======================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
Commission file number 1-3605
KAISER ALUMINUM & CHEMICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-0928288
(State of incorporation) (I.R.S. Employer Identification No.)
6177 Sunol Boulevard, Pleasanton, CA 94566-7769
(Address of principal executive offices) (Zip Code)
(510) 462-1122
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes x No
----- -----
At July 31, 1995, the registrant had 46,171,365 shares of common
stock outstanding.
======================================================================
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
CONSOLIDATED BALANCE SHEETS
(In millions of dollars)
June 30, December 31,
1995 1994
-------------------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 14.7 $ 12.0
Receivables 254.2 200.5
Inventories 516.8 468.0
Prepaid expenses and other current assets 87.0 158.0
-----------------------
Total current assets 872.7 838.5
Investments in and advances to unconsolidated affiliates 171.1 169.7
Property, plant, and equipment - net 1,112.5 1,133.2
Deferred income taxes 279.9 271.0
Other assets 312.3 281.2
-----------------------
Total $2,748.5 $2,693.6
=======================
Liabilities & Stockholders' Equity
Current liabilities:
Accounts payable $ 136.1 $ 152.1
Accrued interest 32.9 32.6
Accrued salaries, wages, and related expenses 68.0 77.7
Accrued postretirement medical benefit obligation - current portion 47.0 47.0
Other accrued liabilities 143.7 171.7
Payable to affiliates 84.6 85.2
Long-term debt - current portion 8.9 11.5
Notes payable to parent - current portion 21.2 21.2
-----------------------
Total current liabilities 542.4 599.0
Long-term liabilities 545.2 495.5
Accrued postretirement medical benefit obligation 738.8 734.9
Long-term debt 792.0 751.1
Notes payable to parent 12.9 23.5
Minority interests 86.6 85.4
Redeemable preference stock 27.7 29.0
Stockholders' equity (deficit):
Preference stock 1.7 1.8
Common stock 15.4 15.4
Additional capital 1,672.7 1,626.3
Accumulated deficit (244.5) (271.5)
Additional minimum pension liability (9.1) (9.1)
Less: Note receivable from parent (1,433.3) (1,387.7)
-----------------------
Total stockholders' equity (deficit) 2.9 (24.8)
-----------------------
Total $2,748.5 $2,693.6
=======================
The accompanying notes to interim consolidated financial statements
are an integral part of these statements.
- 1 -
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME (LOSS)
(Unaudited)
(In millions of dollars)
Quarter Ended Six Months Ended
June 30, June 30,
--------------------------------------
1995 1994 1995 1994
--------------------------------------
C>
Net sales $583.4 $459.5 $1,096.4 $874.6
--------------------------------------
Costs and expenses:
Cost of products sold 463.8 419.0 890.5 806.8
Depreciation 23.7 25.1 47.4 50.0
Selling, administrative, research and development, and general 32.2 29.5 62.1 57.5
--------------------------------------
Total costs and expenses 519.7 473.6 1,000.0 914.3
--------------------------------------
Operating income (loss) 63.7 (14.1) 96.4 (39.7)
Other income (expense):
Interest and other income (expense) - net (1.3) 1.5 (2.0) 3.5
Interest expense (23.8) (22.2) (47.4) (43.6)
--------------------------------------
Income (loss) before income taxes, minority interests, and
extraordinary loss 38.6 (34.8) 47.0 (79.8)
Credit (provision) for income taxes (13.9) 12.3 (16.8) 28.1
Minority interests (.2) .4 (.9) 1.5
--------------------------------------
Income (loss) before extraordinary loss 24.5 (22.1) 29.3 (50.2)
Extraordinary loss on early extinguishment of debt, net of tax
benefit of $2.9 (5.4)
--------------------------------------
Net income (loss) $ 24.5 $(22.1) $ 29.3 $(55.6)
======================================
The accompanying notes to interim consolidated financial statements
are an integral part of these statements.
