-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, sPmzDqppAr5FUVDXIjlbOc//gfNXbgc/AS0cXu2t5wf4cbGMUDskXOwLcOddC835 2gJQGBnA9obSOzf1a2jImw== 0000054291-95-000013.txt : 19950516 0000054291-95-000013.hdr.sgml : 19950516 ACCESSION NUMBER: 0000054291-95-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KAISER ALUMINUM & CHEMICAL CORP CENTRAL INDEX KEY: 0000054291 STANDARD INDUSTRIAL CLASSIFICATION: PRIMARY PRODUCTION OF ALUMINUM [3334] IRS NUMBER: 940928288 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03605 FILM NUMBER: 95538363 BUSINESS ADDRESS: STREET 1: 6177 SUNOL BOULEVARD STREET 2: KAISER CTR CITY: PLEASANTON STATE: CA ZIP: 94566 BUSINESS PHONE: 5104621122 FORMER COMPANY: FORMER CONFORMED NAME: PERMANENTE METALS CORP DATE OF NAME CHANGE: 19660905 10-Q 1 ====================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 Commission file number 1-3605 KAISER ALUMINUM & CHEMICAL CORPORATION (Exact name of registrant as specified in its charter) Delaware 94-0928288 (State of incorporation) (I.R.S. Employer Identification No.) 6177 Sunol Boulevard, Pleasanton, CA 94566-7769 (Address of principal executive offices) (Zip Code) (510) 462-1122 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ----- ----- At April 30, 1995, the registrant had 46,171,365 shares of common stock outstanding. ====================================================================== KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS --------------------
CONSOLIDATED BALANCE SHEETS (In millions of dollars) March 31, December 31, 1995 1994 ------------------------------ (Unaudited) Assets Current assets: Cash and cash equivalents $ 7.3 $ 12.0 Receivables 267.9 200.5 Inventories 503.1 468.0 Prepaid expenses and other current assets 105.0 158.0 --------------------------- Total current assets 883.3 838.5 Investments in and advances to unconsolidated affiliates 168.6 169.7 Property, plant, and equipment - net 1,123.0 1,133.2 Deferred income taxes 279.8 271.0 Other assets 319.2 281.2 --------------------------- Total $2,773.9 $2,693.6 =========================== Liabilities & Stockholders' Equity Current liabilities: Accounts payable $ 145.1 $ 152.1 Accrued interest 13.8 32.6 Accrued salaries, wages, and related expenses 71.3 77.7 Accrued postretirement medical benefit obligation - current portion 47.0 47.0 Other accrued liabilities 156.4 171.7 Payable to affiliates 87.1 85.2 Long-term debt - current portion 12.2 11.5 Notes payable to parent - current portion 21.2 21.2 --------------------------- Total current liabilities 554.1 599.0 Long-term liabilities 539.5 495.5 Accrued postretirement medical benefit obligation 738.1 734.9 Long-term debt 824.3 751.1 Notes payable to parent 18.2 23.5 Minority interests 88.3 85.4 Redeemable preference stock 32.3 29.0 Stockholders' deficit: Preferred stock 1.7 1.8 Common stock 15.4 15.4 Additional capital 1,649.4 1,626.3 Accumulated deficit (267.9) (271.5) Additional minimum pension liability (9.1) (9.1) Less: Note receivable from parent (1,410.4) (1,387.7) --------------------------- Total stockholders' deficit (20.9) (24.8) --------------------------- Total $2,773.9 $2,693.6 ===========================
The accompanying notes to interim consolidated financial statements are an integral part of these statements. - 1 - KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME (LOSS) (Unaudited) (In millions of dollars) Quarter Ended March 31, ------------------- 1995 1994 -------------------- Net sales $513.0 $415.1 -------------------- Costs and expenses: Cost of products sold 426.7 387.8 Depreciation 23.7 24.9 Selling, administrative, research and development, and general 29.9 28.0 -------------------- Total costs and expenses 480.3 440.7 -------------------- Operating income (loss) 32.7 (25.6) Other income (expense): Interest and other income (expense) - net (.7) 2.0 Interest expense (23.6) (21.4) -------------------- Income (loss) before income taxes, minority interests, and extraordinary loss 8.4 (45.0) Credit (provision) for income taxes (2.9) 15.8 Minority interests (.7) 1.1 ------------------- Income (loss) before extraordinary loss 4.8 (28.1) Extraordinary loss on early extinguishment of debt, net of tax benefit of $2.9 (5.4) -------------------- Net income (loss) $ 4.8 $(33.5) ====================
The accompanying notes to interim consolidated financial statements are an integral part of these statements. - 2 - KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited) (In millions of dollars) Quarter Ended March 31, ----------------- 1995 1994 ----------------- Cash flows from operating activities: Net income (loss) $ 4.8 $(33.5) Adjustments to reconcile net income (loss) to net cash used for operating activities: Depreciation 23.7 24.9 Non-cash postretirement medical benefit expenses 3.2 3.4 Amortization of excess investment over equity in net assets of unconsolidated affiliates 2.9 2.9 Amortization of deferred financing costs and discount on long-term debt 1.3 2.2 Equity in (income) losses of unconsolidated affiliates (1.8) 1.3 Minority interests .7 (1.1) Extraordinary loss on early extinguishment of debt - net 5.4 Increase in receivables (69.6) (6.8) (Increase) decrease in inventories (35.1) 14.5 Decrease (increase) in prepaid expenses and other current assets 43.8 (7.3) Incurrence of financing costs (.7) (17.1) Decrease in accounts payable (7.0) (12.8) Decrease in accrued interest (18.6) (10.7) Decrease in payable to affiliates and accrued liabilities (3.9) (8.8) Decrease in accrued and deferred income taxes (3.5) (17.7) Other 3.8 (7.0) ----------------- Net cash used for operating activities (56.0) (68.2) ----------------- Cash flows from investing activities: Net proceeds from disposition of property and investments 1.1 2.3 Capital expenditures (13.7) (9.6) Redemption fund for minority interest preference stock (1.2) (2.3) ----------------- Net cash used for investing activities (13.8) (9.6) ----------------- Cash flows from financing activities: Repayments of long-term debt, including revolving credit (237.5) (321.4) Borrowings of long-term debt, including revolving credit 311.2 353.5 Net short-term debt repayments (.5) Net (payments to) borrowings from parent (5.3) 29.1 Dividends paid (.2) (.2) Redemption of preference stock (3.1) (7.4) Capital contribution 67.2 ----------------- Net cash provided by financing activities 65.1 120.3 ----------------- Net (decrease) increase in cash and cash equivalents during the period (4.7) 42.5 Cash and cash equivalents at beginning of period 12.0 14.2 ----------------- Cash and cash equivalents at end of period $ 7.3 $ 56.7 ================= Supplemental disclosure of cash flow information: Interest paid, net of capitalized interest $ 40.9 $ 29.9 Income taxes paid 3.8 2.4
The accompanying notes to interim consolidated financial statements are an integral part of these statements. - 3 - KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (In millions of dollars) 1. General ------- Kaiser Aluminum & Chemical Corporation (the "Company") is the principal operating subsidiary of Kaiser Aluminum Corporation ("Kaiser"). Kaiser is a subsidiary of MAXXAM Inc. ("MAXXAM"). MAXXAM owns approximately 58% of Kaiser's common stock, assuming the conversion of each outstanding $.65 Depositary Share, each representing ownership of one-tenth of a share of Series A Mandatory Conversion Premium Dividend Preferred Stock (the "Series A Shares"), and each outstanding share of 8.255% PRIDES, Convertible Preferred Stock (the "PRIDES"), into one share of Kaiser's common stock, with the remaining 42% publicly held. The foregoing unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, these financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments necessary for a fair statement of the results for the interim periods presented have been included. Operating results for the first quarter of 1995 are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 1994. Certain reclassifications of prior- period information were made to conform to the current presentation. 2. Inventories ----------- The classification of inventories is as follows:
March 31, December 31, 1995 1994 ------------------------ Finished fabricated aluminum products $ 55.8 $ 49.4 Primary aluminum and work in process 222.8 203.1 Bauxite and alumina 110.3 102.3 Operating supplies and repair and maintenance parts 114.2 113.2 ------------------------ Total $503.1 $468.0 ========================
Substantially all product inventories are stated at last-in, first-out (LIFO) cost, not in excess of market. Replacement cost is not in excess of LIFO cost. 3. Contingencies ------------- Environmental Contingencies - The Company is subject to a wide variety of environmental laws and regulations and to fines or penalties assessed for alleged breaches of the environmental laws and to claims and litigation based on such laws. The Company currently is subject to a number of lawsuits under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments Reauthorization Act of 1986 ("CERCLA"), and, along with certain other entities, has been named as a potentially responsible party for remedial costs at certain third-party sites listed on the National Priorities List under CERCLA. - 4 - KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES Based on the Company's evaluation of these and other environmental matters, the Company has established environmental accruals primarily related to potential solid waste disposal and soil and groundwater remediation matters. At March 31, 1995, the balance of such accruals, which is primarily included in Long-term liabilities, was $40.8. These environmental accruals represent the Company's estimate of costs reasonably expected to be incurred based on presently enacted laws and regulations, currently available facts, existing technology, and the Company's assessment of the likely remediation action to be taken. The Company expects that these remediation actions will be taken over the next several years and estimates that annual expenditures to be charged to these environmental accruals will be approximately $3.0 to $11.0 for the years 1995 through 1999 and an aggregate of approximately $11.0 thereafter. As additional facts are developed and definitive remediation plans and necessary regulatory approvals for implementation of remediation are established or alternative technologies are developed, changes in these and other factors may result in actual costs exceeding the current environmental accruals. The Company believes that it is reasonably possible that costs associated with these environmental matters may exceed current accruals by amounts that could range, in the aggregate, up to approximately $20.0. While uncertainties are inherent in the final outcome of these environmental matters, and it is presently impossible to determine the actual costs that ultimately may be incurred, management currently believes that the resolution of such uncertainties should not have a material adverse effect on the Company's consolidated financial position or results of operations. Asbestos Contingencies - The Company is a defendant in a number of lawsuits in which the plaintiffs allege that certain of their injuries were caused by, among other things, exposure to asbestos during, and as a result of, their employment or association with the Company or exposure to products containing asbestos produced or sold by the Company. The lawsuits generally relate to products the Company has not manufactured for at least 15 years. At March 31, 1995, the number of such lawsuits pending was approximately 29,200. Based on past experience and reasonably anticipated future activity, the Company has established an accrual for estimated asbestos-related costs for claims filed and estimated to be filed and settled through 2007. The Company's accrual was calculated based on the current and anticipated number of asbestos-related claims, the prior timing and amounts of asbestos-related payments, the current state of case law related to asbestos claims, and the advice of counsel. Accordingly, an asbestos-related cost accrual of $135.1, before considerations for insurance recoveries, is included primarily in Long-term liabilities at March 31, 1995. The Company estimates that annual future cash payments in connection with such litigation will be approximately $11.0 to $13.0 for each of the years 1995 through 1999, and an aggregate of approximately $74.0 thereafter through 2007. The Company does not presently believe there is a reasonable basis for estimating such costs beyond 2007 and, accordingly, no accrual has been recorded for such costs which may be incurred beyond 2007. The Company believes that it has insurance coverage available to recover a substantial portion of its asbestos-related costs. While claims for recovery from some of the Company's insurance carriers are currently subject to pending litigation and other carriers have raised certain defenses, the Company believes, based on prior insurance- related recoveries in respect of asbestos-related claims, existing insurance policies, and the advice of counsel, that substantial recoveries from the insurance carriers are probable. Accordingly, an estimated aggregate insurance recovery of $119.5, determined on the same basis as the asbestos-related cost accrual, is recorded primarily in Other assets at March 31, 1995. While uncertainties are inherent in the final outcome of these asbestos matters and it is presently impossible to determine the actual costs that ultimately may be incurred and the insurance recoveries that will be received, management currently believes that, based on the factors discussed in the preceding paragraphs, the resolution of the asbestos-related uncertainties and the incurrence of asbestos-related costs net of related insurance recoveries should not have a material adverse effect on the Company's consolidated financial position or results of operations. - 5 - KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES Other Contingencies - The Company is involved in various other claims, lawsuits, and other proceedings relating to a wide variety of matters. While uncertainties are inherent in the final outcome of such matters, and it is presently impossible to determine the actual costs that ultimately may be incurred, management currently believes that the resolution of such uncertainties and the incurrence of such costs should not have a material adverse effect on the Company's consolidated financial position or results of operations. 4. Derivative Financial Instruments and Related Hedging Programs ------------------------------------------------------------- The Company enters into primary metal hedging transactions with off-balance sheet risk in the normal course of business. The prices realized by the Company under certain sales contracts for alumina, primary aluminum, and fabricated aluminum products as well as the costs incurred by the Company on certain items, such as aluminum scrap, rolling ingot, power, and bauxite, fluctuate with the market price of primary aluminum, together resulting in a "net exposure" of earnings. The primary metal hedging transactions are designed to mitigate the net exposure of earnings to declines in the market price of primary aluminum, while retaining the ability to participate in favorable environments that may materialize. The Company has developed strategies which include forward sales of primary aluminum at fixed prices and the purchase or sale of options for primary aluminum. In this regard, in respect of its remaining 1995 anticipated net exposure, at March 31, 1995, the Company had net forward sales contracts for 235,800 tons* of primary aluminum at fixed prices, purchased call options in respect of 47,250 tons of primary aluminum, purchased put options to establish a minimum price for 160,250 tons of primary aluminum, and entered into option contracts that established a price range for 71,000 tons of primary aluminum. In respect of its 1996 anticipated net exposure, at March 31, 1995, the Company had sold forward 15,000 tons of primary aluminum at fixed prices. The Company also enters into hedging transactions in the normal course of business that are designed to reduce its exposure to fluctuations in foreign exchange rates. At March 31, 1995, the Company had net forward foreign exchange contracts totaling approximately $139.5 for the purchase of 192.0 Australian dollars through March 1997. At March 31, 1995, the net unrealized loss on the Company's position in aluminum forward sales and option contracts (based on a market price of $1,859 per ton of primary aluminum) and forward foreign exchange contracts was $16.3. The Company has established margin accounts with its counterparties related to aluminum forward sales and option contracts. The Company is entitled to receive advances from counterparties related to unrealized gains and, in turn, is required to make margin deposits with counterparties to cover unrealized losses related to these contracts. At March 31, 1995, the Company had $7.5, compared with $50.5 at December 31, 1994, on deposit with various counterparties in respect of such unrealized losses. These amounts are recorded in Prepaid expenses and other current assets. See Note 11 of the Notes to Consolidated Financial Statements for the year ended December 31, 1994. - -------------------------- * All references to tons in this report refer to metric tons of 2,204.6 pounds. - 6 - KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS ------------------------- (In millions of dollars, except shipments and prices) The following should be read in conjunction with the response to Item 1, Part I, of this Report. Results of Operations - --------------------- The Company's operating results are sensitive to changes in prices of alumina, primary aluminum, and fabricated aluminum products, and also depend to a significant degree on the volume and mix of all products sold and on its hedging strategies. See Note 4 of Notes to Interim Consolidated Financial Statements for an explanation of the Company's hedging strategies. The table on the following page provides selected operational and financial information on a consolidated basis with respect to the Company for the quarters ended March 31, 1995 and 1994. As an integrated aluminum producer, the Company uses a portion of its bauxite, alumina, and primary aluminum production for additional processing at certain of its other facilities. Intracompany shipments and sales are excluded from the information set forth on the following page. - 7 - KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES SELECTED OPERATIONAL AND FINANCIAL INFORMATION
Quarter Ended March 31, ----------------- 1995 1994 ----------------- Shipments: Alumina 446.5 468.2 Aluminum products: Primary aluminum 47.7 64.3 Fabricated aluminum products 94.5 96.8 ----------------- Total aluminum products 142.2 161.1 ================= Average realized sales price: Alumina (per ton) $ 197 $ 155 Primary aluminum (per pound) .81 .55 Net sales: Bauxite and alumina: Alumina $ 87.9 $ 72.5 Other 19.1 20.4 ----------------- Total bauxite and alumina 107.0 92.9 ----------------- Aluminum processing: Primary aluminum 85.0 77.3 Fabricated aluminum products 316.2 241.5 Other 4.8 3.4 ----------------- Total aluminum processing 406.0 322.2 ----------------- Total net sales $513.0 $415.1 ================= Operating income (loss): Bauxite and alumina $ 1.4 $ (2.4) Aluminum processing 49.3 (6.0) Corporate (18.0) (17.2) ----------------- Total operating income (loss) $ 32.7 $(25.6) ================= Income (loss) before income taxes, minority interests, and extraordinary loss $ 8.4 $(45.0) ================= Income (loss) before extraordinary loss $ 4.8 $(28.1) Extraordinary loss on early extinguishment of debt, net of tax benefit of $2.9 (5.4) ----------------- Net income (loss) $ 4.8 $(33.5) ================= Capital expenditures $ 13.7 $ 9.6 ================= - ------------------------------------------------- In thousands of tons. Includes net sales of bauxite. Includes the portion of net sales attributable to minority interests in consolidated subsidiaries.
