KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES (Debtor-in-Possession) STATEMENTS OF CONSOLIDATED INCOME (LOSS) (Unaudited) (In millions of dollars, except share and per share amounts) Quarter Nine Months Ended Ended September 30, September 30, --------------- ---------------- 2005 2004 2005 2004 ------- ------- ------- -------- Net sales $271.6 $244.4 $815.9 $684.7 ------- ------- ------- -------- Costs and expenses: Cost of products sold 233.7 217.5 710.0 620.0 Depreciation and amortization 4.9 5.9 15.0 16.9 Selling, administrative, research and development, and general 17.7 26.8 52.4 68.3 Other operating charges (1) 0.3 154.7 6.5 154.7 ------- ------- ------- -------- Total costs and expenses 256.6 404.9 783.9 859.9 ------- ------- ------- -------- Operating income (loss) 15.0 (160.5) 32.0 (175.2) Other income (expense): Interest expense (excluding unrecorded contractual interest expense of $23.7 for both quarters and $71.2 for both nine-month periods) (1.0) (2.4) (4.2) (6.5) Reorganization items (8.2) (10.0) (25.3) (28.9) Other - net (.5) 1.2 (1.5) 5.3 ------- ------- ------- -------- Income (loss) before income taxes and discontinued operations 5.3 (171.7) 1.0 (205.3) Provision for income taxes (2) (1.4) (1.5) (6.0) (5.3) ------- ------- ------- -------- Income (loss) from continuing operations 3.9 (173.2) (5.0) (210.6) ------- ------- ------- -------- Discontinued operations: (2) (3) Income (loss) from discontinued operations, net of income taxes, including minority interests 8.0 2.1 21.3 (23.7) Gain from sale of commodity interests, net of income taxes of $8.5 in 2005 -- 101.6 365.6 125.0 ------- ------- ------- -------- Income from discontinued operations 8.0 103.7 386.9 101.3 ------- ------- ------- -------- Net income (loss) $11.9 $(69.5) $381.9 $(109.3) ======= ======= ======= ======== Income (loss) per share - Basic/Diluted: (4) Income (loss) from continuing operations $.05 $(2.17) $(.06) $(2.64) ======= ======= ======= ======== Income from discontinued operations $.10 $1.30 $4.85 $1.27 ======= ======= ======= ======== Net income (loss) $.15 $(.87) $4.79 $(1.37) ======= ======= ======= ======== Weighted average shares outstanding (000): (4) Basic/Diluted 79,672 79,815 79,676 79,858 Notes Follow (1) Other operating charges for the quarter and nine month periods ended September 30, 2005 included charges totaling $.3 and $5.9, respectively, associated with the 2004 portion of the Company's defined contribution plans, which were implemented in March 2005 (Fabricated products business unit: $.2 for the quarter and $5.4 for the nine month period, and Corporate: $.1 for the quarter and $.5 for the nine month period). Other operating charges for the nine month period ended September 30, 2005, also included a charge totaling $.6 related to termination of the Houston, Texas administrative office lease in connection with the combination of the Corporate headquarters into the existing Fabricated products headquarters. Other operating charges for the quarter and nine month periods ended September 30, 2004 included pension charges of $155.5 related to pension plans whose responsibility was assumed by the Pension Benefit Guaranty Corporation (Corporate). (2) Provision for income taxes for continuing operations for the quarters ended September 30, 2005 and 2004, relates primarily to foreign income taxes. For the quarters ended September 30, 2005 and 2004, as a result of the Cases, the Company did not recognize any U.S. income or any tax benefits for the losses incurred from its domestic operations (including temporary differences) or any U.S. tax benefit for foreign income taxes. Instead, the increases in federal and state deferred tax assets as a result of the additional net operating losses and foreign tax credits generated in 2005 and 2004 were fully offset by increases in the valuation allowances. Results of operations for discontinued operations were net of income tax (benefit) provision of $(.7) and $2.8 for the quarters ended September 30, 2005 and 2004, respectively, and $12.0 and $15.1 for the nine month periods ended September 30, 2005 and 2004, respectively. The gain on sale of the Company's commodity-related interests for the nine month period ended September 30, 2005 (which is also a part of discontinued operations), includes approximately $8.5 