======================================================================================================================================
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
(Fee Required)
For the fiscal year ended December 31, 19931995
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 267-3777
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
---------------------------- ----------------------------------------- --------------------
Common Stock, $.01 par value New York Stock Exchange
$.65 Depositary shares, each8.255% PRIDES, Convertible Preferred Stock, New York Stock Exchange
representing ownership of one-tenth
of a share of Series A Mandatory
Conversion Premium Dividend Preferred
Stock
Series A Mandatory Conversion Premium None
Dividend Preferred Stock, $.05 par value
8.255% PRIDES, Convertible Preferred New York Stock Exchange
Stock,
$.05 par value
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, and (2) has been
subject to such filing requirements for the past 90 days. Yes _ X__X
---
No
____----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
___---
As of March 21, 1994,15, 1996, there were 58,095,59971,641,854 shares of the common stock
of the registrant outstanding. Based upon New York Stock Exchange
closing prices on March 21, 1994,15, 1996, the aggregate market value of the
registrant's common stock $.65 depositary shares, and 8.255% PRIDES held by non-affiliates was
$313.0$421.1 million.
Certain portions of the registrant's annual report to shareholders for
the fiscal year ended December 31, 1993,1995, are incorporated by reference
into Parts I, II, and IV of this Report on Form 10-K. Certain
portions of the registrant's definitive proxy statement to be filed
not later than 120 days after the close of the registrant's fiscal
year are incorporated by reference into Part III of this Report on
Form 10-K.
=============================================================================================================================================
NOTE
Kaiser Aluminum Corporation's Report on Form 10-K filed with the
Securities and Exchange Commission includes all exhibits required to
be filed with the Report. Copies of this Report on Form 10-K,
including only Exhibit 21 of the exhibits listed on pages 28 - 3325-28 of
this Report, are available without charge upon written request. The
registrant will furnish copies of the other exhibits to this Report on
Form 10-K upon payment of a fee of 25 cents per page. Please contact
the office set forth below to request copies of this Report on Form
10-K and for information as to the number of pages contained in each
of the other exhibits and to request copies of such exhibits:
Corporate Secretary
Kaiser Aluminum Corporation
5847 San Felipe, Suite 2600
Houston, Texas 77057-3010
(i)
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
-------------------------------------------------------------------
T A B L E O F C O N T E N T S- -----------------------------------------------------
TABLE OF CONTENTS
Page
----
PART I.I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 1. BUSINESS. . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. PROPERTIES. . . . . . . . . . . . . . . . . . . . . . 1412
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . 1412
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.HOLDERS . . . . . . . . . . . . . . . . . 18. . 16
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1816
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS. . . . . . . . . . . . . 1916
ITEM 6. SELECTED FINANCIAL DATA.DATA . . . . . . . . . . . . . . . 1917
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONSOPERATIONS. . . . . . . . . 1917
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.DATA . . . . . 1917
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSUREDISCLOSURE. . . . . . . . . . 1917
PART III.III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19. 17
ITEM 10.10.. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . 1917
ITEM 11. EXECUTIVE COMPENSATIONCOMPENSATION. . . . . . . . . . . . . . 17
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENTMANAGEMENT. . . . . . . . . . . . . . . . . . . . . . 1917
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSTRANSACTIONS. . . . . 1917
PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . .20
SCHEDULES17
SCHEDULE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SIGNATURES.19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2724
INDEX OF EXHIBITSEXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . 2825
EXHIBIT 21.21 SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3429
(ii)
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------- -----------------------------------------------------
PART I
ITEM 1. BUSINESS
Industry Overview
Primary aluminum is produced by the refining of bauxite (the major
aluminum-bearing ore) into alumina (the intermediate material) and
the reduction of alumina into primary aluminum. Approximately two pounds
of bauxite are required to produce one pound of alumina, and approximately
two pounds of alumina are required to produce one pound of primary
aluminum. Aluminum's valuable physical properties include its light
weight, corrosion resistance, thermal and electrical conductivity, and high
tensile strength.
Demand
The packaging, transportation and transportationconstruction industries are the principal
consumers of aluminum in the United States, Japan, and Western Europe. In
the packaging industry, which accounted for approximately 22%20% of aluminum
consumption in 1992,1994, aluminum's recyclability and weight advantages have
enabled it to gain market share from steel and glass, primarily in the
beverage container area. The aluminum packaging market in the
United States, Japan, and Western Europe grew at a rate of
approximately 4.0% per year during the period 1982-1992, and total
United States aluminum beverage can shipments increased at a rate of
approximately 2.5% in 1993, 1.5% in 1992, and 3.9% in 1991. Nearly all beer cans and approximately 95% of the soft drink cans
manufactured for the United States market are made of aluminum. DespiteKaiser
Aluminum Corporation ("Kaiser" or the flat
demand currently being experienced in the can stock market,"Company") believes that growth in
the packaging area is generally expectedlikely to continue inthrough the 1990s due to general
population increase and to further penetration of the beverage cancontainer
market in Western EuropeAsia and Japan,Latin America, where aluminum cans are a substantially
lower percentage of the total beverage container market than in the United
States. Kaiser believes that growth in demand for can sheet in the United
States will follow the growth in population, offset, in part, by the
effects of the use of lighter gauge aluminum for can sheet and of plastic
container production from newly installed capacity.
In the transportation industry, which accounted for approximately 28% of
aluminum consumption in the United States, Japan, and Western Europe in
1992,1994, automotive manufacturers use aluminum instead of steel, ductile iron,
or copper for an increasing number of components, including radiators,
wheels, suspension components, and engines, in order to meet more stringent
environmental, safety, and fuel efficiency requirements through vehicle weight reduction.
Managementrequirements. Kaiser believes
that sales of aluminum to the transportation industry have considerable
growth potential due to projected increases in the use of aluminum in
automobiles. According to industry sources,
aluminum content in United States automobiles nearly doubled in the
last 15 years to an average of 191 pounds per vehicle and the amount
of aluminum consumed in the manufacture of Japanese automobiles more
than doubled from 1983 to 1990. ManagementIn addition, Kaiser believes that the useconsumption of aluminum in
automobilesthe construction industry will follow the cyclical growth pattern of that
industry, and will benefit from higher growth in the United StatesAsian and Japan will
approximately double between 1991 and 2006.Latin American
economies.
Supply
As of year-end 1993,1995, Western world aluminum capacity from 109107 smelting
facilities was approximately 16.416.6 million tons* per year. Western world
production of primary aluminum for 1995 increased approximately 1.8%
compared to 1994. Net exports of aluminum from the Commonwealth of Independent States (the "C.I.S.")former Sino Soviet bloc
increased substantiallyapproximately 250% from 1990 levels during the period from 1991
through 1993 and have1994 to approximately 2.2 million tons per year. These exports
contributed to a significant increase in London Metal Exchange ("LME")
stocks of primary aluminum.
---------------------aluminum which peaked in June 1994 at 2.7 million tons.
By the end of 1995, LME stocks of primary aluminum had declined 2.1 million
tons from this peak level and 1.1 million tons from the beginning of 1995.
See "-Recent Industry Trends."
Based upon information currently available, the Company believes that
moderate additions will be made during 1996-1998 to Western world alumina
and primary aluminum production capacity. The increases in alumina
capacity during 1996-1998 are expected to come from one new refinery which
began operations in 1995 and incremental expansions of existing
- ----------
* All references to tons in this Report refer to metric tons of
2,204.6 pounds.
- 1 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------- -----------------------------------------------------
ITEM 1. BUSINESS (continued)
Based upon information currently available,refineries. In addition, Kaiser Aluminum
Corporation (the "Company") believes that only moderate additions will
be made during 1994-1995 to Western world alumina and primary aluminum
production capacity; however, due to the decline of primary aluminum
prices since January 1, 1991, and other factors, curtailments or
permanent shutdowns have been announced, to management's knowledge,
with respect tothere is currently
approximately three.9 million tons of primarycurtailed smelting capacity that could be
restarted by aluminum production capacity. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Trends."producers. The increases in aluminaprimary aluminum
capacity during 1994-1995 will1996-1998 are expected to come from one new smelter, which
began operations in 1995 and is expected to reach its rated capacity of
approximately 466,000 tons per year in 1996, and the remainder principally
from incremental expansions of existing refineries and not from new plants, which
generally require a four to five-year design, engineering, and
construction period.smelters.
Recent Industry Trends
TheMarket fundamentals for aluminum industry has been cyclicalimproved significantly in 1994 as aluminum
producers worldwide curtailed primary aluminum production, Western world
consumption of aluminum grew strongly, and customers replenished
inventories, particularly in the United States. In 1995, production of
primary aluminum increased and consumption of aluminum continued to grow,
but at a much lower rate than in 1994. In general, the overall aluminum
market was strongest in the first half of 1995. By the second half of
1995, orders and shipments for certain products had softened and the rate
of decline in LME inventories had leveled off. By the end of 1995, some
small increases in LME inventories occurred, and prices of alumina
andaluminum
weakened from first-half levels. The Midwest U.S. transaction price for
primary aluminum have been volatile from timein 1995 averaged approximately 86 cents per pound,
compared to time. During
1989, tight supply conditionsa 1994 annual average of approximately 72 cents per pound. The
Midwest U.S. transaction price for primary aluminum averaged approximately
79 cents per pound in December 1995.
Western world demand for alumina, and strong demand for
primary aluminum resulted in unusually high spot prices for alumina.
During 1990, a moderate surplusthe price of alumina, supply developed duedeclined in
1994 in response to new
aluminathe curtailment of Western world smelter production from two facilities restarted in prior years
(including the Company's Alpart refinery) and increased production at
other refineries. Furthermore, curtailments of
primary aluminum, productionpartially offset by increased usage of Western world
alumina by smelters in response to declining ingot prices have increased the surplusCommonwealth of alumina supply. Since 1990, spot pricesIndependent States (the "CIS")
and in the People's Republic of alumina have
declined substantially due to these factors and slow economic growth
in major aluminum consuming countries. Contract prices for deliveries
of alumina in 1993 were in a lower range than the ranges applicable
during the past several years. As a result of these factors and the
continuing expansion of existing alumina refineries during 1992-1993,
the current surplus of alumina is expected to continue.
During 1989 and 1990, primary aluminum smelters throughout theChina (the "PRC"). Increased Western world
operated at near capacity levels. This factor, combined with
increased production from smelter capacity additions during 1989 and
1990, resulted in a reduction of the market price of primary aluminum, from 1988 peak prices. Additions to smelter capacity in 1991, 1992,
and 1993, continued high operating rates in the Western world, and slow
economic growth in major aluminum consuming countries, as well as exports from the C.I.S. have contributed to an oversupplycontinued imports of primary
aluminum and a significant increase in primary aluminum inventories in
the world. If Western
world productionalumina by the CIS and exports from the C.I.S.
continuePRC, during 1995 resulted in higher demand
for Western world alumina and significantly stronger alumina pricing.
United States shipments of domestic fabricated aluminum products in 1995
were approximately at current1994 levels, primary aluminum inventory levels are
expected to increase furtheralthough in 1994. The foregoing factors have
contributed to a significant reduction1995 demand for can sheet in the market price of primary
aluminum, and may continue to adversely affect the market price of
primary aluminum in the future. The average price of primary aluminum
was at historic lows in real terms for the year ended 1993. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Trends."
Government officials from the European Union,
the United States Canada, Norway, Australia, and the Russian Federation met in a
multilateral conference in January 1994softened relative to discuss the current excess
global supply of primary aluminum. All participants have ratified as a
trade agreement the resulting Memorandum which provides, in part, for
(i) a reduction in Russian Federation primary aluminum production by
300,000 tons per year within three months of the date of ratification
of the Memorandum and an additional 200,000 tons within the following
three months, (ii) improved availability of comprehensive data on
Russian aluminum production, and (iii) certain assistance to the
Russian aluminum industry. A Russian Federation Trade Ministry
official has publicly stated1994. Overall, Kaiser believes that
the market fundamentals for aluminum will be good for the near future,
barring prolonged economic recession, and that demand is likely to continue
growing at levels sufficient to absorb the output reduction would remain in
effect for 18 months to two years, provided that other worldwide
production cutbacks occur, existing trade restrictions on aluminum are
eliminated,from restarts of industry
smelter capacity and nofrom the limited additions of new trade restrictions on aluminum are imposed. The
Memorandum does not require specific levels of production cutbacks by
other producing nations. The Memorandum was finalized at a second
meeting of the participants held at the end of February 1994.
- 2 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 1. BUSINESS (continued)supply under
construction.
The Company
General
The Company is a direct subsidiary of MAXXAM Inc. ("MAXXAM"). The Company,
through its subsidiary, Kaiser Aluminum & Chemical Corporation ("KACC"),
operates in all principal aspects of the aluminum industry - the mining of
bauxite, the refining of bauxite into alumina, the production of primary
aluminum from alumina, and the manufacture of fabricated (including
semi-fabricated) aluminum products. In addition to the production
utilized by KACC in its operations, KACC sells significant amounts
of alumina and primary aluminum in the domestic and international markets.
In 1993,1995, KACC produced approximately 2,826,6002,838,000 tons of alumina, of which
approximately 71%72% was sold to third parties, and produced 436,200413,600 tons
of primary aluminum, of which approximately 56%66% was sold to third parties.
KACC is also a major domestic supplier of fabricated aluminum products.
In 1993,1995, KACC shipped approximately 373,200368,200 tons of fabricated
aluminum products to third parties, which accounted for approximately
6% of the total tonnage of United States domestic shipments in 1993.shipments. A majority
of KACC's fabricated products are sold to distributors or used by
customers as components in the manufacture and assembly of finished
end-use products. Note 10 of the Notes to Consolidated Financial
Statements contained in the Company's 1995 Annual Report to Shareholders
(the "Annual Report") is incorporated herein by reference.
2
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- -----------------------------------------------------
ITEM 1. BUSINESS (continued)
The following table sets forth total shipments and intracompany transfers
of KACC's alumina, primary aluminum, and fabricated aluminum operations:
Year Ended December 31,
------------------------------
1993 1992 1991
------ ------ ------
Year Ended December 31,
-----------------------
1995 1994 1993
------- ------- -------
(in thousands of tons)
ALUMINA:
Shipments to Third Parties 2,040.1 2,086.7 1,997.5 2,001.3 1,945.9
Intracompany Transfers 807.5 878.2 884.2
PRIMARY ALUMINUM:
Shipments to Third Parties 242.5 355.4 340.6
Intracompany Transfers 800.6 820.9 807.5
PRIMARY ALUMINUM:
Shipments to Third Parties 271.7 224.0 242.5
Intracompany Transfers 217.4 225.1 233.6 224.4 199.6
FABRICATED ALUMINUM PRODUCTS:
Shipments to Third Parties 368.2 399.0 373.2
343.6 314.2
Business Strategy
KACC has made significant changes in the mix of products sold to
customers by disposing of selected assets, restarting and increasing
its percentage ownership interest in the Alumina Partners of Jamaica
("Alpart") alumina refinery, and increasing production of alumina at
Gramercy, Louisiana, and Queensland Alumina Limited ("QAL") in
Australia. The percentage of KACC's alumina production sold to third
parties increased from approximately 35% in 1987 to approximately 71%
in 1993, and the percentage of its primary aluminum production sold to
third parties increased from approximately 20% in 1987 to
approximately 56% in 1993.
KACC has concentrated its fabricated products operations on the
beverage container market (which historically has been recession-
resistant); high value-added, heat-treated sheet and plate products
for the aerospace industry; hubs, wheels and other products for the
truck, trailer and shipping container industry; parts for air bag
canisters and other automotive components; and distributor markets for
a variety of semifabricated aluminum products. Since January 1,
- 3 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 1. BUSINESS (continued)
1989, KACC has constructed four new fabrication facilities and has
modernized and expanded others, with the objective of reducing
manufacturing costs and expanding sales in selected product markets in
which KACC has production expertise, high-quality capability, and
geographic and other competitive advantages.
KACC has taken steps to control and reduce costs, improve the
efficiency and increase the capacity of its alumina and primary
aluminum production and fabricating operations, modernize its
facilities, and streamline and decentralize its management structure
to reduce corporate overhead and shift decision-making and
accountability to its business units. In October 1993, KACC announced
that it is restructuring its flat-rolled products operation at its
Trentwood plant in Spokane, Washington, to reduce that facility's
annual operating costs. This effort is in response to overcapacity in
the aluminum rolling industry, flat demand in the U. S. can stock
market, and declining demand for aluminum products sold to customers
in the commercial aerospace industry, all of which have resulted in
declining prices in Trentwood's key markets. The Trentwood
restructuring is expected to result in annual cost savings of at least
$50.0 million after it has been fully implemented (which is expected
to occur by the end of 1995). See "- Production Operations - Fabricated
Products - Flat-Rolled Products".
