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                  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 September 30, 1995

                     Commission file number 1-9447


                      KAISER ALUMINUM CORPORATION
        (Exact name of registrant as specified in its charter)


          Delaware                         94-3030279
   (State of incorporation)   (I.R.S. Employer Identification No.)


        5847 San Felipe, Suite 2600, Houston, Texas  77057-3010
         (Address of principal executive offices)    (Zip Code)


                            (713) 267-3777
         (Registrant's telephone number, including area code)


     Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.  Yes   x        No
          -----         -----

     At October 31, 1995, the registrant had 71,637,654 shares of
common stock outstanding.


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         KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES

                    PART I - FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (In millions of dollars) September 30, December 31, 1995 1994 -------------------------------- (Unaudited) Assets Current assets: Cash and cash equivalents $ 11.2 $ 17.6 Receivables 277.8 199.2 Inventories 530.6 468.0 Prepaid expenses and other current assets 73.9 158.0 --------------------------- Total current assets 893.5 842.8 Investments in and advances to unconsolidated affiliates 187.2 169.7 Property, plant, and equipment - net 1,099.3 1,133.2 Deferred income taxes 282.8 271.2 Other assets 324.7 281.2 --------------------------- Total $2,787.5 $2,698.1 =========================== Liabilities & Stockholders' Equity Current liabilities: Accounts payable $ 147.0 $ 152.1 Accrued interest 14.4 32.6 Accrued salaries, wages, and related expenses 62.2 77.7 Accrued postretirement medical benefit obligation - current portion 47.0 47.0 Other accrued liabilities 141.6 176.9 Payable to affiliates 91.0 85.3 Long-term debt - current portion 12.1 11.5 --------------------------- Total current liabilities 515.3 583.1 Long-term liabilities 573.3 495.5 Accrued postretirement medical benefit obligation 739.1 734.9 Long-term debt 798.5 751.1 Minority interests 118.1 116.2 Stockholders' equity: Preferred stock .4 .6 Common stock .7 .6 Additional capital 530.0 527.8 Accumulated deficit (478.8) (502.6) Additional minimum pension liability (9.1) (9.1) --------------------------- Total stockholders' equity 43.2 17.3 --------------------------- Total $2,787.5 $2,698.1 ===========================
The accompanying notes to interim consolidated financial statements are an integral part of these statements. - 1 - KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED INCOME (LOSS) (Unaudited) (In millions of dollars, except per share amounts) Quarter Ended Nine Months Ended September 30, September 30, --------------------------------------- 1995 1994 1995 1994 --------------------------------------- Net sales $550.3 $461.1 $1,646.7 $1,335.7 --------------------------------------- Costs and expenses: Cost of products sold 439.3 416.0 1,329.8 1,222.8 Depreciation 23.7 22.8 71.1 72.8 Selling, administrative, research and development, and general 34.1 29.2 96.4 86.8 --------------------------------------- Total costs and expenses 497.1 468.0 1,497.3 1,382.4 --------------------------------------- Operating income (loss) 53.2 (6.9) 149.4 (46.7) Other income (expense): Interest and other income (expense) - net (7.7) (.7) (9.8) 2.5 Interest expense (23.9) (22.3) (71.3) (65.9) --------------------------------------- Income (loss) before income taxes, minority interests, and extraordinary loss 21.6 (29.9) 68.3 (110.1) (Provision) credit for income taxes (7.8) 10.5 (24.6) 38.6 Minority interests (1.3) (1.4) (4.4) (2.2) --------------------------------------- Income (loss) before extraordinary loss 12.5 (20.8) 39.3 (73.7) Extraordinary loss on early extinguishment of debt, net of tax benefit of $2.9 (5.4) --------------------------------------- Net income (loss) 12.5 (20.8) 39.3 (79.1) Dividends on preferred stock (4.9) (5.3) (15.5) (14.8) --------------------------------------- Net income (loss) available to common shareholders $ 7.6 $(26.1) $ 23.8 $ (93.9) ======================================= Earnings (loss) per common and common equivalent share: Primary: Income (loss) before extraordinary loss $ .13 $ (.45) $ .40 $ (1.53) Extraordinary loss (.09) --------------------------------------- Net income (loss) $ .13 $ (.45) $ .40 $ (1.62) ======================================= Fully diluted $ .14 $ .46 ======================================= Weighted average common and common equivalent shares outstanding (000): Primary 60,225 58,161 59,015 58,118 Fully diluted 71,782 71,613
The accompanying notes to interim consolidated financial statements are an integral part of these statements. - 2 - KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS (Unaudited) (In millions of dollars) Nine Months Ended September 30, ----------------- 1995 1994 ----------------- Cash flows from operating activities: Net income (loss) $ 39.3 $(79.1) Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation 71.1 72.8 Non-cash postretirement medical benefit expenses 4.2 10.4 Amortization of excess investment over equity in net assets of unconsolidated affiliates 8.7 8.7 Amortization of deferred financing costs and discount on long-term debt 4.1 4.8 Equity in (income) losses of unconsolidated affiliates (17.2) 3.2 Minority interests 4.4 2.2 Extraordinary loss on early extinguishment of debt - net 5.4 (Increase) decrease in receivables (86.6) 13.4 (Increase) decrease in inventories (62.6) 13.7 Decrease (increase) in prepaid expenses and other current assets 68.5 (13.2) Incurrence of financing costs (.8) (19.1) Decrease in accounts payable (5.2) (.3) Decrease in accrued interest (18.0) (9.8) Increase in payable to affiliates and accrued liabilities 8.1 5.3 Decrease in accrued and deferred income taxes (8.5) (46.2) Other 9.8 (3.2) ----------------- Net cash provided by (used for) operating activities 19.3 (31.0) ----------------- Cash flows from investing activities: Net proceeds from disposition of property and investments 6.9 4.2 Capital expenditures (53.2) (37.5) Redemption fund for minority interest preference stock (.2) (1.2) ----------------- Net cash used for investing activities (46.5) (34.5) ----------------- Cash flows from financing activities: Repayments of long-term debt, including revolving credit (431.4) (326.2) Borrowings of long-term debt, including revolving credit 481.9 353.5 Repayment of note payable (3.4) Net short-term debt repayments (.5) Dividends paid (18.7) (14.8) Capital stock issued 1.2 100.4 Redemption of minority interests' preference stock (8.8) (8.5) ----------------- Net cash provided by financing activities 20.8 103.9 ----------------- Net (decrease) increase in cash and cash equivalents during the period (6.4) 38.4 Cash and cash equivalents at beginning of period 17.6 14.7 ----------------- Cash and cash equivalents at end of period $ 11.2 $ 53.1 ================= Supplemental disclosure of cash flow information: Interest paid, net of capitalized interest $ 85.2 $ 70.9 Income taxes paid 26.6 9.7 Tax allocation payments from MAXXAM Inc. (3.6)
The accompanying notes to interim consolidated financial statements are an integral part of these statements. - 3 - KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (In millions of dollars, except prices and per share amounts) 1. General - ----------- Kaiser Aluminum Corporation (the "Company") is a subsidiary of MAXXAM Inc. ("MAXXAM"). MAXXAM owns approximately 62% of the Company's common stock, assuming the conversion of each outstanding share of 8.255% PRIDES, Convertible Preferred Stock (the "PRIDES"), into one share of the Company's common stock, with the remaining approximately 38% publicly held. The Company operates through its direct subsidiary, Kaiser Aluminum & Chemical Corporation ("KACC"). On September 19, 1995, the Company redeemed all 1,938,295 of its Mandatory Conversion Premium Dividend Preferred Stock (the "Series A Shares"), which resulted in the simultaneous redemption of all $.65 Depositary Shares in exchange for (i) 13,126,521 shares of the Company's common stock and (ii) $2.8 in cash comprised of (a) an amount equal to all accrued and unpaid dividends up to and including the day immediately prior to redemption date and (b) cash in lieu of any fractional shares of common stock that would have otherwise been issuable. 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 nine months 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:
September 30, December 31, 1995 1994 ----------------------------- Finished fabricated aluminum products $ 70.1 $ 49.4 Primary aluminum and work in process 207.3 203.1 Bauxite and alumina 134.1 102.3 Operating supplies and repair and maintenance parts 119.1 113.2 ----------------------------- Total $530.6 $468.0 =============================
Substantially all product inventories are stated at last-in, first-out (LIFO) cost, not in excess of market. Replacement cost is not in excess of LIFO cost. 3. Earnings (Loss) per Common and Common Equivalent Share - ---------------------------------------------------------- Primary earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common and common equivalent shares outstanding during the period. Fully diluted earnings per common and common equivalent share is computed as if the Series A Shares had - 4 - KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES been converted to common shares at the beginning of each period. Accordingly, for purposes of the fully diluted calculations, the dividends attributable to the Series A Shares ($2.8 and $9.1 for the quarter and nine months ended September 30, 1995, respectively) have not been deducted from net income, and the weighted average number of common and common equivalent shares outstanding includes the shares issued upon conversion of the Series A Shares as if they had been outstanding for the entire periods. As a result of the conversion of the Series A Shares during the 1995 periods, fully diluted earnings per share are presented even though the results are antidilutive. For the quarter and nine months ended September 30, 1994, common equivalent shares attributable to the preferred stock and nonqualified stock options were excluded from the calculation of weighted average shares because they were antidilutive. 4. Contingencies - ----------------- Environmental Contingencies - The Company and KACC are subject to a wide variety of environmental laws and regulations and to fines or penalties assessed for alleged breaches of the environmental laws and to claims and litigation based on such laws. KACC currently is subject to a number of lawsuits under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments Reauthorization Act of 1986 ("CERCLA"), and, along with certain other entities, has been named as a potentially responsible party for remedial costs at certain third-party sites listed on the National Priorities List under CERCLA. Based on the Company's evaluation of these and other environmental matters, the Company has established environmental accruals primarily related to potential solid waste disposal and soil and groundwater remediation matters. At September 30, 1995, the balance of such accruals, which is primarily included in Long-term liabilities, was $39.7. 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 $12.0 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 $22.0. While uncertainties are inherent in the final outcome of these environmental matters, and it is presently impossible to determine the actual costs that ultimately may be incurred, management currently believes that the resolution of such uncertainties should not have a material adverse effect on the Company's consolidated financial position or results of operations. Asbestos Contingencies - KACC is a defendant in a number of lawsuits in which the plaintiffs allege that certain of their injuries were caused by, among other things, exposure to asbestos during, and as a result of, their employment or association with KACC or exposure to products containing asbestos produced or sold by KACC. The lawsuits generally relate to products KACC has not manufactured for at least 15 years. At October 31, 1995, the number of such lawsuits pending was approximately 58,200, as compared to 31,700 at June 30, 1995. KACC has been advised by its regional counsel that, although there can be no assurance, the recent increase in pending lawsuits 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 - 5 - KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES substantial portion of the asbestos-related lawsuits that were filed and served on KACC between June 30, 1995, and October 31, 1995, were filed in Texas prior to September 1, 1995. Based on past experience and reasonably anticipated future activity, the Company has established an accrual for estimated asbestos-related costs for claims filed and estimated to be filed and settled through 2008. The Company's accrual was calculated based on the current and anticipated number of asbestos-related claims, the prior timing and amounts of asbestos-related payments, the current state of case law related to asbestos claims, and the advice of counsel. Accordingly, an asbestos-related cost accrual of $155.3 ($134.6 at June 30, 1995), before considerations for insurance recoveries, is included primarily in Long-term liabilities at September 30, 1995. The Company estimates that annual future cash payments in connection with such litigation will be approximately $11.0 to $19.0 for each of the years 1995 through 1999, and an aggregate of approximately $90.8 thereafter through 2008. The Company does not presently believe there is a reasonable basis for estimating such costs beyond 2008 and, accordingly, no accrual has been recorded for such costs which may be incurred beyond 2008. The Company believes that KACC has insurance coverage available to recover a substantial portion of its asbestos-related costs. While claims for recovery from some of KACC's insurance carriers are currently subject to pending litigation and other carriers have raised certain defenses, the Company believes, based on prior insurance- related recoveries in respect of asbestos-related claims, existing insurance policies, and the advice of counsel, that substantial recoveries from the insurance carriers are probable. Accordingly, an estimated aggregate insurance recovery of $134.7 ($120.6 at June 30, 1995), determined on the same basis as the asbestos-related cost accrual, is recorded primarily in Other assets at September 30, 1995. While uncertainties are inherent in the final outcome of these asbestos matters and it is presently impossible to determine the actual costs that ultimately may be incurred and the insurance recoveries that will be received, management currently believes that, based on the factors discussed in the preceding paragraphs, the resolution of the asbestos-related uncertainties and the incurrence of asbestos-related costs net of related insurance recoveries should not have a material adverse effect on the Company's consolidated financial position or results of operations. Other Contingencies - The Company and KACC are involved in various other claims, lawsuits, and other proceedings relating to a wide variety of matters. While uncertainties are inherent in the final outcome of such matters, and it is presently impossible to determine the actual costs that ultimately may be incurred, management currently believes that the resolution of such uncertainties and the incurrence of such costs should not have a material adverse effect on the Company's consolidated financial position or results of operations. 