- 2 -
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
(In millions of dollars)
Six Months Ended
June 30,
-------------------
1995 1994
-------------------
Cash flows from operating activities:
Net income (loss) $ 29.3 $ (55.6)
Adjustments to reconcile net income (loss) to net cash provided by (used for)
operating activities:
Depreciation 47.4 50.0
Non-cash postretirement medical benefit expenses 3.9 6.9
Amortization of excess investment over equity in net assets of unconsolidated
affiliates 5.8 5.8
Amortization of deferred financing costs and discount on long-term debt 2.7 3.5
Equity in (income) losses of unconsolidated affiliates (7.1) 1.3
Minority interests .9 (1.5)
Extraordinary loss on early extinguishment of debt - net 5.4
(Increase) decrease in receivables (60.2) 6.4
(Increase) decrease in inventories (48.8) 32.4
Decrease (increase) in prepaid expenses and other current assets 57.8 (12.8)
Incurrence of financing costs (.8) (18.5)
Decrease in accounts payable (16.0) (15.7)
Increase in accrued interest .5 8.7
Decrease in payable to affiliates and accrued liabilities (6.6) (7.5)
Decrease in accrued and deferred income taxes (4.8) (33.6)
Other 7.1 (3.9)
-------------------
Net cash provided by (used for) operating activities 11.1 (28.7)
-------------------
Cash flows from investing activities:
Net proceeds from disposition of property and investments 1.2 2.8
Capital expenditures (27.1) (21.7)
Redemption fund for preference stock (.3) (1.3)
-------------------
Net cash used for investing activities (26.2) (20.2)
-------------------
Cash flows from financing activities:
Repayments of long-term debt, including revolving credit (299.9) (322.7)
Borrowings of long-term debt, including revolving credit 340.8 353.5
Repayment of note payable (3.4)
Net short-term debt repayments (.5)
Net (payments to) borrowings from parent (10.6) 23.8
Dividends paid (.4) (.4)
Redemption of preference stock (8.7) (8.4)
Capital contribution 67.2
-------------------
Net cash provided by financing activities 17.8 112.5
-------------------
Net (decrease) increase in cash and cash equivalents during the period 2.7 63.6
Cash and cash equivalents at beginning of period 12.0 14.2
-------------------
Cash and cash equivalents at end of period $ 14.7 $ 77.8
===================
Supplemental disclosure of cash flow information:
Interest paid, net of capitalized interest $ 44.2 $ 31.4
Income taxes paid 16.8 5.4
The accompanying notes to interim consolidated financial statements
are an integral part of these statements.
- 3 -
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(In millions of dollars, except prices and share amounts)
1. General
-------
Kaiser Aluminum & Chemical Corporation (the "Company") is the
principal operating subsidiary of Kaiser Aluminum Corporation
("Kaiser"). Kaiser is a subsidiary of MAXXAM Inc. ("MAXXAM"). MAXXAM
owns approximately 62% of Kaiser's common stock, after giving effect
to the conversion of each outstanding $.65 Depositary Share (the
"Depositary Shares"), each representing ownership of one-tenth of a
share of Series A Mandatory Conversion Premium Dividend Preferred
Stock (the "Series A Shares") (see Note 5), and assuming the
conversion of each outstanding share of 8.255% PRIDES, Convertible
Preferred Stock (the "PRIDES"), into one share of Kaiser's common
stock, with the remaining approximately 38% publicly held.
The foregoing unaudited interim consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X as promulgated by the
Securities and Exchange Commission. Accordingly, these financial
statements do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
necessary for a fair statement of the results for the interim periods
presented have been included. Operating results for the first half of
1995 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1995. These unaudited
interim consolidated financial statements should be read in
conjunction with the audited consolidated financial statements for the
year ended December 31, 1994. Certain reclassifications of prior-
period information were made to conform to the current presentation.
2. Inventories
-----------
The classification of inventories is as follows:
June 30, December 31,
1995 1994
-------------------------
Finished fabricated aluminum products $ 62.4 $ 49.4
Primary aluminum and work in process 218.4 203.1
Bauxite and alumina 115.9 102.3
Operating supplies and repair and maintenance parts 120.1 113.2
-------------------------
Total $516.8 $468.0
=========================
Substantially all product inventories are stated at last-in,
first-out (LIFO) cost, not in excess of market. Replacement cost is
not in excess of LIFO cost.