Primary aluminum production at KACC's Mead and Tacoma smelters was
curtailed in 1993 because of a power reduction imposed by the
Bonneville Power Administration (the "BPA") which reduced the
operating rates for those smelters. See "- Primary Aluminum Products."
Furthermore, KACC announced on February 24, 1994, that it will
curtail approximately 9.3% of its annual production capacity currently
available from its primary aluminum smelters.
KACC has also attempted to lessen its exposure to possible future
declines in the market prices of alumina and primary aluminum by
entering into fixed and variable rate power and fuel supply contracts,
and a labor contract with the United Steelworkers of America (the
"USWA") which provides for semi-variable compensation with respect to
approximately 73% of KACC's domestic hourly work force. See
"- Production Operations" and "- Employees."
Sensitivity to Prices and Hedging Programs
The Company's earningsKaiser's operating results 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
and on KACC's hedging strategies. Fabricated aluminum prices, which vary
considerably among products, are influenced by KACC.changes in the price of
primary aluminum and generally lag behind primary aluminum prices for
periods of up to six months. Changes in the market price of primary
aluminum also affect Kaiser's production costs of fabricated products
because they influence the price of aluminum scrap purchased by Kaiser and
Kaiser's labor costs, to the extent such costs are indexed to primary
aluminum prices. Through its variable cost structures, forward sales, and
hedging programs, KACC has attempted to mitigate its exposure to possible
further declines in the market prices of alumina, and primary aluminum, and fabricated
aluminum products while retaining the ability to participate in favorable
pricing environments that may materialize. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS"Management's Discussion
and Analysis of Financial Condition and Results of Operations - Trends -
Sensitivity to Prices and Hedging Programs."Programs" and Note 9 of the Notes to
Consolidated Financial Statements in the Annual Report.
Production Operations
The Company's operations are conducted through KACC's decentralized
business units which compete throughout the aluminum industry.
o The Alumina Business Unit,alumina business unit, which mines bauxite and obtains
additional bauxite tonnage under long termlong-term contracts,
produced approximately 8% of Western world alumina in 1993.1995.
During 1993,1995, KACC utilizedthird party shipments of bauxite
represented approximately 82%21% of its bauxite production at its alumina refineries and the remainder was
either sold to third
- 4 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 1. BUSINESS (continued)
parties or tolled into alumina by a third party.mined. In
addition, during 1993 KACC utilizedthird party shipments of alumina represented
approximately 29%72% of its alumina for internal purposes and sold the remainder
to third parties.produced. KACC's share of
total Western world alumina capacity was 8%approximately 7% in
1993.1995.
o The Primary Aluminum Products Business Unitprimary aluminum products business unit operates two
domestic smelters wholly owned by KACC and two foreign
smelters in which KACC holds significant ownership
interests. In 1993,During 1995, KACC utilized approximately 44%third party shipments of its
primary aluminum for internal purposes and sold the remainder to
third parties.represented approximately 66% of primary
aluminum production. KACC's share of total Western world
primary aluminum capacity was approximately 3% in 1993.1995.
3
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- -----------------------------------------------------
ITEM 1. BUSINESS (continued)
o Fabricated aluminum products are manufactured by three
Business Unitsbusiness units - Flat-Rolled Products, Extruded Products (including rodflat-rolled products, extruded products and
bar), and Forgings - which manufacture a variety of
fabricatedengineered components. The products (includinginclude body, lid, and
tab stock for beverage containers, sheet and plate products,
heat-treated products, screw machine stock, redraw rod,
forging stock, truck wheels and hubs, air bag canisters,
engine manifolds, and other castings, forgings and extruded
products) and
operateproducts, which are manufactured at plants located in
principal marketing areas of the United States and Canada.
Substantially all of the primaryThe aluminum utilized in KACC's fabricated products
operations is comprised of primary aluminum, obtained both
internally with the balance of the metal utilized
in its fabricated products operations obtainedand from third parties, and scrap metal purchases. In 1993, KACC shipped approximately 373,200
tons of fabricated aluminum products topurchased
from third parties, which
accounted for approximately 6% of the total tonnage of United
States domestic fabricated shipments for such year.parties.
Alumina
- -------
The following table lists KACC's bauxite mining and alumina refining
facilities as of December 31, 1993:1995:
Annual
Production Total
Capacity Annual
Company Available to Production
Activity Facility Location Ownership the Company Capacity
- -------- -------- -------- --------- ------------ --------------------- --------
(tons) (tons)
Bauxite Mining KJBC(1) Jamaica 49% 4,500,000 4,500,000
Alpart(2) Jamaica 65% 2,275,000 3,500,000
--------- ---------
6,775,000 8,000,000
========= =========
Alumina Refining Gramercy Louisiana 100% 1,000,000 1,000,000
Alpart Jamaica 65% 943,000 1,450,000
QAL Australia 28.3% 934,000 3,300,000
------- ---------
---------
2,877,000 5,750,000
========= =========
=========
--------------------------
(1) Although KACC owns 49% of Kaiser Jamaica Bauxite Company, it has the
right to receive all of such entity's output.
(2) Alpart- ------------
(1) Although KACC owns 49% of Kaiser Jamaica Bauxite Company
("KJBC"), it has the right to receive all of such entity's
output.
(2) Alumina Partners of Jamaica ("Alpart") bauxite is refined into
alumina at the Alpart refinery.
Bauxite mined in Jamaica by Kaiser Jamaica Bauxite Company ("KJBC")KJBC is refined into alumina at KACC's plant at
Gramercy, Louisiana, or is sold to third parties. In 1979, the Government
of Jamaica granted KACC a mining lease
- 5 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 1. BUSINESS (continued) for the mining of bauxite sufficient
to supply KACC's then-existing Louisiana alumina refineries at their annual
capacities of 1,656,000 tons per year until January 31, 2020. Alumina from
the Gramercy plant is sold to third parties.
KACC has entered into a series of medium-
term contracts for the supply of natural gas to the Gramercy plant.
The price of such gas varies based upon certain spot natural gas
prices, with floor and ceiling prices applicable to approximately one-
half of the delivered gas. KACC has, however, established a fixed
price for a portion of the delivered gas through a hedging program.
Alpart holds bauxite reserves and owns ana 1,450,000 tons per year alumina
plant located in Jamaica. KACC hasowns a 65% interest in Alpart, and Hydro
Aluminium a.s.a.s ("Hydro") owns the remaining 35% interest. KACC has
management responsibility for the facility on a fee basis. KACC and Hydro
have agreed to be responsible for their proportionate shares of Alpart's
costs and expenses. Alpart began a program of modernization and
expansion of its facilities in 1991. As a part of that program, the
capacity of the Alpart alumina refinery has been increased to
1,450,000 tons per year as of December 31, 1992. In 1981, theThe Government of Jamaica has granted Alpart a mining
lease covering bauxite
reserves sufficient to operate the Alpart plant until December 31,
2019. In connection with the expansion program, the Alpart partners
haveand has entered into an agreementother agreements with the Government of JamaicaAlpart designed to assure
that sufficient reserves of bauxite will be available to Alpart to operate
its refinery as it has been expanded and as it may be expanded through the year 2024 (toto a capacity of 2,000,000 tons per year).
In mid-1990,year
through the year 2024. Alpart has entered into a five-yearan agreement for the supply
of substantially all of its fuel oil the refinery's primary energy
source. In February 1992, the termthrough 1996. The balance of this agreement was extended to
1996 and the quantity ofAlpart's
fuel oil torequirements through 1996 will be supplied was increased. The
price for 80% of the initial quantity remains fixed at a price which
prevailedpurchased in the fourth quarter of 1989; the price for 80% of the
increased quantity is fixed at a negotiated price; and the price for
the balance of the initial and increased quantities was based upon
certain spot fuel oil prices plus transportation costs. Alpart has
purchased all of the quantities of fuel oil which could be purchased
based upon certain spot fuel oil prices under both the initial and
extended agreements.market.
4
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- -----------------------------------------------------
ITEM 1. BUSINESS (continued)
KACC holdsowns a 28.3% interest in QAL,Queensland Alumina Limited ("QAL"), which
owns the largest and one of the most efficient alumina refineries in the
world, located in Queensland, Australia. QAL refines bauxite into alumina,
essentially on a cost basis, for the account of its stockholders pursuant to long-
termunder
long-term tolling contracts. The stockholders, including KACC, purchase
bauxite from another QAL stockholder pursuant tounder long-term supply contracts.
KACC has contracted with QAL to take approximately 751,000792,000 tons per year of
capacity or pay standby charges. KACC is unconditionally obligated to pay
amounts calculated to service its share ($73.688.9 million at December 31,
1993)1995) of certain debt of QAL, as well as other QAL costs and expenses,
including bauxite shipping costs. QAL's annual production capacity is
approximately 3,300,000 tons, of which approximately 934,000 tons are
available to KACC.
KACC's principal customers for bauxite and alumina consist of large and
small domestic and international aluminum producers that purchase bauxite
and reduction-grade alumina for use in their internal refining and smelting
operations, and trading intermediaries who resell raw materials to end-users.end-users,
and users of chemical-grade alumina. In 1993,1995, KACC sold all of its bauxite
to one
customer, andtwo customers, the largest of which accounted for approximately 74% of
such sales. KACC also sold alumina to 13nine customers, the largest and top
five of which accounted for approximately 22%23% and 79%90% of such sales,
respectively. AmongSee "- Competition." The Company believes that among
alumina producers the Company believes KACC is now the world's second largest seller of alumina
to third parties. KACC's strategy is to sell a substantial portion of the
bauxite and alumina available to it in excess of its internal refining and
smelting requirements pursuant to forwardunder multi-year sales contracts.
See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - Trends - Sensitivity to Prices and Hedging
Programs." Marketing and sales efforts are conducted by executives of
the Alumina Business Unit and KACC.
- 6 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 1. BUSINESS (continued)
Primary Aluminum Products
- -------------------------
The following table lists KACC's primary aluminum smelting facilities as of
December 31, 1993:1995:
Annual Rated Total 1995
Capacity Annual 1993Average
Company Available to Rated Operating
Location Facility Ownership the Company Capacity Rate
- -------- -------- --------- ----------- -------- -------------
(tons) (tons)
Domestic
Washington Mead 100% 200,000 200,000 80%82%
Washington Tacoma 100% 73,000 73,000 77%
------- -------82%
------ ------
Subtotal 273,000 273,000
------- -------
International
Ghana Valco 90% 180,000 200,000 88%68%
Wales, United Kingdom Anglesey 49% 55,000 112,000 112%
-------119%
------ -------
Subtotal 235,000 312,000
------- -------
Total 508,000 585,000
======= =======
KACC owns two smelters located at Mead and Tacoma, Washington, where
alumina is processed into primary aluminum. The Mead facility uses pre-bake
technology and produces primary aluminum, almost allaluminum. Approximately 71% of which
isMead's 1995
production was used at KACC's Trentwood fabricating facility and the
balance of
which iswas sold to third parties. The Tacoma plant uses Soderberg
technology and produces primary aluminum and high-grade, continuous-
cast,continuous-cast,
redraw rod, which currently commands a premium price in excess of the price
of primary aluminum. Both smelters have achieved significant production
efficiencies in recent years through retrofit technology, cost controls,
and semi-variable wage and power contracts, leading to increases in
production volume and enhancing their ability to compete with newer
smelters. At the Mead plant, KACC
5
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- -----------------------------------------------------
ITEM 1. BUSINESS (continued)
has converted to welded anode assemblies to increase energy efficiency,
reducedextended the number of anodes usedanode life-cycle in the smelting process,
changed from pencil to liquid pitch to produce carbon anodes which achieved
environmental and operating savings, and engaged in efforts to increase
production through the use of improved, higher-efficiency reduction cells.
ElectricalElectric power represents an important production cost for KACC at its
aluminum smelters. In 1995 electric power purchase agreements for KACC's
facilities in the Pacific Northwest were successfully restructured, which
the Company anticipates will result in significantly lower electric power
costs in 1996 and beyond for the Mead and Tacoma, smelters. The electricity supply contracts
betweenWashington, smelters and
the Trentwood, Washington, rolling mill compared to 1995 electric power
costs. From 1981 until 1995, electric power for KACC's Mead and Tacoma
smelters was purchased exclusively from the Bonneville Power Administration
(the "BPA") by KACC under a contract which expires in 2001. In April 1995
the BPA and KACC expire in 2001. The electricity contracts
between the BPA andagreed to allow each of its direct service industryindustrial customers
(which
consist(the "DSIs"), which include KACC, to purchase a portion of 15 energy intensive companies, principally aluminum
producers, including KACC) permitits requirement
for electric power from sources other than the BPA beginning October 1,
1995. In June 1995 KACC entered into an agreement with The Washington
Water Power Company (the "WWP") to interruptpurchase up to 25%50 megawatts of electric
power for its Northwest facilities for a five-year term beginning October
1, 1995. KACC is receiving power under that contract, which power
displaces a portion of KACC's interruptible power from the BPA. In
addition, in 1995 KACC entered into a new power purchase contract with the
BPA, which amends the existing BPA power contract and which contemplates
reductions during 1996 in the amount of power which it normally suppliesKACC is obligated to
purchase from the BPA and which the BPA is obligated to sell to KACC, and
the replacement of such customers.
Bothpower with power to be purchased from other
suppliers. KACC is negotiating power purchase agreements for such power
with suppliers other than the BPA. Contracts for the purchase of all power
required by KACC's Mead and Tacoma plants operated atsmelters and Trentwood rolling mill for
1996, and for approximately full rated
capacity during 1991-1992, but operated at less than rated capacity
throughout 1993. As a result of drought conditions, in January 1993
the BPA reduced the amount of power it normally supplies to its direct
service industry customers. In response to such reduction, KACC
removed three reduction potlines from production (two at the Mead
smelter and one at the Tacoma smelter) and purchased substitute power
in the first quarter of 1993 at increased costs. Despite the
temporary availabilityone-half of such power through July 1993,for the period 1997-2000,
have been finalized. Two lawsuits were filed in December 1995
against the BPA by various parties, one of which petitions for a review of
the BPA's "Record of Decision on Direct Service Industrial Customer
Requirements Power Sales Contract" issued on September 28, 1995, and one of
which petitions for review of, and to set aside, suspend, or modify, the
action of the BPA to decide to offer five-year "block" power sales to the
DSIs. The effect of such lawsuits, if any, on KACC's new power purchase
contract with the BPA is not known. Certain of the DSIs, including KACC,
operatedhave intervened in the two lawsuits.
In 1995 KACC also entered into agreements with the BPA and with the WWP,
with terms ending in 2001, under which the BPA and the WWP would provide to
KACC transmission services for power purchased from sources other than the
BPA. The term of the transmission services agreement with the BPA was
subsequently extended for an additional fifteen years, which extension has
been challenged. Four lawsuits have been filed against the BPA by various
parties, which lawsuits either challenge the BPA's record of decision
offering such an extension agreement to the DSIs or challenge the BPA's
Business Plan Environmental Impact Statement record of decision in
connection therewith. Certain of the DSIs, including KACC, have intervened
in the four lawsuits.
KACC began operating its Mead and Tacoma smelters in Washington at
the reduced operating rates introducedapproximately 75% of their full capacity in January 1993, and operated its Trentwood fabrication facility
without any curtailment of its production. The Company currently
anticipates that in 1994, KACC will operate thewhen three
reduction potlines were removed from production (two at Mead and Tacoma
smeltersone at
rates which do not exceedTacoma) in response to a power reduction imposed by the current operating rates of
75% of full capacityBPA. In March
1995, the BPA offered to its industrial customers, including KACC, surplus
firm power at a discounted rate for such smelters. The BPA has recently notified
its direct service industry customers that it intends to restore full
powerthe period April 1, 1995, through July
31, 1994.
- 7 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 1. BUSINESS (continued)
Through June 1996,1995, to enable such customers to restart idle industrial loads. In
April 1995, KACC paysand the BPA entered into a contract for power on a basis which varies, within
certain limits, with the market pricean amount of primary aluminum,such
power, and thereafter KACC will pay for powerrestarted one-half of an idle potline
(approximately 9,000 tons of annual capacity) at variable ratesits Tacoma, Washington,
smelter. The Tacoma smelter was returned to be negotiated.
During 1993,full production in October
1995. In 1995 KACC paid for power under itsentered into a one-year power supply contract with the
BPA, for a term ending September 30, 1996, in connection with the restart
of idled capacity at the floor rate. Effective October 1, 1993, an increaseits Mead smelter. The Mead smelter returned to full
production in the base rate the BPA charges to its direct service industry customers
for electricity was adopted which will increase KACC's production
costs at the Mead and Tacoma smelters by approximately $15.0 million
per year (approximately $9.1 million per year based on KACC's current
operating rate of approximately 75% of full capacity). The rate
increase generally is expected to remain in effect for two years. In
the event that the BPA's revenues fall below certain levels prior to
April 1994, the BPA may impose up to a 10% surcharge on the base rate
it charges to its direct service industry customers, effective during
the period from October 1994 through October 1995 (which would
increase KACC's production costs at the Mead and Tacoma smelters by
approximately $9.1 million per year based on KACC's current operating
rate of approximately 75% of full capacity). In addition, in order to
comply with certain federal laws and regulations applicable to
endangered fish species, the BPA may be required in the future to
reduce its power generation and to purchase substitute power (at
greater expense) from other sources.December 1995.