5. Derivative Financial Instruments and Related Hedging Programs - ----------------------------------------------------------------- KACC enters into primary metal hedging transactions with off-balance sheet risk in the normal course of business. The prices realized by the Company under certain sales contracts for alumina, primary aluminum, and fabricated aluminum products as well as the costs incurred by the Company on certain items, such as aluminum scrap, rolling ingot, power, and bauxite, fluctuate with the market price of primary aluminum, together resulting in a "net exposure" of earnings. The primary metal hedging transactions are designed to mitigate the net exposure of earnings to declines in the market price of primary aluminum, while retaining the ability to participate in favorable environments that may materialize. KACC has developed strategies which include forward sales of primary aluminum at fixed prices and the purchase or sale of options for primary aluminum. In this regard, in respect of its remaining 1995 anticipated net exposure, at September 30, 1995, KACC had net forward sales contracts for 53,875 tons* of primary aluminum at fixed prices, had purchased call options in respect of 17,250 tons of primary - ---------------------------------------------- * All references to tons in this report refer to metric tons of 2,204.6 pounds. - 6 - KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES aluminum, had purchased put options to establish a minimum price for 48,375 tons of primary aluminum, and had entered into option contracts that established a price range for 22,500 tons of primary aluminum. In respect of its 1996 anticipated net exposure, at September 30, 1995, KACC had sold forward 11,100 tons of primary aluminum at fixed prices. KACC also enters into hedging transactions in the normal course of business that are designed to reduce its exposure to fluctuations in foreign exchange rates. At September 30, 1995, KACC had net forward foreign exchange contracts totaling approximately $125.9 for the purchase of 174.0 Australian dollars through April 1997. At September 30, 1995, the net unrealized gain on KACC's position in aluminum forward sales and option contracts (based on a market price of $1,773 per ton of primary aluminum) and forward foreign exchange contracts was $9.1. KACC has established margin accounts with its counterparties related to forward aluminum sales and option contracts. KACC is entitled to receive advances from counterparties related to unrealized gains and, in turn, is required to make margin deposits with counterparties to cover unrealized losses related to these contracts. At September 30, 1995, KACC had $2.5 compared with $50.5 at December 31, 1994, on deposit with a counterparty in respect of such contracts. These amounts are recorded in Prepaid expenses and other current assets. See Note 10 of the Notes to Consolidated Financial Statements for the year ended December 31, 1994. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION - -------------------------------------------------------------------- AND RESULTS OF OPERATIONS ------------------------- (In millions of dollars, except shipments, prices, and per share amounts) The following should be read in conjunction with the response to Item 1, Part I, of this Report. Results of Operations - --------------------- The Company's operating results are sensitive to changes in prices of alumina, primary aluminum, and fabricated aluminum products, and also depend to a significant degree on the volume and mix of all products sold and on KACC's hedging strategies. See Note 5 of Notes to Interim Consolidated Financial Statements for an explanation of KACC's hedging strategies. The table on the following page provides selected operational and financial information on a consolidated basis with respect to the Company for the quarter and nine months ended September 30, 1995 and 1994. As an integrated aluminum producer, the Company uses a portion of its bauxite, alumina, and primary aluminum production for additional processing at certain of its other facilities. Intracompany shipments and sales are excluded from the information set forth on the following page. - 7 - KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES
SELECTED OPERATIONAL AND FINANCIAL INFORMATION Quarter Ended Nine Months Ended September 30, September 30, ---------------------------------------- 1995 1994 1995 1994 ---------------------------------------- Shipments:(1) Alumina 471.5 534.9 1,494.6 1,577.3 Aluminum products: Primary aluminum 73.0 48.4 184.5 175.8 Fabricated aluminum products 90.4 105.4 284.3 307.1 ---------------------------------------- Total aluminum products 163.4 153.8 468.8 482.9 ======================================== Average realized sales price: Alumina (per ton) $ 206 $ 171 $ 203 $ 162 Primary aluminum (per pound) .83 .60 .82 .56 Net sales: Bauxite and alumina: Alumina $ 97.2 $ 91.5 $ 303.8 $ 255.3 Other(2)(3) 22.3 19.8 65.3 60.6 ---------------------------------------- Total bauxite and alumina 119.5 111.3 369.1 315.9 ---------------------------------------- Aluminum processing: Primary aluminum 133.4 64.1 335.0 218.2 Fabricated aluminum products 293.0 281.9 929.0 790.8 Other(3) 4.4 3.8 13.6 10.8 ---------------------------------------- Total aluminum processing 430.8 349.8 1,277.6 1,019.8 ---------------------------------------- Total net sales $550.3 $461.1 $1,646.7 $1,335.7 ======================================== Operating income (loss): Bauxite and alumina $ 14.8 $ 7.8 $ 36.4 $ 5.3 Aluminum processing 58.9 3.3 170.9 1.4 Corporate (20.5) (18.0) (57.9) (53.4) ---------------------------------------- Total operating income (loss) $ 53.2 $ (6.9) $ 149.4 $ (46.7) ======================================== Income (loss) before extraordinary loss $ 12.5 $(20.8) $ 39.3 $ (73.7) Extraordinary loss on early extinguishment of debt, net of tax benefit of $2.9 (5.4) ---------------------------------------- Net income (loss) $ 12.5 $(20.8) $ 39.3 $ (79.1) ======================================== Capital expenditures $ 26.1 $ 15.8 $ 53.2 $ 37.5 ========================================
[FN] - -------------------------------- (1) In thousands of tons. (2) Includes net sales of bauxite. (3) Includes the portion of net sales attributable to minority interests in consolidated subsidiaries. - 8 - KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES Net Sales Bauxite and Alumina - Revenue from net sales to third parties for the bauxite and alumina segment was 7% higher in the third quarter of 1995 than in the third quarter of 1994, and was 17% higher in the first nine months of 1995 than in the first nine months of 1994. Revenue from alumina increased 6% in the third quarter of 1995 from the third quarter of 1994, and increased 19% in the first nine months of 1995 from the first nine months of 1994, due to higher average realized prices partially offset by lower shipments. Aluminum Processing - Revenue from net sales to third parties for the aluminum processing segment was 23% higher in the third quarter of 1995 than in the third quarter of 1994, and was 25% higher in the first nine months of 1995 than in the first nine months of 1994. Revenue from primary aluminum increased 108% in the third quarter of 1995 from the third quarter of 1994, and increased 54% in the first nine months of 1995 from the first nine months of 1994, due primarily to higher average realized prices and higher shipments. The increase in revenue for the first nine months of 1995 was partially offset by decreased shipments caused by the strike by the United Steelworkers of America ("USWA") discussed below. Shipments of primary aluminum to third parties were approximately 45% and 39% of total aluminum products shipments in the third quarter and first nine months of 1995, respectively, compared with approximately 31% and 36% in the third quarter and first nine months of 1994, respectively. Revenue from fabricated aluminum products increased 4% in the third quarter of 1995 from the third quarter of 1994, and increased 17% in the first nine months of 1995 from the first nine months of 1994, due to higher average realized prices partially offset by lower shipments for most of these products. Operating Income (Loss) Improved operating results in the third quarter of 1995 were partially offset by expenditures related to the Company's joint venture in China (see Liquidity and Capital Resources, Financing Activities), accelerated expenditures on the Company's micromill technology, maintenance expenses as a result of an electrical lightning strike at the Company's Trentwood, Washington, facility, and a work slowdown at the Company's 49%-owned Kaiser Jamaica Bauxite Company prior to signing a new labor contract. The combined impact of these expenditures on the results for the third quarter of 1995 was approximately $6.0 (on a pre-tax basis). Improved operating results in the first nine months of 1995 were partially offset by (i) an eight-day strike at five major domestic locations by the USWA, (ii) a six-day strike by the National Workers Union at the Company's 65%-owned Alpart alumina refinery in Jamaica, and (iii) a four-day disruption of alumina production at Alpart caused by a boiler failure. The combined impact of these events on results for the first nine months of 1995 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's operating income was $14.8 in the third quarter of 1995, compared with $7.8 in the third quarter of 1994, and $36.4 in the first nine months of 1995, compared with $5.3 in the first nine months of 