- 8 - KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES Net Sales Bauxite and Alumina - Revenue from net sales to third parties for the bauxite and alumina segment in the first quarter of 1995 was 15% higher than the first quarter of 1994. Revenue from alumina increased 21% in the first quarter of 1995 from the first quarter of 1994, principally due to increased average realized prices, partially offset by lower shipments. Aluminum Processing - Revenue from net sales to third parties for the aluminum processing segment in the first quarter of 1995 was 26% higher than the first quarter of 1994. Revenue from primary aluminum increased 10% in the first quarter of 1995 from the first quarter of 1994, principally due to higher average realized prices, significantly offset by decreased shipments caused by the strike by the United Steelworkers of America ("USWA") discussed below and by a mid-1994 partial curtailment of production at the Company's 90%-owned Valco smelter. Shipments of primary aluminum to third parties were approximately 34% of total aluminum products shipments in the first quarter, compared with approximately 40% in the first quarter of 1994. Revenue from fabricated aluminum products increased 31% in the first quarter of 1995 from the first quarter of 1994, due to higher average realized prices, partially offset by lower shipments for most of these products. Operating Income (Loss) First quarter results were adversely affected by (i) an eight-day strike at five major domestic locations by the USWA, (ii) a six-day strike by the National Workers Union at the Company's 65%-owned Alpart alumina refinery in Jamaica, and (iii) a four-day disruption of alumina production at Alpart caused by a boiler failure. The combined impact of these events on the first quarter results was approximately $17.0 in the aggregate (on a pre-tax basis) principally from lower production volume and other related costs. Bauxite and Alumina - This segment had operating income in the first quarter of 1995, compared with an operating loss in the first quarter of 1994, principally due to higher revenue, partially offset by the effect of the strikes and boiler failure. Aluminum Processing - This segment had operating income in the first quarter of 1995, compared with an operating loss in the first quarter of 1994, principally due to higher revenue, partially offset by the effect of the strike by the USWA. Corporate - Corporate operating expenses represented corporate general and administrative expenses which are not allocated to the Company's segments. Net Income (Loss) The Company had a net income for the first quarter of 1995, compared with a net loss for the first quarter of 1994. The principal reason for this change was the improvement in operating income previously described. Liquidity and Capital Resources - ------------------------------- Operating Activities At March 31, 1995, the Company had working capital of $329.2, compared with working capital of $239.5 at December 31, 1994. The increase in working capital was due to an increase in Receivables (as a result of an increase in net sales) and Inventories (as a result of lower shipments) and a decrease in Accrued interest and Other - 9 - KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES accrued liabilities. The increase in working capital is partially offset by a decrease in Prepaid expenses and other current assets (due to lower margin deposits). See Note 4 of the Notes to Interim Consolidated Financial Statements. Investing Activities Cash used for investing activities in the first quarter of 1995 primarily consisted of capital expenditures to improve production efficiency, reduce operating costs, and expand capacity at existing facilities. Financing Activities At March 31, 1995, the Company had long-term debt of $824.3, compared with $751.1 at December 31, 1994. In March 1995, the 1994 Credit Agreement (see Note 5 of the Notes to Consolidated Financial Statements for the year ended December 31, 1994) was amended by the Second Amendment to Credit Agreement (the "Second Amendment"). The Second Amendment provided, among other things, for an increase in the revolving line of credit from $275.0 to $325.0. At March 31, 1995, $173.4 (of which $57.5 could have been used for letters of credit) was available to the Company under the 1994 Credit Agreement. Trends - ------ In March 1995, the Bonneville Power Administration (the "BPA") offered to its industrial customers, including the Company, 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, the Company and the BPA entered into a contract for an amount of such power, and the Company expects to restart one- half of an idle potline (approximately 9,000 tons of annual capacity) at its Tacoma, Washington, smelter in the near future. In February 1995, the BPA issued an initial rate increase announcement which proposed a 5.4% increase to its direct service industry customers (the "DSIs") to apply during a two-year period beginning October 1, 1995. In April 1995, the DSIs, including the Company, entered into agreements with the BPA pursuant to which (i) the proposed 5.4% rate increase was replaced by an agreed 4% rate increase to be in effect for the one-year period October 1, 1995, through September 30, 1996, which will increase production costs at the Company's Mead and Tacoma smelters by an aggregate of approximately $4.0 per year, based on the operating rate of those smelters after the restart of one-half of a potline at the Tacoma smelter, discussed above, (ii) the variable rate structure currently in effect was extended through September 30, 1996, (iii) the BPA rate proceedings were deferred, (iv) the DSIs waived their rights to assert certain claims in respect of past interruptible service by the BPA, and (v) the BPA agreed to allow each DSI to supply a portion of its requirement for electric power from sources other than the BPA, up to 50% of its top quartile (interruptible) service beginning October 1, 1995, and up to 100% of its top quartile service beginning October 1, 1996, which will help to assure the supply of power and encourage more competitive power rates. Separately, the BPA has offered to contract with each of the DSIs to provide transmission services for power purchased from sources other than the BPA to replace all or any portion of the power now purchased from the BPA under its existing power contract. The amount of power available from the BPA under such an existing power contract would be permanently redued by the amount of power purchased from such other sources. KACC has entered into a transmission services contract with the BPA, but has not now elected to replace any portion of the power which it purchased from the BPA with power from another source. These new arrangements may help to assue the supply of power and encourage more competitive power rates. - 10 - KAISER ALUMINUM & CHEMICAL CORPORATION AND SUBSIDIARY COMPANIES PART II - OTHER INFORMATION ITEM 5. OTHER INFORMATION ----------------- On March 27, 1995, the United States Department of Justice issued Civil Investigative Demand No. 12503 (the "CID"), as part of an industry-wide investigation, requesting information from the Company 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 the Company to produce can stock and the manner in which the Company'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. The Company is gathering documents and preparing interrogatory answers in order to comply with the CID. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) Exhibits. Exhibit No. Exhibit ----------- ------- 10.1 Kaiser 1995 Employee Incentive Compensation Program 27 Financial Data Schedule (b) Reports on Form 8-K. No report on Form 8-K was filed by the Company during the quarter ended March 31, 1995. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, who has signed this report on behalf of the registrant and as the principal financial officer of the registrant. KAISER ALUMINUM & CHEMICAL CORPORATION /s/ John T. La Duc By:---------------------------------- John T. La Duc Vice President and Chief Financial Officer Dated: May 12, 1995 - 11 - EX-10.1 2 Kaiser 1995 Employee Incentive Compensation Program Kaiser 1995 Employee Incentive Compensation Program TABLE OF CONTENTS ----------------- Section Page ------------ Section 1. Purpose of Program and Its Parts - ------------------------------------------- 1.1 Purpose 1 1.2 Program as Part of the Plan 1 Section 2. Definitions - ----------------------- 2.1 Definitions 2 Section 3. Eligibility - ----------------------- 3.1 Eligibility for Long-Term Awards 9 3.2 Eligibility for Annual Awards 9 3.3 No Right to Participate 10 Section 4. Administration - -------------------------- 4.1 Administration 10 Section 5. Stock Subject to Program; Type and Nature - ----------------------------------------------------- of Awards --------- 5.1 Stock Subject to the Long Term Component 11 5.2 Type and Nature of Awards 12 Section 6. Effective Date and Long Term Component Life - ------------------------------------------------------- 6.1 Effective Date and Long Term Component Life 12 Section 7. Determination and Payment of Awards - ----------------------------------------------- 7.1 General Principles 12 7.2 Determining Target Incentives and Granting Performance Units 13 7.3 Performance Goals and Valuation 14 7.4 Payment of Actual Awards 20 7.5 Form and Timing of Payment 20 7.6 Termination of Employment Due To Death, Disability, or Retirement 21 7.7 Termination of Employment for Other Reasons 22 7.8 Nontransferability 22 Section 8. Beneficiary Designation - ----------------------------------- 8.1 Beneficiary Designation 22 Kaiser 1995 Employee Incentive