KACC manages, and holdsowns a 90% interest in, the Volta AluminumAluminium Company
Limited ("Valco") aluminum smelter in Ghana. The Valco smelter uses
pre-bake technology and processes alumina supplied by KACC and the other
participant into primary aluminum under long-term tolling contracts which
provide for proportionate payments by the participants
6
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- -----------------------------------------------------
ITEM 1. BUSINESS (continued)
in amounts intended to pay not less than all of Valco's operating and
financing costs. KACC's share of the primary aluminum is sold to third
parties. Power for the Valco smelter is supplied under an agreement which
expires in 1997, subject to Valco's right to extend the
agreement for 20 years.2017. The agreement indexes two-thirds of the price of two-thirds of the
contract quantity of power to the market price of primary aluminum and
fixes the price for the remainder.aluminum. The
agreement also provides for a review and adjustment of the base power rate
and the price index every five years. The most recent review was completed
in April 1994 for the 1994-1998 period. Valco smelter restarted production early in 1985 after
being closed for more than two years due to lackhas entered into an
agreement with the government of rainfall and the
resultant hydroelectricity shortage. The Company believes that thereGhana under which Valco has been assured
(except in cases of force majeure) that it will receive sufficient rainfall and water storage such that an adequate
supply of electricity for the Valco plantelectric
power to operate at its current operating
rate is probable forlevel of three and one-half potlines
through December 31, 1996. Kaiser believes that, assuming normal rainfall
during 1996, Valco should have available sufficient electric power to
operate at least one year.its current level through 1996.
KACC hasowns a 49% interest in the Anglesey Aluminium Limited ("Anglesey")
aluminum smelter and port facility at Holyhead, Wales. The Anglesey
smelter uses pre-bake technology. KACC supplies 49% of Anglesey's alumina
requirements and purchases 49% of Anglesey's aluminum output. KACC sells
its share of Anglesey's output to third parties. Power for the Anglesey
aluminum smelter is supplied under an agreement which expires in 2001.
KACC has developed and installed proprietary retrofit and control
technology in all of its smelters.smelters, as well as at third party locations.
This technology --- which includes the redesign of the cathodes and anodes
that conduct electricity through reduction cells, improved "feed"feed systems
that add alumina to the cells, and a computerized system that controls
energy flow in the cells --- enhances KACC's ability to compete more
effectively with the industry's newer smelters. KACC is actively engaged
in efforts to license this technology and sell technical and managerial
assistance to other producers worldwide, and may participate in joint
ventures or similar business partnerships which employ KACC's technical and
managerial knowledge. Pursuant to various arrangements, KACC's
technology has been installed in aluminum smelters located in West
Virginia, Ohio, Missouri, Kentucky, Sweden, Germany, India, Australia,
New Zealand, Ghana, the C.I.S., and the United Kingdom. See "-- Research"-Research and Development."
KACC's principal primary aluminum customers consist of large trading
intermediaries and metal brokers, who resell primary aluminum to fabricated
product manufacturers, and large and small international aluminum
fabricators. In 1993,1995, KACC sold the approximately 56% of its primary aluminum production not
utilized for internal purposes to approximately 5035 customers, the largest
and top five of which accounted for approximately 44%25% and 64%62% of such
sales, respectively. See "- Competition." Marketing and sales efforts are
conducted by a small staff located at the business unit's headquarters in
- 8 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 1. BUSINESS (continued)
Pleasanton, California, and by senior executives of KACC who participate in
the structuring of major sales transactions. A majority of the business
unit's sales are based upon long-term relationships with metal merchants
and end-users.
Fabricated Aluminum Products
-------------------- ----------------------------
KACC manufactures and markets fabricated aluminum products for the
packaging, transportation, construction, and consumer durables markets in
the United States and abroad. Sales in these markets are made directly and
through distributors to a large number of customers, both
domestic and foreign.customers. In 1993, seven1995, four
domestic beverage container manufacturers constitutedwere among the leading customers
for KACC's fabricated products and accounted for approximately 19%12% of
the Company'sKACC's sales revenue.
KACC's fabricated products compete with those of numerous domestic and
foreign producers and with products made withof steel, copper, glass, plastic,
and other materials. Product quality, price, and availability are the
principal competitive factors in the market for fabricated aluminum
products. KACC has refocusedfocused its fabricated products operations to concentrate on selected
products in which KACC has production expertise, high qualityhigh-quality capability,
and geographic and other competitive advantages.
Flat-Rolled Products - The Flat-Rolled Products Business Unit,flat-rolled products business unit, the largest
of KACC's fabricated products businesses, operates the Trentwood sheet and
plate mill at Spokane, Washington. The Trentwood facility is KACC's
largest fabricating plant and accounted for substantially more than one-halfapproximately 64% of KACC's
19931995 fabricated aluminum products shipments. The business unit supplies
the beverage container market (producing body, lid, and tab stock), the
aerospace market, and the tooling plate, heat-treated alloy and common
alloy coil markets, both directly and through distributors. During 1995,
KACC announced in October 1993 that
it issuccessfully
7
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- -----------------------------------------------------
ITEM 1. BUSINESS (continued)
completed the two year restructuring of its flat-rolled products operation
at its Trentwood plant to reduce that facility's annual operating costs. This
effort is in response to overcapacity in the aluminum rolling
industry, flat demand in the U.S. can stock market, and declining
demand for aluminum products sold to customers in the commercial
aerospace industry, all of which have resulted in declining prices in
Trentwood's key markets. The Trentwood restructuring is expected to
result in annual cost savings ofcosts by
at least $50.0 million after it
has been fully implemented (which is expected to occur by the end of
1995). In connection with the restructuring, Trentwood completed an
organizational streamlining that included a reduction of approximately
80 salaried employees. In addition, KACC has reached an agreement
with the USWA that will reduce the total number of hourly employees at
Trentwood by approximately 300 employees, or about 25%, by the end of
1995. The agreement with the USWA also includes a commitment by KACC
to spend up to $50.0 million of capital at Trentwood over three years,
provided that goals on cost reduction and profitability are met or
exceeded.million.
KACC's flat-rolled products are sold primarily to beverage container
manufacturers located in the western United States and in the Asian Pacific
Rim countries where the Trentwood plant's location provides KACC haswith a
transportation advantage. Quality of products for the beverage container
industry and timeliness of delivery and price are the primary bases on which KACC
competes. The CompanyKaiser believes that KACC's capital improvements at Trentwood have
enhanced the quality of KACC's products for the beverage container industry
and the capacity and efficiency of KACC's manufacturing operations. The Company believesoperations, and
that KACC is one of the highest quality producers of aluminum beverage can
stock in the world.
In 1993,1995, the Flat-Rolled Products Business Unitflat-rolled products business unit had 2231 domestic and foreign and
domestic
can stock customers, including the majority of which were beverage can
manufacturers (including seven of the eightfive major domestic beverage can
manufacturers) and the balance of which were brewers.manufacturers. The largest and top five of such customers accounted for
approximately 25%14% and 56%41%, respectively, of the business unit's sales revenue.
See "- Competition." In 1993,1995, the business unit shipped products to
over 200approximately 150 customers in the aerospace, transportation, and
industrial ("ATI") markets, most of which were distributors who sell
- 9 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 1. BUSINESS (continued) to a
variety of industrial end-users. The top five customers in the ATI markets
for flat-rolled products accounted for approximately 10%13% of the business
unit's sales revenue. The marketing staff for the Flat-Rolled Products Business Unitflat-rolled products business
unit is headquartered in Pleasanton,
California, and is also located at the Trentwood facility.facility and in Pleasanton, California.
Sales are made directly to customers (including distributors) from teneight
sales offices located throughout the United States. International
customers are served by a sales officeoffices in the Netherlands and Japan and by
independent sales agents in Asia and Latin America.
See also "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - Trends - Sensitivity to Prices and Hedging Programs -
Aluminum Processing" for a discussion of demand for fabricated
products in the aerospace market.
Extruded Products - The Extruded Products Business Unitextruded products business unit is headquartered in
Dallas, Texas, and operates soft-alloy extrusion facilities in Los Angeles,
California; Santa Fe Springs, California; Sherman, Texas; and London,
Ontario, Canada; a cathodic protection business located in Tulsa, Oklahoma,
that also extrudes both aluminum and magnesium; and rod and bar facilities in
Newark, Ohio, and Jackson, Tennessee, which produce screw machine stock,
redraw rod, forging stock, and billet.billet; and a facility in Richland,
Washington, which produces seamless tubing in both hard and soft alloys for
the automotive, other transportation, export, recreation, agriculture, and
other industrial markets. Each of the soft-alloy extrusion facilities has
fabricating capabilities and provides finishing services.
The Extruded Products Business Unit'sextruded products business unit's major markets are in the
transportation industry, to which it provides extruded shapes for
automobiles, trucks, trailers, cabs, and shipping containers, and in the
distribution, durable goods, defense, building and construction, ordnance
and electrical markets. In 1993,1995, the Extruded Products
Business Unitextruded products business unit had
over 900approximately 825 customers for its products, the largest and top five of
which accounted for approximately 6% and 19%20%, respectively, of its sales revenue.
See "- Competition." Sales are made directly from plants as well as
marketing locations across the United States.
ForgingsEngineered Components - The Forgings Business Unitengineered components business unit operates
forging facilities at Erie, Pennsylvania; Oxnard, California; and
Greenwood, South Carolina; and a machine shop at Greenwood, South Carolina.Carolina; and
a casting facility in Canton, Ohio. The Forgings Business
Unitengineered components business
unit is one of the largest producers of aluminum forgings in the United
States and is a major supplier of high-quality forged parts to customers in
the automotive, commercial vehicle and ordnance markets. The high
strength-to-weight properties of forged and cast aluminum make it
particularly well suitedwell-suited for automotive applications. The Forgings
Business Unit entered the castings business by purchasing the assets
of Winters Industries, which supplies castunit's
casting facility manufactures aluminum engine manifolds tofor the automobile,
truck and marine markets.
The casting production
facilities include two foundries and a machining facility in Ohio.
KACC has recently implemented a plan to discontinue its castings
operations at these facilities. See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Results of
Operations - Aluminum Processing." In 1993,1995, the Forgings Business
Unitengineered components business unit had over 500approximately 250
customers, for its products, the largest and top five of which accounted for approximately
20%34% and 57%77%, respectively, of the Forgings Business Unit's salesbusiness unit's revenue. See "-
Competition." The Forgings Business Unit'sengineered components business unit's headquarters is
located in Erie, Pennsylvania, and additionalthere is a sales
marketing, and engineering groups areoffice
located in Detroit, Michigan, which works with car makers and other
customers, the midwesternCenter for Technology (see "-Research and western United States.Development"),
and plant personnel to create new automotive component designs and improve
existing products.
8
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- -----------------------------------------------------
ITEM 1. BUSINESS (continued)
Competition
Aluminum products competecompetes in many markets with steel, copper, glass, plastic, and
numerous other materials. In recent years, plastic containers have
increased and glass containers have decreased their respective shares of
the soft drink sector of the beverage container market. In the United
States, beverage container materials, including aluminum, face increased
competition from plastics as increased polyethylene ("PET") container
capacity is brought on line by plastics manufacturers. Within the aluminum
business, KACC competes with both domestic and foreign producers of
bauxite, alumina and primary aluminum, and with domestic and foreign
fabricators. Many of KACC's competitors have greater financial resources
than KACC. KACC's principal competitors in the sale of alumina include
Alcoa of Australia Ltd.,Alumina and Chemicals LLC, Billiton International Metals B.V.,
Clarendon Ltd.,Marketing and Pechiney S.A. In addition to the foregoing,Trading BV, and
Alcan Aluminium Limited. KACC competes with most aluminum producers in the
productionsale of primary aluminum. Many of KACC's competitors have greater financial resources
than KACC. In addition, the C.I.S. has been supplying large quantities
of primary aluminum to the Western world.
- 10 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 1. BUSINESS (continued)
Primary aluminum and, to some degree, alumina are commodities with
generally standard qualities, and competition in the sale of these
commodities is based primarily upon price, quality and availability.
The Company believes that, assuming the current relationship between
worldwide supply and demand for alumina and primary aluminum does not
change materially, the loss of any one of KACC's customers, including
intermediaries, would not have a material adverse effect on the
Company's business or operations. KACC
also competes with a wide range of domestic and international fabricators
in the sale of fabricated aluminum products. Competition in the sale of
fabricated products is based upon quality, availability, price and service,
including delivery performance. KACC concentrates its fabricating
operations on selected products in which KACC has production expertise,
high qualityhigh-quality capability, and geographic and other competitive advantages.
Kaiser believes that, assuming the current relationship between worldwide
supply and demand for alumina and primary aluminum does not change
materially, the loss of any one of KACC's customers, including
intermediaries, would not have a material adverse effect on the Company's
financial condition or results of operations.
Research and Development
KACC conducts research and development activities principally at three
facilities dedicated to that purpose - the Center for Technology ("CFT") in Pleasanton, California;
the Primary Aluminum Products Division Technology Center ("DTC") adjacent
to the Mead smelter in Washington; and the Alumina Development Laboratory
("ADL") at the Gramercy, Louisiana, refinery.refinery, which supports Kaiser Alumina
Technical Services ("KATS") and the facilities of the alumina business
unit. Net expenditures for Company-sponsored research and development
activities were $18.5 million in 1993, $13.51995, $16.7 million in 1992,1994, and $11.4$18.5
million in 1991.1993. KACC's research staff totaled 160157 at December 31, 1993.1995.
KACC estimates that research and development net expenditures will be
in the range of approximately $17
- $19$22.5 million in 1994.1996.
CFT concentrates itsperforms research and development efforts on flat-rolled
products while providing specialized servicesacross a range of aluminum process
and product technologies to support KACC's other business units. Its activities include development of can stock productsunits and aircraft sheet and plate products, and process improvements directed
at efficiency and quality. In can stock, CFT works to optimize the
product's metallurgy, surface characteristics, coatings, and
lubrication. CFTnew business
opportunities. It also selectively offers research and development, technical services and selected proprietary technology for license or sale to third
parties. Significant efforts are directed at product and process
technology for the can stock, aircraft and automotive markets, and aluminum
reduction cell models which are applied to improving cell designs and
operating conditions. The largest and most notable single project being
developed at CFT provided technologyis a strip-casting micromill process for producing can
sheet. The conversion and technical assistancecapital costs of these micromills are expected
to Samyang Metal Co. Ltd.be significantly lower than conventional rolling mills and to result in
building an aluminum rolling millimproved economics compared with historical manufacturing and
transportation costs for can stock. A pilot facility has been constructed
and operated at CFT. The first micromill is being constructed in Yongju,
Korea. CFT alsoNevada as
a demonstration production facility, and KACC expects operational startup
of the facility at the end of 1996. KACC currently intends to finance the
cost of the construction of the Nevada micromill, estimated to be
approximately $45.0 million, from general corporate funds, including
possible borrowings under the 1994 Credit Agreement (defined below),
although KACC is engaged in cooperative research and development
projectsdiscussions with Furukawa Electric Co., Ltd., Pechiney Rhenalu, and
Kawasaki Steel Corporationthird parties which might provide some
or all of Japan, with respect to the ground
transportation market.such funding. DTC maintains specialized laboratories and a
miniature carbon plant where experiments with new anode and cathode
technology are performed. DTC supports KACC's primary aluminum smelters,
concentratingand concentrates on the development of cost-effective technical innovations
andsuch as equipment and process improvements. Energy savings of approximately 10% have been
achieved at smelters utilizing proprietary DTC developed technologies
(which are employedKATS provides improved alumina
process technology to KACC's facilities and technical support to new
business ventures in both retrofit and new construction
applications), such as improved cathode and anode design and
insulation, modified electrolyte chemistry, distributive
microprocessor control, and modified cell magnetics. Other proprietary
DTC retrofit technologies, such as redesigned reduction cells, have
helpedcooperation with KACC's older smelters achieve competitiveness with more
recently constructed facilities.international business
development group.
9
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- -----------------------------------------------------
ITEM 1. BUSINESS (continued)
KACC is actively engaged in efforts to license thisits technology and sell
technical and managerial assistance to other producers worldwide. Pursuant to various
arrangements, KACC's
technology has been installed in alumina refineries, aluminum smelters and
rolling mills located in West Virginia, Ohio, Missouri, Kentucky,the United States, Jamaica, Sweden, Germany,
Russia, India, Australia, Korea, New Zealand, Ghana, United Arab Emirates,
and the United Kingdom. KACC's revenue from technology sales and technical
assistance to third parties were $5.7 million in 1995, $10.0 million in
1994, and $12.8 million in 1993.