1994, principally due to higher revenue. Improved results for the first nine months of 1995 were partially offset by the effect of the strikes and boiler failure. Aluminum Processing - This segment's operating income was $58.9 in the third quarter of 1995, compared with $3.3 in the third quarter of 1994, and was $170.9 in the first nine months of 1995, compared with $1.4 in the first nine months of 1994, principally due to higher revenue. Improved results for the first nine months of 1995 were partially offset by the effect of the strike by the USWA. Corporate - Corporate operating expenses represented corporate general and administrative expenses which are not allocated to the Company's segments. - 9 - KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES Net Income (Loss) The Company had net income of $.13 and $.40 per common share ($.14 and $.46 on a fully diluted basis) for the third quarter and the first nine months of 1995, respectively, compared with a net loss of $.45 and $1.62 per common share for the third quarter and first nine months of 1994, respectively. The principal reason for these changes was the improvement in operating income previously described, partially offset by other charges in the third quarter of 1995, principally related to the establishment of additional litigation reserves. Liquidity and Capital Resources - ------------------------------- Operating Activities At September 30, 1995, the Company had working capital of $378.2, compared with working capital of $259.7 at December 31, 1994. The increase in working capital was due primarily to an increase in Receivables and Inventories and a decrease in Accrued interest and Other accrued liabilities, partially offset by a decrease in Prepaid expenses and other current assets (principally due to lower margin deposits related to hedging activities). Investing Activities Cash used for investing activities in the third quarter and the first nine months of 1995 consisted primarily of capital expenditures to improve production efficiency, reduce operating costs, expand capacity at existing facilities, and invest in a joint venture in China. Financing Activities At September 30, 1995, the Company had long-term debt of $798.5, 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 (of which $125.0 could be used for letters of credit). At September 30, 1995, $210.0 (of which $72.4 could have been used for letters of credit) was available to KACC under the 1994 Credit Agreement. As of July 20, 1995, the 1994 Credit Agreement was amended by the Third Amendment to Credit Agreement in connection with the investment by Kaiser Yellow River Investment Limited, a subsidiary of KACC, in Yellow River Aluminum Industry Company Limited, an aluminum smelter joint venture in the People's Republic of China. Loans under the 1994 Credit Agreement bear interest at a rate per annum, at KACC's election, equal to a Reference Rate (as defined) plus 1-1/2% or LIBO Rate (Reserve Adjusted) (as defined) plus 3-1/4%. After June 30, 1995, the interest rate margins applicable to borrowings under the 1994 Credit Agreement may be reduced by up to 1- 1/2% (non-cumulatively), based on a financial test, determined quarterly. As of September 30, 1995, the financial test permitted a reduction of 1% per annum in margins effective October 1, 1995. Trends - ------ Hedging Programs In respect of its remaining 1995 anticipated net exposure, at October 31, 1995, KACC had net forward sales contracts for 25,950 tons of primary aluminum at fixed prices, had purchased call options in respect of 11,500 tons of primary aluminum, had purchased put options to establish a minimum price for 32,250 tons of primary aluminum, - 10 - KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES and had entered into option contracts that established a price range for 15,000 tons of primary aluminum. In respect of its 1996 anticipated net exposure, at October 31, 1995, KACC has sold forward 6,100 tons of primary aluminum at fixed prices (see Note 5 of Notes to Interim Consolidated Financial Statements). Pacific Northwest On November 6, 1995, KACC announced that it had signed new agreements with each of the Bonneville Power Administration ("BPA") and The Washington Water Power Company ("WWP"), each ending September 30, 2001, with respect to its electric power requirements in the Pacific Northwest. The agreement with BPA is for the purchase of electric power and the agreement with WWP is for power management services. These new arrangements contemplate a reduction in the amount of power which KACC will purchase from BPA in the future and the replacement of such power with power purchased from other suppliers under a variety of terms. Contemporaneously with entering into these agreements, KACC entered into a one-year power supply contract with BPA, ending September 30, 1996, in connection with the restart of idled capacity at its Mead smelter in Spokane, Washington. The restart began in late October 1995 and KACC expects to return the Mead smelter to full production by early 1996. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - -------------------------- Catellus Development Corporation v. Kaiser Aluminum & Chemical Corporation and James L. Ferry & Sons, Inc. As previously and more fully stated in "Item 3. LEGAL PROCEEDINGS - - Catellus Development Corporation v. Kaiser Aluminum & Chemical Corporation and James L. Ferry & Sons, Inc." in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (the "10-K"), and as supplemented in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, on June 2, 1995, the United States District Court for the Northern District of California (the "District Court") issued an Order stating its preliminary findings on the remaining claims in that action. On October 12, 1995, the District Court issued final Findings of Fact and Conclusions of Law on those claims concluding that KACC is liable for various costs and interest through August 30, 1995, aggregating approximately $2.2 million, fifty percent (50%) of future costs of cleaning up certain parts of the Property (as defined in the 10-K), and certain fees and costs associated specifically with the claim by Catellus against KACC. Entry of judgment is pending. United States of America v. Kaiser Aluminum & Chemical Corporation As previously and more fully stated in "Item 3. LEGAL PROCEEDINGS - - United States of America v. Kaiser Aluminum & Chemical Corporation" in the 10-K, KACC and the Environmental Protection Agency (the "EPA") have been involved in negotiations to resolve claims arising from alleged emissions from certain stacks at KACC's Trentwood facility in Spokane, Washington. 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 on October 31, 1995, was lodged in United States District Court for the Eastern District of Washington for approval. If approved, the Consent Decree will settle the underlying disputes and require KACC to (i) pay a $.5 million civil penalty, (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 (as defined in the 10-K) by no later than February 28, 1997. The Company anticipates that capital expenditures for the - 11 - KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES 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. Asbestos-related Litigation As previously and more fully stated in "Item 3. LEGAL PROCEEDINGS - - Asbestos-related Litigation" in the 10-K, KACC is a defendant in a number of lawsuits in which the plaintiffs allege that certain of their injuries were caused by 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 portion of Note 4 of the Notes to Interim Consolidated Financial Statements contained in this report under the heading "Asbestos Contingencies" is incorporated herein by reference. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ----------------------------------------- (a) Exhibits. Exhibit No. Exhibit 4.1 Fourth Amendment to Credit Agreement, dated as of October 17, 1995, amending the Credit Agreement, dated as of February 17, 1994, as amended, among the Company, KACC, the financial institutions a party thereto, and BankAmerica Business Credit, Inc., as Agent. 11 Computation of Earnings Per Common and Common Equivalent Share 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 September 30, 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 CORPORATION /s/ John T. La Duc By:------------------------ John T. La Duc Vice President and Chief Financial Officer Dated: November 13, 1995 - 12 -
EXHIBIT 4.1




