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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 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)
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
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Common Stock, $.01 par value New York Stock Exchange
8.255% PRIDES, Convertible Preferred Stock, New York Stock Exchange
$.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
---
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 15, 1996, there were 71,641,854 shares of the common stock
of the registrant outstanding. Based upon New York Stock Exchange
closing prices on March 15, 1996, the aggregate market value of the
registrant's common stock and 8.255% PRIDES held by non-affiliates was
$421.1 million.
Certain portions of the registrant's annual report to shareholders for
the fiscal year ended December 31, 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.
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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 25-28 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
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TABLE OF CONTENTS
Page
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PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 1. BUSINESS. . . . . . . . . . . . . . . . . . . 1
ITEM 2. PROPERTIES. . . . . . . . . . . . . . . . . . 12
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS . . . . . . . . . . . . . . . . . . . 16
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS. . . . . . . . . . 16
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. . . . . . . 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . 17
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . 17
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ITEM 10.. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 17
ITEM 11. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . 17
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT. . . . . . . . . . . . . . . . . 17
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . 17
PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K . . . . . . . . . . . . . . 17
SCHEDULE I . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
INDEX OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . 25
EXHIBIT 21 SUBSIDIARIES. . . . . . . . . . . . . . . . . . . 29
(ii)
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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PART I
ITEM 1. BUSINESS
Industry Overview
Primary aluminum is produced by the refining of bauxite into alumina 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 construction industries are the principal
consumers of aluminum in the United States, Japan, and Western Europe. In
the packaging industry, which accounted for approximately 20% of aluminum
consumption in 1994, aluminum's recyclability and weight advantages have
enabled it to gain market share from steel and glass, primarily in the
beverage container area. Nearly all beer cans and soft drink cans
manufactured for the United States market are made of aluminum. Kaiser
Aluminum Corporation ("Kaiser" or the "Company") believes that growth in
the packaging area is likely to continue through the 1990s due to general
population increase and to further penetration of the beverage container
market in Asia and 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
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. 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. In addition, Kaiser believes that consumption of aluminum in
the construction industry will follow the cyclical growth pattern of that
industry, and will benefit from higher growth in Asian and Latin American
economies.
Supply
As of year-end 1995, Western world aluminum capacity from 107 smelting
facilities was approximately 16.6 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 former Sino Soviet bloc
increased approximately 250% from 1990 levels during the period from 1991
through 1994 to approximately 2.2 million tons per year. These exports
contributed to a significant increase in London Metal Exchange ("LME")
stocks of primary 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
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ITEM 1. BUSINESS (continued)
refineries. In addition, Kaiser believes that there is currently
approximately .9 million tons of curtailed smelting capacity that could be
restarted by aluminum producers. The increases in primary aluminum
capacity during 1996-1998 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 smelters.
Recent Industry Trends
Market fundamentals for aluminum improved 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 aluminum
weakened from first-half levels. The Midwest U.S. transaction price for
primary aluminum in 1995 averaged approximately 86 cents per pound,
compared to a 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 the price of alumina, declined in
1994 in response to the curtailment of Western world smelter production of
primary aluminum, partially offset by increased usage of Western world
alumina by smelters in the Commonwealth of Independent States (the "CIS")
and in the People's Republic of China (the "PRC"). Increased Western world
production of primary aluminum, as well as continued imports of Western
world alumina by the CIS and the PRC, 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 1994 levels, although in 1995 demand for can sheet in
the United States softened relative to 1994. 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 from restarts of industry
smelter capacity and from the limited additions of new 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 domestic and international markets.
In 1995, KACC produced approximately 2,838,000 tons of alumina, of which
approximately 72% was sold to third parties, and produced 413,600 tons
of primary aluminum, of which approximately 66% was sold to third parties.
KACC is also a major domestic supplier of fabricated aluminum products.
