KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
R E P O R T O F I N D E P E N D E N T P U B L I C
A C C O U N T A N T S
To the Stockholders and the Board of Directors of Kaiser Aluminum
Corporation:
We have audited the accompanying consolidated balance sheets of
Kaiser Aluminum Corporation (a Delaware corporation) and
subsidiaries as of December 31, 1998 and 1997, and the related
statements of consolidated income (loss) and cash flows for each
of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Kaiser Aluminum Corporation and subsidiaries as of December
31, 1998 and 1997, and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
February 28, 1999
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
C O N S O L I D A T E D B A L A N C E S H E E T S
December 31,
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(In millions of dollars, except share amounts) 1998 1997
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ASSETS
Current assets:
Cash and cash equivalents $ 98.3 $ 15.8
Receivables:
Trade, less allowance for doubtful receivables
of $6.2 in 1998 and $5.8 in 1997 170.1 232.9
Other 112.6 107.3
Inventories 543.5 568.3
Prepaid expenses and other current assets 105.5 121.3
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Total current assets 1,030.0 1,045.6
Investments in and advances to unconsolidated affiliates 128.3 148.6
Property, plant, and equipment - net 1,108.7 1,171.8
Deferred income taxes 377.9 330.6
Other assets 346.0 317.3
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Total $ 2,990.9 $ 3,013.9
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 173.3 $ 176.2
Accrued interest 37.3 37.6
Accrued salaries, wages, and related expenses 73.8 97.9
Accrued postretirement medical benefit obligation -
current portion 48.2 45.3
Other accrued liabilities 148.3 145.6
Payable to affiliates 77.1 82.7
Long-term debt - current portion .4 8.8
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Total current liabilities 558.4 594.1
Long-term liabilities 532.9 491.9
Accrued postretirement medical benefit obligation 694.3 720.3
Long-term debt 962.6 962.9
Minority interests 123.5 127.7
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01, authorized 100,000,000
shares; issued and outstanding, 79,153,543 and
78,980,881 in 1998 and 1997 .8 .8
Additional capital 535.4 533.8
Accumulated deficit (417.0) (417.6)
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Total stockholders' equity 119.2 117.0
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Total $ 2,990.9 $ 3,013.9
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The accompanying notes to consolidated financial statements are
an integral part of these statements.
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
S T A T E M E N T S O F C O N S O L I D A T E D I N C O M E
( L O S S )
Year Ended December 31,
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(In millions of dollars, except share amounts) 1998 1997 1996
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Net sales $ 2,256.4 $ 2,373.2 $ 2,190.5
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Costs and expenses:
Cost of products sold 1,906.2 1,951.2 1,857.5
Depreciation and amortization 99.1 102.5 107.6
Selling, administrative, research and development,
and general 115.5 131.8 127.6
Impairment of Micromill(TM) assets/restructuring of
operations 45.0 19.7 -
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Total costs and expenses 2,165.8 2,205.2 2,092.7
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Operating income 90.6 168.0 97.8
Other income (expense):
Interest expense (110.0) (110.7) (93.4)
Other - net 3.5 3.0 (2.7)
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Income (loss) before income taxes and minority interests (15.9) 60.3 1.7
Benefit (provision) for income taxes 16.4 (8.8) 9.3
Minority interests .1 (3.5) (2.8)
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Net income .6 48.0 8.2
Dividends on preferred stock - (5.5) (8.4)
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Net income (loss) available to common shareholders $ .6 $ 42.5 $ (.2)
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Earnings per share:
Basic $ .01 $ .57 $ .00
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Diluted $ .01 $ .57 $ .00
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Weighted average shares outstanding (000):
Basic 79,115 74,221 71,644
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Diluted 79,156 74,382 71,644
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The accompanying notes to consolidated financial statements are
an integral part of these statements.
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
S T A T E M E N T S O F C O N S O L I D A T E D C A S H F L O W S
Year Ended December 31,
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(In millions of dollars) 1998 1997 1996
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Cash flows from operating activities:
Net income $ .6 $ 48.0 $ 8.2
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization (including deferred
financing costs) 103.0 108.6 113.2
Impairment of Micromill assets/restructuring of
operations 45.0 19.7 -
Non-cash benefit for income taxes (8.3) (12.5) -
Equity in (income) loss of unconsolidated affiliates,
net of distributions .1 7.8 3.0
Minority interests (.1) 3.5 2.8
Decrease (increase) in receivables 61.5 (92.1) 51.8
Decrease (increase) in inventories 24.8 (9.3) (36.5)
Decrease (increase) in prepaid expenses and other
assets 2.5 7.8 (39.5)
(Decrease) increase in accounts payable and accrued
interest (3.2) (11.5) 8.8
Decrease in payable to affiliates and accrued
liabilities (41.6) (19.6) (62.9)
Decrease in accrued and deferred income taxes (26.2) (17.4) (36.5)
Other 12.6 12.0 9.5
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Net cash provided by operating activities 170.7 45.0 21.9
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Cash flows from investing activities:
Additions to property, plant, and equipment (77.6) (128.5) (161.5)
Other 3.2 19.9 17.2
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Net cash used for investing activities (74.4) (108.6) (144.3)
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Cash flows from financing activities:
Repayments under revolving credit facility, net - - (13.1)
Borrowings of long-term debt - 19.0 225.9
Repayments of long-term debt (8.9) (8.8) (9.0)
Incurrence of financing costs (.6) (.9) (6.2)
Dividends paid - (4.2) (10.5)
Capital stock issued .1 .4 -
Decrease (increase) in restricted cash, net 4.3 (5.3) -
Redemption of minority interests' preference stock (8.7) (2.1) (5.3)
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Net cash (used for) provided by financing
activities (13.8) (1.9) 181.8
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Net increase (decrease) in Cash and cash equivalents during the year 82.5 (65.5) 59.4
Cash and cash equivalents at beginning of year 15.8 81.3 21.9
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Cash and cash equivalents at end of year $ 98.3 $ 15.8 $ 81.3
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Supplemental disclosure of cash flow information:
Interest paid, net of capitalized interest $ 106.3 $ 102.7 $ 84.2
Income taxes paid 16.8 24.4 22.7
Tax allocation payments to MAXXAM Inc. - 11.8 1.1
The accompanying notes to consolidated financial statements are
an integral part of these statements.