                  E x e c u t i o n   C o p y

               FOURTH AMENDMENT TO CREDIT AGREEMENT
              -------------------------------------

          THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this
"Amendment"), dated as of October 17, 1995, is by and between 
 ---------
KAISER ALUMINUM & CHEMICAL CORPORATION, a Delaware corporation
(the "Company"), KAISER ALUMINUM CORPORATION, a Delaware 
      -------
corporation (the "Parent Guarantor"), the various financial 
                  ----------------
institutions that are or may from time to time become parties to
the Credit Agreement referred to below (collectively, the
"Lenders" and, individually, a "Lender"), and BANKAMERICA 
 -------                        ------
BUSINESS CREDIT, INC., a Delaware corporation, as agent (in such
capacity, together with its successors and assigns in such
capacity, the "Agent") for the Lenders.  Capitalized terms used, 
               -----
but not defined, herein shall have the meanings given to such
terms in the Credit Agreement, as amended hereby.

                       W I T N E S S E T H:

          WHEREAS, the Company, the Parent Guarantor, the Lenders
and the Agent are parties to the Credit Agreement, dated as of
February 15, 1994, as amended by the First Amendment to Credit
Agreement, dated as of July 21, 1994, the Second Amendment to
Credit Agreement, dated as of March 10, 1995 and the Third
Amendment to Credit Agreement and Acknowledgement, dated as of
July 20, 1995 (the "Credit Agreement"); and
                    ----------------

          WHEREAS, the parties hereto have agreed to amend the
Credit Agreement as herein provided;

          NOW, THEREFORE, the parties hereto agree as follows:

          Section 1.   Amendments to Credit Agreement.
                       ------------------------------  

     1.1  Amendment to Article I:  Definitions.
          -----------------------  -----------


          A.   The definition of "Joint Venture Affiliate"
contained in Section 1.1 of the Credit Agreement is hereby 
             -----------
amended by inserting the phrase "Alwis (but only at such time as
Alwis is not a Subsidiary of the Company and is an Affiliate of
the Company), Alwis Acquisition (but only at such time as Alwis
Acquisition is not a Subsidiary of the Company and is an
Affiliate of the Company)," after the term "Furukawa," in the
second line thereof.

          B.   The following definitions are hereby added to
Section 1.1 of the Credit Agreement in the appropriate 
- -----------
alphabetical order:

                                1


          "'Alwis' means Alwis Leasing Corp., a Delaware 
            -----
corporation."

          "'Alwis Acquisition' means Kaiser Center Leasing, Inc., 
            -----------------
a Delaware corporation formed by the Company for the purpose of
acquiring  he capital stock of Alwis."

     1.2  Amendments to Article IX:  Covenants.
          ------------------------------------

          A.   Clause (b)(ii) of Section 9.2.2 of the Credit 
               --------------    -------------
Agreement is hereby amended by (i) adding the phrase ", Alwis,
Alwis Acquisition" after the term "KAAC" in the first
parenthetical contained in clause (A) thereof; (ii) adding the 
                           ----------
phrase ", Alwis or Alwis Acquisition" after the phrase "Yellow
River Investment Company" in the first parenthetical contained in
clause (B) thereof; and (iii) adding the phrase ", Alwis or Alwis 
- ----------
Acquisition" after the phrase "Yellow River Investment Company"
in the first parenthetical contained in clause (C) thereof.
                                        ----------

          B.   Section 9.2.2 of the Credit Agreement is hereby 
               -------------
amended by adding the following at the end of clause (b)(xvii) 
                                              ----------------
thereof:

          "; provided, however, that no Indebtedness incurred by 
             --------  -------
Alwis or Alwis Acquisition pursuant to this Section 
                                            -------
9.2.2(b)(xvii) may be guaranteed by the Company or any of its
Subsidiaries." 

          C.   Section 9.2.2 of the Credit Agreement is hereby 
               -------------
amended by (i) deleting the word "and" at the end of clause 
                                                     ------
(b)(xvii) thereof; and (ii) adding the following as new clause 
- ---------                                               ------
(b)(xix) thereof:
- --------

          "(xix)  Indebtedness of Alwis and Alwis Acquisition to
the Company and its Subsidiaries; provided that the aggregate 
                                  --------
principal amount of such Indebtedness plus the aggregate amount
of Investments in Alwis and Alwis Acquisition (without
duplication) under Section 9.2.5(n) does not exceed $250,000 in 
                   ----------------
the aggregate at any one time outstanding; and" 

          D.   Clause (e) of Section 9.2.5 of the Credit 
               ----------    -------------
Agreement is hereby amended by adding the phrase ", Alwis or
Alwis Acquisition" at the end of the first parenthetical
contained therein.  

          E.   Clause (n) of Section 9.2.5 of the Credit 
               ----------    -------------
Agreement is hereby amended to read in its entirety as follows:

          "(n) Investments in Alwis and Alwis Acquisition and
Investments (other than Investments in MAXXAM, any Affiliate of
MAXXAM (other than the Company, its Subsidiaries which are not
Restricted Subsidiaries, or any Joint Venture Affiliate), Yellow


                                2



River Investment Company or Yellow River Aluminum) not otherwise
permissible hereunder; provided that the aggregate amount of all 
                       --------
Investments (without duplication) under this Section 9.2.5(n) 
                                             ----------------
does not exceed $20,000,000 at any one time outstanding and
provided further that the aggregate amount of Investments under 
- ----------------
this Section 9.2.5(n) in Alwis and Alwis Acquisition (without 
     ----------------
duplication) plus the aggregate principal amount of Indebtedness
under Section 9.2.2(b)(xix) does not exceed $250,000 in the 
      ---------------------
aggregate at any one time outstanding;"

          F.   Clause (o) of Section 9.2.5 of the Credit 
               ----------    -------------
Agreement is hereby amended by adding the phrase "Alwis, Alwis
Acquisition," after the phrase "other than" in the first
parenthetical contained in clause (ii) thereof.
                           -----------

          G.   Section 9.2.5 of the Credit Agreement is hereby 
               -------------
amended by (i) deleting the period at the end of clause (q) 
                                                 ----------
thereof and substituting the phrase "; and" therefor; and (ii)
amending clause (r) thereof to read in its entirety as follows:
         ----------
          
          "(r) Indebtedness which is an Investment permitted by
clause (b)(xviii) or clause (b)(xix) of Section 9.2.2."
- -----------------           --------    ------------- 

          H.   Section 9.2.20 of the Credit Agreement is hereby 
               --------------
amended by adding the following at the end thereof:

          "; provided, however, the Company and its Subsidiaries 
             --------  -------
shall be permitted to transfer to the Company's Gramercy alumina
refinery, at any time after the Initial Borrowing Date, equipment
with a book value not to exceed $100,000 in the aggregate owned
on the Initial Borrowing Date and located at the Company's Baton
Rouge facility on the Initial Borrowing Date"

          Section 2.  Conditions to Effectiveness.
                      ---------------------------    

          This Amendment shall become effective as of the date
hereof (the "Fourth Amendment Effective Date") only when the 
             -------------------------------
following conditions shall have been met and notice thereof shall
have been given by the Agent to the Parent Guarantor, the
Company, the Agent and each Lender:

          A.   The Agent shall have received for each Lender
counterparts hereof duly executed on behalf of the Parent
Guarantor, the Company, the Agent and the Required Lenders (or
notice of the approval of this Amendment by the Required Lenders
satisfactory to the Agent shall have been received by the Agent).

          B.   The Agent shall have received:

               (1)  Resolutions of the Board of Directors or of
the Executive Committee of the Company and the Parent Guarantor
approving and authorizing the execution, delivery and performance 

                                3




of this Amendment, certified by its corporate secretary or an
assistant secretary as being in full force and effect without
modification or amendment as of the date of execution hereof by
the Company or the Parent Guarantor, as the case may be;

               (2)  A signature and incumbency certificate of the
officers of the Company and the Parent Guarantor executing this
Amendment;

               (3)  Certified copies of Alwis Acquisition's
Articles of Incorporation;

               (4)  Copies of Alwis Acquisition's Bylaws,
certified as of the date of delivery to Agent by its corporate
secretary or an assistant secretary;

               (5)  For each Lender an opinion, addressed to the
Agent and each Lender, from Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel, in substantially the form of Exhibit A attached
hereto, with such changes therein as shall be satisfactory to the
Agent; and

               (6)  Such other information approvals, opinions,
documents, or instruments as the Agent may reasonably request.

