======================================================================
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 1-9447
KAISER ALUMINUM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-3030279
(State of incorporation) (I.R.S. Employer Identification No.)
5847 San Felipe, Suite 2600, Houston, Texas 77057-3010
(Address of principal executive offices) (Zip Code)
(713) 267-3777
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes x No
_____ ______
At July 31, 1995, the registrant had 58,253,103 shares of common
stock outstanding.
======================================================================
KAISER ALUMINUM 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 $ 14.8 $ 17.6
Receivables 252.8 199.2
Inventories 516.8 468.0
Prepaid expenses and other current assets 87.1 158.0
------------------------
Total current assets 871.5 842.8
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 280.1 271.2
Other assets 312.3 281.2
------------------------
Total $2,747.5 $2,698.1
========================
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 144.1 176.9
Payable to affiliates 84.3 85.3
Long-term debt - current portion 8.9 11.5
------------------------
Total current liabilities 521.3 583.1
Long-term liabilities 545.2 495.5
Accrued postretirement medical benefit obligation 738.8 734.9
Long-term debt 792.0 751.1
Minority interests 116.0 116.2
Stockholders' equity:
Preferred stock .6 .6
Common stock .6 .6
Additional capital 528.5 527.8
Accumulated deficit (486.4) (502.6)
Additional minimum pension liability (9.1) (9.1)
------------------------
Total stockholders' equity 34.2 17.3
------------------------
Total $2,747.5 $2,698.1
========================
The accompanying notes to interim consolidated financial statements
are an integral part of these statements.
- 1 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME (LOSS)
(Unaudited)
(In millions of dollars, except per share amounts)
Quarter Ended Six Months Ended
June 30, June 30,
--------------------------------------
1995 1994 1995 1994
--------------------------------------
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 32.3 29.6 62.3 57.6
--------------------------------------
Total costs and expenses 519.8 473.7 1,000.2 914.4
--------------------------------------
Operating income (loss) 63.6 (14.2) 96.2 (39.8)
Other income (expense):
Interest and other income (expense) - net (1.3) 1.2 (2.1) 3.2
Interest expense (23.8) (22.2) (47.4) (43.6)
--------------------------------------
Income (loss) before income taxes, minority interests, and
extraordinary loss 38.5 (35.2) 46.7 (80.2)
Credit (provision) for income taxes (13.9) 12.3 (16.8) 28.1
Minority interests (1.3) (.7) (3.1) (.8)
--------------------------------------
Income (loss) before extraordinary loss 23.3 (23.6) 26.8 (52.9)
Extraordinary loss on early extinguishment of debt, net of tax
benefit of $2.9 (5.4)
--------------------------------------
Net income (loss) 23.3 (23.6) 26.8 (58.3)
Dividends on preferred stock (5.3) (5.3) (10.6) (9.5)
--------------------------------------
Net income (loss) attributable to common shareholders $ 18.0 $(28.9) $ 16.2 $(67.8)
======================================
Earnings (loss) per common and common equivalent share:
Primary:
Income (loss) before extraordinary loss $ .31 $ (.50) $ .28 $(1.08)
Extraordinary loss (.09)
--------------------------------------
Net income (loss) $ .31 $ (.50) $ .28 $(1.17)
======================================
Fully diluted $ .27
======
Weighted average common and common equivalent shares
outstanding (000):
Primary 58,207 58,096 58,206 58,096
Fully diluted 85,272
The accompanying notes to interim consolidated financial statements
are an integral part of these statements.
- 2 -
KAISER ALUMINUM 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) $ 26.8 $ (58.3)
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 3.1 .8
Extraordinary loss on early extinguishment of debt - net 5.4
(Increase) decrease in receivables (60.2) 7.1
(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) (7.9)
Decrease in accrued and deferred income taxes (4.8) (33.6)
Other 6.8 (3.9)
-------------------
Net cash provided by (used for) operating activities 10.5 (28.8)
-------------------
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 minority interest 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)
Dividends paid (15.9) (9.5)
Capital stock issued 100.4
Redemption of minority interests' preference stock (8.7) (8.4)
-------------------
Net cash provided by financing activities 12.9 112.8
-------------------
Net (decrease) increase in cash and cash equivalents during the period (2.8) 63.8
Cash and cash equivalents at beginning of period 17.6 14.7
-------------------
Cash and cash equivalents at end of period $ 14.8 $ 78.5
===================
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 CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(In millions of dollars, except prices and per share amounts)
1. General
-------
Kaiser Aluminum Corporation (the "Company") is a subsidiary of
MAXXAM Inc. ("MAXXAM"). MAXXAM owns approximately 62% of the
Company's common stock, 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 6), and assuming the conversion of each outstanding share of
8.255% PRIDES, Convertible Preferred Stock (the "PRIDES"), into one
share of the Company's common stock, with the remaining approximately
38% publicly held. The Company operates through its direct
subsidiary, Kaiser Aluminum & Chemical Corporation ("KACC").
The foregoing unaudited interim consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X as promulgated by the
Securities and Exchange Commission. Accordingly, these financial
statements do not include all of the 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. Earnings (Loss) per Common and Common Equivalent Share
------------------------------------------------------
Primary earnings (loss) per common and common equivalent share is
computed by deducting (adding) preferred stock dividends from (to) net
income (loss) in order to determine net income (loss) attributable to
common shareholders. This amount is then divided by the weighted
average number of common and common equivalent shares outstanding
during the period. Fully diluted earnings per common and common
equivalent share is computed by dividing net income by the weighted
average number of common shares outstanding during the period after
giving effect to common equivalent shares arising from preferred stock
and nonqualified stock options assumed converted to common shares.