KACC has entered into agreements with respect to the Krasnoyarsk smelter located in
Russia pursuant tounder which KACC has licensed certain of its technology for use in
such facility and agreed to provide purchasing services in obtaining
western-sourcedWestern-sourced technology and equipment to be used in such facility.
These agreements were entered into in November 1990, and the services under
them are expected to be completed in 1994.1996. In addition, in 1993 KACC has
entered into
- 11 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 1. BUSINESS (continued) agreements with respect to the Nadvoitsy smelter located in Russia and
the Korba smelter of the Bharat Aluminum Co. Ltd., located in India, pursuant tounder which
KACC has licensed certain of its technology for use in such facilities.
The agreements relating toServices under the Nadvoitsy agreement were completed in 1995, and Korba
smelters were entered into in 1993, and theKACC
expects that services under such
agreementsthe Korba agreement will be completed in 1996.
Operations in China
In 1994, KACC commenced efforts to increase its activities in certain
countries that are expected to be completedimportant suppliers of aluminum and large
customers for aluminum and alumina. KACC intends to use its technical
skills, together with capital investments, to form joint ventures or
acquire equity in facilities in such countries.
In 1995, and 1994,
respectively.
ADL has developed technologies which have improved alumina refinery
efficiency. These includeKaiser Yellow River Investment Limited ("KYRIL"), a high capacity thickener process usedsubsidiary of
the Company, was formed to participate in the separationprivatization, modernization,
expansion, and operation of alumina from bauxite slurry, plant conversion
designs that enable alumina refineries to convert fromaluminum smelting facilities in the productionPRC. KYRIL
has entered into a Joint Venture Agreement and related agreements (the
"Joint Venture Agreements") with the Lanzhou Aluminum Smelters ("LAS") of
fine aluminathe China National Nonferrous Metals Industry Corporation relating to the
preferred coarser "sandy" alumina, technology
that enables refineries to process different qualitiesformation and operation of bauxite, and
computer-aided instrumentation systems to improve process efficiencies
and energy use in alumina refineries. KACC is actively pursuingYellow River Aluminum Industry Company Limited,
a Sino-foreign joint equity enterprise organized under PRC law (the "Joint
Venture").
The Joint Venture constitutes the licensing of alumina refinery technology worldwide. KACC's technology
is in use in alumina refineriesfirst large-scale privatization in the
Americas, Australia, India,Chinese aluminum smelting industry. The Joint Venture's assets and
Europe.
KACC'soperations are located primarily in the industrial city of Lanzhou, the
capital of Gansu Province in northwestern China, and in nearby Lianhai, a
special economic zone also in Gansu Province. The smelter at Lanzhou is
the fifth largest aluminum smelter in the PRC and produces approximately
55,000 tons of primary aluminum per year. The smelter at Lianhai produces
approximately 30,000 tons of primary aluminum per year. LAS's capital
contribution to the Joint Venture consisted primarily of the Lanzhou and
Lianhai smelters.
The Joint Venture Agreements include provisions for KYRIL to contribute up
to $59.7 million to the Joint Venture in exchange for up to a 49% interest
in the Joint Venture (the "Capital Contribution") and contemplate that such
capital may be used to expand the annual production capacity of LAS from
85,000 to 115,000 tons, construct a dry Soderberg paste plant, install and
upgrade pollution control equipment, and provide for general corporate
purposes, including working capital. KYRIL contributed $9.0 million as a
contribution to the capital of the Joint Venture in July 1995. The parties
to the Joint Venture are currently engaged in discussions concerning the
amount, timing and other conditions relating to KYRIL's additional
contributions to the Joint Venture. Governmental approval in the PRC will
be necessary in order to implement any arrangements agreed to by the
parties, and there can be no assurance such approvals will be obtained.
KACC, through its extruded products business unit, has entered into
contracts to form two small joint venture companies in the PRC. KACC will
indirectly acquire equity interests of approximately 45% and 49%,
respectively, in these two companies which will manufacture aluminum
extrusions, in exchange for the contribution to those companies of certain
used equipment, technology, salesservices and revenue from technical assistance to third
parties were $12.8 millioncash. The majority equity
interests in 1993, $14.1 million in 1992, and $10.9
million in 1991.the two companies will be owned by affiliates of Guizhou Guang
Da Construction Company.
10
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- -----------------------------------------------------
ITEM 1. BUSINESS (continued)
Employees
During 1993,1995, KACC employed an average of approximately 10,2209,546 persons, compared with an
average of approximately 10,1309,744 employees in 1992,1994, and approximately 9,97010,220 employees in 1991.1993. At
December 31, 1993,1995, KACC's work force was approximately 10,029,9,624, including a domestic work
force of approximately 5,930,5,946, of whom approximately 4,1504,010 were paid at an hourly rate. Most hourly
paid domestic employees are covered by collective bargaining agreements
with various labor unions. Approximately 73%74% of such employees are covered
by a master agreement (the "Labor Contract") with the USWA which expires on October 31,
1994.United Steelworkers
of America ("USWA") expiring September 30, 1998. The Labor Contract covers
KACC's plants in Spokane (Trentwood),
Mead,(Trentwood and Mead) and Tacoma, Washington;
Gramercy, Louisiana; and Newark, Ohio. The Labor Contract replaced a
contract that expired October 31, 1994, and was reached after an eight-day
work stoppage by the USWA at these plants in February 1995.
The Labor Contract provides for floor levelbase wages at all covered plants. In
addition, for workers covered by the Labor Contract at the
Mead and Newark plants, for any quarterly period when the average
Midwest U.S. transaction price of primary aluminum is $.54 per pound
or above, a bonus payment is made. The amount of the quarterly bonus
payment changes incrementally with each full cent change in the price
of primary aluminum between $.54 per pound and $.61 per pound, remains
constant when the price is $.61 or more per pound but is below $.74
per pound, changes incrementally again with each full cent change in
the price between $.74 per pound and $.81 per pound, and remains at
the ceiling when the price is $.81 per pound or more. Workers covered
by the Labor Contract at the Trentwood, Tacoma, and Gramercy plants may receive quarterly bonus
payments based on various indices of profitability, productivity,
efficiency, and other aspects of specific plant performance, as well as, in
certain cases, the price of alumina or primary aluminum. The particular quarterly bonus variable
compensation formula currently applicable at each plant will remain
applicable for the remainder of the contract term.
Pursuant to the
Labor Contract, base wage rates were raised $.50 per
hour in 1990effective January 2, 1995, were
raised again effective November 6, 1995, and werewill be raised an additional
$.50 per houramount effective November 1, 1993. Each3, 1997, and an amount in respect of the cost of
living adjustment under the previous master agreement will be phased into
base wages during the term of the Labor Contract. In the second quarter of
1995, KACC acquired up to $2,000 of preference stock held in a stock plan
for the benefit of each of approximately 82% of the employees covered by
the Labor Contract has received $2,000 in lump-sum signing and special bonuses. In
addition, in the first quarterhalf of 1991 KACC acquired1998 will acquire up to $4,000 of
preference stock held in the stock bonus plan for the benefit of
approximately 80% of the employees covered by the Labor Contract
- 12 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 1. BUSINESS (continued)
and in February 1994 acquired an
additional $2,000$4,000 of such preference stock held in the stock bonussuch plan for the
benefit of substantially the same employees. In the first quarter of 1991,addition, a profitability
test was satisfied and, therefore, KACC acquiredwill acquire during 1996 up to $4,000an
additional $1,000 of such preference stock held in such plan for the
benefit of substantially the same employees. KACC made and will make
comparable acquisitions of preference stock which had been held for the benefit of each of
certain salaried employees.
In February 1995, Alpart's employees andengaged in February 1994 acquired an
additional $2,000 of such preference stock held in the stock bonus
plan for the benefit of substantially the same employees. The
February 1994 acquisitions of preference stock were in the aggregate
amount of $5.4 million. The Companya six-day work stoppage by
its National Workers Union, which was settled by a new contract.
Management considers KACC's employee relations to be satisfactory.
Environmental Matters
The CompanyKaiser and KACC are subject to a wide variety of international, federal,
state and local environmental laws and regulations ("(the "Environmental
Laws"). From time to time the Environmental Laws") which continue to be adoptedLaws are amended and amended.new ones
are adopted. The Environmental Laws regulate, among other things, air and
water emissions and discharges; the generation, storage, treatment,
transportation, and disposal of solid and hazardous waste; the release of
hazardous or toxic substances, pollutants and contaminants into the
environment; and, in certain instances, the environmental condition of
industrial property prior to transfer or sale. In addition, the CompanyKaiser and
KACC are subject to various federal, state, and local workplace health and
safety laws and regulations ("Health Laws").
From time to time, KACC is subject, with respect to its current and former
operations, to fines or penalties assessed for alleged breaches of the
Environmental and Health Laws and to claims and litigation brought by
federal, state or local agencies and by private parties seeking remedial or
other enforcement action under the Environmental and Health Laws or damages
related to alleged injuries to health or to the environment, including
claims with respect to certain waste disposal sites and the remediation of
sites presently or formerly operated by KACC. See "LEGAL PROCEEDINGS."Legal Proceedings."
KACC currently is currently subject to a number of lawsuits under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
by the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA").
KACC, along with severalcertain other entities, has been named as a Potentially
Responsible Party ("PRP") for remedial costs at certain third-party
11
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- -----------------------------------------------------
ITEM 1. BUSINESS (continued)
sites listed on the National Priorities List under CERCLA and, in certain
instances, may be exposed to joint and several liability for those costs or
damages to natural resources. KACC's Mead, Washington, facility has been
listed on the National Priorities List under CERCLA. In addition, in
connection with certain of its asset sales, KACC has indemnifiedagreed to indemnify
the purchasers of assets with respect to certain liabilities (and associated
expenses) resulting from acts or omissions arising prior to such
dispositions, including environmental liabilities. While uncertainties are
inherent in the ultimate extentfinal outcome of KACC's
liability for pending or potential fines, penalties, remedial costs,
claims,these matters, and litigation relating to environmental and health and safety
matters cannot be determined at this time and, in light of evolving
case law relating to insurance coverage for environmental claims,
managementit is unablepresently
impossible to determine definitively the extent of such
coverage, management currentlyactual costs that ultimately may be incurred,
Kaiser believes that the resolution of these
matters (even without giving effect to potential insurance recovery)such uncertainties should not have a
material adverse effect on the Company'sKACC's consolidated financial position, or results
of operations.operations, or liquidity.
Environmental capital spending was $9.2 million in 1995, $11.9 million in
1994, and $12.6 million in 1993, $13.1
million in 1992, and $11.2 million in 1991.1993. Annual operating costs for pollution
control, not including corporate overhead or depreciation, were
approximately $26.0 million in 1995, $23.1 million in 1994, and $22.4
million in 1993, $21.6 million in 1992, and
$17.8 million in 1991.1993. Legislative, regulatory, and economic uncertainties make
it difficult to project future spending for these purposes. However,
the CompanyKaiser currently anticipates that in the 1994-
19951996-1997 period, environmental
capital spending will be within the range of approximately $7.0$27.0 - $20.0$33.0 million per
year, and operating costs for pollution control will be within the range of
$20.0$28.0 - $22.0$29.0 million per year. These expenditures will be made to assure compliance
with applicable Environmental Laws and are expected to include, among
other things, additional "red mud" disposal facilities and improved
levees at the Gramercy, Louisiana refinery (which are being financed
by the industrial revenue bonds); bath crushing improvements, baking
furnace modernization, and
- 13 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 1. BUSINESS (continued)
improved calcining controls at the Mead, Washington facility; new and
continuing environmental projects at the Trentwood, Washington
facility; and environmental projects required under the Clean Air Act
Amendments of 1990. In addition, $7.2$4.5 million in cash
expenditures in 1993, $9.61995, $3.6 million in 1992,1994, and $14.0$7.2 million in 19911993 were
charged to previously established reserves relating to environmental cost.costs.
Approximately $7.0$8.4 million is expected to be charged to such reserves in
1994.1996.
Based on Kaiser's evaluation of these and other environmental matters,
Kaiser has established environmental accruals primarily related to
potential solid waste disposal and soil and groundwater remediation
matters. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources - Environmental
Contingencies." The portion of Note 108 of the Notes to Consolidated
Financial Statements contained in the Company's 1993 Annual Report to Shareholders (the "Annual Report")under the heading "Environmental
Contingencies" is incorporated herein by reference.
ITEM 2. PROPERTIES
The locations and general character of the principal plants, mines, and
other materially important physical properties relating to KACC's
operations are described in "ITEM 1. BUSINESS,""Business - The Company - Production
Operations" and those descriptions are incorporated herein by reference.
KACC owns in fee or leases all the real estate and facilities used in
connection with its business. Plants and equipment and other facilities
are generally in good condition and suitable for their intended uses,
subject to changing environmental requirements. Although KACC's domestic
aluminum smelters and alumina facility were initially designed early in
KACC's history, they have been modified frequently over the years to
incorporate technological advances in order to improve efficiency, increase
capacity, and achieve energy savings. The CompanyKaiser believes that KACC's domestic
plants are cost competitive on an international basis. Due to KACC's
variable cost structure, the plants' operating costs are relatively lower
in periods of low primary aluminum prices and relatively higher in periods
of high primary aluminum prices.
The Company'sKACC's obligations under the Credit Agreement entered into on February 17,
1994, which replaced the Company's prior credit
agreement,as amended (the "1994 Credit Agreement") are secured by, among other
things, mortgages on KACC's major domestic plants (other than the Gramercy
alumina plant). See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -"Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Spending."Resources -
Capital Structure" in the Annual Report.
ITEM 3. LEGAL PROCEEDINGS
Aberdeen Pesticide Dumps Site Matter
The Aberdeen Pesticide Dumps Site, listed on the Superfund National
Priorities List, is composed of five separate sites around the town of
Aberdeen, North Carolina. These sitesCarolina (collectively, the "Sites")
include the Farm Chemicals Site, Twin Sites, Fairway Six Site, McIver
Dump Site and the Route 211 Site.. The Sites are of
concern to the United States Environmental Protection Agency (the "EPA")
because of their past use as either pesticide formulation facilities or
pesticide
12
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- -----------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS (continued)
disposal areas from approximately the mid 1930smid-1930's through the late
1980s.late-1980's.
The United States originally filed a cost recovery complaint (as
amended, the(the "Complaint") in the
United States District Court for the Middle District of North Carolina,
Rockingham Division, No. C-89-23 1
-R, against five defendants on March 31, 1989,C-89-231-R, which, as amended, includes KACC and subsequently
amended its complaint to add another ten defendants on February 6,
1991, and another four defendants on August 1, 1991. Neither the
Company nor KACC were defendants named in the Complaint.a
number of other defendants. The Complaint, as amended, seeks reimbursement
for past and future response costs and a determination of liability of the
defendants - 14 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS (continued)
under Section 107 of CERCLA. On or about October 2, 1991, KACC, along
with approximately 17 other parties, was served with third party
complaints from four of the defendants named in the Complaint (the
"Third Party Plaintiffs") alleging claims arising under various
theories of contribution and indemnity. On October 22, 1992, the
United States filed a motion for leave to file an amended complaint
naming KACC as a first party defendant in its cost recovery action. On
February 16, 1993, the court granted that motion. The EPA has performed a Remedial
Investigation/Feasibility Study and issued a Record of Decision ("ROD") dated September 30, 1991, for
the Sites.Sites in September 1991. The estimated cost of the major soil
remediation remedy selected for the five Sites in the ROD
consisted of excavation of contaminated soil treatment of the
contaminated soil at a single location utilizing thermal treatment and
placement of the treated material back into the areas of excavation.
The estimated cost of such remedy for the five Sites is approximately $32 million.
Other possible remedies described in the ROD included on-
site incineration and on-site ash disposal at anwould have estimated costcosts of
approximately $53 million and off-site incineration and disposal at
an estimated cost of approximately $222 million. The Company
understands that the EPA is also investigating contamination of
groundwater at the Sites.million, respectively. The EPA has
stated that it has incurred past costs at the Sites in the range of $7.5 - $8$7.5-$8
million as of February 9, 1993, and alleges that response costs will
continue to be incurred in the future.
On May 20, 1993, the EPA issued three unilateral Administrative Orders
under Section 106(a) of CERCLA ordering the respondents, including KACC, to
perform the soil remedial design and remedial action described in the ROD
for three of the Farm Chemicals Site (EPA Docket No. 93-13-C), Twin
Sites (EPA Docket No. 93-14-C) and Fairway Six Site (EPA Docket No.