In 1995, KACC shipped approximately 368,200 tons of fabricated
aluminum products to third parties, which accounted for approximately
6% of the total tonnage of United States domestic 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
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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,
-----------------------
1995 1994 1993
------- ------- -------
(in thousands of tons)
ALUMINA:
Shipments to Third Parties 2,040.1 2,086.7 1,997.5
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
FABRICATED ALUMINUM PRODUCTS:
Shipments to Third Parties 368.2 399.0 373.2
Sensitivity to Prices and Hedging Programs
Kaiser'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 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
declines in the market prices of alumina, 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 - Trends -
Sensitivity to Prices and Hedging 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, which mines bauxite and obtains
additional bauxite tonnage under long-term contracts,
produced approximately 8% of Western world alumina in 1995.
During 1995, KACC third party shipments of bauxite
represented approximately 21% of bauxite mined. In
addition, KACC third party shipments of alumina represented
approximately 72% of alumina produced. KACC's share of
total Western world alumina capacity was approximately 7% in
1995.
o The primary aluminum products business unit operates two
domestic smelters wholly owned by KACC and two foreign
smelters in which KACC holds significant ownership
interests. During 1995, KACC third party shipments of
primary aluminum represented approximately 66% of primary
aluminum production. KACC's share of total Western world
primary aluminum capacity was approximately 3% in 1995.
3
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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ITEM 1. BUSINESS (continued)
o Fabricated aluminum products are manufactured by three
business units - flat-rolled products, extruded products and
engineered components. The products include 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, which are manufactured at plants located in
principal marketing areas of the United States and Canada.
The aluminum utilized in KACC's fabricated products
operations is comprised of primary aluminum, obtained both
internally and from third parties, and scrap metal purchased
from third parties.
Alumina
- -------
The following table lists KACC's bauxite mining and alumina refining
facilities as of December 31, 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
("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 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 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.
Alpart holds bauxite reserves and owns a 1,450,000 tons per year alumina
plant located in Jamaica. KACC owns a 65% interest in Alpart, and Hydro
Aluminium 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. The Government of Jamaica has granted Alpart a mining
lease and has entered into other agreements with Alpart designed to assure
that sufficient reserves of bauxite will be available to Alpart to operate
its refinery as it may be expanded to a capacity of 2,000,000 tons per year
through the year 2024. Alpart has entered into an agreement for the supply
of substantially all of its fuel oil through 1996. The balance of Alpart's
fuel oil requirements through 1996 will be purchased in the spot market.
4
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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ITEM 1. BUSINESS (continued)
KACC owns a 28.3% interest in 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 under
long-term tolling contracts. The stockholders, including KACC, purchase
bauxite from another QAL stockholder under long-term supply contracts.
KACC has contracted with QAL to take approximately 792,000 tons per year of
capacity or pay standby charges. KACC is unconditionally obligated to pay
amounts calculated to service its share ($88.9 million at December 31,
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, trading intermediaries who resell raw materials to end-users,
and users of chemical-grade alumina. In 1995, KACC sold all of its bauxite
to two customers, the largest of which accounted for approximately 74% of
such sales. KACC also sold alumina to nine customers, the largest and top
five of which accounted for approximately 23% and 90% of such sales,
respectively. See "- Competition." The Company believes that among
alumina producers 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 under multi-year sales contracts.
Primary Aluminum Products
- -------------------------
The following table lists KACC's primary aluminum smelting facilities as of
December 31, 1995:
Annual Rated Total 1995
Capacity Annual Average
Company Available to Rated Operating
Location Facility Ownership the Company Capacity Rate
- -------- -------- --------- ----------- -------- ----
(tons) (tons)
Domestic
Washington Mead 100% 200,000 200,000 82%
Washington Tacoma 100% 73,000 73,000 82%
------ ------
Subtotal 273,000 273,000
------- -------
International
Ghana Valco 90% 180,000 200,000 68%
Wales, United Kingdom Anglesey 49% 55,000 112,000 119%
------ -------
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. Approximately 71% of Mead's 1995
production was used at KACC's Trentwood fabricating facility and the
balance was sold to third parties. The Tacoma plant uses Soderberg
technology and produces primary aluminum and high-grade, 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
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ITEM 1. BUSINESS (continued)
has converted to welded anode assemblies to increase energy efficiency,
extended the anode 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.