          Section 3.   Company's Representations and Warranties.  
                       ----------------------------------------

          In order to induce the Lenders and the Agent to enter
into this Amendment and to amend the Credit Agreement in the
manner provided herein, the Parent Guarantor and the Company
represent and warrant to each Lender and the Agent that, as of
the Fourth Amendment Effective Date after giving effect to the
effectiveness of this Amendment, the following statements are
true and correct in all material respects:

          A.   Authorization of Agreements.  The execution and 
               ---------------------------
delivery of this Amendment by the Company and the Parent
Guarantor and the performance of the Credit Agreement as amended
by this Amendment (the "Amended Agreement") by the Company and 
                        -----------------
the Parent Guarantor are within such Obligor's corporate powers
and have been duly authorized by all necessary corporate action
on the part of the Company and the Parent Guarantor, as the case
may be.

          B.   No Conflict.  The execution and delivery by the 
               -----------
Company and the Parent Guarantor of this Amendment and the
performance by the Company and the Parent Guarantor of the
Amended Agreement do not:

                                4



               (1)  contravene such Obligor's Organic Documents;

               (2)  contravene the Indenture dated as of
February 1, 1993, as amended by the First Supplemental Indenture
dated May 1, 1993, between the Company, and Kaiser Finance
Corporation, Kaiser Alumina Australia Corporation, Alpart Jamaica
Inc. and Kaiser Jamaica Corporation, as Subsidiary Guarantors,
and The First National Bank of Boston, as Trustee, or the
Indenture dated as of February 17, 1994, between the Company, and
Kaiser Finance Corporation, Kaiser Alumina Australia Corporation,
Alpart Jamaica Inc. and Kaiser Jamaica Corporation, as Subsidiary
Guarantors, and First Trust National Association, as Trustee, or
contravene any other contractual restriction where such a
contravention has a reasonable possibility of having a Materially
Adverse Effect or contravene any law or governmental regulation
or court decree or order binding on or affecting such Obligor or
any of its Subsidiaries; or 

               (3)  result in, or require the creation or
imposition of, any Lien on any of such Obligor's properties or
any of the properties of any Subsidiary of such Obligor, other
than pursuant to the Loan Documents.

          C.   Binding Obligation.  This Amendment has been duly 
               ------------------
executed and delivered by the Company and the Parent Guarantor
and this Amendment and the Amended Agreement constitute the
legal, valid and binding obligations of the Company and the
Parent Guarantor, enforceable against the Company and the Parent
Guarantor in accordance with their respective terms, except as
may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors'
rights generally and by general principles of equity.

          D.   Governmental Approval, Regulation, etc.  No 
               ---------------------------------------
authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or any
other Person is required for the due execution, delivery or
performance of this Amendment by the Company or the Parent
Guarantor.

          E.   Incorporation of Representations and Warranties 
               -----------------------------------------------
from Credit Agreement.  Each of the statements set forth in 
- ---------------------
Section 7.2.1 of the Credit Agreement is true and correct.
- -------------

          Section 4.  Conditions Subsequent.  
                      ---------------------

          On or prior to the date on which Alwis Acquisition
acquires any of the capital stock of Alwis, the Agent shall have
received:

          A.   Stock certificates evidencing at least 50% of the
issued and outstanding shares of capital stock of Alwis

                                5



Acquisition, accompanied by undated stock powers duly executed in
blank; and

          B.   A Pledge Amendment to the Company Pledge Agreement
with respect to at least 50% of the issued and outstanding shares
of capital stock of Alwis Acquisition duly executed on behalf of
the Company.    

          Section 5.   Acknowledgement and Consent.
                       --------------------------- 

          The Company is a party to the Company Collateral
Documents, in each case as amended through the Fourth Amendment
Effective Date, pursuant to which the Company has created Liens
in favor of the Agent on certain Collateral to secure the
Obligations.  The Parent Guarantor is a party to the Parent
Collateral Documents, in each case as amended through the Fourth
Amendment Effective Date, pursuant to which the Parent Guarantor
has created Liens in favor of the Agent on certain Collateral and
pledged certain Collateral to the Agent to secure the Obligations
of the Parent Guarantor.  Certain Subsidiaries of the Company are
parties to the Subsidiary Guaranty and/or one or more of the
Subsidiary Collateral Documents, in each case as amended through
the Fourth Amendment Effective Date, pursuant to which such
Subsidiaries have (i) guarantied the Obligations and/or (ii)
created Liens in favor of the Agent on certain Collateral.  The
Company, the Parent Guarantor and such Subsidiaries are
collectively referred to herein as the "Credit Support Parties", 
                                        ----------------------
and the Company Collateral Documents, the Parent Collateral
Documents, the Subsidiary Guaranty and the Subsidiary Collateral
Documents are collectively referred to herein as the "Credit 
                                                      ------
Support Documents".
- -----------------

          Each Credit Support Party hereby acknowledges that it
has reviewed the terms and provisions of the Credit Agreement as
amended by this Amendment and consents to the amendment of the
Credit Agreement effected as of the date hereof pursuant to this
Amendment.

          Each Credit Support Party acknowledges and agrees that
any of the Credit Support Documents to which it is a party or
otherwise bound shall continue in full force and effect.  Each
Credit Support Party hereby confirms that each Credit Support
Document to which it is a party or otherwise bound and all
Collateral encumbered thereby will continue to guaranty or
secure, as the case may be, the payment and performance of all
obligations guaranteed or secured thereby, as the case may be.

          Each Credit Support Party (other than the Company and
the Parent Guarantor) acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this
Amendment, such Credit Support Party is not required by the terms
of the Credit Agreement or any other Loan Document to consent to
the amendments to the Credit Agreement effected pursuant to this

                                6



Amendment and (ii) nothing in the Credit Agreement, this
Amendment or any other Loan Document shall be deemed to require
the consent of such Credit Support Party to any future amendments
to the Credit Agreement.

          Section 6.  Miscellaneous.
                      -------------

          A.   Reference to and Effect on the Credit Agreement 
               -----------------------------------------------
and the Other Loan Documents.
- ----------------------------  

               (1)  On and after the Fourth Amendment Effective
Date, each reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof", "herein" or words of like import referring
to the Credit Agreement, and each reference in the other Loan
Documents to the "Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement shall mean
and be a reference to the Amended Agreement.

               (2)  Except as specifically amended by this
Amendment, the Credit Agreement and the other Loan Documents
shall remain in full force and effect and are hereby ratified and
confirmed.

          B.   Applicable Law.  THIS AMENDMENT SHALL BE DEEMED TO 
               -------------- 
BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO SUCH LAWS RELATING TO
CONFLICTS OF LAWS.

          C.   Headings.  The various headings of this Amendment 
               --------
are inserted for convenience only and shall not affect the
meaning or interpretation of this Amendment or any provision
hereof.

          D.   Counterparts.  This Amendment may be executed by 
               ------------
the parties hereto in several counterparts and by the different
parties on separate counterparts, each of which shall be deemed
to be an original and all of which shall constitute together but
one and the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached
to the same document.

          E.   Severability.  Any provision of this Amendment 
               ------------
which is prohibited or unenforceable in any jurisdiction shall,
as to such provision and such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Amendment or
affecting the validity or enforceability of such provisions in
any other jurisdiction.

                                7



          IN WITNESS WHEREOF, this Amendment has been duly
executed and delivered as of the day and year first above
written.

KAISER ALUMINUM CORPORATION        KAISER ALUMINUM & CHEMICAL
                                     CORPORATION

By: _______________________        By:________________________
Name Printed: John T. La Duc       Name Printed: John T. La Duc
Its: Vice President, Chief         Its: Vice President, Chief
     Financial Officer &                Financial Officer &
     Treasurer                          Treasurer


BANKAMERICA BUSINESS CREDIT,       BANKAMERICA BUSINESS CREDIT,
  INC., as Agent                     INC.