For the six months ended June 30, 1995, and the quarter and six months
ended June
- 4 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
30, 1994, common equivalent shares attributable to the preferred stock
and nonqualified stock options were excluded from the calculation of
weighted average shares because they were antidilutive.
4. Contingencies
-------------
Environmental Contingencies - The Company and KACC are 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. KACC currently is
subject to a number of lawsuits under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the
Superfund Amendments Reauthorization Act of 1986 ("CERCLA"), and,
along with certain other entities, has been named as a potentially
responsible party for remedial costs at certain third-party sites
listed on the National Priorities List under CERCLA.
Based 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 - KACC 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 KACC or exposure
to products containing asbestos produced or sold by KACC. The
lawsuits generally relate to products KACC has not manufactured for at
least 15 years. At 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.
- 5 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
The Company believes that KACC has insurance coverage available to
recover a substantial portion of its asbestos-related costs. While
claims for recovery from some of KACC'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.
Other Contingencies - The Company and KACC are involved in various
other claims, lawsuits, and other proceedings relating to a wide
variety of matters. While uncertainties are inherent in the final
outcome of such matters, and it is presently impossible to determine
the actual costs that ultimately may be incurred, management currently
believes that the resolution of such uncertainties and the incurrence
of such costs should not have a material adverse effect on the
Company's consolidated financial position or results of operations.
5. Derivative Financial Instruments and Related Hedging Programs
-------------------------------------------------------------
KACC 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. KACC 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, KACC 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.
KACC also enters into hedging transactions in the normal course of
business that are designed to reduce its exposure to fluctuations in
foreign exchange rates. At June 30, 1995, KACC 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 KACC'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.
KACC has established margin accounts with its counterparties
related to aluminum forward sales and option contracts. KACC 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.
-------------------------------------
* All references to tons in this report refer to metric
tons of 2,204.6 pounds.
- 6 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
At June 30, 1995, KACC 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 10 of the Notes to Consolidated Financial Statements for
the year ended December 31, 1994.
6. Subsequent Event
----------------
On July 21, 1995, the Company 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 the Company'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 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.
The primary earnings per share for the quarter and six months
ended June 30, 1995, would have been $.30 and $.32, respectively, if
the redemption of Series A Shares had taken place at the beginning of
each period.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
(In millions of dollars, except shipments, prices, and per
share amounts)
The following should be read in conjunction with the response to
Item 1, Part I, of this Report.
Results of Operations
---------------------
The Company's operating results are sensitive to changes in prices
of alumina, primary aluminum, and fabricated aluminum products, and
also depend to a significant degree on the volume and mix of all
products sold and on KACC's hedging strategies. See Note 5 of Notes
to Interim Consolidated Financial Statements for an explanation of
KACC's hedging strategies. The table on the following page provides
selected operational and financial information on a consolidated basis
with respect to the Company for the 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 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 (19.3) (18.2) (37.4) (35.4)
----------------------------------------
Total operating income (loss) $ 63.6 $(14.2) $ 96.2 $ (39.8)
========================================
Income (loss) before income taxes,
minority interests, and
extraordinary loss $ 38.5 $(35.2) $ 46.7 $ (80.2)
========================================
Income (loss) before extraordinary loss $ 23.3 $(23.6) $ 26.8 $ (52.9)
Extraordinary loss on early
extinguishment of debt, net of
tax benefit of $2.9 (5.4)
----------------------------------------
Net income (loss) $ 23.3 $(23.6) $ 26.8 $ (58.3)
========================================
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 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 of $.31 and $.28 per common and common
equivalent share for the second quarter and the first half of 1995,
respectively, compared with a net loss of $.50 and $1.17 per common
and common equivalent share for the second quarter and first half of
1994, respectively. The principal reason for these changes was the
improvement in operating income previously described.
- 9 -
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
Liquidity and Capital Resources
-------------------------------
Operating Activities
At June 30, 1995, the Company had working capital of $350.2,
compared with working capital of $259.7 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 5 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 KACC 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 KACC, in Yellow River
Aluminum Industry Company, an aluminum smelter joint venture in the
People's Republic of China.
Trends
------
On June 15, 1995, KACC 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 KACC's interruptible power supply
from the Bonneville Power Administration (the "BPA"), and could save
KACC in excess of $7.0 over the term of the agreement compared to
current BPA rates, assuming that KACC would purchase 50 megawatts for
the entire term of the agreement. KACC also announced that it had
signed an electric power services agreement with the WWP for the WWP
to represent KACC 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 KACC, 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 KACC'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.
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KAISER ALUMINUM 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 KACC 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 KACC. KACC
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 May
17, 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: 59,767,000
Votes Against:
Votes Withheld: 33,760
Abstentions:
Broker Nonvotes:
George T. Haymaker, Jr.
Votes For: 59,768,427
Votes Against:
Votes Withheld: 32,332
Abstentions:
Broker Nonvotes:
Charles E. Hurwitz
Votes For: 59,764,385
Votes Against:
Votes Withheld: 36,375
Abstentions:
Broker Nonvotes:
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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
Ezra G. Levin
Votes For: 59,763,905
Votes Against:
Votes Withheld: 36,855
Abstentions:
Broker Nonvotes:
Robert Marcus
Votes For: 59,770,095
Votes Against:
Votes Withheld: 30,664
Abstentions:
Broker Nonvotes:
Robert J. Petris
Votes For: 59,767,231
Votes Against:
Votes Withheld: 33,528
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: 59,520,221
Votes Against: 200,783
Votes Withheld:
Abstentions: 63,755
Broker Nonvotes: 16,000
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, KACC,
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 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 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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