Compensation Program TABLE OF CONTENTS ----------------- Section Page ------------ Section 9. Rights of Participants - ---------------------------------- 9.1 Employment 23 Section 10. Amendment, Modification, and Termination of - -------------------------------------------------------- Program ------- 10.1 Amendment, Modification, and Termination of Program 23 Section 11. Tax Withholding - ---------------------------- 11.1 Tax Withholding 24 Section 12. Indemnification - ---------------------------- 12.1 Indemnification 24 Section 13. Requirements of Law; Consents ------------------------------------------ 13.1 Requirements of Law 25 13.2 Consents to Program Actions 25 13.3 Governing Law 26 APPENDIX A APPENDIX B APPENDIX C Section 1. Purpose of Program and Its Parts ------------------------------------------- 1.1 Purpose ------- . The Kaiser 1995 Employee Incentive Compensation Program (the "Program") is intended to increase the value of the shareholder's investment in Kaiser Aluminum Corporation by providing key Employees with incentives to achieve positive Economic Value Added, as defined in Section 2 below, with emphasis in those areas of the business that such Employees can influence. The Program is designed to provide the opportunity to earn levels of total annual compensation that, at levels of profitability equal to the cost of capital, are competitive with the compensation provided by other employers with whom the Company competes for management, at similar profitability levels, and to allow the Participants to earn higher total compensation if economic value (profit above that required to return the cost of capital) is added. These opportunities are provided through a combination of Annual and Long-Term (as both such terms are defined below) incentives. 1.2 Program as Part of the Plan --------------------------- . The long-term incentive part of the Program (the "Long Term Component") is consequently intended to further the purposes of the Kaiser 1993 Omnibus Stock Incentive Plan (the "Plan") by supplementing and implementing the provisions of Section 9 of the Plan and is made a part of the Plan effective as of January 1, 1994. It includes provisions for the payment of incentives in part in Kaiser Aluminum Corporation ("KAC") common stock and is included in the Program along with Annual incentives so as to coordinate the payment of base salary, Annual and Long Term incentive compensation. The provisions of the Long Term Component as - 1- they relate to KAC common stock grants and awards are subject to and limited by those of the Plan, and they shall be interpreted and administered so that they are consistent with the provisions of the Plan. The description of provisions for determination and payment of Annual incentives are included in this Program for information and disclosure, but these provisions are not subject to the provisions of the Plan. Thus, this Program repeats or summarizes various Plan definitions and other provisions insofar as they are applicable to the Long Term Component. In the event of any conflict or ambiguity, the definitions and rules of the Plan are overriding and controlling when interpreting provisions of the Long Term Component. Because the Long Term Component supplements and implements a portion of the Plan without changing any basic rules of the Plan, the Program does not constitute an amendment of the Plan. For purposes of summary communication documents provided to Participants, certain other terminology will be used; refer to definitions in Section 2 below, of "Long Term Component" and "Program" for identification of such different terminology. Section 2. Definitions ----------------------- 2.1 Definitions ----------- . Subject to Section 1, any capitalized term that is defined in this document shall have the meaning set forth in the appropriate definition in this Section or elsewhere herein when such term is used in connection with the Program. Moreover, any term that describes an accounting measure shall be determined for each Long-Term Performance Period in accordance with the definition of such term, applied on a consistent basis, using the amounts recorded in 2 the Company's books of accounts and generally accepted accounting principles as in effect at the beginning of the applicable Performance Period, with such modifications and such computational methodology as the Committee may deem appropriate and approve in order to carry out the purpose of the Program. Definitions relating to the Annual incentive part of the Program shall also be determined in accordance with the rules and terminology of this Section 2.1 except as they may be modified in the case of Annual incentive arrangements for particular Business Units or Participant groups that incorporate modifications approved by the CEO with the consent of the Committee in following the principles described in this document. (a)"Actual Award" means the amount, if any, of a Participant's ------------ Target Incentive that, assuming continued participation for the full Performance Period for which the Target Incentive was granted, has been earned and will become payable at the times and in the manner determined under the Long Term Component or the Annual incentive part of the Program, as applicable, provided payment shall be contingent upon meeting or exceeding the threshold level of performance (minimum Company-wide EVA of 5 percent or minimum Business Unit EVA of 7-1/2 percent). Pursuant to Section 7.3(l), 7.6, or 10.1, a Participant's Actual Award may be prorated in the case of participation for less than the full Performance Period. (b)"Annual" means of or pertaining to the short-term part of the ------ Program, which provides for the possibility of Awards which may be made each year and for results to be measured for the one-year Performance Period for which the Award was made. (c)"Award" means ----- (1)with respect to the Long Term Component, the Performance Units granted to a Participant at the beginning of the Long Term Performance Period, and (2)with respect to the Annual incentive part of the Program, the total cash incentive under the Annual incentive part of the Program, 3 where (1) and (2) collectively constitute the Participant's total Target Incentive under the Program when granted and either (1) or (2) or both may result in payment of an Actual Award after the end of the applicable Performance Period. (d)"Board" unless otherwise specified means the Board of ----- Directors of KACC. The term "Boards" shall refer collectively to the Boards of Directors of KAC and KACC. (e)"Business Plan" for any fiscal year beginning on or after ------------- January 1, 1995, means the Business Units and KACC consolidated business plan for such fiscal year, as approved by the Board. For 1994, the second quarter updated business plan will be used. (f)"Business Unit" means a separate operating unit of the ------------- Company, as determined for purposes of the Company's internal organization and reflected in its Business Plan. (g)"Capital Employed" means the net assets of the Company or ---------------- Business Unit, as applicable. Net assets are determined as total assets minus liabilities adjusted for the following exclusions. Total assets shall exclude deferred financing recorded in the other assets category, and total liabilities shall exclude debt, accrued and deferred income taxes, and accrued interest, all net of minority interests in these items. (h)"Capital Spending" means KAC's or the Business Unit's share of ---------------- expenditures constituting capital spending as defined by Policy 160 in the KAC Controller's Policy Manual, including 100 percent of such spending for consolidated entities and KAC's proportionate share of such spending for non-consolidated entities whose results are reflected in KAC's financial reporting. (i)"CEO" or "Chief Executive Officer" means the chief executive --- ----------------------- officer of KAC. (j)"Committee" means the Compensation Committees of the Boards, --------- acting jointly, as provided in Section 2.1(d) of the Plan. (k)"Company" means KAC and KACC collectively. ------- (l)"Cost of Capital" means --------------- 4 (1)for the Company on a consolidated basis, 15 percent, which is deemed to be the actual cost for the Company based on a 50 percent debt and 50 percent equity ratio and assuming that the cost of debt is 10 percent and the cost of equity is 20 percent, and (2)for a Business Unit, 20 percent, which is deemed to be the actual cost for each Business Unit since certain Corporate level costs are not allocated against the earnings of Business Units. (m)"Disability" means disability as defined in the Kaiser ---------- Aluminum Self-Insured Welfare Plan for Employees. (n)"EBDIT" or "Earnings Before Depreciation, Interest, and Taxes" ----- ------------------------------------------------- means EBIT plus depreciation, where depreciation includes purchase accounting investment amortization and depreciation recorded in the cost of goods sold, and does not include depreciation in minority interest. (o)"EBIT" or "Earnings Before Interest and Taxes" means net ---- ---------------------------------- income plus the Company share of interest expense (including interest recorded in the cost of goods sold), amortization of deferred financing, capital charges, income taxes, and extraordinary items. (p)"Employee" means an officer, director, or regular full-time -------- salaried employee (including any officer or director who is also an employee, other than a director who serves on the Committee) of the Company or its subsidiaries or any branch, unit or division thereof. For purposes of this Program, Employee