By: _______________________        By:________________________
Name: Michael J. Jasaitis          Name: Michael J. Jasaitis  
Its: Vice President                Its: Vice President


BANK OF AMERICA NATIONAL TRUST     THE CIT GROUP/BUSINESS CREDIT,
  AND SAVINGS ASSOCIATION             INC.

By: _______________________        By:________________________
Name Printed:______________        Name Printed:______________
Its:_______________________        Its:_______________________


CONGRESS FINANCIAL CORPORATION     HELLER FINANCIAL, INC.
   (WESTERN)

By: _______________________        By:________________________
Name Printed:______________        Name Printed:______________
Its:_______________________        Its:_______________________


LA SALLE NATIONAL BANK             NATIONAL WESTMINSTER BANK PLC

By: _______________________        By:________________________
Name Printed:______________        Name Printed:______________
Its:_______________________        Its:_______________________


TRANSAMERICA BUSINESS CREDIT       ABN AMRO BANK N.V.
   CORPORATION

By: _______________________        By:________________________        
Name Printed:______________        Name Printed:______________
Its:_______________________        Its:_______________________

                                   8



ACKNOWLEDGED AND AGREED TO:

AKRON HOLDING CORPORATION          KAISER ALUMINUM & CHEMICAL
                                     INVESTMENT, INC.

By: _______________________        By:________________________
Name Printed: John T. La Duc       Name Printed: John T. La Duc
Its: Vice President, Chief         Its: Vice President, Chief
     Financial Officer &                Financial Officer &
     Treasurer                          Treasurer

KAISER ALUMINUM PROPERTIES,        KAISER ALUMINUM TECHNICAL
   INC.                               SERVICES, INC.

By: _______________________        By:________________________
Name Printed: John T. La Duc       Name Printed: John T. La Duc
Its: Vice President, Chief         Its: Vice President, Chief
     Financial Officer &                Financial Officer &
     Treasurer                          Treasurer

OXNARD FORGE DIE COMPANY, INC.     KAISER ALUMINIUM
                                          INTERNATIONAL, INC.

By: _______________________        By:________________________
Name Printed: John T. La Duc       Name Printed: John T. La Duc
Its: Vice President, Chief         Its: Vice President, Chief
     Financial Officer &                Financial Officer &
     Treasurer                          Treasurer

KAISER ALUMINA AUSTRALIA           KAISER FINANCE CORPORATION
  CORPORATION

By: _______________________        By:________________________
Name Printed: John T. La Duc       Name Printed: John T. La Duc
Its: Vice President, Chief         Its: Vice President, Chief
     Financial Officer &                Financial Officer &
     Treasurer                          Treasurer

ALPART JAMAICA INC.                KAISER JAMAICA CORPORATION

By: _______________________        By:________________________
Name Printed: John T. La Duc       Name Printed: John T. La Duc
Its: Vice President, Chief         Its: Vice President, Chief
     Financial Officer &                Financial Officer &
     Treasurer                          Treasurer

KAISER BAUXITE COMPANY             KAISER EXPORT COMPANY

By: _______________________        By:________________________
Name Printed: John T. La Duc       Name Printed: John T. La Duc
Its: Vice President, Chief         Its: Vice President, Chief
     Financial Officer &                Financial Officer &

                                   9



     Treasurer                          Treasurer

                                  10



                               EXHIBIT A


                            October __,1995
                                    


BankAmerica Business Credit, Inc.,
  as Agent
Two North Lake Avenue, Suite 400
Pasadena, California  91101

     and

The Lenders Listed on Schedule A Hereto

     Re:  Fourth Amendment to Credit Agreement (the "Fourth
          Amendment"), dated as of October 17, 1995, among
          Kaiser Aluminum & Chemical Corporation, Kaiser
          Aluminum Corporation, certain financial institutions,
          and BankAmerica Business Credit, Inc., as Agent (the        
          "Agent")                                            
     ---------------------------------------------------------

Ladies and Gentlemen:

          We have acted as special counsel to Kaiser Aluminum &
Chemical Corporation, a Delaware corporation (the "Company"), and 
Kaiser Aluminum Corporation, a Delaware corporation (the "Parent
Guarantor"), in connection with the Fourth Amendment.  Capitalized
terms used but not defined herein have the meanings assigned thereto
in the Credit Agreement, as amended by the Fourth Amendment.  As used
herein, "Credit Agreement" has the meaning ascribed thereto in the
first recital of the Fourth Amendment.
 
          In rendering the opinion set forth herein, we have reviewed
the Credit Agreement, the Fourth Amendment and have examined originals
or copies, certified, or otherwise identified to our satisfaction, of
(a) the Certificate of Incorporation and By-laws of the Company and
the Parent Guarantor as in effect on the date hereof, and (b) such
other documents, records, certificates and instruments (collectively,
"Documents") as in our judgment are necessary or appropriate as the
basis for the opinion expressed below.

          In our examination we have assumed the genuineness of all
signatures, the authenticity of all Documents submitted to us as
originals, the conformity to original documents of all Documents
submitted to us as certified or photostatic copies, and the
authenticity of the originals of such copies.  As to any facts
material to this opinion which we did not independently establish or
verify, we have relied upon statements and representations of officers
and other representatives of the Company and the Parent Guarantor and
certificates of public officials.  We also have assumed (i) the valid
authorization, execution, and delivery of the Fourth Amendment by the
parties thereto (other than the Company and the Parent Guarantor),

                                  A-1



BankAmerica Business Credit, Inc.,                October ____, 1995
   Agent                                                      Page 2

   and

The Lenders Listed on Schedule A Hereto



(ii) that each such other party has been duly organized and is validly
existing and in good standing under the laws of the jurisdiction of
its organization with the corporate or other organizational power to
perform its obligations thereunder, and (iii) that the Fourth
Amendment constitutes the legal, valid and binding obligations of each
such other party enforceable against each such other party in
accordance with its terms (subject to qualifications and limitations
similar to those set forth in clauses (a) and (b) on pages __ and __
of this opinion).

          Based upon the foregoing, and subject to the qualifications
set forth herein, we are of the opinion that:

          1.   The execution, delivery, and performance by each of the
Company and the Parent Guarantor of the Fourth Amendment, and the
performance by the Company and the Parent Guarantor of the Credit
Agreement as amended by the Fourth Amendment are within their
respective corporate powers, have been duly authorized by all
necessary corporation action on the part of the Company and the Parent
Guarantor, and do not:

          (a)  violate the Organic Documents of the Company or the
          Parent Guarantor; or

          (b)  violate any court decree or order of any governmental
          authority which, after our due inquiry, has been
          specifically disclosed to us by the Company or the Parent
          Guarantor.

          2.   The Fourth Amendment has been duly executed and
delivered by each of the Company and the Parent Guarantor.

          3.   The Fourth Amendment constitutes the legal, valid, and
binding obligation of each of the Company and the Parent Guarantor,
enforceable against each of the Company and the Parent Guarantor in
accordance with its terms.
                    