93-15-C).Sites. The estimated cost as set forth in the ROD for the
remedial action at the three Sites is approximately $27 million. In addition to
KACC, respondents named in the Administrative Orders for all three
Sites include J.M. Taylor, Grower Service Corporation, E.I. DuPont
de Nemours & Co., Olin Corporation, UCI Holdings, Inc., PPG
Industries, Inc., and Union Carbide Corporation. Ciba-Geigy
Corporation, Hercules, Inc., Mobil Oil Corporation, Shell Oil Company,
The Boots Company (USA), Inc., Nor-Am Chemical Co., George D.
Anderson, Farm Chemicals, Inc., Partners In The Pits, Ltd., Dan F.
Maples, Pits Management Corp., Maples Golf Construction, Inc., YadcoA number
of Pinehurst, Inc. and Robert Trent Jonesother companies are also named as respondents for
one or two of the Sites.respondents. KACC has entered into ana
PRP Participation Agreement in Principle with certain of the respondents (the "Aberdeen
Site PRP Group" or the "Group") to participate jointly in responding to the
Administrative Orders dated May 20, 1993, regarding soil remediation, to
share costs incurred on an interim basis, and to seek to reach a final
allocation of costs through agreement or to allow such final allocation and
determination of liability to be made by the United States District Court. A definitive PRP Participation Agreement
is currently awaiting execution by the group.
By letter dated July 6, 1993, KACC has notified the EPA of its ongoing
participation with such group of respondents which, as a group, are
intending to comply with the Administrative Orders to the extent consistent
with applicable law. By letters dated December 30, 1993, the EPA notified
KACC of its potential liability for, and requested that KACC, along with certaina
number of other companies, undertake or agree to finance, groundwater
remediation at certain of the Sites. With respect to the Farm
Chemicals and Twin Sites, in addition to KACC, the EPA issued such
letters to J.M. Taylor, Grower Services Corporation, Farm Chemicals,
Inc., E.I. DuPont de Nemours and Company, Olin Corporation, UCI
Holdings, Inc., Union Carbide Corporation, Miles, Inc., Mobil Oil
Corporation, Shell Oil Company, Hercules, Inc., The Boots Company
(USA), Inc., Nor-Am Chemical Company, and Ciba-Geigy Corporation. With
respect to the Fairway Six Site, in addition to KACC, the EPA issued
such letters to J.M. Taylor, G.D. Anderson, Grower Service
Corporation, Partners in Pits, Dan Maples, Pits Management
Corporation, Maples Golf Construction, Inc., Yadco of Pinehurst Inc.,
Robert Trent Jones, E.I. DuPont de Nemours and Company, Olin
Corporation, UCI Holdings, Inc., Union Carbide Corporation, Miles,
Inc., Ciba-Geigy Corporation, and Hercules, Inc. The ROD-selected remedy for the
groundwater remediation selected by the EPA includes extraction, on site treatment by coagulation, flocculation,
- 15 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS (continued)
precipitation, air stripping, GAC absorption, and discharge on site
for the Farm Chemicals/Twin Sites and extraction, on-site treatment by
GAC absorption and discharge on-site for the Fairway Six Site.a variety of techniques.
The EPA has estimated the total present worth cost, including 30thirty years
of operation and maintenance, at $11,849,757.approximately $11.8 million. On June 22,
1994, the EPA issued two unilateral Administrative Orders under Section
106(a) of CERCLA ordering the respondents, including KACC, along with other
notified parties, plans to meet with representativesundertake the
groundwater remediation at three of the EPA to
discuss whether an agreement to perform this remediation is possible.
Based upon the information presently available to it, the Company is
unable to determine whether KACC has any liabilitySites. A PRP Participation
Agreement with respect to anygroundwater remediation has been entered into by
certain of the respondents, including KACC.
By letter dated March 6, 1996, KACC gave notice of withdrawal from the
Aberdeen Site PRP Group pursuant to the provisions of the PRP Participation
Agreement. KACC advised the Group and the EPA that even if it were liable
for cleanup at the Sites, or, if there is anywhich it expressly denies, it had already
contributed far more than its allocable potential share of response costs.
KACC has advised the Group and the EPA that it has fully complied with the
Unilateral Orders and that should additional evidence be presented which
demonstrates KACC's liability in excess of the amount thereof. Two
government witnesses have testifiedcontributed to date,
KACC would be willing to discuss the matter further at that KACC acquired pesticide
products from the operator of the formulation site over a two to three
year period. KACC has been unable to confirm the accuracy of this
testimony.time.
United States of America v. Kaiser Aluminum & Chemical Corporation
OnIn February 8, 1989, a civil action was filed by the United States Department
of Justice (the "DOJ") at the request of the EPA against KACC in the United
States District Court for the Eastern District of Washington, Case No.
C-89-106-CLQ. The complaint alleged that emissions from certain stacks at
KACC's Trentwood facility in Spokane, Washington intermittently violated
the opacity standard contained in the Washington State Implementation Plan
("SIP"), approved by the EPA under the federal Clean Air Act. The
complaint sought injunctive relief, including an order that KACC take all
necessary action to achieve compliance with the Washington SIP opacity limit and the
assessment of civil penalties of not more than $25,000 per day.
In the course of the litigation, questions arose as to whether the
observers who recorded the alleged exceedances were qualified under
the Washington SIP to read opacity. In July 1990, KACC and the DepartmentEPA, without adjudication of Justice agreed to a voluntary dismissalany issue of fact or law, and
without any admission of the action.
Atviolations alleged in the underlying
complaint, have entered into a Consent Decree, which was approved by a
Consent Order entered by the United States District Court for the Eastern
District of Washington in January 1996. As approved, the Consent Decree
13
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- -----------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS (continued)
settles the underlying disputes and requires KACC to (i) pay a $.5 million
civil penalty (which penalty has been paid), (ii) complete a program of
plant improvements and operational changes that time, however,began in 1990 at its
Trentwood facility, including the EPA had arrangedinstallation of an emission control
system to capture particulate emissions from certain furnaces, and (iii)
achieve and maintain furnace compliance with the opacity standard in the
SIP by no later than February 28, 1997. The Company anticipates that
capital expenditures for increased surveillancethe environmental upgrade of the furnace operation
at its Trentwood facility, including the improvements and changes required
by consultants and the EPA's personnel. From
May 1990 through May 1991, these observers recordedConsent Decree, will be approximately 130
alleged exceedances of the SIP opacity rule. Justice Department
representatives have stated their intent to file a second lawsuit
against KACC based on the opacity observations recorded during that
period.
The second lawsuit has not yet been filed. Instead, KACC has entered
into negotiations with the EPA to resolve the claims against KACC
through a consent decree. Although the EPA and KACC have made
substantial progress in negotiating the terms of the consent decree,
key issues remain to be resolved. Anticipated elements of any
settlement would include a commitment by KACC to improve the emission
control equipment at the Trentwood facility and a civil penalty
assessment against KACC, in an amount to be determined.
At this time, the Company cannot predict the likelihood that the EPA
and KACC will reach an agreement upon the terms of a consent decree.
In the event that the negotiations are not successful the matter
likely would be resolved in federal court.$20.0 million.
Catellus Development Corporation v. Kaiser Aluminum & Chemical Corporation
and James L. Ferry & Son Inc.
OnIn January 7, 1991, the City of Richmond, et al. (the "Plaintiffs") filed a
Second Amended Complaint for Damages and Declaratory Relief against the
United States, of America, the United States Maritime
Administration and Santa Fe Land Corporation (now known as Catellus Development Corporation ("Catellus")) and other
defendants (collectively, the "Defendants") alleging, among other things,
that the Defendants caused or allowed hazardous substances, pollutants,
contaminants, debris and other solid wastes to be discharged, deposited,
disposed of or released on certain property located in Richmond, California
(the "Property") formerly owned by Catellus and leased to (i) KACC for the
purpose of
- 16 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS (continued) shipbuilding activities conducted by KACC on behalf of the
United States during World War II, and (ii) subsequent tenants thereafter.II. The Plaintiffs allege, among other things, that (i) the Defendants are
jointly and severally liable forsought recovery of
response costs and natural resourcesresource damages under CERCLA, (ii) Defendant United States of America is
liable on grounds of negligence for damages under the Federal Tort
Claims Act, and (iii) Defendant Catellus is strictly liable on
grounds of negligence for such discharge, deposit, disposal or
release.CERCLA. Certain of the
Plaintiffs have alleged that they had incurred or expectexpected to incur costs and damages
in the amount of approximately $49 million, in the aggregate.
On or about September 23, 1992, the Plaintiffs filed a Third Amended
Complaint, alleging, among other things, that (i) the Defendants are
jointly and severally liable for response costs, declaratory relief,
and natural resources damages under CERCLA; (ii) Defendant United
States of America is liable on grounds of negligence, continuing
trespass, and continuing nuisance for damages under the Federal Tort
Claims Act; (iii) Defendant$49.0 million. Catellus is strictly liable on grounds of
continuing nuisance, continuing trespass, and negligence for such
discharge, deposit, disposal or release; (iv) Catellus is liable to
indemnify Plaintiffs; and (v) Catellus is liable for fraudulent
concealment of the alleged contamination.
On February 20, 1991, Catellussubsequently filed a third party
complaint (the "Third Party Complaint") against KACC and James L. Ferry & Son, Inc.
("Ferry") in the United States
District Court for the Northern District of California, Case No. C-89-2935
DLJ. The Third Party
Complaint was served on KACC as of April 12, 1991. The Third Party
Complaint alleges that, if the allegations ofThereafter, the Plaintiffs are true,
thenfiled a separate complaint against KACC,
Case No. C-92-4176. The Plaintiffs settled their CERCLA and Ferry (whichtort claims
against the United States for $3.5 million plus thirty-five percent (35%)
of future response costs.
The trial involving this case commenced in March 1995. During the trial,
Plaintiffs settled their claims against Catellus in exchange for payment of
approximately $3.25 million. Subsequently, on June 2, 1995, the United
States District Court for the Northern District of California issued an
order on the remaining claims in that action. On December 7, 1995, the
District Court issued the Final Judgment on those claims concluding that
KACC is alleged to have performedliable for various costs and interest, aggregating approximately
$2.2 million, fifty percent (50%) of future costs of cleaning up certain
excavation activities onparts of the Property and certain fees and costs associated specifically
with the claim by Catellus against KACC. In January 1996, Catellus filed a
notice of appeal with respect to its indemnity judgment against KACC. KACC
has since filed a notice of cross appeal as to the Court's decision
adjudicating that KACC is obligated to indemnify Catellus. In February
1996, the Plaintiffs filed motions, which KACC intends to contest, seeking
reimbursement of fees and costs from KACC in the aggregate amount of $2.76
million. Based on KACC's estimate of future costs of cleanup, resolution
of the Catellus matter is not expected to have a material adverse effect on
Kaiser's consolidated financial condition, results of operations, or
liquidity.
Waste Inc. Superfund Site
On December 8, 1995, the EPA issued a unilateral Administrative Order for
Remedial Design and Remedial Action under CERCLA to KACC and thirty-one
other respondents for remedial design and action at the Waste Inc.
Superfund Site at Michigan City, Indiana. This site was operated as a
result thereof,landfill from 1965 to have released contaminants on the Property and1982. KACC is alleged to have arranged for the
transportation, treatment, and disposal of such contaminants) are
liable for Catellus' response costs and damages under CERCLA and
damages under other theorieswaste from its formerly-owned plant at Wanatah, Indiana, during
the period from 1964 to 1972. In its Record of negligence and nuisance and, inDecision, the caseEPA estimated
the cost of KACC, waste. Catellus seeks (i) contribution from KACC and
Ferry, jointly and severally, for its costs and damages pursuantthe work to CERCLA; (ii) indemnity from KACC and Ferry for any liability or
judgment imposed upon it; (iii) indemnity from KACC and Ferry for
reasonable attorneys fees and costs incurred by it; (iv) damages forbe performed to have a present value of $15.7
million. KACC's share of the injury to its interest in the Property; and (v) treble damages
from KACC pursuant to California Code of Civil Procedure Section 732.
On June 4, 1991, Catellus served on KACC a first amended third party
complaint which alleges, in additiontotal waste sent to the allegationssite is unknown. A
consultant retained by a group of PRPs estimated that KACC contributed 2.0%
of the Third
Party Complaint, that KACC and/or a predecessor in interestwaste sent to KACC is
also liable for Catellus' damages, if any,the site by the forty-one largest contributors.
KACC's ultimate exposure will depend on the basisnumber of alleged
contractual indemnities contained in certain former leasesPRPs that participate
and the volume of waste properly allocable to KACC. Based on the Property.
The Third Party Complaint was amended on or about October 26, 1992.
The amended Third Party Complaint allegesEPA's
cost estimate, KACC believes that if the allegations of
the Plaintiffs are true, then KACCits financial exposure for remedial
design and Ferry are liable for (i)
Catellus' response costs and natural resources damageremedial action at this site is less than $500,000. A PRP
participation agreement is under CERCLA;
(ii) damages under theories of negligence, trespass and nuisance;
(iii) indemnity (equitable and contractual); and (iv) attorneys fees
under California Code of Civil Procedure Section 1021.6.
By letter dated October 26, 1992, counsel for certain underwriters at
Lloyd's London and certain London Market insurance companies ("London
Insurers") advised that the London Insurers agreed to reimburse KACC
for defense expenses in the third party action filed by Catellus,
subject to a full reservation of rights.
The Plaintiffs filed a motion for leave to file a Third Amended
Complaint which would have added KACC as a first party defendant. This
motion was denied. On October 26, 1992, the Plaintiffs served a
separate Complaint against KACC for damages and declaratory relief.
The claims asserted by the Plaintiffs are for (i) recovery of costs,
natural resources damages, and declaratory relief under CERCLA; (ii)
damages for injury to the Property arising from negligence,
- 17 -negotiation.
14
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------- -----------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS (continued)
(iii)Hammons v. Alcan Aluminum Corp. et al
On March 5, 1996, a class action complaint was filed in California against
the Company, Alcan Aluminum Corp., Aluminum Company of America, Alumax,
Inc, Reynolds Metal Company, the Aluminum Association and others in the
Superior Court of California for the County of Los Angeles, Case No.
BC145612. The complaint claims that the defendants conspired, in violation
of state antitrust laws, to raise, stabilize and maintain the price of
primary aluminum and aluminum products through cuts in production allegedly
in connection with the ratification of a Memorandum of Understanding in
1994 by representatives of the authorities of Australia, Canada, the
European Union, Norway, the Russian Federation and the United States. The
complaint seeks certification of a class consisting of persons who at any
time between January 1, 1994, and the date of the complaint purchased
aluminum or aluminum products manufactured by one or more of the defendants
and estimates damages under a theory of strict liability; (iv) continuing
nuisance and continuing trespass; (v) equitable indemnity; (vi)
response costs incurredsustained by the Richmond Redevelopment Agencyclass to be $4.4 billion, before
trebling.
Matheson et al v. Kaiser Aluminum Corporation et al
On September 11, 1995, Kaiser announced that it had appointed an
independent committee of its Board of Directors to consider a possible
recapitalization transaction. On February 5, 1996, Kaiser publicly
announced that it had filed a preliminary proxy statement with the
Securities and Exchange Commission relating to a proposed recapitalization.
A special shareholders' meeting to consider the recapitalization was
subsequently scheduled for April 10, 1996, and the definitive proxy
statement was mailed to shareholders commencing on March 20, 1996. See
Note 7 of the Notes to Consolidated Financial Statements of the Company,
under California Health & Safety Code Section 33459.4;the heading Proposed Recapitalization, at pages 50-51 of the Annual
Report for a description of the proposed recapitalization. On March 19,
1996, a lawsuit was filed against MAXXAM, Kaiser, and (vii) declaratoryKaiser's directors
challenging and seeking to enjoin the recapitalization and the April 10,
1996, special shareholders' meeting. The suit, which is entitled Matheson
et al v. Kaiser Aluminum Corporation et al (No. 14900) and was filed in the
Delaware Court of Chancery, purports to be a class action by persons who as
of March 18, 1996 (the record date for the April 10, 1996, meeting) owned
Kaiser's outstanding common stock and 8.255% PRIDES, Convertible Preferred
Stock ("PRIDES"). Plaintiffs allege, among other things, breaches of
fiduciary duties by certain defendants and that the proposed
recapitalization violates Delaware law and the certificate of designation
for the PRIDES. Plaintiffs seek injunctive relief, rescission,
rescissory damages and other relief. A hearing on the state claims. This matter has been tendered to the
London Insurers.