does not include the Chief Executive Officer, the Chief Financial Officer or the Chief Administrative Officer. (q)"EVA" or "Economic Value Added" means the return on Company or --- -------------------- Business Unit assets, expressed as a percent and determined for the applicable Performance Period with respect to either Annual EVA or Long-Term EVA as described below. (1)Annual EVA, in most cases, is determined for the Annual Performance Period as the EBIT divided by the average Capital Employed. For certain Business Units Annual EVA will be defined the same as 5 Long Term EVA, with the exception that only the first two steps are used in determination of such Annual EVA. For purposes of the foregoing, the average Capital Employed shall be the simple average of annual, quarterly or monthly figures, as available. (2)Long-Term EVA is determined as follows. First, for each year in the Long-Term Performance Period, determine (c) as the EBDIT minus the Capital Spending, and (d) as the average Capital Employed. Second, divide (c) by (d). Third, determine the EVA for the Long-Term Performance Period as the simple average of the three annual percentages determined in the second step above. For purposes of the foregoing, the average Capital Employed shall be the simple average of annual, quarterly or monthly figures, as available. (r)"Exchange Act" means the Securities Exchange Act of 1934, as ------------ amended and in effect from time to time. (s)"KAC" means Kaiser Aluminum Corporation, a Delaware --- corporation. (t)"KACC" means Kaiser Aluminum & Chemical Corporation, a ---- Delaware corporation. (u)"Long-Term" means of or pertaining to the Long Term Component, --------- which provides for Awards to be made each year near the beginning of a new three-year Performance Period and for results to be measured for such three-year Performance Period. (v)"Long Term Component" means the long-term incentive ------------------- compensation Program described in this document that is part of the Program and is governed by the Plan, as described in Section 1 hereof. For purposes of describing the Long Term Component of the Program to Participants in summary communication materials, the title "Kaiser Aluminum Long Term Incentive Program", short-titled "LTI Program" will be used. (w)"Participant" means any Employee designated by the CEO or the ----------- Committee to participate pursuant to Section 3. 6 (x)"Performance Goal" means, as applicable, ---------------- (1)the Annual EVA planned for achievement on average over the Annual Performance Period, or (2)the Long-Term EVA planned for achievement on average over the Long-Term Performance Period. (y)"Performance Period" means a period commencing on the date ------------------ that the Program is first effective or on any subsequent anniversary of such date for which an Award has been made and will be measured in accordance with the rules of the Program, as follows: (1) with respect to the Annual part of the Program, the period shall be the calendar year, and each calendar year shall constitute a Performance Period. (2)with respect to the Long Term Component, the period shall consist of three consecutive calendar years, and a new Long-Term Performance Period shall begin each year and shall partially overlap the two immediately preceding Long-Term Performance Periods, if any. (z)"Performance Unit" means a unit with an initial value of $1.00 ---------------- that is granted to a Participant as part of a Target Incentive and applies only to the Long Term Component. (aa)"Plan" means the Kaiser 1993 Omnibus Stock Incentive Plan, as ---- amended and in effect from time to time. (bb)"Program" means the Kaiser 1995 Employee Incentive ------- Compensation Program that includes Annual incentive and Long Term incentive amounts which, when combined with base salary, comprise the total compensation for a Participant. For purposes of describing the Program to Participants in summary communication materials, the title "Kaiser Aluminum Total Compensation System", short titled "System" shall be used. (cc)"Retirement" means termination of employment on or after ---------- attaining eligibility for a full early or normal retirement benefit under the Kaiser Aluminum Salaried Employees Retirement Plan. 7 (dd)"Section 16 Reporting Persons" means Employees who are KAC ---------------------------- executive officers, directors, or 10 percent beneficial owners for purposes of required reporting and potential liability under Section 16 of the Exchange Act, as to whom the Committee shall have sole discretion in making determinations hereunder. (ee)"Stock" means the common stock, par value $0.01 per share, of ----- KAC. (ff)"Stock Closing Price" means the average of the closing prices ------------------- of Stock on trading dates in the final month of the Performance Period, as listed in the New York Stock Exchange Composite Transactions of the Wall Street Journal or such other generally available, published listing as may be designated by the Committee for this purpose. (gg)"Target Incentive" means ---------------- (1)with respect to the Long Term Component, the sum of Performance Units awarded to a Participant for the Long-Term Performance Period, and (2)with respect to the Annual incentive part of the Program, the initial targeted cash amount for the Actual Award, where the Target Incentives in both (1) and (2) plus the Participant's base salary at the beginning of the Performance Period are designed to provide the desired total compensation target for the Participant. (hh)"Tentative Award" means the amount of the Actual Award --------------- before any adjustment to reflect Business Unit safety and before any other adjustments permitted on a discretionary basis under rules set forth in Section 7 below. 8 Section 3. Eligibility ----------------------- 3.1 Eligibility for Long-Term Awards -------------------------------- As provided in Section 3.1 of the Plan, Employees are selected to participate and receive Awards under the Long Term Component, as determined by the Committee in its sole discretion. Except as otherwise determined by the Committee, the Employees selected for the Long Term Component shall include (a) the Employees who report directly to the CEO (excluding the Chief Financial Officer and the Chief Administrative Officer), (b) Employees recommended by the CEO who are managers who report directly to the CEO's direct reports and have a direct impact on Corporate and/or Business Unit financial results, and (c) other Employees recommended by the CEO who are not described in (a) or (b), but who, because of the nature of their employment, have a direct impact on Corporate and/or Business Unit financial results. For a new hire or a promoted Employee who was not initially selected to participate at the beginning of an applicable Long-Term Performance Period, or in other appropriate circumstances, the Committee may approve the selection of an Employee to commence participation as of an appropriate date during the Long-Term Performance Period, subject to the rules in Section 7.3(l) regarding the proration of any resulting Actual Award to reflect the shortened period of participation during the remainder of such Performance Period. 3.2 Eligibility for Annual Awards ----------------------------- Eligibility for Annual Awards under the Program shall follow analogous rules to those in Section 3.1 above, subject to such modifications and delegation of decision-making authority as is deemed appropriate by the CEO. 9 3.3 No Right to Participate ----------------------- As provided in Section 3.2 of the Plan, no Participant, regardless of position or responsibility, shall have any entitlement or right to cause any Award to be made under the Long Term Component without the approval of the Committee. Except as otherwise required by the Plan or determined by the Committee pursuant to the Plan, the making of a Long-Term Award shall not entitle a Participant to any subsequent or additional Award. Similar rules shall apply to the Annual incentive part of the Program, subject to the appropriate approval level. Section 4. Administration -------------------------- 4.1 Administration -------------- . Consistent with Section 4 of the Plan, the Committee shall have broad administrative responsibility for the Long Term Component. As required by Sections 2.1(d) and 4.1 of the Plan, each Committee member shall be a "disinterested person" for purposes of Rule 16b-3 under the Exchange Act with respect to the right to acquire Stock or any other interest in equity securities of KAC pursuant to the Long Term Component. In administering the Long Term Component, the Committee shall have all the powers and responsibilities assigned to it in Section 4 and other provisions of the Plan that are applicable to the Long Term Component and the type of Awards it describes, including, without limitation, the power to interpret the Long Term Component, to prescribe, amend, and rescind rules and regulations relating to it, to provide for conditions and assurances deemed necessary or advisable to protect the interests of the Company, and to make all other determinations necessary or advisable for the administration of the Long Term Component, but only to the extent not contrary to express provisions of the Plan except 10 that the Committee may correct any defect, supply any omission and reconcile any inconsistency in the Plan. Committee actions with respect to the Long Term Component shall be taken in accordance with procedures described in Section 4 of the Plan, and the Committee shall have the authority to make non-uniform determinations and to issue Stock with respect to the Long