Electric 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, Washington, 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 agreed to allow each of its direct service industrial customers
(the "DSIs"), which include KACC, to purchase a portion of its 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 purchase up to 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 KACC is obligated to
purchase from the BPA and which the BPA is obligated to sell to KACC, and
the replacement of such power 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 smelters and Trentwood rolling mill for
1996, and for approximately one-half of such power 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,
have 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
approximately 75% of their full capacity in January 1993, when three
reduction potlines were removed from production (two at Mead and one at
Tacoma) in response to a power reduction imposed by the BPA. In March
1995, the BPA offered to its industrial customers, including KACC, surplus
firm power at a discounted rate for the period April 1, 1995, through July
31, 1995, to enable such customers to restart idle industrial loads. In
April 1995, KACC and the BPA entered into a contract for an amount of such
power, and thereafter KACC restarted one-half of an idle potline
(approximately 9,000 tons of annual capacity) at its Tacoma, Washington,
smelter. The Tacoma smelter was returned to full production in October
1995. In 1995 KACC entered 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 its Mead smelter. The Mead smelter returned to full
production in December 1995.
KACC manages, and owns a 90% interest in, the Volta Aluminium 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
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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 2017. The agreement indexes two-thirds of the price of the
contract quantity of power to the market price of primary 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 has entered into an
agreement with the government of Ghana under which Valco has been assured
(except in cases of force majeure) that it will receive sufficient electric
power to operate at its current level 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 its current level through 1996.
KACC owns 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, 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 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. See "-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 1995, KACC sold its primary aluminum production not
utilized for internal purposes to approximately 35 customers, the largest
and top five of which accounted for approximately 25% and 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
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. In 1995, four
domestic beverage container manufacturers were among the leading customers
for KACC's fabricated products and accounted for approximately 12% of
KACC's sales revenue.
KACC's fabricated products compete with those of numerous domestic and
foreign producers and with products made of 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 focused its fabricated products operations on selected
products in which KACC has production expertise, high-quality capability,
and geographic and other competitive advantages.
Flat-Rolled Products - The 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 approximately 64% of KACC's
1995 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 successfully
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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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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 by
at least $50.0 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 with a
transportation advantage. Quality of products for the beverage container
industry and timeliness of delivery are the primary bases on which KACC
competes. Kaiser believes that 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, and
that KACC is one of the highest quality producers of aluminum beverage can
stock in the world.
In 1995, the flat-rolled products business unit had 31 domestic and foreign
can stock customers, including the five major domestic beverage can
manufacturers. The largest and top five of such customers accounted for
approximately 14% and 41%, respectively, of the business unit's revenue.
See "- Competition." In 1995, the business unit shipped products to
approximately 150 customers in the aerospace, transportation, and
industrial ("ATI") markets, most of which were distributors who sell to a
variety of industrial end-users. The top five customers in the ATI markets
for flat-rolled products accounted for approximately 13% of the business
unit's revenue. The marketing staff for the flat-rolled products business
unit is located at the Trentwood facility and in Pleasanton, California.
Sales are made directly to customers (including distributors) from eight
sales offices located throughout the United States. International
customers are served by sales offices in the Netherlands and Japan and by
independent sales agents in Asia and Latin America.
Extruded Products - The extruded 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; rod and bar facilities in
Newark, Ohio, and Jackson, Tennessee, which produce screw machine stock,
redraw rod, forging stock, and 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'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 1995, the extruded products business unit had
approximately 825 customers for its products, the largest and top five of
which accounted for approximately 6% and 20%, respectively, of its revenue.
See "- Competition." Sales are made directly from plants as well as
marketing locations across the United States.
