfy its working capital and capital expenditure requirements for the next
year.

     KACC's ability to make payments on and to refinance its debt on a long-term
basis depends on its ability to generate cash in the future. This, to a certain
extent, is subject to general economic, financial, competitive, legislative,
regulatory and other factors beyond KACC's control. KACC will need to refinance
all or a substantial portion of its debt on or before its maturity. No assurance
can be given that KACC will be able to refinance its debt on acceptable terms.
However, with respect to long-term liquidity, management believes that operating
cash flow, together with the ability to obtain both short and long-term
financing, should provide sufficient funds to meet KACC's and the Company's
working capital and capital expenditure requirements.

CAPITAL STRUCTURE
     MAXXAM Inc. ("MAXXAM") and one of its wholly owned subsidiaries
collectively own approximately 63% of the Company's Common Stock, with the
remaining approximately 37% of the Company's Common Stock being publicly held.
Certain of the shares of the Company's Common Stock beneficially owned by MAXXAM
are subject to a pledge agreement by MAXXAM and its subsidiary.

                                      -19-
<PAGE>   21

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

     The Company has an effective "shelf" registration statement covering the
offering from time to time of up to $150.0 million of equity securities. Any
such offering will only be made by means of a prospectus. The Company also has
an effective "shelf" registration statement covering the offering of up to
10,000,000 shares of the Company's Common Stock that are owned by MAXXAM. The
Company will not receive any of the net proceeds from any transaction initiated
by MAXXAM pursuant to this registration statement.

     The Credit Agreement does not permit the Company, and significantly
restricts KACC's ability, to pay any dividends on their common stock.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     This section contains forward-looking statements that involve risk and
uncertainties. Actual results could differ materially from those projected in
these forward-looking statements.

     The following sets forth updated information regarding the impact on future
earnings of adverse market changes related to KACC's alumina and primary
aluminum hedging positions resulting from the downward shift in the forward
market prices for primary aluminum experienced during the first quarter of 2000,
as well as additional hedging positions put in place during the quarter. See
"Quantitative and Qualitative Disclosures About Market Risk" in the Company's
Annual Report on Form 10-K for additional information regarding KACC's hedging
activities.

     On average, before consideration of hedging activities, any fixed price
contracts with fabricated aluminum products customers, variations in production
and shipment levels, and timing issues related to price changes the Company
estimates that each $.01 increase (decrease) in the market price per
price-equivalent pound of primary aluminum increases (decreases) the Company's
annual pre-tax earnings by approximately $15.0 million.

     As of March 31, 2000, approximately 65%, 45% and 15% of KACC's net
hedgeable volume with respect to the remainder of 2000, 2001 and 2002,
respectively, is subject to a minimum and maximum contract price. If the March
31, 2000 London Metal Exchange ("LME") cash price for primary aluminum of
approximately $.69 per pound were to be the prevailing price during the period
of these hedging contracts, the Company estimates that it would realize a net
aggregate pre-tax reduction of operating income of approximately $40.0 million
from its hedging positions and fixed price customer contracts during the
remainder of 2000, 2001 and 2002. The Company estimates that a hypothetical $.10
increase from the March 31, 2000, LME price would result in an additional net
aggregate pre-tax reduction of operating income of approximately $100.0 million
being realized during the remainder of 2000, 2001 and 2002 related to KACC's
hedging positions and fixed price customer contracts. Approximately 25% of any
reductions in operating income would occur in the second quarter of 2000 as the
maximum contract prices in that period are lower than in the other periods. Both
amounts above are versus what the Company's results would have been without the
derivative commodity contracts and fixed price customer contracts discussed
above. Conversely, the Company estimates that a hypothetical $.10 decrease from
the March 31, 2000, LME price would result in an aggregate pre-tax increase in
operating income of approximately $65.0 million being realized during 2000 and
2001 related to KACC's hedging positions and fixed price customer contracts. It
should be noted, however, that, since the hedging positions and fixed price
customer contracts lock-in a specified price or range of prices, any increase or
decrease in earnings attributable to KACC's hedging positions or fixed price
customer contracts would be significantly offset by a decrease or increase in
the value of the hedged transactions.

     As stated in Note 5 of Notes to Interim Consolidated Financial Statements,
KACC has certain hedging positions which do not qualify for treatment as a
"hedge" under current accounting guidelines and thus must be marked-to-market
each period. Fluctuations in forward market prices for primary aluminum would
likely result in additional earnings volatility as a result of these positions.
The Company estimates that a hypothetical $.10 increase in spot market prices
from the March 31, 2000, LME cash price would, if the forward market were in a
"contango" position (i.e., where future prices exceed spot prices), result in
additional aggregate mark-to-market charges of between $20.0 - $30.0 million
during the balance of 2000 and 2001. Conversely, the Company estimates that a
hypothetical $.10 decrease in quarter-end 2000 spot market prices would result
in aggregate mark-to-market income of up to $19.0 million during the balance of
2000 and 2001 (which is the amount of cumulative net mark-to-market losses
reflected

                                      -20-
<PAGE>   22

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

through March 31, 2000). For purposes of this computation, the Company assumed
that the forward market would be essentially "flat" (i.e., future prices would
approximate the current forward market price).