3. Contingencies
-------------
Environmental Contingencies - The Company is subject to a wide
variety of environmental laws and regulations and to fines or
penalties assessed for alleged breaches of the environmental laws and
to claims and litigation based on such laws. The Company currently is
subject to a number of lawsuits under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the
Superfund Amendments Reauthorization Act of 1986 ("CERCLA"), and,
along with certain other entities, has been named as a potentially
responsible party for remedial costs at certain third-party sites
listed on the National Priorities List under CERCLA.
- 4 -
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
Based on the Company's evaluation of these and other environmental
matters, the Company has established environmental accruals primarily
related to potential solid waste disposal and soil and groundwater
remediation matters. At June 30, 1995, the balance of such accruals,
which is primarily included in Long-term liabilities, was $41.3.
These environmental accruals represent the Company's estimate of costs
reasonably expected to be incurred based on presently enacted laws and
regulations, currently available facts, existing technology, and the
Company's assessment of the likely remediation action to be taken.
The Company expects that these remediation actions will be taken over
the next several years and estimates that annual expenditures to be
charged to these environmental accruals will be approximately $3.0 to
$11.0 for the years 1995 through 1999 and an aggregate of
approximately $11.0 thereafter.
As additional facts are developed and definitive remediation plans
and necessary regulatory approvals for implementation of remediation
are established or alternative technologies are developed, changes in
these and other factors may result in actual costs exceeding the
current environmental accruals. The Company believes that it is
reasonably possible that costs associated with these environmental
matters may exceed current accruals by amounts that could range, in
the aggregate, up to approximately $21.0. While uncertainties are
inherent in the final outcome of these environmental matters, and it
is presently impossible to determine the actual costs that ultimately
may be incurred, management currently believes that the resolution of
such uncertainties should not have a material adverse effect on the
Company's consolidated financial position or results of operations.
Asbestos Contingencies - The Company is a defendant in a number of
lawsuits in which the plaintiffs allege that certain of their injuries
were caused by, among other things, exposure to asbestos during, and
as a result of, their employment or association with the Company or
exposure to products containing asbestos produced or sold by the
Company. The lawsuits generally relate to products the Company has
not manufactured for at least 15 years. At June 30, 1995, the number
of such lawsuits pending was approximately 31,700.
Based on past experience and reasonably anticipated future
activity, the Company has established an accrual for estimated
asbestos-related costs for claims filed and estimated to be filed and
settled through 2008. The Company's accrual was calculated based on
the current and anticipated number of asbestos-related claims, the
prior timing and amounts of asbestos-related payments, the current
state of case law related to asbestos claims, and the advice of
counsel. Accordingly, an asbestos-related cost accrual of $134.6,
before considerations for insurance recoveries, is included primarily
in Long-term liabilities at June 30, 1995. The Company estimates that
annual future cash payments in connection with such litigation will be
approximately $11.0 to $13.0 for each of the years 1995 through 1999,
and an aggregate of approximately $74.0 thereafter through 2008. The
Company does not presently believe there is a reasonable basis for
estimating such costs beyond 2008 and, accordingly, no accrual has
been recorded for such costs which may be incurred beyond 2008.
The Company believes that it has insurance coverage available to
recover a substantial portion of its asbestos-related costs. While
claims for recovery from some of the Company's insurance carriers are
currently subject to pending litigation and other carriers have raised
certain defenses, the Company believes, based on prior insurance-
related recoveries in respect of asbestos-related claims, existing
insurance policies, and the advice of counsel, that substantial
recoveries from the insurance carriers are probable. Accordingly, an
estimated aggregate insurance recovery of $120.6, determined on the
same basis as the asbestos-related cost accrual, is recorded primarily
in Other assets at June 30, 1995.
While uncertainties are inherent in the final outcome of these
asbestos matters and it is presently impossible to determine the
actual costs that ultimately may be incurred and the insurance
recoveries that will be received, management currently believes that,
based on the factors discussed in the preceding paragraphs, the
resolution of the asbestos-related uncertainties and the incurrence of
asbestos-related costs net of related insurance recoveries should not
have a material adverse effect on the Company's consolidated financial
position or results of operations.