Engineered Components - The engineered components business unit operates
forging facilities at Erie, Pennsylvania; Oxnard, California; and
Greenwood, South Carolina; a machine shop at Greenwood, South Carolina; and
a casting facility in Canton, Ohio. The engineered 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-suited for automotive applications. The business unit's
casting facility manufactures aluminum engine manifolds for the automobile,
truck and marine markets.
In 1995, the engineered components business unit had approximately 250
customers, the largest and top five of which accounted for approximately
34% and 77%, respectively, of the business unit's revenue. See "-
Competition." The engineered components business unit's headquarters is
located in Erie, Pennsylvania, and there is a sales and engineering office
located in Detroit, Michigan, which works with car makers and other
customers, the Center for Technology (see "-Research and Development"),
and plant personnel to create new automotive component designs and improve
existing products.
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ITEM 1. BUSINESS (continued)
Competition
Aluminum competes 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 Alumina and Chemicals LLC, Billiton Marketing and Trading BV, and
Alcan Aluminium Limited. KACC competes with most aluminum producers in the
sale of primary aluminum.
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. 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-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 - 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, 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 1995, $16.7 million in 1994, and $18.5
million in 1993. KACC's research staff totaled 157 at December 31, 1995.
KACC estimates that research and development net expenditures will be
approximately $22.5 million in 1996.
CFT performs research and development across a range of aluminum process
and product technologies to support KACC's business units and new business
opportunities. It also selectively offers technical services 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 is a strip-casting micromill process for producing can
sheet. The conversion and capital costs of these micromills are expected
to be significantly lower than conventional rolling mills and to result in
improved 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 Nevada 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 in discussions with third parties which might provide some
or all of 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,
and concentrates on the development of cost-effective technical innovations
such as equipment and process improvements. KATS provides improved alumina
process technology to KACC's facilities and technical support to new
business ventures in cooperation with KACC's international business
development group.
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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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ITEM 1. BUSINESS (continued)
KACC is actively engaged in efforts to license its technology and sell
technical and managerial assistance to other producers worldwide. KACC's
technology has been installed in alumina refineries, aluminum smelters and
rolling mills located in 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 in
Russia under which KACC has licensed certain of its technology for use in
such facility and agreed to provide purchasing services in obtaining
Western-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 1996. In addition, in 1993 KACC
entered into agreements with respect to the Nadvoitsy smelter in Russia and
the Korba smelter of the Bharat Aluminum Co. Ltd., in India, under which
KACC has licensed certain of its technology for use in such facilities.
Services under the Nadvoitsy agreement were completed in 1995, and KACC
expects that services under the 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 important 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, Kaiser Yellow River Investment Limited ("KYRIL"), a subsidiary of
the Company, was formed to participate in the privatization, modernization,
expansion, and operation of aluminum smelting facilities in the PRC. KYRIL
has entered into a Joint Venture Agreement and related agreements (the
"Joint Venture Agreements") with the Lanzhou Aluminum Smelters ("LAS") of
the China National Nonferrous Metals Industry Corporation relating to the
formation and operation of Yellow River Aluminum Industry Company Limited,
a Sino-foreign joint equity enterprise organized under PRC law (the "Joint
Venture").
The Joint Venture constitutes the first large-scale privatization in the
Chinese aluminum smelting industry. The Joint Venture's assets and
operations 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, services and cash. The majority equity
interests in the two companies will be owned by affiliates of Guizhou Guang
Da Construction Company.
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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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ITEM 1. BUSINESS (continued)
Employees
During 1995, KACC employed an average of 9,546 persons, compared with an
average of 9,744 employees in 1994, and 10,220 employees in 1993. At
December 31, 1995, KACC's work force was 9,624, including a domestic work
force of 5,946, of whom 4,010 were paid at an hourly rate. Most hourly
paid domestic employees are covered by collective bargaining agreements
with various labor unions. Approximately 74% of such employees are covered
by a master agreement (the "Labor Contract") with the United Steelworkers
of America ("USWA") expiring September 30, 1998. The Labor Contract covers
KACC's plants in Spokane (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 base wages at all covered plants. In
addition, workers covered by the Labor Contract 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. Pursuant to the
Labor Contract, base wage rates were raised effective January 2, 1995, were
raised again effective November 6, 1995, and will be raised an additional
amount effective November 3, 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 and in the first half of 1998 will acquire up to an
additional $4,000 of such preference stock held in such plan for the
benefit of substantially the same employees. In addition, a profitability
test was satisfied and, therefore, KACC will acquire during 1996 up to an
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 held for the benefit of each of
certain salaried employees.