of alternative minimum tax ("AMT") estimated to be payable in the United States as a result of the Company's sale of its interests in and related to QAL. If the Company and/or the four Liquidating Subsidiaries emerge from bankruptcy during 2005 (see Note 1 of Notes to Interim Consolidated Financial Statements in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2005), certain of the tax attributes would likely be available to reduce the AMT provision recorded during the nine months ended September 30, 2005. (3) The Company sold its interests in and related to Alpart, Gramercy, KJBC, Valco and the Mead Facility in 2004. The Company completed the sale of its interests in and related to QAL in April 2005. In accordance with Generally Accepted Accounting Principles, the operating results of these interests are reported as Discontinued operations. Results from discontinued operations for the quarter and nine month periods ended September 30, 2005 and 2004 include the following significant items. Additional information with regard to Discontinued operations is included in Note 4 of Notes to Interim Consolidated Financial Statements in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. Quarter Nine Months -------------- ---------------- 2005 2004 2005 2004 ------ ------ ------- ------- Gain on sale of - QAL interests $ - $ - $365.6 $ - Alpart interests - 101.6 - 101.6 Mead properties - - - 23.4 Valco impairment charge - - - (33.0) (4) Income (loss) per share may not be meaningful, because as a part of a plan of reorganization, it is likely the interests of the Company's existing stockholders will be cancelled without consideration. See Note 2 of Notes to Interim Consolidated Financial Statements in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2005. KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES (Debtor-in-Possession) SELECTED OPERATIONAL AND FINANCIAL INFORMATION (Unaudited) (In millions of dollars, except shipments and prices) Quarter Nine Months Ended Ended September 30, September 30, ---------------- ---------------- 2005 2004 2005 2004 ------- -------- ------- -------- Shipments (mm lbs) Fabricated Products 120.7 117.9 365.2 341.0 Primary Aluminum 38.8 40.3 115.7 117.5 ------- -------- ------- -------- 159.5 158.2 480.9 458.5 ======= ======== ======= ======== Average Realized Third-Party Sales Price (per pound): Fabricated Products (1) $ 1.95 $ 1.79 $ 1.94 $ 1.72 Primary Aluminum (2) $ .92 $ .85 $ .93 $ .83 Net Sales: Fabricated Products $235.9 $ 210.4 $707.7 $ 587.4 Primary Aluminum 35.7 34.0 108.2 97.3 ------- -------- ------- -------- Total Net Sales $271.6 $ 244.4 $815.9 $ 684.7 ======= ======== ======= ======== Segment Operating Income (Loss): (3) Fabricated Products $ 24.5 $ 12.3 $ 62.7 $ 21.1 Primary Aluminum 6.2 3.4 17.9 11.9 Corporate and Other (15.4) (21.5) (42.1) (53.5) Other Operating Charges (4) (0.3) (154.7) (6.5) (154.7) ------- -------- ------- -------- Total Operating Income (Loss) $ 15.0 $(160.5) $ 32.0 $(175.2) ======= ======== ======= ======== Discontinued operations (5) $ 8.0 $ 103.7 $386.9 $ 101.3 ======= ======== ======= ======== Net Income (Loss) $ 11.9 $ (69.5) $381.9 $(109.3) ======= ======== ======= ======== Capital expenditures (excluding discontinued operations) $ 11.8 $ 1.9 $ 20.4 $ 4.5 ======= ======== ======= ======== (1) Average realized prices for the Company's Fabricated products business unit are subject to fluctuations due to changes in product mix as well as underlying primary aluminum prices and are not necessarily indicative of changes in underlying profitability. (2) Average realized prices for the Company's Primary aluminum business unit excludes hedging revenues. (3) The Company changed its segment presentation in 2004 to eliminate the "Eliminations" segment as the primary purpose for such segment was to eliminate the intercompany profit on sales by the Primary aluminum and Bauxite and alumina business units, substantially all of which are now considered Discontinued operations. Eliminations not representing Discontinued operations are now included in segment results. Operating results for the Primary aluminum business unit in quarter and nine month periods ended September 30, 2004 are after the elimination of $.3 and $1.0, respectively. See Note 14 of Notes to Interim Consolidated Financial Statements