- 5 -
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
Other Contingencies - The Company is involved in various other
claims, lawsuits, and other proceedings relating to a wide variety of
matters. While uncertainties are inherent in the final outcome of
such matters, and it is presently impossible to determine the actual
costs that ultimately may be incurred, management currently believes
that the resolution of such uncertainties and the incurrence of such
costs should not have a material adverse effect on the Company's
consolidated financial position or results of operations.
4. Derivative Financial Instruments and Related Hedging Programs
-------------------------------------------------------------
The Company enters into primary metal hedging transactions with
off-balance sheet risk in the normal course of business. The prices
realized by the Company under certain sales contracts for alumina,
primary aluminum, and fabricated aluminum products as well as the
costs incurred by the Company on certain items, such as aluminum
scrap, rolling ingot, power, and bauxite, fluctuate with the market
price of primary aluminum, together resulting in a "net exposure" of
earnings. The primary metal hedging transactions are designed to
mitigate the net exposure of earnings to declines in the market price
of primary aluminum, while retaining the ability to participate in
favorable environments that may materialize. The Company has
developed strategies which include forward sales of primary aluminum
at fixed prices and the purchase or sale of options for primary
aluminum. In this regard, in respect of its remaining 1995
anticipated net exposure, at June 30, 1995, the Company had net
forward sales contracts for 157,725 tons* of primary aluminum at fixed
prices, purchased call options in respect of 34,500 tons of primary
aluminum, purchased put options to establish a minimum price for
96,750 tons of primary aluminum, and entered into option contracts
that established a price range for 45,000 tons of primary aluminum.
In respect of its 1996 anticipated net exposure, at June 30, 1995, the
Company had sold forward 15,000 tons of primary aluminum at fixed
prices.
The Company also enters into hedging transactions in the normal
course of business that are designed to reduce its exposure to
fluctuations in foreign exchange rates. At June 30, 1995, the Company
had net forward foreign exchange contracts totaling approximately
$149.9 for the purchase of 207.0 Australian dollars through April
1997.
At June 30, 1995, the net unrealized loss on the Company's position
in aluminum forward sales and option contracts (based on a market
price of $1,808 per ton of primary aluminum) and forward foreign
exchange contracts was $3.8.
The Company has established margin accounts with its
counterparties related to aluminum forward sales and option contracts.
The Company is entitled to receive advances from counterparties
related to unrealized gains and, in turn, is required to make margin
deposits with counterparties to cover unrealized losses related to
these contracts. At June 30, 1995, the Company had $4.0, compared with
$50.5 at December 31, 1994, on deposit with various counterparties in
respect of such unrealized losses. These amounts are recorded in
Prepaid expenses and other current assets.
See Note 11 of the Notes to Consolidated Financial Statements for
the year ended December 31, 1994.
5. Subsequent Event
----------------
On July 21, 1995, Kaiser announced that it is calling for
redemption of all 1,938,295 of its Series A Shares on September 19,
1995. Redemption of the Series A Shares will result in the
simultaneous redemption of all 19,382,950 Depositary Shares in
exchange for (i) 13,126,521 shares of Kaiser's common stock determined
by dividing the Call Price (as defined) in effect on the redemption
date ($110.218 per Series A Share) by the Current
----------------------------------
* All references to tons in this report refer to metric tons of
2,204.6 pounds.
- 6 -
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
Market Price (as defined) per share of common stock ($16.275)
determined as of July 19, 1995, pursuant to the Certificate of
Designations of the Series A Shares, (ii) an amount in cash equal to
all accrued and unpaid dividends to and including the day immediately
prior to redemption date, and (iii) cash in lieu of any fractional
shares of common stock that would otherwise be issuable.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
(In millions of dollars, except shipments and prices)
The following should be read in conjunction with the response to
Item 1, Part I, of this Report.
