Kaiser Aluminum Third Quarter Results to Include Significant One-Time Real Estate-Related Income Offset by Comparable Asbestos Charge
HOUSTON--(BUSINESS WIRE)--Oct. 3, 2000--Kaiser Aluminum & Chemical Corporation, the operating subsidiary of Kaiser Aluminum Corporation (NYSE:KLU), announced today that its third-quarter financial results will include pre-tax income of approximately $40 million related to two real estate properties. This amount will be offset by a comparable non-cash pre-tax charge related to an increase in the company's net asbestos liability.
The one-time real estate pre-tax income results from the sale of Kaiser's Pleasanton, Calif., office complex to PE Biosystems Group at a pre-tax gain of approximately $25 million and, separately, a favorable non-cash pre-tax adjustment of approximately $15 million to Kaiser's accrued long-term net lease obligation on an office building in Oakland, Calif.
The company sold the Pleasanton complex -- which includes approximately 80 acres and about 330,000 square feet of office, laboratory and warehouse space -- because the administrative and research and development functions located there have been or are being relocated to other Kaiser locations, and the complex hadbecome surplus to the company's needs. The sale closed on Sept. 29, 2000 and generated net cash proceeds of approximately $50 million.
The adjustment of the net lease obligation on the Oakland office building reflects new lease agreements in 2000 at occupancy and lease rates above those previously projected, due to substantial improvement in the area's commercial real estate market. Although Kaiser has not maintained executive offices in the building for a number of years, the company is the master tenant through 2008 (subject to certain extension and other rights that can be exercised by the company) under a 1983 sale-and-leaseback agreement. The 28-story building has about 750,000 square feet of rentable space.
"The real estate income that will appear in third-quarter results is an example of our commitment to generate and redeploy cash to create maximum value," said Raymond J. Milchovich, president and chief executive officer of Kaiser Aluminum.
The asbestos-related charge results from the company's recurring assessment of existing reserves, net of expected insurance recoveries, based on recent cost and other trends experienced by Kaiser and other companies. The company continues to believe that it has insurance coverage available to recover a substantial portion of its asbestos-related costs.
"Clearly, we are not pleased to take this charge," noted Milchovich. "Having said that, we remain convinced that a substantial majority of the costs incurred will be covered by insurance recoveries. We are diligently seeking to optimize the amount and timing of such recoveries and are also actively exploring all opportunities for recovery or limitation of our costs. Additionally, we have dedicated additional senior management resources to this effort and have significantly strengthened the external legal team that is assisting us."
In addition to the foregoing items, Kaiser has previously reported that its financial results for the third quarter of 2000 will also include two other approximately offsetting items: a pre-tax net gain of $40 million on the sale of electrical power and a pre-tax charge of between $30 million and $40 million to reflect the incremental, non-recurring impacts of a labor settlement with the United Steelworkers of America. |