     The foregoing estimated earnings impact on 2001 excludes the possible
effect on pre-tax income of Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which must be
adopted by the Company as of January 1, 2001.

     In addition to having an impact on the Company's earnings, a hypothetical
$.10-per-pound change in primary aluminum prices would also impact the Company's
cash flows and liquidity through changes in possible margin advance
requirements. At March 31, 2000, KACC had made margin advances of approximately
$10.0 million and had posted letters of credit totaling $20.0 million in lieu of
paying margin advances. Increases in primary aluminum prices subsequent to March
31, 2000, could result in KACC having to make additional margin advances or post
additional letters of credit and such amounts could be significant. If primary
aluminum prices increased by $.10 per pound (from the March 31, 2000 LME price)
by June 30, 2000 and the forward curve were as described above, it is estimated
that KACC could be required to make additional margin advances in the range of
$60.0 to $90.0 million. On the other hand, a hypothetical $.10 decrease in
primary aluminum prices by June 30, 2000, using the same forward curve
assumptions stated above, would be expected to result in KACC receiving all of
its March 31, 2000, margin advances. KACC's exposure to margin advances is
expected to improve throughout 2000 as its year 2000 positions, which have a
lower average maximum contract price than KACC's 2001 positions, expire. KACC is
also considering various financing and hedging strategies to limit its exposure
to further margin advances in the event of aluminum price increases. However, no
assurance can be given that KACC will be successful in this regard.

                           PART II - OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

Gramercy Litigation

      On July 5, 1999, KACC's Gramercy, Louisiana, alumina refinery was
extensively damaged by an explosion in the digestion area of the plant. The
cause of the accident is under investigation by KACC and various governmental
agencies. In January 2000, the U.S. Mine Safety and Health Administration issued
21 citations and in March 2000 proposed KACC be assessed a penalty of $.5
million in connection with its investigation of the Gramercy incident. The
citations allege, among other things, that certain aspects of the plant's
operations were unsafe and that such mode of operation contributed to the
explosion. KACC has previously announced that it disagrees with the substance of
the citations and has challenged them and the associated penalty. It is possible
that other civil or criminal fines or penalties could be levied against KACC.

      Twenty-four employees were injured in the incident, several of them
severely. KACC may be liable for claims relating to the injured employees. The
incident has also resulted in more than thirty-five lawsuits, most of which were
styled as class action suits, being filed against KACC on behalf of more than
13,000 claimants. The lawsuits allege, among other things, property damage and
personal injury. Such lawsuits were initially filed, on dates ranging from July
5, 1999, through December 26, 1999, in the Fortieth Judicial District Court for
the Parish of St. John the Baptist, State of Louisiana, or in the Twenty-Third
Judicial District Court for the Parish of St. James, State of Louisiana, and
such lawsuits have been removed to the United States District Court, Eastern
District of Louisiana, and are consolidated under the caption Carl Bell. et al.
V. Kaiser Aluminum & Chemical Corporation, No. 99-2078, et.seq. Plaintiffs have
filed motions to remand the actions to state court, and the federal court has
taken the matter under advisement. The cases are currently stayed pending
mediation between the parties. The aggregate amount of damages sought in the
lawsuits cannot be determined at this time. See Note 2 of Notes to Interim
Consolidated Financial Statements. See Part I, Item 3. "LEGAL PROCEEDINGS -
Gramercy Litigation" in the Company's Form 10-K for the year ended December 31,
1999.

                                      -21-
<PAGE>   23

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

Asbestos-related Litigation

      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 portion of Note 4 of Notes to
Interim Consolidated Financial Statements contained in this report under the
heading "Asbestos Contingencies" is incorporated herein by reference. See Part
I, Item 3. "LEGAL PROCEEDINGS - Asbestos-related Litigation" in the Company's
Form 10-K for the year ended December 31, 1999.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits.

<TABLE>
<CAPTION>

     Exhibit No.                         Exhibit
<S>                 <C>
        3.1         Restated Certificate of Incorporation of Kaiser Aluminum
                    Corporation (the "Company" or "KAC"), dated February 18,
                    2000 (incorporated by reference to Exhibit 3.1 to the Report
                    on Form 10-K for the period ended December 31, 1999, filed
                    by KAC, No. 1-9447).

        3.2         Certificate of Retirement of KAC, dated October 24, 1995
                    (incorporated by reference to Exhibit 3.2 to the Report on
                    Form 10-K for the period ended December 31, 1995, filed by
                    KAC, File No. 1-9447).

        3.3         Certificate of Retirement of KAC, dated February 12, 1998
                    (incorporated by reference to Exhibit 3.3 to the Report on
                    Form 10-K for the period ended December 31, 1997, filed by
                    KAC, File No. 1-9447).