Results of Operations
---------------------
The Company's operating results are sensitive to changes in prices
of alumina, primary aluminum, and fabricated aluminum products, and
also depend to a significant degree on the volume and mix of all
products sold and on the Company's hedging strategies. See Note 4 of
Notes to Interim Consolidated Financial Statements for an explanation
of the Company's hedging strategies. The table on the following page
provides selected operational and financial information on a
consolidated basis with respect to the Company for the quarter and six
months ended June 30, 1995 and 1994. As an integrated aluminum
producer, the Company uses a portion of its bauxite, alumina, and
primary aluminum production for additional processing at certain of
its other facilities. Intracompany shipments and sales are excluded
from the information set forth on the following page.
- 7 -
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
SELECTED OPERATIONAL AND FINANCIAL INFORMATION
Quarter Ended Six Months Ended
June 30, June 30,
----------------------------------------
1995 1994 1995 1994
----------------------------------------
Shipments:<F1>
Alumina 576.6 574.2 1,023.1 1,042.4
Aluminum products:
Primary aluminum 63.8 63.1 111.5 127.4
Fabricated aluminum products 99.4 104.9 193.9 201.7
----------------------------------------
Total aluminum products 163.2 168.0 305.4 329.1
========================================
Average realized sales price:
Alumina (per ton) $ 206 $ 159 $ 202 $ 157
Primary aluminum (per pound) .83 .55 .82 .55
Net sales:
Bauxite and alumina:
Alumina $118.7 $ 91.3 $ 206.6 $ 163.8
Other <F2><F3> 23.9 20.4 43.0 40.8
----------------------------------------
Total bauxite and alumina 142.6 111.7 249.6 204.6
----------------------------------------
Aluminum processing:
Primary aluminum 116.6 76.8 201.6 154.1
Fabricated aluminum products 319.8 267.4 636.0 508.9
Other <F3> 4.4 3.6 9.2 7.0
----------------------------------------
Total aluminum processing 440.8 347.8 846.8 670.0
----------------------------------------
Total net sales $583.4 $459.5 $1,096.4 $ 874.6
========================================
Operating income (loss):
Bauxite and alumina $ 20.2 $ (.1) $ 21.6 $ (2.5)
Aluminum processing 62.7 4.1 112.0 (1.9)
Corporate (19.2) (18.1) (37.2) (35.3)
----------------------------------------
Total operating income (loss) $ 63.7 $(14.1) $ 96.4 $ (39.7)
========================================
Income (loss) before income taxes, minority interests, and
extraordinary loss $ 38.6 $(34.8) $ 47.0 $ (79.8)
========================================
Income (loss) before extraordinary loss $ 24.5 $(22.1) $ 29.3 $ (50.2)
Extraordinary loss on early extinguishment of debt, net of
tax benefit of $2.9 (5.4)
----------------------------------------
Net income (loss) $ 24.5 $(22.1) $ 29.3 $ (55.6)
========================================
Capital expenditures $ 13.4 $ 12.1 $ 27.1 $ 21.7
========================================
<FN>
------------------------------------
<F1> In thousands of tons.
<F2> Includes net sales of bauxite.
<F3> Includes the portion of net sales attributable to minority
interests in consolidated subsidiaries.
</FN>
- 8 -
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
Net Sales
Bauxite and Alumina - Revenue from net sales to third parties for
the bauxite and alumina segment was 28% higher in the second quarter
of 1995 than in the second quarter of 1994, and was 22% higher in the
first half of 1995 than in the first half of 1994. Revenue from
alumina increased 30% in the second quarter of 1995 from the second
quarter of 1994, and increased 26% in the first half of 1995 from the
first half of 1994, due to higher average realized prices.