Picketville Road Landfill Matter
On July 1, 1991, the EPA served on KACC and 13 other PRPs a Unilateral
Administrative Order For Remedial Design and Remedial Action (the
"Order") at the Picketville Road Landfill site in Jacksonville,
Florida. The EPA seeks remedial design and remedial action pursuant to
CERCLA from some, but apparently not all, PRPs based upon a Record of
Decision outlining remedial cleanup measures to be undertaken at the
site adopted by the EPA on September 28, 1990. The site was operated
as a municipal and industrial waste landfill from 1968 to 1977 by the
City of Jacksonville. KACC was first notified by the EPA on January
17, 1991, that wastes from one of KACC's plants may have been
transported to and deposited in the site. In its Record of Decision,
the EPA estimated that the total capital, operations, and maintenance
costs of its elected remedymotion for
the site would be approximately $9.9
million. In addition, the EPA has reserved the right to seek recovery
of its costs incurred relating to the Order, including, but not
limited to, reimbursement of the EPA's cost of response. Through
negotiations with the EPA and other PRPs, KACC has reached an
agreement with such PRPs under which KACC will fund $146,700 of the
cost of the remedial action (unless remedial costs exceed $19 million
in which event the settlement agreement will be re-opened). The
implementation of the foregoing agreementinjunctive relief is subject to continuing
discussions among the EPA, the other PRPs, and KACC.presently scheduled for April 8, 1996.
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 lawsuits
generally relate to products KACC has not manufactured for at least 15
years. The number of such lawsuits instituted against KACC increased
substantially in 1993 and management believesAt December 31, 1995, the number of such lawsuits will continueclaims pending was
approximately 59,700, as compared with 25,200 at December 31, 1994. In
1995, approximately 41,700 of such claims were received and 7,200 settled
or dismissed. KACC has been advised by its regional counsel that, although
there can be no assurance, the recent increase in pending claims may be
attributable in part to increase attort reform legislation in Texas which was passed
by the legislature in March 1995 and which became effective on September 1,
1995. The legislation, among other things, is designed to restrict,
beginning September 1, 1995, the filing of cases in Texas that do not have
a greater annualized rate thansufficient nexus to that jurisdiction, and to impose, generally as of
September 1, 1996, limitations relating to joint and several liability in
tort cases. A substantial portion of the asbestos-related claims that were
filed and served on KACC between June 30, 1995, and November 30, 1995, were
filed in Texas prior years.to September 1, 1995. For additional information, see
"MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital SpendingResources - Asbestos Contingencies."
The portion of Note 8 of the Notes to Consolidated Financial Statements in
the Annual Report under the heading "Asbestos Contingencies" is
incorporated herein by reference.
15
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- -----------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS (continued)
Other Proceedings
On August 24, 1994, the DOJ issued Civil Investigative Demand No. 11356
("CID No. 11356") requesting information from Kaiser regarding (i) its
production, capacity to produce, and sales of primary aluminum from January
1, 1991, to the date of the response; (ii) any actual or contemplated
reduction in its production of primary aluminum during that period; and
(iii) any communications with others regarding any actual, contemplated,
possible or desired reductions in primary aluminum production by Kaiser or
any of its competitors during that period. Management believes that
Kaiser's actions have at all times been appropriate, and Kaiser has
submitted documents and interrogatory answers to the DOJ responding to CID
No. 11356.
On March 27, 1995, the DOJ issued Civil Investigative Demand No. 12503
("CID No. 12503"), as part of an industry-wide investigation, requesting
information from KACC regarding (i) any actual or contemplated changes in
its method of pricing can stock from January 1, 1994, through March 31,
1995, (ii) the percentage of aluminum scrap and primary aluminum ingot used
by KACC to produce can stock and the manner in which KACC's cost of
acquiring aluminum scrap is factored into its can stock prices, and (iii)
any communications with others regarding any actual or contemplated changes
in its method of pricing can stock from January 1, 1994, through March 31,
1995. Kaiser believes that KACC's actions have at all times been
appropriate, and KACC has submitted documents and interrogatory answers to
the DOJ responding to CID No. 12503.
Various other lawsuits and claims are pending against KACC. ManagementWhile
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 believes that the resolution of such uncertainties and
the lawsuits and claims made
against KACC, including matters discussed above, willincurrence of such costs should not have a material adverse effect on
the Company's consolidated financial position, or results of operations.operations, or
liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders of the Company during
the fourth quarter of 1993.1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
From January 1, 1991, through July 17, 1991, there was no established
public trading market for theThe Company's common stock which was
indirectly owned 100% by MAXXAM. On July 18, 1991, the Company issued
7,250,000 shares of common stock, and since that time the Company's
common stock has beenis traded on the New York Stock Exchange.Exchange under
the symbol "KLU". The number of record holders of the Company's common
stock at March 21,
199415, 1996 was 117. The stock
- 18 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS (continued)
symbol is KLU.169. Page 6259 of the Annual Report, and the
information in Note 97 of the NoteNotes to Consolidated Financial Statements
under the heading "Dividends on Common Stock" at page 5450 of the Annual
Report, are incorporated herein by reference. The Company has not paid a $.05 per shareany
dividends on its common stock dividend each quarter since its initial public offering ofduring the stock in July 1991, through the fourth quarter of 1992.two most recent fiscal years.
The
Company does not expect to declare a common stock dividend until
aluminum prices strengthen.
The Indentures and the 1994 Credit Agreement (Exhibits 4.14.6 through 4.44.11 to this Report)
containcontains restrictions on the ability of the Company to pay dividends on or
make distributions on account of the Company's common stock, and the 1994
Credit Agreement and the Indentures (Exhibits 4.1 through 4.5 to this
Report) contain restrictions on the ability of the Company's subsidiaries
to transfer funds to the Company in the form of cash dividends, loans or
advances. Exhibits 4.1 through 4.44.11 to this Report;Report, Note 64 of the Notes to
Consolidated Financial Statements at pages 39-4237-39 of the Annual Report;Report, and
the information under the heading "Financial Condition"Liquidity and Capital SpendingResources -
Capital Structure" at pages 23-2522-24 of the Annual Report, are incorporated
herein by reference.
16
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- -----------------------------------------------------
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the Company is incorporated herein by reference
to the table at page 3 of this Report;Report, to the table at page 20 of the
Annual Report; inReport, to the discussion under the heading "Results of Operations"
at page 21 of the Annual Report;Report, to Note 1 of the Notes to Consolidated
Financial Statements at pages 35-3733-35 of the Annual Report;Report, and to pages
60-6157-58 of the Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Pages 20-3020-28 of the Annual Report are incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pages 31-5929-56 and page 6259 of the Annual Report Schedules II, V,
VI, IX, and X to this Report, and the Report of Independent Public
Accountants with respect to such Schedules, are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
Information required under PartPART III (Items 10, 11, 12, and 13) has been
omitted from this Report since the Company intends to file with the
Securities and Exchange Commission, not later than 120 days after the close
of its fiscal year, a definitive proxy statement pursuant to Regulation 14A
which involves the election of directors.
- 19 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
PART IV
ItemITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) Index to Financial Statements and Schedules
1. Financial Statements
--------------------
The Consolidated Financial Statements of the Company, the
Notes to Consolidated Financial Statements, the Report of
Independent Public Accountants, and Quarterly Financial Data
are included on pages 31-5929-56 and 6259 of the Annual Report.
2. Financial Statement Schedule Page
----------------------------- ----
Report of Independent Public Accountants . . . . . . . . 21
Schedule II - Amounts Receivable from Related
Parties and Underwriters,
Promoters, and Employees Other
Than Related Parties . . . . . . . . . . 22
Schedule V - Consolidated Property, Plant, and
EquipmentSchedules . . . . . . . . . . . . . . . 23
Schedule VI - Accumulated Depreciation, Depletion,
and AmortizationPage
----------------------------- ----
Report of Consolidated
Property, Plant, and Equipment.Independent Public Accountants. . . . . 24
Schedule IX - Consolidated Short-Term Borrowings. . . 25. 19
Schedule XI - Supplementary ConsolidatedCondensed Balance Sheets - Parent Company,
Condensed Statements of Income Statement Information- Parent
Company, Condensed Statements of Cash
Flows - Parent Company, and Notes to
Condensed Financial Statements
- Parent Company . . . . . . . . . 26. . .20-23
All other schedules are inapplicable or the required
information is included in the Consolidated Financial
Statements or the Notes thereto.
17
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- -----------------------------------------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K (continued)
3. Exhibits
--------
Reference is made to the Index of Exhibits immediately
preceding the exhibits hereto (beginning on page 28)25),
which index is incorporated herein by reference.
(b) Reports on Form 8-K
No Report on Form 8-K was filed by the Company during the last
quarter of the period covered by this Report.
(c) Exhibits
Reference is made to the Index of Exhibits immediately
preceding the exhibits hereto (beginning on page 28)25), which
index is incorporated herein by reference.
18
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- 20 -
-----------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited, in accordance with generally accepted auditing standards,
the financial statements included in Kaiser Aluminum Corporation and
subsidiariesSubsidiaries' annual report to shareholders incorporated by reference in this
Form 10-K and have issued our report thereon dated February 24, 1994. Our report on the financial statements includes an
explanatory paragraph with respect to the change in methods of
accounting for postretirement benefits other than pensions,
postemployment benefits, and income taxes in 1993 as discussed in
Note 1 of the Notes to Consolidated Financial Statements.16, 1996. Our
audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedulesSchedule I listed in the index at Item 14(a)2.
above areis the responsibility of the Company's management and areis presented for
purposes of complying with the Securities and Exchange Commission's rules and
areis not part of the basic financial statements. These schedules haveThis schedule has been
subjected to the auditing procedures applied in the auditsaudit of the basic
financial statements and, in our opinion, fairly statestates in all material
respects the financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.Arthur Andersen LLP
Houston, Texas
February 24, 1994
- 21 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE II
- ----------------------------------------------------------------------
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS, AND
EMPLOYEES OTHER THAN RELATED PARTIES
(In millions of dollars)
Balance at
Deductions End of Year
Balance at ----------------------- ----------------
Beginning Amounts Amounts Not
Name of Debtor of Year Additions Collected Written Off Current Current
-------------- ----------- --------- --------- ----------- ------- -------
1993
----
None
1992
----
J. A. Bonn (1) $.1 $.1
1991
----
J. M. Seidl(2) $1.3 1.3
J. A. Bonn (1) .1 $ .1
(1) This note bears interest at 7.09% per annum and is due on the earlier of demand, the
termination of Mr. Bonn's employment, or on June 30, 1994. The interest is payable
quarterly. The note is secured by real estate owned by Mr. Bonn. The full amount of
the note was paid in March 1992.
(2) The note of $1.0, together with its accrued interest (at 8.9% per annum), was transferred
to the Company by MAXXAM in September 1991 and was subsequently paid off in cash.
- 22 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE V
- -----------------------------------------------------------------------------
CONSOLIDATED PROPERTY, PLANT, AND EQUIPMENT
(In millions of dollars)
Balance at Other Balance at
Beginning Changes End of
Description of Year Additions Retirements Add (Deduct) Year
----------- ---------- --------- ----------- ------------ --------
Year ended December 31, 1993:
Land $ 84.8 $ 1.8 $ 5.1 $ 91.7
Land improvements 39.0 1.0 3.4 43.4
Buildings 155.0 5.9 $ (.7) 24.2 184.4
Machinery and equipment 1,010.7 63.4 (15.7) 164.6 1,223.0
Leasehold improvements 9.1 .7 (.3) .9 10.4
Construction in progress 70.3 (5.1) (.3) 64.9
-------- -------- -------- -------- --------
Total $1,368.9 $ 67.7 $ (17.0) $ 198.2(1) $1,617.8
======== ======== ======== ======== ========
Year ended December 31, 1992:
Land $ 49.5 $ 11.0 $ 24.3 $ 84.8
Land improvements 33.7 5.5 (.2) 39.0
Buildings 135.3 16.6 $(.2) 3.3 155.0
Machinery and equipment 925.7 94.6 (4.8) (4.8) 1,010.7
Leasehold improvements 5.8 3.3 9.1
Construction in progress 87.5 (16.6) (.1) (.5) 70.3
-------- -------- -------- -------- --------
Total $1,237.5 $ 114.4 $ (5.1) $ 22.1(2) $1,368.9
======== ======== ======== ======== ========
Year ended December 31, 1991:
Land $ 43.3 $ 1.4 $ (.2) $ 5.0 $ 49.5
Land improvements 27.7 1.8 4.2 33.7
Buildings 123.5 5.9 (.7) 6.6 135.3
Machinery and equipment 866.7 71.6 (6.0) (6.6) 925.7
Leasehold improvements 5.0 .7 .1 5.8
Construction in progress 52.4 36.7 (.1) (1.5) 87.5
-------- -------- -------- -------- --------
Total $1,118.6 $ 118.1 $ (7.0) $ 7.8 $1,237.5
======== ======== ======== ======== ========
(1) Consists principally of the initial impact of adoption of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," as of January 1, 1993, which required the Company to
restate certain assets to their pre-tax amounts from their net-of-tax amounts originally recorded
in connection with the acquisition by MAXXAM in October 1988.
(2) Consists principally of reclassifications from other current and long-term assets
to property, plant, and equipment.
- 23 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE VI
- -----------------------------------------------------------------------------
ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION
OF CONSOLIDATED PROPERTY, PLANT, AND EQUIPMENT
(In millions of dollars)
Balance at Other Balance at
Beginning Changes End of
Description of Year Additions Retirements Add (Deduct) Year
----------- ---------- --------- ----------- ----------- -------
Year ended December 31, 1993:
Depletable land $ 1.5 $ .6 $ 1.4 $ 3.5
Land improvements 6.3 2.1 1.4 9.8
Buildings 30.7 8.4 $ (.1) 7.2 46.2
Machinery and equipment 261.2 85.4 (5.1) 49.9 391.4
Leasehold improvements 2.4 .6 (.1) .3 3.2
------ ------ ------ ------ ------
Total $302.1 $ 97.1 $ (5.3) $ 60.2(1) $454.1
====== ====== ====== ====== ======
Year ended December 31, 1992:
Depletable land $ 1.2 $ .3 $ 1.5
Land improvements 4.8 1.6 $ (.1) 6.3
Buildings 21.9 7.3 $ (.1) 1.6 30.7
Machinery and equipment 193.2 70.5 (1.1) (1.4) 261.2
Leasehold improvements 1.9 .6 (.1) 2.4
------ ------ ------ ------ ------
Total $223.0 $ 80.3 $ (1.2) nil $302.1
====== ====== ====== ====== ======
Year ended December 31, 1991:
Depletable land $ .7 $ .5 $ 1.2
Land improvements 3.5 1.1 $ .2 4.8
Buildings 14.6 6.5 $ (.1) .9 21.9
Machinery and equipment 128.3 64.5 (1.6) 2.0 193.2
Leasehold improvements 1.2 .6 .1 1.9
------ ------ ------ ------ ------
Total $148.3 $ 73.2 $ (1.7) $ 3.2 $223.0
====== ====== ====== ====== ======
(1) Consists principally of the initial impact of adoption of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," as of January 1, 1993, which required the Company
to restate certain assets to their pre-tax amounts from their net-of-tax amounts originally recorded
in connection with the acquisition by MAXXAM in October 1988.
- 24 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE IX
- ----------------------------------------------------------------------------
CONSOLIDATED SHORT-TERM BORROWINGS
(In millions of dollars)
Maximum Average Weighted
Weighted Amounts Amount Average
Category of Balance Average Outstanding Outstanding Interest Rate
Aggregate Short- at End of Interest During During the During the
Terms Borrowings Year Rate the Year Year(1) Year(2)
---------------- --------- -------- ----------- ----------- -------------
Bank borrowings(3)
1993 $ .5 8.0% $ 18.5 $ 6.2 4.5%
1992 4.8 4.8 52.8 29.6 4.7
1991 6.3 4.9 50.6 29.2 7.0
(1) Based on outstanding borrowings at the end of each month.
(2) Based on outstanding borrowings and weighted average interest rates at the end of each
month.
(3) Short-term bank borrowings are made available on an uncommitted basis and no fee is
charged. Maturities generally range from one to ten days with no formal provisions for
the extension of maturities. Interest rates are based upon short-term prevailing rates.
- 25 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE X
----------------------------------------------------------------------
SUPPLEMENTARY CONSOLIDATED INCOME STATEMENT INFORMATION(1)
(In millions of dollars)
Charged to Costs and Expenses
Year End December 31,
-----------------------------
1993 1992 1991
---- ---- ----
Maintenance and repairs $168.9 $147.0 $161.4
====== ====== ======
Taxes, other than payroll and income
taxes - production levy on bauxite $ 27.9 $ 31.5 $ 34.0
====== ====== ======
(1) The amounts for amortization of intangible assets and preoperating costs and similar
deferrals, royalties, and advertising costs are not reported as these items did not
exceed 1% of sales and revenues.