        3.4         Certificate of Elimination of KAC, dated July 1, 1998
                    (incorporated by reference to Exhibit 3.4 to the Report on
                    From 10-Q for the quarterly period ended June 30, 1999,
                    filed by KAC, File No. 1-9447).

        3.5         Certificate of Amendment of the Restated Certificate of
                    Incorporation of KAC, dated January 10, 2000 (incorporated
                    by reference to Exhibit 3.5 to the Report on Form 10-K for
                    the period ended December 31, 1999, filed by KAC, File No.
                    1-9447).

        3.6         Amended and Restated By-laws of KAC, dated October 1, 1997
                    (incorporated by reference to Exhibit 3.3 to the Report on
                    Form 10-Q for the quarterly period ended September 30, 1997,
                    filed by KAC, File No. 1-9447).

       *27          Financial Data Schedule.

<FN>
- ----------------------
*    Filed herewith
</FN>
</TABLE>

     (b)  Reports on Form 8-K.

     No Report on Form 8-K was filed by the Company during the quarter ended
March 31, 2000.


                                      -22-
<PAGE>   24

              KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES


                                    SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, who have signed this report on behalf of
the registrant as the principal financial officer and principal accounting
officer of the registrant, respectively.

                                     KAISER ALUMINUM CORPORATION


                                                 /S/ JOHN T. LA DUC
                                     By:  --------------------------------------
                                                     John T. La Duc
                                             Executive Vice President and
                                                Chief Financial Officer
                                            (Principal Financial Officer)



                                                /S/ DANIEL D. MADDOX
                                     By:  --------------------------------------
                                                    Daniel D. Maddox
                                             Vice President and Controller
                                            (Principal Accounting Officer)

Dated:   May 1, 2000

<PAGE>   25

                                 EXHIBIT INDEX
<TABLE>
<CAPTION>

    EXHIBIT NO.                            EXHIBIT
    -----------                            -------
<S>                 <C>
        3.1         Restated Certificate of Incorporation of Kaiser Aluminum
                    Corporation (the "Company" or "KAC"), dated February 18,
                    2000 (incorporated by reference to Exhibit 3.1 to the Report
                    on Form 10-K for the period ended December 31, 1999, filed
                    by KAC, No. 1-9447).

        3.2         Certificate of Retirement of KAC, dated October 24, 1995
                    (incorporated by reference to Exhibit 3.2 to the Report on
                    Form 10-K for the period ended December 31, 1995, filed by
                    KAC, File No. 1-9447).

        3.3         Certificate of Retirement of KAC, dated February 12, 1998
                    (incorporated by reference to Exhibit 3.3 to the Report on
                    Form 10-K for the period ended December 31, 1997, filed by
                    KAC, File No. 1-9447).

        3.4         Certificate of Elimination of KAC, dated July 1, 1998
                    (incorporated by reference to Exhibit 3.4 to the Report on
                    From 10-Q for the quarterly period ended June 30, 1999,
                    filed by KAC, File No. 1-9447).

        3.5         Certificate of Amendment of the Restated Certificate of
                    Incorporation of KAC, dated January 10, 2000 (incorporated
                    by reference to Exhibit 3.5 to the Report on Form 10-K for
                    the period ended December 31, 1999, filed by KAC, File No.
                    1-9447).

        3.6         Amended and Restated By-laws of KAC, dated October 1, 1997
                    (incorporated by reference to Exhibit 3.3 to the Report on
                    Form 10-Q for the quarterly period ended September 30, 1997,
                    filed by KAC, File No. 1-9447).

       *27          Financial Data Schedule.
<FN>
- ----------------------
*    Filed herewith
</FN>
</TABLE>

<TABLE> <S> <C>


<ARTICLE>                     5
<LEGEND>
     This schedule contains summary financial information extracted from the
     consolidated financial statements of the Company for the three months
     ended March 31, 2000, and is qualified in its entirety by reference to
     such financial statements.
</LEGEND>
<CIK>                         0000811596
<NAME>                        KAISER ALUMINUM CORPORATION
<MULTIPLIER>                                   1,000,000
<CURRENCY>                                     U.S. DOLLARS

<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                              DEC-31-2000
<PERIOD-START>                                 JAN-01-2000
<PERIOD-END>                                   MAR-31-2000
<EXCHANGE-RATE>                                1
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<RECEIVABLES>                                  296
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<CURRENT-ASSETS>                               936
<PP&E>                                         1,968
<DEPRECIATION>                                 930
<TOTAL-ASSETS>                                 3,150
<CURRENT-LIABILITIES>                          610
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                          0
                                    0
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<TOTAL-LIABILITY-AND-EQUITY>                   3,150
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<CHANGES>                                      0
<NET-INCOME>                                   12
<EPS-BASIC>                                    .15
<EPS-DILUTED>                                  .15



</TABLE>


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