Term Component, as provided in Sections 4.2 and 4.3 of the Plan. The Committee may obtain and rely on recommendations of the CEO and such other persons as it deems appropriate in making determinations with respect to the Long Term Component participation and Awards for Participants who are not Section 16 Reporting Persons, provided that the Committee shall retain final approval authority for all such determinations as well as any other determinations that it has the responsibility and authority to make with respect to the Long Term Component hereunder and the Plan. Section 5. Stock Subject to Program; Type and Nature of Awards - --------------------------------------------------------------- 5.1 Stock Subject to the Long Term Component ---------------------------------------- . Stock that is issued to Participants in payment of Actual Awards under the Long Term Component is provided from the authorized shares of Stock described in Section 5 of the Plan and is subject to all applicable rules of the Plan relating to the issuance of Stock with respect to such Awards, including the rules in Sections 5 and 9 of the Plan. 11 5.2 Type and Nature of Awards ------------------------- (a)Annual Awards that become payable shall be paid entirely in cash as provided herein. (b)Long-Term Awards under the Program shall consist of Performance Units that may become payable in Stock and cash as permitted in Sections 5.5 and 9 of the Plan and as described more specifically herein. Each Long-Term Award shall be evidenced in writing in the form of an appropriate agreement or Notice of Award approved by the Committee in accordance with Section 5.6 of the Plan and the provisions of the Long Term Component. Section 6. Effective Date and Long Term Component Life - ------------------------------------------------------- 6.1 Effective Date and Long Term Component Life ------------------------------------------- . As provided in Section 1.1 herein, the Long Term Component is effective as of January 1, 1994. Thereafter, subject to the rules set forth in this Program and in the Plan, including the rules of Section 6.2 of the Plan and the continuing availability of Stock under Section 5 of the Plan, the Long Term Component as may be amended from time to time, shall continue during such time as the Plan remains in effect. Section 7. Determination and Payment of Awards - ----------------------------------------------- 7.1 General Principles ------------------ . All of the following principles in this Section 7 are applicable to Participants in the Long Term Component, to 12 executive management (the CEO's direct reports) for both the Long Term Component and the Annual incentive portion of the Program, except to the extent that some Participants' short-term or other Annual incentive plan, as approved by the CEO, may be somewhat different. Any short-term incentive plan that varies from the principles herein, however, will be consistent with the overall intent of the Program. 7.2 Determining Target Incentives and Granting Performance ------------------------------------------------------ Units - ----- . Subject to Sections 3, 4, and 5 of the Plan and this Program, Performance Units for the Long Term Component may be granted to Participants at any time and from time to time as shall be determined by the Committee. In practice, except as otherwise determined by the Committee, consideration shall be given to the following general principles in granting Performance Units for the Long Term Component. Performance Units shall be granted as of the beginning of each Long Term Performance Period in amounts that the Committee deems necessary to provide the desired Long-Term Target Incentive for the Participants. In determining a Participant's Target Incentive, the Committee, along with the CEO and his designees, shall focus on a total compensation concept with the following elements: (a)Using an agreed list of comparator companies approved by the Committee and such supplemental third-party compensation surveys as deemed appropriate, the position of a Participant will be matched with similar positions in the comparator group and the supplemental survey data (taking into account differences in the Company structure of responsibilities from the comparator group and differences in the performance of the comparator group in comparator periods) to determine the total market value of the position and the market breakdown of such value into base salary and incentive compensation. 13 (b)Then, considering the objective of setting base salary at the 45th percentile level and incentive compensation (the sum of both Annual and Long-Term incentives) at the 55th percentile level, the Committee, taking into account the recommendations of the CEO and his designees, shall determine an appropriate target level for the Participant's Target Incentive in light of these factors and individual circumstances. (c)Of the total amount of targeted incentive compensation, the Long-Term Target Incentive as a general rule shall represent 75 percent for Participants in executive managerial roles and 60 percent for non-executive Participants. The Annual Target Incentive shall represent the remainder of the targeted incentive compensation that is not provided as a Long-Term Target Incentive. When deemed appropriate, there may be some variation from these ratios. 7.3 Performance Goals and Valuation ------------------------------- . For each Performance Period the Committee, along with the CEO and his designees, shall approve Performance Goals that, depending on the actual results achieved, will allow Annual and Long-Term Target Incentives to be valued at from zero to three times their initial value for purposes of determining and paying Actual Awards. To accomplish this, a planned EVA shall be determined for the Company and for each Business Unit for the applicable Performance Period. This step shall be part of a normal process of developing the Business Plan at the time the determination is made, and it shall be completed before March 31 of the each year or as early as practicable during the Performance Period. This process shall also be subject to the final review and approval of the Committee, along with the CEO and his designees. After the completion of this planning step and as soon as practicable after the end of the Performance Period, the actual EVA results for the Company and for each Business Unit shall be determined and compared to the planned results for the purpose of calculating Actual Awards. Except as otherwise determined by the Committee, which may take into account the recommendations of the CEO and his 14 designees, Performance Goals shall be determined and used to value Target Incentives as follows: (a)A matrix with multipliers from zero to three shall be established for the entire Company to measure the effect of achieving different levels of actual Company EVA results relative to different planned Company EVA levels. The Company-wide matrix, as approved by the Committee, shall be identified as Appendix C and attached hereto so that it can be recognized as part of this document. The initial version of Appendix C shall set the 1.00 multiplier level at the point where both planned and actual EVA equal 15 percent, which is deemed to be the Company's cost of capital. The initial version of Appendix C shall be effective at the same time as this document and shall continue in effect indefinitely unless it is superseded by a revised Appendix C. Any revised Appendix C that may be approved by the Committee or the CEO for the Annual incentive part of the Program, shall indicate the Performance Periods for which it is effective. (b)A matrix with multipliers from zero to three shall be established for Business Units to measure the effect of achieving different levels of actual Business Unit EVA results relative to different planned Business Unit EVA levels. The matrix, as approved by the Committee, which may take into account the recommendations of the CEO and his designees, shall be identified as Appendix A and attached hereto so that it can be recognized as part of this document. The initial version of Appendix A shall set the 1.00 multiplier level at the point where both planned and actual EVA equal 20 percent, which is the required rate of return from the Business Units to cover the Cost of Capital. This is 5 percent higher than the similar EVA target level for Company-wide results due to the fact that certain general costs of the Company, not related to the active Business Units, are not allocated to Business Units. The initial version of Appendix A shall be effective at the same time as this document and shall continue in effect indefinitely unless it is superseded by a revised Appendix A. Any revised Appendix A that may be approved by the Committee, or the CEO for the Annual 15 incentive part of the Program, shall indicate the Performance Periods for which it is effective. (c)A special matrix shall be established as Appendix B for the Alumina and Primary Products Business Units and for any other Business Unit for which a special matrix is appropriate. Appendix B shall be similar to Appendix A except that it shall indicate multipliers based on actual Business Unit EVA only instead of actual versus planned Business Unit EVA. The rules for continuing or revising Appendix B shall parallel those for Appendix A. (d)At the end of the Performance Period, the actual EVA shall be determined for the Company and for each Business Unit, and these EVA results shall be used to determine Actual Awards as described in the steps below. Verification of Actual Award calculations shall be provided as deemed appropriate by the CEO and the