Aluminum Processing - Revenue from net sales to third parties for
the aluminum processing segment was 27% higher in the second quarter
of 1995 than in the second quarter of 1994, and was 26% higher in the
first half of 1995 than in the first half of 1994. Revenue from
primary aluminum increased 52% in the second quarter of 1995 from the
second quarter of 1994, due to higher average realized prices, and
increased 31% in the first half of 1995 from the first half of 1994,
due to higher average realized prices partially offset by decreased
shipments caused by the strike by the United Steelworkers of America
("USWA") discussed below. Shipments of primary aluminum to third
parties were approximately 39% and 37% of total aluminum products
shipments in the second quarter and first half of 1995, respectively,
compared with approximately 38% and 39% in the second quarter and
first half of 1994, respectively. Revenue from fabricated aluminum
products increased 20% in the second quarter of 1995 from the second
quarter of 1994, and increased 25% in the first half of 1995 from the
first half of 1994, due to higher average realized prices partially
offset by lower shipments for most of these products.
Operating Income (Loss)
Improved operating results in the first half of 1995 were
partially offset by (i) an eight-day strike at five major domestic
locations by the USWA, (ii) a six-day strike by the National Workers
Union at the Company's 65%-owned Alpart alumina refinery in Jamaica,
and (iii) a four-day disruption of alumina production at Alpart caused
by a boiler failure. The combined impact of these events on the first
half results was approximately $17.0 in the aggregate (on a pre-tax
basis) principally from lower production volume and other related
costs.
Bauxite and Alumina - This segment had operating income in the
second quarter and the first half of 1995, compared with an operating
loss in the second quarter and the first half of 1994, principally due
to higher revenue. First half results were partially offset by the
effect of the strikes and boiler failure.
Aluminum Processing - This segment had significantly higher
operating income in the second quarter of 1995 than in the second
quarter of 1994, and had operating income in the first half of 1995,
compared with an operating loss in the first half of 1994, principally
due to higher revenue. First half results were partially offset by
the effect of the strike by the USWA.
Corporate - Corporate operating expenses represented corporate
general and administrative expenses which are not allocated to the
Company's segments.
Net Income (Loss)
The Company had net income for the second quarter and the first
half of 1995, compared with a net loss for the second quarter and
first half of 1994. The principal reason for these changes was the
improvement in operating income previously described.
- 9 -
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
Liquidity and Capital Resources
-------------------------------
Operating Activities
At June 30, 1995, the Company had working capital of $330.3,
compared with working capital of $239.5 at December 31, 1994. The
increase in working capital was due to an increase in Receivables (as
a result of an increase in net sales) and Inventories (as a result of
lower shipments) and a decrease in Accounts payable and Other accrued
liabilities. The increase in working capital is partially offset by a
decrease in Prepaid expenses and other current assets (due to lower
margin deposits). See Note 4 of the Notes to Interim Consolidated
Financial Statements.
Investing Activities
Cash used for investing activities in the second quarter and the
first half of 1995 primarily consisted of capital expenditures to
improve production efficiency, reduce operating costs, and expand
capacity at existing facilities.
Financing Activities
At June 30, 1995, the Company had long-term debt of $792.0,
compared with $751.1 at December 31, 1994. In March 1995, the 1994
Credit Agreement (see Note 5 of the Notes to Consolidated Financial
Statements for the year ended December 31, 1994) was amended by the
Second Amendment to Credit Agreement (the "Second Amendment"). The
Second Amendment provided, among other things, for an increase in the
revolving line of credit from $275.0 to $325.0. At June 30, 1995,
$204.8 (of which $57.2 could have been used for letters of credit) was
available to the Company under the 1994 Credit Agreement. As of July
20, 1995, the 1994 Credit Agreement was amended by the Third Amendment
to Credit Agreement in connection with the investment by Kaiser Yellow
River Investment Limited, a subsidiary of the Company, in Yellow River
Aluminum Industry Company, an aluminum smelter joint venture in the
People's Republic of China.
Trends
------
On June 15, 1995, the Company announced that it had signed an
agreement with The Washington Water Power Company (the "WWP") to
purchase up to 50 megawatts of electrical energy to supply its
Northwest facilities. The agreement is for a five-year term beginning
October 1, 1995. Such power would displace a portion of the Company's
interruptible power supply from the Bonneville Power Administration
(the "BPA"), and could save the Company in excess of $7.0 over the
term of the agreement compared to current BPA rates, assuming that the
Company would purchase 50 megawatts for the entire term of the
agreement. The Company also announced that it had signed an electric
power services agreement with the WWP for the WWP to represent the
Company in discussions and solicitations with energy suppliers other
than the BPA.