In February 1995, Alpart's employees engaged in a 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
Kaiser 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 are amended and 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, Kaiser 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."
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 and Reauthorization Act of 1986 ("CERCLA").
KACC, along with certain 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
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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 agreed to indemnify
the purchasers 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 final outcome of these matters, and it is presently
impossible to determine the actual costs that ultimately may be incurred,
Kaiser believes that the resolution of such uncertainties should not have a
material adverse effect on KACC's consolidated financial position, results
of operations, or liquidity.
Environmental capital spending was $9.2 million in 1995, $11.9 million in
1994, and $12.6 million in 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. Legislative, regulatory, and economic uncertainties make
it difficult to project future spending for these purposes. However,
Kaiser currently anticipates that in the 1996-1997 period, environmental
capital spending will be within the range of $27.0 - $33.0 million per
year, and operating costs for pollution control will be within the range of
$28.0 - $29.0 million per year. In addition, $4.5 million in cash
expenditures in 1995, $3.6 million in 1994, and $7.2 million in 1993 were
charged to previously established reserves relating to environmental costs.
Approximately $8.4 million is expected to be charged to such reserves in
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 8 of the Notes to Consolidated
Financial Statements in 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 "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. Kaiser 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.
KACC's obligations under the Credit Agreement entered into on February 17,
1994, 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 - Liquidity and Capital 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 (collectively, the "Sites"). 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
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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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ITEM 3. LEGAL PROCEEDINGS (continued)
disposal areas from approximately the mid-1930's through the late-1980's.
The United States filed a cost recovery complaint (the "Complaint") in the
United States District Court for the Middle District of North Carolina,
Rockingham Division, No. C-89-231-R, which, as amended, includes KACC and 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 under Section 107 of CERCLA. The EPA has performed a Remedial
Investigation/Feasibility Study and issued a Record of Decision ("ROD") for
the Sites in September 1991. The estimated cost of the major soil
remediation remedy selected for the Sites is approximately $32 million.
Other possible remedies described in the ROD would have estimated costs of
approximately $53 million and $222 million, respectively. The EPA has
stated that it has incurred past costs at the Sites in the range of $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 Sites. The estimated cost as set forth in the ROD for the
remedial action at the three Sites is approximately $27 million. A number
of other companies are also named as respondents. KACC has entered into a
PRP Participation Agreement 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.
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 a
number of other companies, undertake or agree to finance, groundwater
remediation at certain of the Sites. The ROD-selected remedy for the
groundwater remediation selected by EPA includes a variety of techniques.
The EPA has estimated the total present worth cost, including thirty years
of operation and maintenance, at 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, to undertake the
groundwater remediation at three of the Sites. A PRP Participation
Agreement with respect to groundwater 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, which 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 contributed to date,
KACC would be willing to discuss the matter further at that time.
United States of America v. Kaiser Aluminum & Chemical Corporation
In February 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 SIP opacity limit and the
assessment of civil penalties of not more than $25,000 per day.
KACC and the EPA, without adjudication of any issue of fact or law, and
without any admission of the violations 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
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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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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 began in 1990 at its
Trentwood facility, including the installation 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 the environmental upgrade of the furnace operation
at its Trentwood facility, including the improvements and changes required
by the Consent Decree, will be approximately $20.0 million.
Catellus Development Corporation v. Kaiser Aluminum & Chemical Corporation
and James L. Ferry & Son Inc.