in the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2005 for additional information with regard to segment information. (4) See Note 11 of Notes to Interim Consolidated Financial Statements in the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2005, for information regarding Other operating charges. (5) See Note 3 of Statements of Consolidated Income (Loss) for a discussion of results from discontinued operations. KAISER ALUMINUM CORPORATION AND SUBSIDIARY COMPANIES (Debtor-in-Possession) CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions of dollars) September December 30, 31, 2005 2004 --------- --------- Assets (1) (2) Current assets (3) $ 270.6 $ 291.3 Discontinued operations' current assets (2) .4 30.6 Investments in and advances to unconsolidated affiliate 16.2 16.7 Property, plant, and equipment - net 218.5 214.6 Restricted proceeds from sale of commodity interests 680.6 280.8 Personal injury-related insurance recoveries receivable 965.5 967.0 Other assets 46.0 42.5 Discontinued operations' long-term assets (2) -- 38.9 --------- --------- Total $ 2,197.8 $ 1,882.4 ========= ========= Liabilities & Stockholders' Equity (Deficit) (1) (2) Liabilities not subject to compromise - Current liabilities (4) $ 168.2 $ 191.2 Discontinued operations' current liabilities (2) 17.2 57.7 Long-term liabilities 41.1 32.9 Long-term debt 1.2 2.8 Discontinued operations' liabilities (liabilities subject to compromise) (2) 26.4 26.4 Liabilities subject to compromise 3,949.8 3,954.9 Minority interests .7 .7 Commitments and contingencies Stockholders' equity (deficit) (2,006.8) (2,384.2) --------- --------- Total $ 2,197.8 $ 1,882.4 ========= ========= (1) The Company and 25 of its subsidiaries have filed petitions for reorganization under Chapter 11 of the United States Federal Code. The balance sheet as of September 30, 2005, has been prepared on a "going concern" basis, which contemplates the realization of assets and liquidation of liabilities in the ordinary course of business; however, as a result of the Chapter 11 filings, such realization of assets and liquidation of liabilities are subject to a significant number of uncertainties. Specifically, but not all inclusive, the balance sheet does not present: (a) the realizable value of assets on a liquidation basis or the availability of such assets to satisfy liabilities, (b) the amount which will ultimately be paid to settle liabilities and contingencies which may be allowed or (c) the effect of any changes which may be made in connection with the Company's capitalization or operations resulting from a plan of reorganization. The Company, KACC, and 19 of their subsidiaries filed a plan of reorganization and disclosure statement in September 2005. The Company has begun the solicitation process for plan approval. Such process is expected to be completed in mid-November 2005. The Court has set November 16, 2005 as the date by which objections to the plan must be filed and January 9, 2006 and January 10, 2006 as dates for Plan confirmation. Upon emergence from the Chapter 11 proceedings, the Company expects to apply "fresh start" accounting to its consolidated financial statements as required by AICPA Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code. As such, the Company will restate its balance sheet to equal the reorganization value as determined in its plan(s) of reorganization and approved by the Court. Because fresh start accounting will be adopted at emergence, and because of the significance of liabilities subject to compromise (that will be relieved upon emergence), comparisons between the current historical financial statements and the financial statements upon emergence may be difficult to make. See Note 1 of Notes to Interim Consolidated Financial Statements of the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005 for additional information regarding the Company's Chapter 11 proceedings. (2) Information with regard to Discontinued operations is included in Note 4 of Notes to Interim Consolidated Statements in the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2005. (3) Includes Cash and cash equivalents of $43.3 and $55.4 at September 30, 2005 and December 31, 2004, respectively. (4) Includes Current portion of long-term debt of $1.2 at September 30, 2005 and December 31, 2004.