The BPA has formally announced its proposed rate of 22.6 mills for
power to be sold to its direct service industrial customers (the
"DSIs"), which includes the Company, beginning October 1, 1996, for a
term of either two years or five years, at the election of each of the
DSIs. Such a rate, if implemented, would represent a rate reduction
of approximately 15% from the BPA rates currently in effect, and would
reduce production costs at the Company's Mead and Tacoma, Washington,
smelters by approximately $12.0 per year based on the current
operating rate of those smelters. However, final adoption of the BPA
rate for the period beginning October 1, 1996, is subject to
completion of the public rate setting process, and there is no
certainty that the proposed rate decrease, or any rate decrease, will
become effective as of October 1, 1996, or at any other time.
- 10 -
KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
As reported and more fully described in "Item 3. LEGAL PROCEEDINGS
- Catellus Development Corporation v. Kaiser Aluminum & Chemical
Corporation and James L. Ferry & Son, Inc." in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994 (the
"10-K"), the trial involving this case commenced in March 1995.
During the trial, Plaintiffs (as defined in the 10-K) settled their
claims against Catellus Development Corporation ("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
finding, among other things, that the Company is liable for various
costs aggregating approximately $1.34 million, as well as interest,
fifty percent (50%) of future costs of cleaning up certain parts of
the Property (as defined in the 10-K), and certain fees and costs
associated specifically with the claim by Catellus against the
Company. The Company has estimated the aggregate interest payable to
be approximately $.53 million. Entry of judgment is pending.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The annual meeting of stockholders of the Company was held on June
7, 1995, at which meeting the stockholders voted to elect management's
slate of nominees as directors of the Company, and voted upon a
proposal to approve the Kaiser 1995 Executive Incentive Compensation
Program.
Nominees for Director
---------------------
The nominees for election as directors of the Company are listed
below, together with the number of votes cast for, against, and
withheld with respect to each such nominee, as well as the number of
abstentions and broker nonvotes with respect to each such nominee:
Robert J. Cruikshank
Votes For: 46,795,238
Votes Against:
Votes Withheld: 113,421
Abstentions:
Broker Nonvotes:
George T. Haymaker, Jr.
Votes For: 46,785,033
Votes Against:
Votes Withheld: 123,626
Abstentions:
Broker Nonvotes:
Charles E. Hurwitz
Votes For: 46,758,516
Votes Against:
Votes Withheld: 150,143
Abstentions:
Broker Nonvotes:
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KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
Ezra G. Levin
Votes For: 46,794,059
Votes Against:
Votes Withheld: 114,600
Abstentions:
Broker Nonvotes:
Robert Marcus
Votes For: 46,896,053
Votes Against:
Votes Withheld: 12,606
Abstentions:
Broker Nonvotes:
Robert J. Petris
Votes For: 46,622,691
Votes Against:
Votes Withheld: 285,968
Abstentions:
Broker Nonvotes:
Kaiser 1995 Executive Compensation Program
------------------------------------------
The vote with respect to the proposal to approve the Kaiser 1995
Executive Incentive Compensation Program was as follows:
Votes For: 46,514,323
Votes Against: 328,979
Votes Withheld:
Abstentions: 63,668
Broker Nonvotes:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits.
Exhibit No. Exhibit
----------- -------
4.1 Third Amendment to Credit Agreement, dated as of July 20,
1995, amending the Credit Agreement, dated as of
February 17, 1994, as amended, among the Company, Kaiser,
the financial institutions a party thereto, and BankAmerica
Business Credit, Inc., as Agent.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
No report on Form 8-K was filed by the Company during the quarter
ended June 30, 1995.
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KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized, who has signed
this report on behalf of the registrant and as the principal financial
officer of the registrant.
KAISER ALUMINUM & CHEMICAL CORPORATION
/s/ John T. La Duc
By:------------------------------------
John T. La Duc
Vice President and
Chief Financial Officer
Dated: August 9, 1995
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