In January 1991, the City of Richmond, et al. (the "Plaintiffs") filed a
Second Amended Complaint for Damages and Declaratory Relief against the
United States, 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 KACC for the
purpose of shipbuilding activities conducted by KACC on behalf of the
United States during World War II. The Plaintiffs sought recovery of
response costs and natural resource damages under CERCLA. Certain of the
Plaintiffs alleged they had incurred or expected to incur costs and damages
of approximately $49.0 million. Catellus subsequently filed a third party
complaint (the "Third Party Complaint") against KACC in the United States
District Court for the Northern District of California, Case No. C-89-2935
DLJ. Thereafter, the Plaintiffs filed a separate complaint against KACC,
Case No. C-92-4176. The Plaintiffs settled their CERCLA and tort 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 liable for various costs and interest, aggregating approximately
$2.2 million, fifty percent (50%) of future costs of cleaning up certain
parts 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
landfill from 1965 to 1982. KACC is alleged to have arranged for the
disposal of waste from its formerly-owned plant at Wanatah, Indiana, during
the period from 1964 to 1972. In its Record of Decision, the EPA estimated
the cost of the work to be performed to have a present value of $15.7
million. KACC's share of the total waste sent to the site is unknown. A
consultant retained by a group of PRPs estimated that KACC contributed 2.0%
of the waste sent to the site by the forty-one largest contributors.
KACC's ultimate exposure will depend on the number of PRPs that participate
and the volume of waste properly allocable to KACC. Based on the EPA's
cost estimate, KACC believes that its financial exposure for remedial
design and remedial action at this site is less than $500,000. A PRP
participation agreement is under negotiation.
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KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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ITEM 3. LEGAL PROCEEDINGS (continued)
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 sustained by the class 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 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 Kaiser'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 motion for
injunctive relief is 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. At December 31, 1995, the number of such claims 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 tort 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 sufficient 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 to September 1, 1995. For additional information, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources - 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. 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 believes that the resolution of such uncertainties and
the incurrence of such costs should not have a material adverse effect on
the Company's consolidated financial position, results of operations, or
liquidity.
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 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on the New York Stock Exchange under
the symbol "KLU". The number of record holders of the Company's common
stock at March 15, 1996 was 169. Page 59 of the Annual Report, and the
information in Note 7 of the Notes to Consolidated Financial Statements
under the heading "Dividends on Common Stock" at page 50 of the Annual
Report, are incorporated herein by reference. The Company has not paid any
dividends on its common stock during the two most recent fiscal years.
The 1994 Credit Agreement (Exhibits 4.6 through 4.11 to this Report)
contains 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 4.11 to this Report, Note 4 of the Notes to
Consolidated Financial Statements at pages 37-39 of the Annual Report, and
the information under the heading "Liquidity and Capital Resources -
Capital Structure" at pages 22-24 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, to the table at page 20 of the
Annual Report, to the discussion under the heading "Results of Operations"
at page 21 of the Annual Report, to Note 1 of the Notes to Consolidated
Financial Statements at pages 33-35 of the Annual Report, and to pages
57-58 of the Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Pages 20-28 of the Annual Report are incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pages 29-56 and page 59 of the Annual Report are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
Information required under PART 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.
PART IV
ITEM 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 29-56 and 59 of the Annual Report.
2. Financial Statement Schedules . . . . . . . . . . . . . Page
----------------------------- ----
Report of Independent Public Accountants. . . . . . . . 19
Schedule I - Condensed Balance Sheets - Parent Company,
Condensed Statements of Income - Parent
Company, Condensed Statements of Cash
Flows - Parent Company, and Notes to
Condensed Financial Statements
- Parent Company . . . . . . . . . . . .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 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 25), which
index is incorporated herein by reference.
18
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- -----------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited, in accordance with generally accepted auditing standards,
the financial statements included in Kaiser Aluminum Corporation and
Subsidiaries' annual report to shareholders incorporated by reference in this
Form 10-K and have issued our report thereon dated February 16, 1996. Our
audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. Schedule I listed in the index at Item 14(a)2.
above is the responsibility of the Company's management and is presented for
purposes of complying with the Securities and Exchange Commission's rules and
is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly states 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 LLP
Houston, Texas
February 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 27, 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 27, 1996 George T. Haymaker, Jr.