- 26 -16, 1996
19
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ---------------------------------------------------------------------------------------------------------------------------
SCHEDULE I
CONDENSED BALANCE SHEETS - PARENT COMPANY
(In millions of dollars, except share amounts)
December 31,
--------------------
1995 1994
-------- --------
Assets
Current assets:
Cash and cash equivalents $ .2 $ 5.7
Note receivable from KACC 10.7 21.2
-------- --------
Total current assets 10.9 26.9
Note receivable from KACC 8.6 23.5
Investments - KACC 1,521.3 1,361.0
-------- --------
Total $1,540.8 $1,411.4
======== ========
Liabilities and Stockholders' Equity
Current liabilities $ 3.3 $ 6.4
Intercompany note payable to KACC, including accrued interest 1,479.8 1,387.7
Stockholders' equity:
Preferred stock, par value $.05, authorized 20,000,000 shares; Series A
Convertible, stated value $.10 issued and outstanding, nil and 1,938,295
in 1995 and 1994 .2
PRIDES Convertible, par value $.05, issued and outstanding, 8,673,850 and
8,855,550 in 1995 and 1994 .4 .4
Common stock, par value $.01, authorized 100,000,000 shares; issued and
outstanding 71,638,514 and 58,205,083 in 1995 and 1994 .7 .6
Additional capital 530.3 527.8
Accumulated deficit (459.9) (502.6)
Additional minimum pension liability (13.8) (9.1)
-------- --------
Total stockholders' equity 57.7 17.3
-------- --------
Total $1,540.8 $1,411.4
======== ========
The accompanying notes to condensed financial statements are
an integral part of these statements.
20
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------
SCHEDULE I
CONDENSED STATEMENTS OF INCOME - PARENT COMPANY
(In millions of dollars)
December 31,
-----------------------------
1995 1994 1993
------- ------- -------
Equity in income (loss) of KACC $ 152.8 $ (20.4) $(537.2)
Administrative and general expenses (.4) (.3) (.4)
Other income (expense):
Interest expense (92.1) (86.1) (115.8)
Other income 1.2
------- ------- -------
Net income (loss) $ 60.3 $(106.8) $(652.2)
======= ======= =======
The accompanying notes to condensed financial statements are
an integral part of these statements.
21
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------
SCHEDULE I
CONDENSED STATEMENTS OF CASH FLOWS - PARENT COMPANY
(In millions of dollars)
December 31,
-----------------------------
1995 1994 1993
------- ------- -------
Cash flows from operating activities:
Net income (loss) $ 60.3 $(106.8) $(652.2)
Adjustments to reconcile net income (loss) to net cash provided by
(used for) operating activities:
Equity in (income) loss of KACC (152.8) 20.4 537.2
Accrued interest on intercompany note payable to KACC 92.1 86.1 115.8
Increase (decrease) in other liabilities .2 .3 (1.0)
------- ------- -------
Net cash used for operating activities (.2) (.2)
------- ------- -------
Cash flows from investing activities:
Investment in KACC (1.2) (66.9) (81.5)
------- ------- -------
Net cash used for investing activities (1.2) (66.9) (81.5)
------- ------- -------
Cash flows from financing activities:
Dividends paid (20.8) (14.8) (6.3)
Capital stock issued 1.2 100.1 119.3
Intercompany notes issued by KACC - net 15.5 (13.2) (31.5)
------- ------- -------
Net cash (used for) provided by financing activities (4.1) 72.1 81.5
------- ------- -------
Net (decrease) increase in cash and cash equivalents during the year (5.5) 5.2 (.2)
Cash and cash equivalents at beginning of year 5.7 .5 .7
------- ------- -------
Cash and cash equivalents at end of year $ .2 $ 5.7 $ .5
======= ======= =======
Supplemental disclosure of non-cash investing activities:
Non-cash investment in KACC $ 9.9 $ 15.0
The accompanying notes to condensed financial statements are an integral part
of these statements.
22
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------
SCHEDULE I
NOTES TO CONDENSED FINANCIAL STATEMENTS - PARENT COMPANY
1. Basis of Presentation
The accompanying parent company financial statements of Kaiser
Aluminum Corporation ("Kaiser") should be read in conjunction
with the 1995 consolidated financial statements of Kaiser and
Subsidiary Companies.
Kaiser is a holding company and conducts its operations through
its wholly owned subsidiary, Kaiser Aluminum & Chemical
Corporation ("KACC"), which is reported herein using the equity
method of accounting.
2. Intercompany Note Payable
The Intercompany Note to KACC was amended in July 1993 to
decrease the fixed interest rate from 13% to 6-5/8%. No interest
or principal payments are due until December 31, 2000, after which
interest and principal will be payable over a 15-year term
pursuant to a predetermined schedule.
3. Restricted Net Assets
The investment in KACC is substantially unavailable to Kaiser
pursuant to the terms of certain debt instruments. The
obligations of KACC in respect of the credit facilities under the
1994 Credit Agreement are guaranteed by Kaiser and by all
significant subsidiaries of KACC. See Note 4 of the Notes to
Consolidated Financial Statements.
23
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
KAISER ALUMINUM CORPORATION
Date: March 30, 199427, 1996 By George T. Haymaker, Jr.
---------------------------------------------------------
George T. Haymaker, Jr.
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Date: March 30, 199427, 1996 George T. Haymaker, Jr.
--------------------------------------------------------------
George T. Haymaker, Jr.
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: March 30, 199427, 1996 John T. La Duc
--------------------------------------------------------------
John T. La Duc
Vice President and Chief Financial
Officer
(Principal Financial Officer)
Date: March 30, 1994 Charlie Alongi
---------------------------------
Charlie Alongi27, 1996 Arthur S. Donaldson
-----------------------------
Arthur S. Donaldson
Controller
(Principal Accounting Officer)
Date: March 30, 199427, 1996 Robert J. Cruikshank
--------------------------------------------------------------
Robert J. Cruikshank
Director
Date: March 30, 199427, 1996 Charles E. Hurwitz
--------------------------------------------------------------
Charles E. Hurwitz
Director
Date: March 30, 199427, 1996 Ezra G. Levin
--------------------------------------------------------------
Ezra G. Levin
Director
Date: March 30, 199427, 1996 Robert Marcus
--------------------------------------------------------------
Robert Marcus
Director
Date: March 30, 1994 Paul D. Rusen
---------------------------------
Paul D. Rusen27, 1996 Robert J. Petris
-----------------------------
Robert J. Petris
Director
- 27 -24
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------------------------------------------------
INDEX OF EXHIBITS
Exhibit
Number Description
- ------ -----------------------
3.1 Restated Certificate of Incorporation of Kaiser Aluminum
Corporation (The(the "Company" or "KAC"), dated February 21, 1991
(incorporated by reference to Exhibit 3.1 to Amendment No. 2 to
the Registration Statement on Form S-1, dated June 11, 1991,
filed by KAC, Registration No. 33-37895).
3.2*3.2 Certificate of Retirement of KAC, dated October 24, 1995.
3.3 By-laws of KAC, amended as of February 26, 1991 (incorporated by
reference to Exhibit 3.2 to Amendment No. 2 to the Registration
Statement on Form S-1, dated June 11, 1991, filed by KAC,
Registration No. 33-37895).
4.1 Indenture, dated as of February 1, 1993, among Kaiser Aluminum &
Chemical Corporation ("KACC"),KACC, as Issuer,
Kaiser Alumina Australia Corporation, Alpart Jamaica Inc., and
Kaiser Jamaica Corporation, as Subsidiary Guarantors, and The
First National Bank of Boston, as Trustee, regarding KACC's
12-3/4% Senior Subordinated Notes Due 2003 (incorporated by
reference to Exhibit 4.1 to Form 10-K for the period ended
December 31, 1992, filed by KACC, File No. 1-3605).
4.2 First Supplemental Indenture, dated as of May 1, 1993, to the
Indenture, dated as of February 1, 1993 (incorporated by
reference to Exhibit 4.2 to the Report on Form 10-Q for the
quarterly period ended June 30, 1993, filed by KACC,
File No. 1-3605).
*4.3 Second Supplemental Indenture, dated as of February 1, 1996, to
the Indenture, dated as of February 1, 1993.
4.4 Indenture, dated as of February 17, 1994, among KACC, as Issuer,
Kaiser Alumina Australia Corporation, Alpart Jamaica Inc.,
Kaiser Jamaica Corporation, and Kaiser Finance Corporation, as
Subsidiary Guarantors, and First Trust National Association, as
Trustee, regarding KACC's 9-7/8% Senior Notes Due 2002.
*4.42002
(incorporated by reference to Exhibit 4.3 to the Report on Form
10-K for the period ended December 31, 1993, filed by KAC, File
No. 1-9447).
*4.5 First Supplemental Indenture, dated as of February 1, 1996, to
the Indenture, dated as of February 17, 1994.
4.6 Credit Agreement, dated as of February 17, 1994, among KAC, KACC,
the financial institutions a party thereto, and BankAmerica
Business Credit, Inc., as Agent and certain financial institutions.
4.5(incorporated by reference to
Exhibit 4.4 to the Report on Form 10-K for the period ended
December 31, 1993, filed by KAC, File No. 1-9447).
4.7 First Amendment to Credit Agreement, dated as of July 21, 1994,
amending the Credit Agreement, dated as of February 17, 1994,
among KAC, KACC, the financial institutions party thereto, and
BankAmerica Business Credit, Inc., as Agent (incorporated by
reference to Exhibit 4.1 to the Report on Form 10-Q for the
quarterly period ended June 30, 1994, filed by KAC, File
No. 1-9447).
4.8 Second Amendment to Credit Agreement, dated as of March 10, 1995,
amending the Credit Agreement, dated as of February 17, 1994, as
amended, among KAC, KACC, the financial institutions party
thereto, and BankAmerica Business Credit, Inc., as Agent
(incorporated by reference to Exhibit 4.6 to the Report on Form
10-K for the period ended December 13, 1989 (the "198931, 1994, filed by KAC, File
No. 1-9447).
25
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------
Exhibit
Number Description
- ------ ------------
4.9 Third Amendment to Credit Agreement"),Agreement, dated as of July 20, 1995,
amending the Credit Agreement, dated as of February 17, 1994, as
amended, among KAC, KACC, KAC, the financial institutions a party
thereto, Bank of America National Trust and Savings
Association, as Agent, and Mellon Bank, N.A.BankAmerica Business Credit, Inc., as Collateral Agent
(incorporated by reference to Exhibit 4.3 to Amendment
No. 54.1 to the Registration StatementReport on Form
S-1, dated
December 13, 1989,10-Q for the quarterly period ended June 30, 1995, filed by KACC RegistrationKAC,
File No. 33-30645)1-9447).
4.6 First4.10 Fourth Amendment to the 1989 Credit Agreement, dated as of AprilOctober 17,
19901995, amending the Credit Agreement, dated as of February 17,
1994, as amended, among KAC, KACC, the financial institutions a
party thereto, and BankAmerica Business Credit, Inc., as Agent
(incorporated by reference to Exhibit 4.2 of4.1 to the Report on Form
10-Q for the quarterly period ended September 30, 1990,
of MAXXAM, Inc. ("MAXXAM")1995, filed November 6, 1990,by
KAC, File No. 1-3924)1-9447).
4.7 Second*4.11 Fifth Amendment to the 1989 Credit Agreement, dated as of
September 17, 1990 (incorporated by reference to Exhibit 4.3
of the Report on Form 10-Q for the quarterly period ended
September 30, 1990, of MAXXAM, filed November 6, 1990,
File No. 1-3924).
4.8 Third Amendment to the 1989 Credit Agreement, dated as of December 7, 1990 (incorporated by reference to Exhibit 4.6 to
Amendment No. 1 to11,
1995, amending the Registration Statement on Form S-1,
dated February 13, 1991, filed by KAC, Registration
No. 33-37895).
- 28-
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
----------------------------------------------------------------------
Exhibit
Number Description
------- -----------
4.9 Fourth Amendment to the 1989 Credit Agreement, dated as of April 19, 1991 (incorporated by reference to Exhibit 4.1 ofFebruary 17,
1994, as amended, among KAC, KACC, the Report on Form 10-Q for the quarterly period ended
March 31, 1991, filed by KACC, File No. 1-3605).
4.10 Fifth Amendment to the 1989financial institutions a
party thereto, and BankAmerica Business Credit, Agreement, datedInc., as of
March 13, 1992 (incorporated by reference to Exhibit 4.8 to
Form 10-K for the period ended December 31, 1991, filed by
KAC, File No. 1-9447).
4.11 Seventh Amendment to the 1989 Credit Agreement, dated as of
November 6, 1992 (incorporated by reference to Exhibit 4.10 to
Amendment No. 5 to the Registration Statement on Form S-2,
dated January 22, 1993, filed by KACC, Registration
No. 33-48260).Agent.
4.12 Eighth Amendment to the 1989 Credit Agreement, dated as of
January 7, 1993 (incorporated by reference to Exhibit 4.12 to
Amendment No. 5 to the Registration Statement on Form S-2,
dated January 22, 1993, filed by KACC, Registration
No. 33-48260).
4.13 Ninth Amendment to 1989 Credit Agreement, dated as of May 19,
1993 including the form of Intercompany Note annexed as an
Exhibit thereto (incorporated by reference to Exhibit 4.10 to
Amendment No. 2 to the Registration Statement on form S-1,
dated June 22, 1993, filed by KACC, Registration No. 33-49555).
4.14 Tenth Amendment to 1989 Credit Agreement, dated as of
July 23,1993 (incorporated by reference to Exhibit 4.13 to
the Registration Statement on Form S-3, dated August 26,
1993, filed by KACC, Registration No. 33-50097).
4.15 Eleventh Amendment to 1989 Credit Agreement, dated as of
August 27, 1993 (incorporated by reference to Exhibit 4.13
to the Registration Statement on Form S-3, dated October 13,
1993, filed by KAC, Registration No. 33-50581).
4.16 Twelfth Amendment to 1989 Credit Agreement, dated as of
December 20, 1993 (incorporated by reference to Exhibit 4.15
to Amendment No. 3 to the Registration Statement on Form S-2,
dated February 8, 1994, filed by KACC, Registration
No. 33-50097).
4.17 Certificate of DesignationDesignations of Series A Mandatory Conversion
Premium Dividend Preferred Stock of KAC, dated June 28, 1993
(incorporated by reference to Exhibit 4.3 to the Report on Form
10-Q for the quarterly period ended June 30, 1993, filed by KAC,
File No. 1-9447).
4.184.13 Deposit Agreement between KAC and The First National Bank of
Boston, dated as of June 30, 1993 (incorporated by reference to
Exhibit 4.4 to the Report on Form 10-Q for the quarterly period
ended June 30, 1993, filed by KAC, File No. 1-9447).
4.194.14 Intercompany Note between KAC and KACC (incorporated by reference
to Exhibit 4.2 to Amendment No. 5 to the Registration Statement
on Form S-1, dated December 13, 1989, filed by KACC, Registration
No. 33-30645).
- 29 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------------------------
Exhibit
Number Description
------- -----------
4.204.15 Senior Subordinated Intercompany Note between KACC and a
subsidiary of MAXXAM, dated January 14, 1993December 15, 1992 (incorporated by
reference to Exhibit 4.13 to Amendment No. 54.10 to the Registration StatementReport on Form S-2,10-K for the
period ended December 31, 1994, filed by KAC, File No. 1-9447).
4.16 Certificate of Designations of 8.255% PRIDES, Convertible
Preferred Stock of KAC, dated January 22,February 17, 1994 (incorporated by
reference to Exhibit 4.21 to the Report on Form 10-K for the
period ended December 31, 1993, filed by KACC,
RegistrationKAC, File No. 33-48260)1-9447).
*4.21 Certificate of Designation of KAC's 8.255% Preferred
Redeemable Increased Dividend Equity Securities, dated
February 17, 1994.
*4.224.17 Senior Subordinated Intercompany Note between KAC and KACC dated
February 15, 1994.
*4.231994 (incorporated by reference to Exhibit 4.22 to
the Report on Form 10-K for the period ended December 31, 1993,
filed by KAC, File No. 1-9447).
4.18 Senior Subordinated Intercompany Note between KAC and KACC dated
March 17, 1994.
*4.241994 (incorporated by reference to Exhibit 4.23 to the
Report on Form 10-K for the period ended December 31, 1993,
filed by KAC, File No. 1-9447).
4.19 Senior Subordinated Intercompany Note between KAC and KACC dated
June 30, 1993.1993 (incorporated by reference to Exhibit 4.24 to the
Report on Form 10-K for the period ended December 31, 1993,
filed by KAC, File No. 1-9447).
26
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------
Exhibit
Number Description
- ------ ------------
KAC has not filed certain long-term debt instruments not being
registered with the Securities and Exchange Commission where the
total amount of indebtedness authorized under any such
instrument does not exceed 10% of the total assets of KAC and its
subsidiaries on a consolidated basis. KAC agrees and undertakes
to furnish a copy of any such instrument to the Securities and
Exchange Commission upon its request.