Committee. (e)The Tentative Award for Business Unit Participants in a Performance Period shall be determined by giving a weighting of 80 percent (or other approved weighting factor) to the multiplier that reflects the Business Unit EVA and 20 percent to the multiplier that reflects the Company-wide EVA. For certain Participants who report to a Business Unit Manager or his or her direct reports, a different weighting that reduces the importance of the Company-wide EVA may be used where appropriate. In the case of the Alumina and Primary Products Business Units or any other Business Unit for which the following treatment is appropriate, the 80 percent (or other approved weighting factor) Business Unit EVA component shall be broken down into two components so that the multiplier determined from Appendix A shall be given a weighting of 24 percent (30 percent of the Business Unit weighting of 80 percent), and the multiplier determined from Appendix B shall be given a weighting of 56 percent (70 percent of the Business Unit weighting of 80 percent). In the case of other Business Units not described in the preceding sentence, the entire Business Unit weighting of 80 percent (or other approved weighting factor) shall apply to 16 Appendix A multiplier for the Business Unit. In all cases, the Business Unit multiplier(s), as adjusted for the appropriate percentage weighting, plus the Company-wide multiplier, as similarly adjusted, shall equal the total multiplier to be applied to the Participant's Target Incentive to determine the Participant's Tentative Award. (f)The Tentative Award for Business Unit Participants described in Section 7.3(e) is subject to two possible adjustments in computing the Actual Award amount, provided that the first such adjustment shall not apply to Business Unit staff Participants who are instead subject to the first adjustment described in Section 7.3(h). (1)First, the Tentative Award may be increased or decreased (but not below zero) by an amount equal to up to plus or minus 10 percent of the Participant's Target Incentive to reflect an evaluation of safety results achieved at the Business Unit in the Performance Period. The determination of the factor will include a combination of objective measurement of safety results appropriate to the Business Unit against aluminum and other industry standards, and qualitative assessment of the safety programs and progress against them. (2)Second, the Tentative Award may be increased or decreased (but not below zero) by an amount up to plus or minus 20 percent of the Participant's Target Incentive to reflect an adjustment for circumstances not already reflected in the determination of the amount being adjusted. This addition or subtraction will be based on such factors as exceptional achievement or failure to achieve agreed objectives which are not reflected in the results of the Business Plan but are important to the longer term success of the business and/or events (either positive or negative) deemed beyond the control of the Participant. Except in the case of Participants who are Section 16 Reporting Persons, the determinations and adjustments described in this paragraph may be made by the CEO or 17 his designate based upon such background information and recommendations as he deems appropriate, and shall be subject, for the Long Term Component, to any final review and approval or modification that the Committee wishes to make. In the case of Participants who are Section 16 Reporting Persons, the adjustments shall be made by the Committee, taking into account the recommendations of the CEO where appropriate. (g)The Tentative Award for corporate staff Participants in a Performance Period shall be determined in a manner similar to that described in Section 7.3(e) above, but giving a weighting of 50 percent to the simple average of all Business Unit multipliers determined under Appendix A for the Performance Period, and 50 percent to the multiplier in Appendix C that reflects the Company-wide EVA. The corporate staff multiplier from Appendix A, as adjusted for the 50 percent weighting, plus the Company-wide multiplier from Appendix C, as similarly adjusted, shall equal the total multiplier to be applied to the Participant's Target Incentive in order to determine the Participant's Tentative Award. (h)The Tentative Award for corporate staff Participants described in Section 7.3(g) is subject to two possible adjustments in computing the Actual Award amount, the first of which is also applicable to Business Unit staff Participants in lieu of the safety adjustment described in Section 7.3(f). (1)First, the Tentative Award may be increased or decreased (but not below zero) by an amount up to plus or minus 10 percent of the Participant's Target Incentive to reflect an evaluation of departmental results or other specific objectives achieved by the Participant's staff group in the Performance period. (2)Second, the Tentative Award may be increased or decreased (but not below zero) by an amount up to plus or minus 20 percent of the Participant's Target Incentive to reflect an adjustment for circumstances not already reflected in the determination of the 18 amount being adjusted. This addition or subtraction will be based on such factors as exceptional achievement or failure to achieve agreed objectives which are not reflected in the results of the Business Plan but are important to the longer term success of the business and/or events (either positive or negative) deemed beyond the control of the Participant. Except in the case of Participants who are Section 16 Reporting Persons, the adjustments described in this paragraph shall be made by the CEO or his designee based upon such background information and recommendations as he deems appropriate, and shall be subject to any final review and approval or modification that the Committee wishes to make. In the case of Participants who are Section 16 Reporting Persons, any such adjustments shall be made by the Committee, taking into account the recommendations of the CEO where appropriate. (i)If a Participant transfers between groups during the Performance Period, calculations under this Section 7.3 shall be made, using the rules for each group separately and applying them on a pro rata basis to reflect the portion of the Performance Period during which the Participant was employed in that group. In the event of a major change during the Performance Period, such as the sale of a Business Unit or some other significant, unforeseen transaction or circumstance that, in the judgment of the Committee, would make it inappropriate to measure actual financial results against the performance criteria on which Target Incentives were based or use them to determine Actual Awards, the Committee may in its discretion approve appropriate adjustments for the purpose of making determinations for the Performance Period as uniform and as near as possible to what they would have been, absent the change. (j)If an Employee was selected to commence participation in the Long Term Component as of a date after the beginning of a Performance Period, such Participant's Actual Award, if any, for 19 the Performance Period shall be prorated by multiplying it by a fraction equal to (i) the number of months in the Performance Period in which the Employee was a Participant, divided by (ii) the total number of months in the Performance Period. (k)In certain circumstances the weighting of factors, as described in this Section 7.3 above, may not be appropriate to provide the proper motivation. For example, a Participant (or department of Participants) engaged in international business development or research center functions may require modified weightings to achieve the purposes of the Program. In those instances, the weightings may be different, but they shall in total be consistent with the principles of the Program. 7.4 Payment of Actual Awards ------------------------ . After the Performance Period has ended, if a Participant's Actual Award has been determined to be greater than zero, payment of the amount earned shall be made in accordance with and subject to the rules and limitations in Sections 7.5 through 7.8 below. No payment shall be made in the case of any amount that is forfeited due to a termination of employment. 