          The opinion set forth in paragraph 3 above is subject to the
following qualifications and limitations and the other opinions set
forth above are subject to the following qualifications and
limitations, other than those set forth in clauses (a), (b) and (c)
below:

                                  A-2



BankAmerica Business Credit, Inc.,                October ____, 1995
   Agent                                                      Page 3

   and

The Lenders Listed on Schedule A Hereto



          (a)  The enforceability of the Fourth Amendment may be
subject to or limited by bankruptcy, insolvency, reorganization,
arrangement, fraudulent conveyance or transfer, moratorium, or other
laws and court decisions now or hereafter in effect relating to or
affecting the rights of creditors generally;

          (b)  The enforceability of the Fourth Amendment is subject
to the application of and may be limited by general principles of
equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing (regardless of whether
considered in a proceeding in equity or at law).  Such principles of
equity are of general application and in applying such principles a
court, among other things, might not allow a creditor to accelerate
the maturity of a debt under certain circumstances, including, without
limitation, upon the occurrence of a default deemed immaterial or
might decline to order an obligor to perform covenants.  Such
principles applied by a court might include a requirement that a
creditor act with reasonableness and in good faith.  Thus, we express
no opinion as to the validity or enforceability of (i) provisions
restricting access to legal or equitable remedies, such as the
specific performance of executory covenants, (ii) provisions that
purport to establish evidentiary standards, (iii) provisions relating
to waivers, severability, indemnity, submissions to jurisdiction, set
off, delay or omission of enforcement of rights or remedies, and (iv)
provisions purporting to convey rights to persons other than parties
to the Credit Agreement.  In addition, we express no opinion as to the
enforceability of any provision purporting to provide indemnification
or contribution relating to matters arising under Federal or State
securities laws;

          (c)  The remedy of specific performance and injunctive and
other forms of equitable relief are subject to equitable defenses and
to the discretion of the court before which any proceeding therefor
may be brought;

          (d)  We have not been requested to render, and with your
permission we do not express, any opinion as to the applicability to
any Loan Document or security interests of Section 548 of the Federal
Bankruptcy code, Article 10 of the New York Debtor & Creditor Law, or
any other fraudulent conveyance, insolvency or transfer laws or any
court decisions with respect to any of the foregoing; 

                                  A-3


BankAmerica Business Credit, Inc.,                October ____, 1995
   Agent                                                      Page 4

   and

The Lenders Listed on Schedule A Hereto



          (e)  Our opinion expressed herein is limited to the laws of
the State of New York, the General Corporation Law of the State of
Delaware, and the Federal laws of the United States of America, and we
do not express any opinion herein concerning any other laws.  We
express no opinion as to the effects (if any) of any laws of any
jurisdiction (except the State of New York) in which any Lender is
located which limits the rate of interest that such Lender may charge
or collect.

          The opinion expressed herein is based upon the laws in
effect on the date hereof, and we assume no obligation to review or
supplement this opinion should any such law be changed by legislative
action, judicial decision or otherwise.

          Ezra G. Levin, a partner of our firm, is a director of the
Company and the Parent Guarantor.

          This opinion is being furnished only to the addressees named
above pursuant to Section 2.B.(5) of the Fourth Amendment and is
solely for the benefit of such Persons in connection with the
execution, delivery and effectiveness of the Fourth Amendment. 
Accordingly, this opinion may not be used, quoted, or relied upon by
any other person or entity or for any other purpose without, in each
instance, our express prior written consent.

                              Very truly yours,







                                  A-4



                              SCHEDULE A



BankAmerica Business Credit, Inc.

Bank of America National Trust
   and Savings Association

The CIT Group/Business Credit, Inc.

Congress Financial Corporation (Western)

Heller Financial, Inc.

La Salle National Bank

National Westminster Bank PLC

Transamerica Business Credit Corporation

ABN Amro Bank N.V.

                                  A-5



                           PLEDGE AMENDMENT

          This Pledge Amendment, dated October   , 1995, is delivered
pursuant to Section 4.2(b) of the Company Pledge Agreement referred to 
            --------------
below.  The undersigned hereby agrees that this Pledge Amendment may
be attached to the Company Pledge Agreement dated as of February 15,
1994, as amended through the date hereof, between the undersigned and
BankAmerica Business Credit, Inc., as the Agent (the "Pledge
Agreement," capitalized terms defined therein being used herein as
therein defined), and that the Pledged Shares listed on this Pledge
Amendment shall be deemed to be part of the Pledged Shares and shall
become part of the Collateral and shall secure all Secured
Obligations.

                              KAISER ALUMINUM & CHEMICAL CORPORATION


                              By:                                     
                              Name Printed:  John T. La Duc
                              Its: Vice President, Chief Financial
                                   Officer & Treasurer



               Jurisdiction      Certificate      Number of      % of
Issuer       of Incorporation       No.(s)          Shares       Class
- ------       ----------------    -----------      ---------      -----

Kaiser           Delaware                                         50%
  Center
  Leasing, 
  Inc.


Debt Issuer                   Amount of Indebtedness   
- -----------                   ----------------------


                           EXHIBIT 11

                    KAISER ALUMINUM CORPORATION 
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE (1) (In millions of dollars, except per share amounts) Quarter Ended Nine Months Ended September 30, September 30, --------------------------------------- 1995 1994 1995 1994 --------------------------------------- Primary: Earnings: Income (loss) before extraordinary loss $ 12.5 $ (20.8) $ 39.3 $ (73.7) Dividends on preferred stock: Series A Shares (2.8) (3.2) (9.1) (9.5) PRIDES (2.1) (2.1) (6.4) (5.3) --------------------------------------- Income (loss) available to common shareholders before extraordinary loss 7.6 (26.1) 23.8 (88.5) Extraordinary loss, net (5.4) --------------------------------------- Net income (loss) available to common shareholders $ 7.6 $ (26.1) $ 23.8 $ (93.9) ======================================= Shares (000): Weighted average common shares outstanding 58,240 58,161 58,234 58,118 Additional weighted average shares arising from conversion of Series A Shares 1,570 529 Assuming excercise of nonqualified stock options 415 252 --------------------------------------- Weighted average common and common equivalent shares 60,225 58,161 59,015 58,118 ======================================= Primary earnings (loss) per common share: Income (loss) before extraordinary loss $ .13 $ (.45) $ .40 $ (1.53) Extraordinary loss (.09) --------------------------------------- Net income (loss) $ .13 $ (.45) $ .40 $ (1.62) ======================================= Fully diluted: Earnings: Income before extraordinary loss $ 12.5 $ 39.3 Dividends on PRIDES (2.1) (6.4) --------------------------------------- Net income available to common and common equivalent shareholders $ 10.4 $ 32.9 ======================================= Shares (000): Weighted average common shares outstanding 58,240 58,234 Weighted average shares assuming conversion of Series A Shares at the beginning of period 13,127 13,127 Assuming excercise of nonqualified stock options 415 252 --------------------------------------- Weighted average common and common equivalent shares 71,782 71,613 ======================================= Fully diluted earnings per common and common equivalent share $ .14 $ .46 =======================================
(1) See Note 3 of Notes to Interim Consolidated Finanical Statements.
 

5 This schedule contains summary financial information extracted from the interim consolidated financial statements of the Company for the nine months ended September 30, 1995, and is qualified in its entirety by reference to such financial statements. 0000811596 KAISER ALUMINUM CORPORATION 1,000,000 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 11 0 278 0 531 894 1,099 0 2,788 515 0 1 0 0 42 2,788 1,647 1,647 1,330 1,330 167 0 71 68 25 39 0 0 0 39 .40 .46