10.1 Form of indemnification agreement with officers and directors
(incorporated by reference to Exhibit (10)(b) to the Registration
Statement of KAC on Form S-4, File No. 33-12836).
10.2 Tax Allocation Agreement between MAXXAM and KACC (incorporated by
reference to Exhibit 10.21 to Amendment No. 6 to the Registration
Statement on Form S-1, dated December 14, 1989, filed by KACC,
Registration No. 33-30645).
10.3 Tax Allocation Agreement between KAC and MAXXAM (incorporated by
reference to Exhibit 10.23 to Amendment No. 2 to the Registration
Statement on Form S-1, dated June 11, 1991, filed by KAC,
Registration No. 33-37895).
10.4 Tax Allocation Agreement, dated as of June 30, 1993, between KACC
and KAC (incorporated by reference to Exhibit 10.3 to the Report
on Form 10-Q for the quarterly period ended June 30, 1993, filed
by KACC, File No. 1-3605).
10.5 Amended and Restated Alumina Supply Agreement, dated as of
October 11, 1989 (incorporated by reference to Exhibit 10.19
to Amendment No. 3 to the Registration Statement on Form S-1,
dated November 14, 1989, filed by KACC, Registration
No. 33-30645).
10.6 Assumption Agreement, dated as of October 28, 1988 (incorporated
by reference to Exhibit HHH to the Final Amendment to the
Schedule 13D of MAXXAM Group Inc. and others in respect of the
Common Stock of KAC, par value $.33-1/3 per share).
10.710.6 Agreement, dated as of June 30, 1993, between KAC and MAXXAM
(incorporated by reference to Exhibit 10.2 to the Report on Form
10-Q for the quarterly period ended June 30, 1993, filed by KACC,
File No. 1-3605).
- 30 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------------------------
Exhibit
Number Description
------- -----------
Executive Compensation Plans and Arrangements
----------------------------------------------
10.8[Exhibits 10.7 - 10.20, inclusive]
10.7 KACC's Bonus Plan (incorporated by reference to Exhibit 10.25 to
Amendment No. 6 to the Registration Statement on Form S-1, dated
December 14, 1989, filed by KACC, Registration No. 33-30645).
10.9 KaiserTech Limited Long Term Incentive Plan, dated June 2,
1989 (incorporated by reference to Exhibit 10.14 to Form 10-K
for the period ended December 31, 1989, filed by KACC,
File No. 1-3605).
10.10 Amendment No. 2 to KaiserTech Limited Long Term Incentive
Plan, dated as of December 18, 1991 (incorporated by reference
to Exhibit 10.7 to Form 10-K for the period ended December 31,
1991, filed by KAC, File No. 1-9447).
10.11 Amendment No. 3 to Kaiser Aluminum Long Term Incentive Plan,
dated as of December 31, 1991 (incorporated by reference to
Exhibit 10.8 to Form 10-K for the period ended December 31,
1991, filed by KAC, File No. 1-9447).
10.12 Kaiser 1993 Omnibus Stock Incentive Plan (incorporated by
reference to Exhibit 10.1 to the Report on Form 10-Q for the
quarterly period ended June 30, 1993, filed by KACC, File
No. 1-3605).
10.1310.9 Kaiser Aluminum Middle Management Long-Term1995 Employee Incentive Plan,
dated June 25, 1990, as amendedCompensation Program (incorporated
by reference to Exhibit 10.22 to Amendment No. 110.1 to the Registration
StatementReport on Form S-1, dated February 13, 1991,10-Q for the
quarterly period ended March 31, 1995, filed by KAC, RegistrationFile
No. 33-37895)1-9447).
10.1410.10 Kaiser 1995 Executive Incentive Compensation Program
(incorporated by reference to Exhibit 99 to the Proxy Statement,
dated April 26, 1995, filed by KAC, File No. 1-9447).
10.11 Employment Agreement, dated April 1, 1993, among KAC, KACC, and
George T. Haymaker, Jr. (incorporated by reference to Exhibit
10.2 to the Report on Form 10-Q for the quarterly period ended
March 31, 1993, filed by KAC, File No. 1-9447).
10.15 Employment Agreement, dated as of October 1, 1992, among KAC,
KACC and A. Stephens Hutchcraft, Jr. (incorporated by
reference to Exhibit 10.15 to Amendment No. 5 to the
Registration Statement on Form S-2, dated January 22, 1993,
filed by KACC, Registration No. 33-48260).
10.16 Severance Agreement, dated July 1, 1985, between KACC and
A. Stephens Hutchcraft, Jr., as amended (incorporated by
reference to Exhibit (10)(f) to Form 10-K for the period
ended December 31, 1988, filed by KACC, File No. 1-3605).
10.17 Amendment, dated October 31, 1989, to the Severance Agreement
of A. Stephens Hutchcraft, Jr. referenced in Exhibit 10.16
above (incorporated by reference to Exhibit 10.24 to Amendment
No. 5 to the Registration Statement on Form S-1, dated
December 13, 1989, filed by KACC, Registration No. 33-30645).
10.18 Consulting Agreement, dated November 19, 1993 between KACC
and A. Stephens Hutchcraft, Jr. (incorporated by reference to
MAXXAM's Annual Report on Form 10-K for the period ended
December 31, 1993, File No. 1-3924; the "MAXXAM 1993
Form 10-K").
- 31 -27
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------------------------------------------------
Exhibit
Number Description
------- -----------
10.19 Employment Agreement, dated September 26, 1990, between KACC,
MAXXAM and John T. La Duc (incorporated by reference to
Exhibit 10.20 to Amendment No. 1 to the Registration Statement
on Form S-1, dated February 13, 1991, filed by KAC,
Registration No. 33-37895).
10.20 Employment Agreement, dated as of August 22, 1990, among
KACC, MAXXAM and Robert W. Irelan (incorporated by reference
to Exhibit 10.2 of the Report on Form 10-Q for the quarterly
period ended March 31, 1991, filed by KACC, File No. 1-3605).
10.21- ------ ------------
10.12 Promissory Note, dated October 4, 1990, by Robert W. Irelan and
Barbara M. Irelan to KACC (incorporated by reference to Exhibit
10.54 to Form 10-K for the period ended December 31, 1990, filed
by MAXXAM, File No. 1-3924).
10.22 Real Estate Lien Note, dated October 4, 1990, by Robert W.
Irelan and Barbara M. Irelan to KACC and related Deed of Trust
(incorporated by reference to Exhibit 10.55 to Form 10-K for
the period ended December 31, 1990, filed by MAXXAM, File
No. 1-3924).
10.23 Employment Agreement, dated as of March 8, 1990, between
MAXXAM and Anthony R. Pierno (incorporated by reference to
Exhibit 10.28 to Form 10-K for the period ended December 31,
1990, filed by MAXXAM, File No. 1-3924).
10.2410.13 Promissory Note, dated February 1, 1989, by Anthony R. Pierno and
Beverly J. Pierno to MAXXAM (incorporated by reference to Exhibit
10.30 to Form 10-K for the period ended December 31, 1988, filed
by MAXXAM, File No. 1-3924).
10.2510.14 Promissory Note, dated July 19, 1990, by Anthony R. Pierno to
MAXXAM (incorporated by reference to Exhibit 10.31 to Form 10-K
for the period ended December 31, 1990, filed by MAXXAM, File No.
1-3924).
10.26 Commercial Guaranty, dated February 22, 1993, executed by
MAXXAM in favor of Charter National Bank-Houston, with
respect to a loan from Charter National Bank-Houston to
Anthony R. Pierno (incorporated herein by reference to
Exhibit 10.27 to Form 10-K for the period ended December 31,
1992, filed by KAC,File No. 1-9447).
10.27 Commercial Guaranty, dated January 24, 1994, between MAXXAM
and Charter National Bank-Houston, in respect of a loan from
Charter National Bank-Houston to Anthony R. Pierno and a
related letter agreement (incorporated by reference to the
MAXXAM 1993 Form 10-K).
10.28 Employment Agreement, dated as of March 8, 1990, between
MAXXAM and Byron L. Wade (incorporated by reference to
Exhibit 10.50 to Form 10-K for the period ended
December 31, 1990, filed by MAXXAM, File No. 1-3924).
10.2910.15 Promissory Note, dated July 20, 1993, between MAXXAM and Byron L.
Wade (incorporated by reference to the MAXXAM
1993 Form 10-K).
- 32 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------------------------
Exhibit Number Description
------ -----------
10.30 Employment Agreement, dated as of July 1, 1991, by and
among MAXXAM,KACC and Joseph A. Bonn (incorporated by
reference to Exhibit 10.2310.59 to Form 10-K for
the period ended December 31, 1991,1993, filed by KACC,MAXXAM,
File No. 1-3605)1-3924).
10.31 Agreement, dated December 20, 1991, between KAC and Joseph
A. Bonn (incorporated by reference to Exhibit 10.3 to the
Report on Form 10-Q for the quarterly period ended
March 31, 1992, filed by KAC, File No. 1-9447).
10.3210.16 Employment Agreement, dated August 20, 1993, between KACC and
Robert E. Cole (incorporated by reference to Exhibit 10.63 to
Form 10-K for the period ended December 31, 1993, filed by
MAXXAM, File No. 1-3924).
10.17 Compensation Agreement, dated July 18, 1994, between KACC and
Larry L. Watts (incorporated by reference to Exhibit 10.1 to the
Report on Form 10-Q for the quarterly period ended June 30, 1994,
filed by KAC, File No. 1-9447).
10.18 Compensation Agreement, dated July 18, 1994, between KACC and
Geoff S. Smith (incorporated by reference to Exhibit 10.2 to the
Report on Form 10-Q for the quarterly period ended June 30, 1994,
filed by KAC, File No. 1-9447).
10.19 Letter Agreement, dated January 1995, between KAC and Charles E.
Hurwitz, granting Mr. Hurwitz stock options under the Kaiser
1993 Omnibus Stock Incentive Plan (incorporated by reference to
Exhibit 10.17 to the Report on Form 10-K)10-K for the period ended
December 31, 1994, filed by KAC, File No. 1-9447).
10.20 Form of letter agreement with persons granted stock options under
the Kaiser 1993 Omnibus Stock Incentive Plan to acquire shares of
KAC common stock (incorporated by reference to Exhibit 10.18 to
the Report on Form 10-K for the period ended December 31, 1994,
filed by KAC, File No. 1-9447).
*11 Computation of Earnings Per Common and Common Equivalent Share.
*13 Pages 20-30 and 32-62The portions of KAC's Annual Report to shareholders for the year
ended December 31, 19931995, which are incorporated by reference into
this Report.
*21 Significant subsidiariesSubsidiaries of KAC.
*99 Report of Independent Public Accountants.
----------
*Filed*27 Financial Data Schedule.
__________
* Filed herewith
- 33 -28
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- --------------------------------------------------------------------------------------------------------------------------
Exhibit 21
SUBSIDIARIES
Listed below are the principal subsidiaries of Kaiser Aluminum Corporation,
and the jurisdiction of their incorporation or organization.organization and the names
under which such subsidiaries do business. Certain subsidiaries are
omitted which, considered in the aggregate as a single subsidiary, would
not constitute a significant subsidiary.
Place of
Name or Organization Incorporation
-------------------- -------------
Place of
Incorporation
Name or Organization
----- ---------------
Alpart Jamaica Inc. . . . . . . . . . . . . . . . Delaware
Alumina Partners of Jamaica (partnership) . . . . . Delaware
Anglesey Aluminium Limited . . . . . . . . . . . . United Kingdom
Kaiser Alumina Australia Corporation . . . . . . . Delaware
Kaiser Aluminium Europe (U.K.) Limited . . . . . . United Kingdom
Kaiser Aluminium International, Inc. . . . . . . . Delaware
Kaiser Aluminum & Chemical Corporation . . . . . . Delaware
Kaiser Aluminum & Chemical International N.V. . . . Netherlands
Antilles
Kaiser Aluminum & Chemical of Canada Limited. . . . Ontario
Kaiser Aluminum Technical Services, Inc . . . . . . California
Kaiser Bauxite Company . . . . . . . . . . . . . . Nevada
Kaiser Center, Inc. . . . . . . . . . . . . . . . . California
Kaiser Center Properties (partnership) . . . . . . California
Kaiser Finance Corporation . . . . . . . . . . . . Delaware
Kaiser Jamaica Bauxite Company (partnership). . . . Jamaica
Kaiser Jamaica Corporation . . . . . . . . . . . . Delaware
Queensland Alumina Limited. . . . . . . . . . . . . Delaware
Alumina Partners of Jamaica (partnership). . Delaware
Anglesey Aluminium Limited . . . . . . . . . United Kingdom
Kaiser Alumina Australia Corporation . . . . Delaware
Kaiser Aluminium International, Inc. . . . . Delaware
Kaiser Aluminum & Chemical Corporation . . . Delaware
Kaiser Aluminum & Chemical of Canada Limited Ontario
Kaiser Bauxite Company . . . . . . . . . . . Nevada
Kaiser Finance Corporation . . . . . . . . . Delaware
Kaiser Jamaica Bauxite Company (partnership) Jamaica
Kaiser Jamaica Corporation . . . . . . . . . Delaware
Queensland Alumina Limited . . . . . . . . . Queensland
Strombus International Insurance Company, Ltd . . . Bermuda
Trochus Insurance Company, Ltd. . . . . . . . . . . Bermuda
Volta Aluminium Company Limited. . . . . . . . . . Ghana
- 34 -29
PAGE>
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------------------------
PRODUCTION AND RESEARCH FACILITIES
(100% owned unless otherwise noted)
Alumina----------------------------------------------------
Domestic California Pennsylvania
---------- ------------
Operations Los Angeles (City of Commerce) Erie
(Partial List) Extruded Products Forgings Plant and Offices
Los Angeles (Santa Fe Springs) South Carolina
--------------
Extruded Products Fabricating Greenwood
Oxnard Forgings
Forgings Greenwood
Pleasanton Machine Shop
R&D at the Center for Technology, Tennessee
----------
Administrative Offices Jackson
Florida Extruded Products
--------
Mulberry Texas
------
Sodium Silicofluoride,
Potassium Silicofluoride Dallas
Louisiana Extruded Products Offices
----------
Baton Rouge Houston
Alumina, Kaiser Alumina
Technical Services, Kaiser Aluminum Corporation
Headquarters
International Business
Development, and Sherman
Environmental Offices Extruded Products
Gramercy Washington
-----------
Alumina Mead
Michigan Primary Aluminum,
---------
Detroit (Southfield) Division Technology Center
Automotive Product Development
and Sales Richland
Ohio Extruded Products
-----
Canton Tacoma
Castings Primary Aluminum
Newark Trentwood
Extruded Products Flat-Rolled Products Plant and Offices
Oklahoma
---------
Tulsa
Aluminum and Magnesium
Extruded Products; Anodes
- ----------------------------------------------------------------------------------------------------
Worldwide Australia Japan
---------- ------
Operations Queensland Alumina Limited
(28.3% owned) Furukawa Kaiser Forged Products Company
(Partial List) Alumina (47.5%)
Canada Sales Office
-------
Kaiser Aluminum & Chemical
of Canada Limited The Netherlands
----------------
(100%) Kaiser Aluminum Mill Products Inc. (100%)
Extruded Products Sales Office
Ghana Russia
------ -------
Volta Aluminium Company Limited (90%) Kaiser Aluminium Russia, Inc. (100%)
Primary Aluminum International Business Development
Jamaica Wales, United Kingdom
-------- ----------------------
Alumina Partners of Jamaica (65%) Anglesey Aluminium Limited (49%)
Bauxite, Alumina Primary Aluminum
Kaiser Jamaica Bauxite Company (49%)
Bauxite
Fabricated Products
Gramercy, Louisiana Flat Rolled Products
--------------------
Alumina Partners of Jamaica, Trentwood, Washington
(Alpart), Jamaica (65%)
Kaiser Jamaica Bauxite Company (KJBC),
Jamaica (49%) Extruded Products, including
Rod and Bar
----------------------------
Queensland Alumina Limited (QAL), Jackson, Tennessee
Australia (28.3%) Los Angeles, California
Alumina Development Laboratory, Santa Fe Springs, California
Gramercy, Louisiana Newark, Ohio
Sherman, Texas
Tulsa, Oklahoma
Kaiser Aluminum & Chemical
of Canada Limited,
Primary Products London, Ontario, Canada
Mead, Washington Forgings
Tacoma, Washington --------
Anglesey Aluminium Limited, Alliance, Ohio
Wales (49%) Canton, Ohio
Volta Aluminium Company Limited (Valco), Erie, Pennsylvania
Ghana (90%) Greenwood, South Carolina,
Division Technology Center, Forge
Mead, Washington Greenwood, South Carolina,
Machine Shop
Center for Technology Oxnard, California
Pleasanton, California
- 35 -
30