7.5 Form and Timing of Payment -------------------------- . The amount, if any, of the Annual Actual Award determined under Section 7.3 above that is not forfeited pursuant to Section 7.6 or 7.7 below (determined after applying the proration rule of such Section 7.6, if applicable) shall be paid in full in cash during the first calendar quarter immediately following the end of the Annual Performance Period to which such Actual Award relates. The amount, if any, of the Long-Term Actual Award determined under Section 7.3 above that is not forfeited pursuant to Section 7.6 or 7.7 below (determined after applying the proration rule of 20 such Section 7.6, if applicable) shall be divided into two equal installments. The first installment shall be paid during the first calendar quarter immediately following the end of the Long-Term Performance Period. The second installment shall be paid during the first calendar quarter of the next year following the first installment. Each installment payment that is due shall automatically consist of the number of whole shares of Stock that most nearly equals, without exceeding, 57 percent (or such other percentage as may be specified by the Committee in the future due to changing tax rates) of the total value of the installment payment. For this purpose, the Stock Closing Price shall be used to determine the number of shares of Stock and their total value. The remaining portion of the installment payment, determined after subtracting such Stock value, shall be paid in cash. Notwithstanding the foregoing, however, if the Stock is not publicly traded at the time any payment is due, the payment will be made entirely in cash. 7.6 Termination of Employment Due to Death, Disability, or ------------------------------------------------------ Retirement - ---------- . Except to the extent otherwise determined by the Committee, in the event that a Participant terminates employment with the Company during a Performance Period due to death, Disability, or Retirement, the Participant (or the Participant's beneficiary) shall receive pro rata payment of the Participant's Actual Award, if any, for such Performance Period, and any remaining amount of the Actual Award shall be forfeited. The portion of the Actual Award to be paid in this case is the amount of the Participant's Actual Award, if any, for the Performance Period that results from multiplying the total Actual Award by a fraction equal to (i) the number of months in the Performance Period in which the Employee was a Participant, divided by (ii) the total number of months in the Performance Period. Payment shall be made at the times and in the manner prescribed by Section 7.5. above for Participants who did not terminate their employment during the Performance Period. 21 7.7 Termination of Employment for Other Reasons ------------------------------------------- . Except to the extent otherwise determined by the Committee, in the event that a Participant voluntarily terminates employment with the Company during the Performance Period for any reason other than death, Disability, or Retirement, all rights of the Participant with respect to Performance Units granted to him/her for the Performance Period shall be forfeited, and no amount of the Participant's Actual Award, if any, for such Performance Period shall be paid. In the event that the termination is by mutual agreement, there may be a partial payment in accordance with Section 7.6 above. 7.8 Nontransferability ------------------ . As provided in Section 9.7 of the Plan, no Performance Units granted may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution until the termination of the applicable Performance Period. All rights with respect to Performance Units granted to a Participant shall be exercisable during his/her lifetime only by such Participant. These rules apply to Target Incentives and Actual Awards that have become vested and are in the process of being paid in accordance with the terms hereof. Section 8. Beneficiary Designation ----------------------------------- 8.1 Beneficiary Designation ----------------------- . As provided in Section 13 of the Plan, each Participant may designate a beneficiary or beneficiaries to receive any payments that may be due under the Program (of either the Annual incentive or the Long Term Component thereof) in the event of his/her death. Each designation will revoke all 22 prior designations by the same Participant, shall be in a form prescribed by the Committee or its designated administrator, and will be effective only when filed by the Participant in writing with the Committee or its designated administrator during his/her lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to his/her surviving spouse or to the deceased Participant's estate. Section 9. Rights of Employees ------------------------------- 9.1 Employment ---------- . Nothing in the Program shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, notwithstanding that as a result of such termination the Employee may not receive any Actual Award, nor confer upon any Participant any right to continue in the employ of the Company. Section 10. Amendment, Modification, and Termination of Program - ---------------------------------------------------------------- 10.1 Amendment, Modification, and Termination of Long ------------------------------------------------ Term Component -------------- . The continuation of the Long Term Component as set forth herein is subject to any amendment, modification, suspension, or termination of the Plan that may occur pursuant to Section 15 of the Plan, and is further subject to any similar action that may be taken by the Committee, consistent with Sections 4, 9, and 15 of the Plan and the provisions herein, with respect to the Long Term Component. If the Long Term Component is terminated during any 23 Performance Period for which Awards have been made, the Actual Awards will be determined as usual at the end of the Performance Period and will then be prorated by multiplying them by a fraction equal to (i) the number of months in the Performance Period prior to the termination, divided by (ii) the total number of months in a full Performance Period. As provided in Section 15 of the Plan, no amendment, revision, modification, suspension, discontinuance or termination of the Plan shall in any manner adversely affect any Award theretofore granted, without the consent of the Grantee. Similar rules shall apply to the Annual incentive part of the Program, subject to the appropriate approval level. Section 11. Tax Withholding ---------------------------- 11.1 Tax Withholding --------------- . The Company shall have the power to withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local withholding tax requirements on with respect to any Award under the Program. Section 12. Indemnification ---------------------------- 12.1 Indemnification --------------- . The Long Term Component is subject to Section 18.1 of the Plan, which provides that each person who is or shall have been a member of the Committee or of the Boards shall be indemnified and held harmless by KACC against and from any loss, cost, liability, or expense that may be imposed upon 24 or reasonably incurred by him/her in connection with or resulting from any claim, action, suit, or proceeding to which he/she may be a party or in which he/she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him/her in settlement thereof, with KACC's approval, or paid by him/her in satisfaction of any judgment in any such action, suit, or proceeding against him/her, provided he/she shall give the Company an opportunity, at its own expense, to handle and defend the same before he/she undertakes to handle and defend it on his/her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. Section 13. Requirements of Law; Consents ------------------------------------------ 13.1 Requirements of Law ------------------- . The granting of Awards and the issuance of Stock under the Long Term Component shall be subject to all applicable laws, rules, regulations, and such approvals by any governmental agencies or national securities exchanges as may be required. 13.2 Consents to Program Actions --------------------------- . As determined by the Committee in accordance with Sections 19.2 and 19.3 of the Plan, no action under the Long Term Component shall be taken unless and until any "Consent" deemed necessary or desirable in connection therewith shall have been effected or obtained to the full satisfaction of 25 the Committee. For this purpose, "Consent" is defined in Section 19.3 of the Plan and includes any listings, registrations or qualifications in respect of the Plan upon any securities exchange or under any Federal, state or local law, rule or regulation, and any written agreements and representations by a Participant with respect to the disposition of shares of Stock or any other matter which the Committee shall deem necessary or desirable to comply with the terms of any such listing, registration or qualification or to obtain an exemption therefrom. 13.3 Governing Law ------------- . As provided in Section 19.4 of the Plan, the Long Term Component, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Texas. 26 APPENDIX A KAISER 1995 EMPLOYEE INCENTIVE COMPENSATION PROGRAM LONG AND SHORT TERM INCENTIVE PERFORMANCE AWARD SCHEDULE - BUSINESS UNIT PLAN EVA 35% 0.160 0.300 0.800 1.200 1.500 2.250 3.000 32% 0.180 0.450 0.850 1.300 1.850 2.500 2.750 29% 0.200 0.500 0.900 1.400 2.000 2.250 2.500 25% 0.220 0.550 0.950 1.500 1.750 2.000 2.250 20% 0.230 0.600 1.000 1.250 1.500 1.750 2.000 14% 0.240 0.700 0.850 1.000 1.250 1.500 1.850 7.5% 0.250 0.600 0.700 0.800 1.000 1.250 1.500 0.0% 0.260 0.500 0.550 0.600 0.750 1.000 1.300 ----- ----- ----- ----- ----- ----- ----- 7.5% 14% 20% 25% 29% 32% 35% ACTUAL EVA
APPENDIX B KAISER 1995 EMPLOYEE INCENTIVE COMPENSATION PROGRAM LONG AND SHORT TERM INCENTIVE PERFORMANCE AWARD SCHEDULE FOR SELECT BUSINESS UNITS ACTUAL EVA MULTIPLIER 7.5% 0.25 14% 0.70 20% 1.00 25% 1.50 29% 2.00 32% 2.50 35% 3.00
APPENDIX C KAISER 1995 EMPLOYEE INCENTIVE COMPENSATION PROGRAM LONG AND SHORT TERM INCENTIVE PERFORMANCE AWARD SCHEDULE - CORPORATE CONSOLIDATED PLAN EVA 30% 0.180 0.450 0.850 1.550 2.150 3.000 25% 0.200 0.500 0.900 1.650 2.250 2.600 20% 0.210 0.550 0.950 1.750 2.050 2.250 15% 0.220 0.600 1.000 1.400 1.750 2.000 10% 0.230 0.650 0.850 1.100 1.450 1.750 5% 0.240 0.600 0.750 0.950 1.200 1.500 0% 0.250 0.500 0.650 0.800 1.000 1.250 ----- ----- ----- ----- ----- ----- 5% 10% 15% 20% 25% 30% ACTUAL EVA
EX-27 3
5 This schedule contains summary financial information extracted from the interim consolidated financial statements of the Company for the quarter ended March 31, 1995, and is qualified in its entirety by reference to such financial statements. 0000054291 KAISER ALUMINUM & CHEMICAL CORPORATION 1,000,000 3-MOS DEC-31-1995 JAN-01-1995 MAR-31-1995 7 0 268 0 503 883 1,122 0 2,774 554 0 15 2 0 (38) 2,774 513 513 427 427 54 0 24 8 3 5 0 0 0 5 0 0
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