-----------------------------
George T. Haymaker, Jr.
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: March 27, 1996 John T. La Duc
-----------------------------
John T. La Duc
Vice President and Chief Financial
Officer
(Principal Financial Officer)
Date: March 27, 1996 Arthur S. Donaldson
-----------------------------
Arthur S. Donaldson
Controller
(Principal Accounting Officer)
Date: March 27, 1996 Robert J. Cruikshank
-----------------------------
Robert J. Cruikshank
Director
Date: March 27, 1996 Charles E. Hurwitz
-----------------------------
Charles E. Hurwitz
Director
Date: March 27, 1996 Ezra G. Levin
-----------------------------
Ezra G. Levin
Director
Date: March 27, 1996 Robert Marcus
-----------------------------
Robert Marcus
Director
Date: March 27, 1996 Robert J. Petris
-----------------------------
Robert J. Petris
Director
24
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------
INDEX OF EXHIBITS
Exhibit
Number Description
- ------ ------------
3.1 Restated Certificate of Incorporation of Kaiser Aluminum
Corporation (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 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 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
(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 (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 31, 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, dated as of July 20, 1995,
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 4.1 to the Report on Form
10-Q for the quarterly period ended June 30, 1995, filed by KAC,
File No. 1-9447).
4.10 Fourth Amendment to Credit Agreement, dated as of October 17,
1995, 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 4.1 to the Report on Form
10-Q for the quarterly period ended September 30, 1995, filed by
KAC, File No. 1-9447).
*4.11 Fifth Amendment to Credit Agreement, dated as of December 11,
1995, 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.
4.12 Certificate of Designations 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).
4.13 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).
4.14 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).
4.15 Senior Subordinated Intercompany Note between KACC and a
subsidiary of MAXXAM, dated December 15, 1992 (incorporated by
reference to Exhibit 4.10 to the Report on Form 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 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 KAC, File No. 1-9447).
4.17 Senior Subordinated Intercompany Note between KAC and KACC dated
February 15, 1994 (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 (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 (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 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).
10.6 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).
Executive Compensation Plans and Arrangements
[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).
10.8 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).
10.9 Kaiser 1995 Employee Incentive Compensation Program (incorporated
by reference to Exhibit 10.1 to the Report on Form 10-Q for the
quarterly period ended March 31, 1995, filed by KAC, File
No. 1-9447).
10.10 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).
27
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------
Exhibit
Number Description
- ------ ------------
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).
10.13 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).
10.14 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).
10.15 Promissory Note, dated July 20, 1993, between MAXXAM and Byron L.
Wade (incorporated by reference to Exhibit 10.59 to Form 10-K for
the period ended December 31, 1993, filed by MAXXAM,
File No. 1-3924).
10.16 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 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 The portions of KAC's Annual Report to shareholders for the year
ended December 31, 1995, which are incorporated by reference into
this Report.
*21 Significant Subsidiaries of KAC.
*27 Financial Data Schedule.
__________
* Filed herewith
28
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
- ----------------------------------------------------
Exhibit 21
SUBSIDIARIES
Listed below are the principal subsidiaries of Kaiser Aluminum Corporation,
the jurisdiction of their incorporation or 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
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 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
Volta Aluminium Company Limited. . . . . . . Ghana
29
KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
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Domestic California Pennsylvania
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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
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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
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Volta Aluminium Company Limited (90%) Kaiser Aluminium Russia, Inc. (100%)
Primary Aluminum International Business Development
Jamaica Wales, United Kingdom
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Alumina Partners of Jamaica (65%) Anglesey Aluminium Limited (49%)
Bauxite, Alumina Primary Aluminum
Kaiser Jamaica Bauxite Company (49%)
Bauxite
30